We propose a new framework to unify three conceptions of institutions that play a prominent role in the philosophical and scientific literature: the equilibria account, the regulative rules account, and the constitutive rules account. We argue that equilibrium-based and rule-based accounts are individually inadequate, but that jointly they provide a satisfactory conception of institutions as rules-in-equilibrium. In the second part of the paper we show that constitutive rules can be derived from regulative rules via the introduction of theoretical terms. We argue that the constitutive rules theory is reducible to the rules-in equilibrium theory, and that it accounts for the way in which we assign names to social institutions.

This paper supports the effort by Hindriks and Guala (2014) to integrate the prevailing accounts of institutions. I illustrate with traffic narratives how we can think of their concept of rules-in-equilibrium as evolving from universal elementary forms. These conceptions resonate fully with Smith (1759) who saw rule-following conduct as the basis of human sociality and action.

This short commentary basically supports the unified approach to institutions of Hindriks and Guala (2014). First, using a flow diagram over the two-by-two boxes in the space spanned by the collective-individual dimension and the behavior (play)-cognitive (belief) dimension, it argues that the classical game theory and the so-called institution-as-rule theory are both incomplete and that they should be regarded as complementary for an integrated theory of institution as a process. However, the substantive forms of institutions ought to be linguistic representations (i.e. rules and ideas) that summarize equilibrium states of play of the societal game so as to mediate them to be incorporated into minds of players as collective intentionality (i.e. shared beliefs). From this perspective this note also supports the authors’ argument to unpack the ‘Y’ term in Searle's notion of constitutive rule (that is, the regulative rule) and submit it to be based on a neo-Hegelian notion of mutual recognition (i.e. equilibrium).

This note comments on Hindriks and Guala's ‘unified theory of institutions’. One of the components that Hindriks and Guala seek to unify, and which they claim is unsatisfactory on its own, is the analysis of conventions that derives from the work of Lewis. I argue that the Lewisian approach provides simple and powerful explanations of many regularities in the social behaviour of humans and other animals. Those explanations can be seen as good social science even if, as Hindriks and Guala argue, they do not fit with common-sense ontology.

This brief note is a commentary on Hendriks and Guala's (2014) unification of the institutional theories of Lewis, North, and Searle. It argues that the equilibrium theory of Lewis is fundamental and that the kind of equilibrium best suited in this role remains the orthodox notion of Nash.

In their stimulating paper, Hindriks and Guala (2014) bridge the prominent alternative conceptions of institutions-as-rules and institutions-as-equilibria, by proposing a ‘rules in equilibrium’ interpretation. This comment argues that the task of defining institutions as a class of phenomena is different from the tasks of understanding or analysing them. Definitions are classification devices and are typically ill-based on behavioural outcomes such as equilibria. Accepting the useful insights of the Hindriks and Guala (2014) article, attention to the matter of definition reinstates a rules-based approach, notwithstanding the importance of understanding and analysing equilibria. The comment establishes a broad definition of institutions as systems of rules, which includes organizations. Finally this comment raised some of the problems involved in understanding the nature of institutional rules.

Hindriks and Guala (2014) hope to provide a unified account of institutional theory that will combine the accounts of regulative rules, constitutive rules, and equilibria. I argue that only the constitutive rule approach has any possibility of success, and that the other two cannot even pose the right questions, much less answer them. Hindriks and Guala think constitutive rules can be reduced to regulative rules. I argue that their reduction is mistaken. The key to understanding social ontology is understanding status functions.

Our goal is to develop a theory that combines the best insights of philosophical and scientific theories of institutions. We are not committed a priori to save the commonsense notion of institution, or the thesis of human exceptionalism. We think that human cognition is important, but we do not claim that common knowledge or collective intentions are necessary for coordination. Like most of our commentators, we believe that there is continuity between simple rules of precedence and sophisticated institutions like property, marriage, or money. Finally, we argue that a satisfactory account of institutions must be compatible with different theories of normativity, specifying the social and psychological mechanisms that make it possible to override selfish desires.

The purpose of this special topic forum is to call for research on the topic of minds and institutions. I briefly discuss three specific research opportunities: (1) bounded rationality versus mind, (2) many minds and the interfaces of institutions, (3) the affordances of institutions and arbitrage. I then briefly introduce the two special topic forum papers and highlight how they link to the topic of minds and institutions.

In this work we analyze the characteristics and dynamics of organizations wherein members diverge in terms of capabilities and visions they hold, and interests which they pursue. In particular we examine how different forms of power can achieve coordination among such diverse capabilities, visions, and interests while at the same time ensuring control and allowing mutual learning. By means of a simple simulation model of collective decisions by heterogeneous agents, we will examine three different forms of power, ranging from the power to design the organization, to the power to overrule by veto or fiat the others’ decisions, to the power to shape the very preferences of the members of the organization. We study the efficiency of different balances between the three foregoing mechanisms, within a framework in which indeed organizations ‘aggregate’ and make compatible different pieces of distributed knowledge, but the causation arrow goes also the other way round: organizations shape the characteristics and distribution of knowledge itself, and of the micro ‘visions’ and judgements.

Many institutions, large or small, make their decisions through some process of deliberation. Nonetheless, deliberating institutions often fail, in the sense that they make judgments that are false or that fail to take advantage of the information that their members have. Micro mistakes can lead to macro blunders or even catastrophes. There are four such failures; all of them have implication for large-scale institutions as well as small ones. (1) Sometimes the predeliberation errors of an institution's members are amplified, not merely propagated, as a result of deliberation. (2) Institutions fall victim to cascade effects, as the initial speakers or actors are followed by their successors, who do not disclose what they know. Non-disclosure, on the part of those successors, may be a product of either informational or reputational cascades. (3) As a result of group polarization, deliberating institutions sometimes end up in a more extreme position in line with their predeliberation tendencies. Sometimes group polarization leads in desirable directions, but there is no assurance to this effect. (4) In deliberating institutions, shared information often dominates or crowds out unshared information, ensuring that institutions do not learn what their members know. Informational signals and reputational pressure help to explain all four errors. The results can be harmful to numerous institutions, including large ones, and to societies as a whole. Markets are able to correct some of these problems, but cascade effects occur there as well.

Over the last three decades entrepreneurship has become a hot topic in economics and management. Much of the entrepreneurship research literature has built upon insights of economists such as Schumpeter, Knight, and Kirzner, each of whom has inspired a distinct strand of entrepreneurship theory and application. Schumpeterian innovation and Kirznerian alertness are the best-known concepts of entrepreneurship, but a newer research stream is building on Knight's idea of entrepreneurship as judgmental decision-making under uncertainty. What we call the judgment-based view models entrepreneurs as owning, controlling, and combining heterogeneous assets, which differ in their attributes, and deploying these assets within a firm to produce goods and services in anticipation of economic profit. This Forum presents three papers that develop, extend, and challenge the judgment-based view of entrepreneurship, focusing on the foundations of judgment, the processes of entrepreneurial resource assembly, and the relationship between the judgment-based view and other theories of economic organization.

Doctor-patient jokes are universally popular because of the information asymmetries within the diagnostic relationship. We contend that entrepreneurial diagnosis is present in markets where consumers are unable to diagnose their own problems and, instead, rely on the entrepreneur to diagnose them. Although it is widely recognized that consumers face information asymmetries over price comparison and quality assessment, little attention has been given to information asymmetries regarding individual customers’ needs. This has led to the economic contribution of the diagnostic entrepreneur being overlooked. Entrepreneurial diagnosis is a cognitive skill possessed by the entrepreneur. It is a subset of entrepreneurial judgment and can be modeled. The model shows that in order to exploit opportunities it is often necessary for entrepreneurs to invest in market-making activities, such as customer-focused diagnostic services, backed up by credible reputations for competence and integrity. While diagnostic entrepreneurship is particularly important in knowledge-intensive service industries (such as medicine) it is important in all industries whenever radical product innovation occurs (e.g. modern computers and phones). Successful commercialization of innovation often requires, not only new technology, but diagnostic entrepreneurship too.

The effects of a truly uncertain future are more far-reaching than what has traditionally been assumed in transaction cost economics (TCE). Uncertain governance choices require that agents exercise judgment in the absence of other means of estimating the payoffs associated with complex combinations of transaction attributes, contractual contingencies, and governance structures. Judgments are made on an experimental basis to incrementally improve actors’ heterogeneous cognitive representations of the contractual landscape. I argue that uncertain governance choices are subject to specific decision-biases that interact with the potentially corrective function of current organization and asymmetries in actors’ access to decision-supporting systems. These asymmetries may affect the contracting parties’ preferences over differential governance structures. Specifically, by overestimating individual unbiased rationality and disregarding how access to decision-supporting systems may affect governance choice, TCE runs the risk of underestimating the degree of vertical integration in actual firms.

Entrepreurship theory within economics has long touted the importance of judgment in entrepreneurial action. More recently, proponents have begun to advocate extension of this work to organization studies. However, critics of entrepreneurial judgment have responded by claiming that the construct is only meaningful post hoc and vapid when examined ex ante. Instead, they claim that, if entrepreneurship theory is to progress, then judgment must be replaced by a process logic known as effectuation. This article examines their claims and redefines the judgment dilemma as one of scope rather than existence. Empathic accuracy is then introduced to offer a means of addressing their criticism without having to deny the existence of entrepreneurial judgment. Empathic accuracy is also shown to be capable of explaining some of the cognitive mechanisms necessary for effectuation and dynamic socio-economic order.