Does Neoinstitutionalist Economics Have a
General Theory of Economic Institutions?
Explaining the Trajectories of Property Systems in
Corporate High-Group Societies
Jeremy Schulz
Department of Sociology
University of California, Berkeley
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INTRODUCTION
In this paper I examine the theoretical paradigm of neoinstitutionalist economics (NIE) with a view to
exposing its strengths, limitations, and presuppositions. In critiquing the NIE paradigm, I treat the model as an
explanatory theory used to account for the genesis and trajectories of a special kind of economic institution,
the social arrangements for controlling nonsocial resources (Parsons & Smelser 1965 [1956]). Such
arrangements go under the name of “property rights” in the language of NIE. For many years, adherents of
the NIE model, whether economists, legal theorists, historians, anthropologists, or sociologists, have sought to
explain how specific kinds of property rights develop in response to particular economic conditions.
The NIE model of property rights has been applied to a wide variety of socio-economic formations, including
market capitalist systems with and without state apparatuses, feudal-seignurial systems, and state socialist
systems (see Collins 1999). In their panoramic overview of Western economic history, for example, Douglass
North and Robert Thomas use the same neoinstitutionalist tools to analyze the economic conditions of
prehistoric pastoral societies, ancient agricultural societies, feudal societies, and industrial societies (North &
Thomas 1973, 1977, North 1981, 1990, Eggertsson 1990). For the most ambitious of the NIE enthusiasts, the
NIE model can be used to identify the mechanisms responsible for the emergence of private property rights in
corporate social units such as tribal societies and intentional communes (Coleman 1990), as well as open
functionally differentiated societies. A thorough review of the NIE literature yields a number of such property
rights analyses. These accounts are designed to show that the forces driving the development of property
rights in corporate societies are the same as the forces driving the development of property rights in
noncorporate societies, particular market capitalist societies. However, a careful look at the anthropological
and sociological studies of such societies suggests that the range of applicability of the model cannot be
extended indefinitely. The limitations of the NIE model are quite apparent when the model is used to explain
the trajectories of property systems in societal settings where production and consumption activities are carried
out by communal agencies rather than agencies (social actors) acting independently of the corporate body (see
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Meyer & Jepperson 2000). In fact, we cannot make sense of the dynamics of property systems in such
societies unless we turn to social mechanisms foreign to the NIE framework. Thus, in this paper I explore
what happens to resource management institutions in corporate societies.
I THE OUTLINES OF THE NIE APPROACH TO PROPERTY RIGHTS
According to the NIE model, institution and institutional systems (Rutherford 1994: 96) are the outcomes of
institutional-choice situations where affected actors decide whether to retain the constitutional rules embedded
in the status quo, the amend the rules, or to replace them entirely (see Ostrom 1990: 193, Bromley 1989: 40).1
A status quo institutional structure will give way to a new institutional structure if and when these actors act in
concert to carry out an “institutional transaction” (Bromley 1989: 49, 110), or establish a new structure of rules
and conventions. The “Northian” NIE analysts present the macrosocietal rule structures of the economy,
particularly property systems and systems of exchange, as effects of economic forces and conditions. By
economic forces and conditions, North means only those demographic, ecological, and technological forces
affecting relative prices of inputs and outputs. The process of institutional transformation begins only when
changes in resource scarcities (as registered by prices) prompt economic actors to reexamine the institutional
component of their choice environment. Thus, only relative scarcities can mediate between large-scale
“macrolevel forces” (Turner 2001: 359) such as population pressures and technological capabilities, on the one
hand, and the institutional structure of the economy, on the other hand. We can always trace the structure of
any underlying property relations in a socio-economic system to the relative scarcities of various inputs and
the relative demand for various outputs as they are registered by factor and product prices (Ensminger 1992,
North 1990: 7, 84, Field 1981: 184-5). Thus, when the exchange ratios of productive inputs change – (when
the land/labor ratio changes) or when the exchange ratios of outputs change (when some types of clothing
become more expensive relative to other types) – the demand for new ground rules materializes.2 North’s
1
The operation of the new institutional form will, over a period of time, then affect the macro-economic
conditions which induce institutional change, creating a feedback loop between economic conditions, individuallevel actions, and foundation-level institutional structures (see Little 1989: 223-228 for more).
2
In the context of a market exchange system this means that new institutions should make it possible to generate
more commodity or exchange value than the previous institution and/or lose (“dissipate” Barzel 1989,
Eggertsson 1990: 117) as little value as possible. There will be a demand for the reproduction and maintenance
of the status quo institutional forms, on the other hand, whenever these institutions furnish the interested actors
with a locally optimal mix of incentives/disincentives, opportunities/opportunity costs, and coercive sanctions.
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NIE model takes care of three distinct explanatory tasks: the task of explaining the reproduction of property
institutions, the task of explaining incremental shifts in the scope and structure of existing property
institutions, and the task of explaining qualitative changes in these institutional structures.
Of course, it may be impossible to implement any new foundational-level institution in a given social
environment if the costs of coordinating private decisions are prohibitive or if the central political authority
cannot overcome the opposition of interested actors (see Kantor 1998: 9-10, 145-8). The political system may
be incapable of translating the demands of constituents into institutionalizing actions. However, the demand
for institutional transformation will arise whenever changing economic conditions present interested social
actors with new opportunities/opportunity costs and different economic incentives/disincentives. 3 The
demand for change in constitutional institutions arises exclusively from the cost-benefit strategizing of
independent actors who are each seeking the optimal “choice domain” (Chong 2000: 14, Rutherford 1994: 44,
Bromley 1989: 39, 50) in which to act. To put the point in different terms, if we want to understand the
structuring of the institutions that control nonsocial resources, it suffices to investigate the dynamics of the
economy’s structure of incentives and opportunities. It is unnecessary to inquire into the relational or cultural
features of the institution’s social environment.
Among those sociologists who concentrate on the foundation-level institutions of the economic system, most
have borrowed the core of the choice-theoretic framework underlying NIE, even if they have extended it in
significant ways. Michael Hechter stays within the ambit of the choice-theoretic framework when he probes
the conditions necessary for the establishment of collective action regimes and property arrangements. In
Hechter’s the NIE model suffices, with a few modifications, for explaining the emergence and trajectories of
such institutions. Hechter does contend that, in order for social agents to create or transform institutions
Such a mix should ensure that the economic system is operating as efficiently as possible in both the arenas of
production and consumption (i.e. production inputs are going to their most highly valued productive uses and
consumption expenditures are going to the most highly valued commodity outputs see Bromley 1989: 122-16 –
135-142).
3
It is unclear whether the resource-constituting actions are to be analyzed as instances of “parametric rationality”,
where the agents are acting within a given environment ruled by predictable causal laws or instances of “strategic
rationality”, where agents are acting within a social environment composed of equally rational alters. See Elster
1983: 75-7).
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“from below”, each agent must commit himself or herself to a joint project (see Hechter, Opp, Wippler 1990:
14-16). But, Hechter’s social actors act on the basis of independently formulated ends and have no cause to
concern themselves with collective ends unless, by pursuing these ends, they advance their private interests
(see Barnes 1995: 10-12, 29, 77). In making this claim Hechter adopts the NIE model of action (Little 1989).
According to this model, only individuals can initiate action, and only incentives and opportunities can drive
them to do so.4 Institution-building, as a specific type of collective action, can be accomplished only through
the coordination of independently acting individuals through the manipulation of incentives and other features
of the choice environment.5 It is impossible, if we accept Hechter’s choice-theoretic premises, to explain the
creation, reproduction or transformation of social institutions without taking into account the private pay-offs
and opportunity costs which enter into the calculations of these independent “decision units” (see Barnes 1995:
80-84). If there is a joint project animating the institution-building actions, it has to be one built upon the
privately defined interests of the social actors.
According to the accounts of the NIE, the demand for new institutional structures materializes only when
interested social actors, weighing the costs and benefits of the status quo institutional structure against viable
alternative institutional structures, determine that their economic interests would be better served by the
alternative structures. In its pure or “naïve” form (Eggertsson 1990: 249), the NIE model “explains” the
change in RMIs as a direct function of social actors’ responses to new cost-benefit possibilities. If new costbenefit possibilities emerge because of shifts in relative scarcities brought about by demographic,
technological, or ecological transformations, we should see a rise in demand for institutional restructuring. 6
Absent such shifts, the demand for institutional restructuring should remain constant. If collective action
decision mechanisms can translate this demand into action, then institutional restructuring will inevitably
Philip Pettit calls these two mechanisms “sanctions” and “screens” respectively. Sanctions influence choice by
altering the relative desirability of particular options while screens shape choice by selecting which options will
be available to which agents (see Pettit 1996: 57-8).
5
James Coleman does not discuss the establishment of foundation-level institutions directly in his comprehensive
choice-theoretic reworking of social theory The Foundations of Social Theory. However, when Coleman dissects
markets and other systems of exchange, he analyzes how social agents can transfer rights to control other social
agents’ actions, as well as rights to private and nonprivate resources (see Coleman 1990: 32-50).
6
If the political-cultural conditions are ripe for institutional restructuring, “institutional entrepreneurs” (Colomy
1985: 140) will take charge of building support for the changes.
4
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follow in the wake of new cost-benefit possibilities generated by changes in the demand and supply
characteristics of resources.7 The demand for communalized property arrangements, on the other hand, grows
when the new property arrangement imposes economic costs that outweigh the expected economic gains
(Eggertsson 1990: 264). Both benefits and costs can be defined in use-value terms as the usable output of the
economic system or exchange-value terms as the monetary value of the salable output.
We can see how such a process could work in one of the original applications of NIE to the question of
restructuring in resource-management institutions, Demsetz’s theory of property rights. Demsetz uses the
NIE model of scarcity-induced change to explain the introduction of exclusive rights in land among native
American hunting tribes in Eastern Canada in the early years of 18th century (Eggertsson 1990: 250-251,
Bromley 1989: 216, Demsetz 1967). As Demsetz argues:
The emergence of new property rights takes place in response to the desires of the interacting persons
for adjustment to new cost-benefit possibilities...(Demsetz 1967: 350)
Demsetz explains the stepwise privatization of hunting territory used by the indigenous peoples of the Quebec
area (the Montagnes) in the 18th century as an organized attempt to cope with the overexploitation of hunting
territory. This overexploitation suddenly became costly once the economic value of animal pelts rose on
account of increased trade with Europeans. Under the original “open access” regime, the amount of game
hunters could harvest in the territory was not restricted in any way. As Demsetz argues, the hunters
appropriated more game than could be replenished by the natural ecosystem, and imposed unwelcome
“negative externalities” on future hunters (see Ellickson 1993: 5, Demsetz 1967: 351) who had to make do
with depleted stocks of game. Under this property regime, none of the hunters had an interest in restraining
their hunting activities because they could offload the costs of their activities onto future hunters. In addition,
the hunters faced a class “tragedy of the commons” problem: the nonexclusivity of the prevailing property
arrangements mean that each hunter is motivated to take as much game as he wants, but has no reason to
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There are really two parts to the argument: 1. the demand for more highly institutionalized (more codified,
inflexible, and formalized) rights in resources arises in response to the relative scarcities in productive resources
and 2. the demand for more “atomized” (Bromley 1989: 14, 207) property arrangements climbs when interested
actors expect “positive net gains” from the privatized property arrangements (when the economic benefits of the
restructuring exceeds the added costs in resources used to facilitate contracting, governance, and enforcement of
the new property rights [Eggertsson 1990: 263]).
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contribute towards paying the costs incurred by his usage of the resource (Ostrom 1990: 5-7, Hardin 1982).
Even if he makes an effort to conserve the depletable resource, his private contribution will make a negligible
difference if others continue to overexploit the hunting lands.
Before the arrival of European traders and settlers willing to pay for animal pelts, the Montagnes hunters could
live with the open-access arrangements despite these failings. They had no strong incentives to assign
parcelized hunting lands to individual families. The arrival of European fur traders and the sudden rise in the
economic value of animal pelts changed the hunters’ cost/benefit calculus and made the “parcelization” of
hunting lands economically advantageous enough to outweigh the costs of setting up new untried property
arrangements (Eggertsson 2001: 81, Barzel 1989: 65, Demsetz 1967). Now it was in each hunter’s interest to
ward off poaching by other hunters. To accomplish this task, the hunters parceled out the hunting lands and
assigned each family a specific territory. According to Demsetz, the “privatization” of hunting lands was a
device whereby the native American community “internalized the externalities” following from
overexploitative hunting activity (Demsetz 1967: 350). Because of the economic benefits of the parcelized
property regime to the hunters, it was worth it for them to pay the “specification” and “enforcement” costs
associated with the rights (see Furubotn & Richter 1997: 90).
Other neoinstitutionalist economists have extended and developed Demsetz’s model. The law and economics
theorist Robert Ellickson condensed Demsetz’s argument into the “efficiency thesis” in his 1993 law review
article “Property in Land”. Ellickson extends the efficiency thesis’ scope of application to all “close-knit
groups” (Ellickson 1993) and develops many of Demsetz’s ideas about externalities and governance costs as
they apply to land. For the community to use its land efficiently, socially harmful “grabbing” and “shirking”
tendencies must be discouraged. One way to do this is to parcelize the land so that the owners and only the
owners bear the costs and benefits accruing from their usage of the land. In this way the collectivity ensures
that the private costs and benefits of the owner’s (small-scale) appropriative and provisioning activities
approximates the costs and benefits for the social group in which he lives (Ellickson 1993).
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While the less sophisticated NIE property rights accounts do nothing more than analyze the demand for
property rights innovations, and shy away from explaining the actual institutionalization of these innovations
(Demsetz being a good example), many recent accounts seek to improve upon the “naive” property rights
models. They introduce factors that are supposed to account for the translation of the demand for institutional
change into actual observable institutional restructuring. Most of this translation processes take place in the
political sphere. Neoinstitutionalist economists interested in the evolution of property rights explore such
factors as the structure of state and nonstate authority systems (Furubotn & Richter 1997: 106, Eggertsson
1990: 287-296) and democratic and legislative decision-making processes (Furubotn & Richter 1997: 110-1,
Kantor 1998: 11-14, 90-1, 146-7). Commonly, the NIE analyst searches for sources of inefficiency in the
political sphere, while assuming that the processes at work in the economic sphere will promote the
economization of resources and the maximization of economic value (Eggertsson 2001: 84).
II PROPERTY INSTITUTIONS, CLOSED SOCIAL SYSTEMS, AND
MULTI-LEVEL INSTITUTIONS
Most NIE accounts of property arrangements apply to noncorporate societies “low-group” societies such as
modern market capitalist societies. However, a number of particular ambitious advocates of the NIE approach
have sought to demonstrate the universal scope of the NIE model by applying it to corporate high-group socioeconomic systems. As the proponents of the NIE model want to present their model as having a universal
scope of application, it is important for them to show how the theory works in the most challenging settings,
the social settings that are furthest removed from the differentiated market-capitalist differentiated societies of
the modern world. The legal theorists Richard Posner and Robert Ellickson have approached the topic of
property rights in corporate societies from the NIE perspective. Starting from NIE premises, both analysts
have derived a number of propositions about the trajectories of property arrangements in such societies. While
Posner focuses on the “archaic” primordial corporate units (Coleman 1990: 326-7, Sahlins 1972) that have
traditionally been the concern of anthropologists, Ellickson concentrates on intentional communities such as
the Hutterites, the pioneer colonies of Plymouth and Jamestown, and the modern Israeli Kibbutzim (Ellickson
1993). Posner explains the existence of communal resource arrangements as a general feature of corporate
societies that depend on an unforgiving resource base for their economic survival and reproduction. In such
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societies, the risks associated with shortages of food, water, land, and other critical productive resources are so
severe that much of the society’s the institutional infrastructure is designed to minimize these risks. Because
the primary “meta-good” (Posner 1980: 10-12) generated in these societies is insurance against societyincapacitating shortages, critical resources are always handled as inalienable communal entitlements rather
than property. This way, a single individual or family cannot deprive another individual or family of the
means of subsistence by acquiring exclusive rights in some resource critical for their subsistence. Ellickson
extends Posner’s “social insurance” theory to encompass property arrangements in intentional communities
such as the pioneer settlements of Jamestown and Plymouth, the American Hutterite colonies of the late 19th
century, and the Israeli Kibbutzim of the late 20th century (Ellickson 1993).
None of the NIE analysts who try to explain the resource management institutions in corporate high-group
societies draw attention to the profound differences between these societies and the low-group noncorporate
societies which are featured in most NIE accounts. Yet, we should not overlook these differences. Corporate
“high-group” (Thompson et al 1990: 5) societies differ from the noncorporate societies in several critical ways.
First, in corporate high-group societies, individuals’ interests and ends are defined in and through their
membership in the social group, and individuals are authorized to act as agents of the collectivity, not as
autonomous decision units. Second, relatively high degrees of “interactive density” prevail in these smallscale societies. The frequency of face-to-face contact and ease of mutual behavioral monitoring makes a
difference when it comes to compliance to norms (Therborn 1996: 122-3), as does the individual’s material
and social dependence on jointly produced goods (Chong 2000: 54, Hechter 1987). Conjoint norms dominate
disjoint norms in such societies because most members of the group are both the targets of most norms and
rules and the enforcers of those norms and rules (Therborn 1996: 129, Coleman 1990: 326-7).
These societies can be distinguished from noncorporate societies from the standpoint of systems-theory as
well. In the case of the corporate high-group society, the institutional machinery of the societies is
functionally undifferentiated internally, yet at the same time separated the external environment by relatively
nonpermeable boundaries (Luhmann 1988, 1982, 1974). This is true within the economic system, where the
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production-oriented and consumption-oriented subsystems are highly integrated with one another.
Membership in the producer collectivity is co-extensive with membership in the consumer collectivity (see
Merton 1963 [1957]: 30) – we have what Wiles calls “auto-consumption” or productive autarky (Wiles 1977:
147). The end-users who consume the output of the corporate unit are the very social units that generate the
inputs fed into the productive process (i.e. labor and land). Further, matters of production and allocation are
handled by multifunctional institutions rather than functionally specialized production units and consumption
units (Luhmann 1982 [1978]: 197-200, 215). In the contrasting case of the noncorporate low-group society,
the overall social system is highly differentiated internally in terms of task areas (the political system is
differentiated from the economic system), but the social system is open to inputs from the external
environment.
As we have seen, many NIE analysts have sought to extend its model of resource management institutions to
societies very unlike the noncorporate market societies to which the model was originally applied. Posner,
Ellickson, and Ensminger all use the NIE model to account for the trajectories of institutionalized property
arrangements in such societies. While their attempts do shed light on certain aspects of these arrangements,
they do not constitute fully satisfactory explanations of institutionalization processes. It is in reference to
corporate high-group societies that the NIE model’s incompleteness is most clearly exhibited. If we carefully
review the ethnographic evidence collected by certain social anthropologists, we can see that the NIE model
falls short in certain crucial respects. Moreover, this evidence suggests that a very different approach to
institutionalization can succeed precisely where the NIE model fails.
the NIE model and multi-leveled economic institutions
From the viewpoint of coherence, the most serious flaw in the NIE model, as a general model of economic
institutions, has to do with its inability to countenance multi-level institutions and “meta-rules”. This
deficiency becomes evident when we look at Alan Fiske’s groundbreaking work in social anthropology, The
Structures of Social Life. In this study, we meet the Moose, a contemporary kin-based agrarian West African
society with a highly communalized set of institutions for handling both productive and nonproductive
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resources. In Moose society all resources are treated as open access facilities available to every member of the
group (Fiske 1991). As in many West African tribal societies, input resources such as water as well as output
resources such as food belong inalienably to all members of the group (Fiske 1991: 258-285). Correlatively,
no member of the group has the authority to acquire exclusive ownership rights in any resource, no matter
what he or she is willing to exchange for such ownership rights. Custom and formal sanctions prohibit the
transferral of ownership rights and the selling of resources. In contrast to many other African societies, where
the negation of property rights is restricted to particular resources such as land (Ensminger 1992), in Moose
society, the acquisition of property rights in any resource is treated as a violation of the society’s foundational
principle (Fiske 1991: 289). As Fiske reports from his ethnographic studies, it is very rare for any member of
Moose society, no matter his or her position, to express any dissatisfaction with the communalized
arrangements for handling resources. On the rare occasions when a particular person or family tries to
proprietize land and acquire ownership rights in it, other members of the group inevitably refuse to recognize
the legitimacy of the “owner’s” claims (Fiske 1991: 275).
Now, Posner and other proponents of the NIE approach would undoubtedly explain the Moose’s stricture
against proprietization and the resultant communalization of resources as a way of managing risks associated
with resource shortages. But, if the nonproprietization condition served exlusively as an “insurance” device,
why did it apply to nonproductive resources like prepared food (see Fiske 1991: 263-4)? Why did Moose
society resist any moves toward the proprietization and decommunalization of resources so strongly, when
even small steps in the direction of proprietization would have improved the society’s economic health and
enhanced its productivity? Why did the Moose, unlike Ensminger’s East African society, selectively
decommunalize particular resources when it became politically and economically feasible to do so (see
Esnminger 1992)?
Fiske has an answer to this question, but it has nothing to do with the NIE model of institutionalization. In
Fiske’s view, the communal mode of handling resources does not persist in Moose society because it performs
well in an economic capacity or because it serves the interests of social actors looking to create the optimal
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choice environment for their economic activities. Rather, in keeping with his “generative grammar” (Fiske
1991: 21, 25, 68) approach to forms of social interaction, Fiske proposes that the Moose retain the systemwide
stricture against proprietization because they conform both their economic and their social practices to the
“communal sharing” (Fiske 1991: 60) model of social relations.8 Valuing the “solidarity, cohesiveness, and
mutuality” (Fiske 1991: 266, 307) of social relations more than the efficiency of their productive operations,
they prefer to treat resources as communal holdings even when the might benefit economically if those
resources were proprietized and handled as commodities. In modern market capitalist societies and, to a lesser
extent in state socialist societies, “market pricing” along with “authority ranking” now play the primary role in
orchestrating economic activities. In Moose society, the role played by these two models in organizing
provisioning and allocative activities is negligible in comparison with the communal sharing model.
Although Fiske does not conceptualize the communal sharing model in terms familiar to either sociologically
or economically oriented institutionalists, it is clear that he is speaking about something like an institution
when he talks of models and templates. However, if we analyze his discussion of templates, it becomes
apparent that he is referring to an organizing principle that operates at a higher level than the practices which it
organizes. For this reason, we should conceptualize these models as higher-order meta-institutions akin to the
meta-rules mentioned by systems theorists (Baumgartner et al 1986: 18-19) and decision theorists (Lindenberg
1996: 30). Located at the summit of the social system’s “control hierarchy” (Luhmann 1988, 1982, 1974),
these relational templates determine the essential form of institutions in various domains of social life,
including the economic domain. The meta-rule of communality stipulates that all individuals should engage in
provisioning activities that serve the interests of the collectivity and all productive and allocative activities
should contribute to the cohesiveness of the group. The communal institutions of the Moose economy bind
together all members of the group by maximizing their material interdependence. These institutions foster
social solidarity at the same time that they generate economically inefficient externalities. Each individual
member of Moose society, rather than seeking to optimize the choice environment facing him or her,
8
As Fiske tell us, all human societies make use of a limited number of templates to organize social life and to
“build, sustain, and restructure groups, institutions, and whole societies” (see Fiske 1991: 22, 41, 160). The
communal sharing model is one of four different models which can govern social life. These models are usually
combined and it is unusual to find them in their pure form.
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adheres to the meta-rule of communality, a rule enacted in the holding of resources as rights of persons rather
than property rights and the managing of resources as communal assets.
the NIE model and preference-formation mechanisms
Without exception, the NIE accounts concern the trajectories of resource management arrangements dealing
with a single species of resource, namely, productive assets or input resources. The accounts produced by NIE
analysts never deal with the genesis, reproduction, and transformation of those resource institutions handling
output resources (i.e. consumption goods consumed by end-users). This is an unfortunate omission. One
could argue that the resource management institutions that take care of output resources play an equally
important role in a society’s overall socio-economic system and require explanations of their own. As it turns
out, the NIE model no longer works wekk as an explanatory apparatus when the institutional explananda is a
distributive institution, as opposed to the input institutions that typically serve as the explananda in NIE
models. A satisfactory account of distributive institutions requires us, at the very least , to augment the NIE
model with more “sociological” social mechanisms (Hedström & Swedberg 1998).
We can see the incompleteness of the NIE model, as a general theory of resource management institutions,
when we use it to explain the trajectory of distributive institutions in the Israeli Kibbutzim of the 1930s and
1940s. In his article Property in Land, Ellickson attributes the the rapid decommunalization of resources in
the Kibbutzim to the economic inefficiencies brought about by the original communalization of resources, as
well as changes in the reigning “ideology” (Ellickson 1993).9 But, as it turns out, the decommunalization that
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Ellickson contends that both the Hutterite colonies and Israeli Kibbutzim adopted a communal approach to resources
because of their “ideological” commitment to sharing and egalitarianism (Ellickson 1993: 16). Ellickson’s
invocation of ideology creates two problems for the NIE model. First, there is a “translation” problem. If ideology
is either a feature of social actors’ cultural equipment or a feature of the society’s relational structure, it cannot be a
feature of the cost/benefit environment and cannot be part of a genuine NIE explanation. Second, Ellickson does not
tell us how ideological commitments interact with the familiar incentive/disincentive and opportunity/opportunity
cost mechanisms integral to the NIE model. Why should ideological commitments stabilize a property regime in the
face of the ostensibly irresistible forces of the efficiency dynamic? Ellickson does not indicate the socio-structural
or cultural conditions under which it is likely that ideological commitments will dominate over incentives or vice
versa.
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changed the face of the Kibbutzim’s distributive institutions in the 1940s left the productive institutions of
Kibbutz society largely untouched (Rosenfeld 1952). In other words, this period witnessed the selective
decommunalization of the Kibbutzim’s institutions for managing resources, not the complete
decommunalization. As Ben-Rafael observes, the means of production have remained fully corporatized and,
even after the prolonged economic crisis of the 1980s, there has been little movement in the direction of
privatizing the productive assets of the Kibbutz (Ben-Rafael 1997: 127, 210).
Moreover, when if we try to explain the institutional tranformations of this period, we cannot help adducing
preference-formation mechanisms (Elster 1983b), social mechanisms that do not enter into NIE models. As
we will see, it was the rapid rise in consumer expectations and aspiration that instigated the
decommunalization of these distributive institutions. We cannot understand the trajectory of the Kibbutzim’s
early distributive institutions unless we posit a preference-formation mechanism that accounts for this rise in
consumer aspirations. If we go back to the ethnographic literature on the early Kibbutzim we discover that
there is a credible candidate for this mechanism, namely Mertonian “reference-group” processes (Merton 1965
[1957]). In this case, distributive institutions were restructured not because social agents sought to optimize
their choice environment, but because their consumer preferences shifted as a result of changes in the status
systems of Israeli society (Sauder 2002). Thus, if the NIE’s inability to accommodate multi-level institutions
or meta-rules is its most serious flaw from the standpoint of logical consistency and coherence, its neglect of
demand-side “instigating conditions” (Little 1989: 240) may qualify as its most serious limitation from the
standpoint of empirical applicability.
decommunalization in the distributive and consumptive institutions of Kibbutz society
We can reconstruct the trajectory of these distributive institutions from Eva Rosenfeld’s detailed ethnographic
study of consumption in the early Kibbutzim (Rosenfeld 1952). She reports that the highly communalized
distributive institutions of the Kibbutzim performed well during the first two decades of the movement
(Rosenfeld 1952: 113). Under this fully communalized system, every Kibbutz member received a simple and
standardized package of goods and services distributed by the Kibbutz. Like the members of the Moose
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society studied by Fiske, Kibbutz members had free access to food, clothing, furniture, and health services
(Rosenfeld 1952: 21). Under this system, it is the responsibility of the Kibbutz to supply each member with a
specific package or “basket” (Gluck 1998: 128) of noncommodity goods and services.
The decommunalization of distributive institutions began in the area of clothing and did not spread to other
areas until several years later (Rosenfeld 1952: 130). During the early years of the Kibbutzim, from 1910 to
1930, members of the Kibbutzim were generally satisfied with their standardized allotments of after-work
clothing. The drab quality and simplicity of the clothing did not bother them, nor did their interactions with
the representative in charge of distributing clothing (Rosenfeld 1952: 121). Yet, the system started to show
strains when, during the 1930s, and influx of newcomers transformed the social composition of the Kibbutzim.
These American and European newcomers brought their own wardrobes with them as well as a new attitude
towards nonwork clothing. Although the collectivity was supposed to appropriate these clothes and
redistribute them in accord with the principle of equality (Rosenfeld 1952: 124), the mahsans typically
returned several items of clothing to the owner out of a vague sense of “propriety” (Rosenfeld 1952: 127).
Suddenly, the oldtimers found themselves living with others who had access to after work clothing of greater
quality and variety than the standard-issue clothes to which they had access. When the newcomers showed up
with their relatively stylish garments, the oldtimers developed a new passion for higher quality clothing
(Rosenfeld 1952: 134).
At the same time that the newcomers were bringing new kinds of clothing into the Kibbutzim, a wave of
immigrants was changing the face of the outside society. Waves of affluent European and American Jews
were settling in Israel to escape the persecution in Europe. Many of these immigrants wore clothing that, by
the standards of the early Zionist settlers, were far from plain and simple. The shift in the social composition
of the Kibbutz and the surrounding society meant that the Kibbutz had increasing trouble sustaining the
normative consensus on austerity necessary to restrain aspirations for high-quality clothing. Moreover,
because the newcomers were drawn from the same class as the affluent Israeli immigrants in the outside
society, and because these newcomers enjoyed considerable status within Israeli society, the less austerity-
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minded members of the Kibbutz started to orient their clothing choices to the standards prevailing in the wider
society (Rosenfeld 1952: 128-131, 227-9). They demanded a wider variety of clothes as well as access to
higher-quality clothing than the Kibbutz could provide. By the end of the 1930s, many members of the
Kibbutz had reoriented their clothing preferences and aligned them with the standards of the non-austerity
oriented “outgroup” (Merton 1957: 260-270, Rosenfeld 1952: 129-131, 134, 261). As Rosenfeld reports,
many of the newcomers mentioned the clothes worn by the affluent emigrants in the outside society rather than
the plain dress of their fellow Kibbutniks when they discussed their consumer aspirations in the domain of
clothing (Rosenfeld 1952: 223, 227-9). In this way the newcomers inserted themselves into the society-wide
status system partially based on ownership of socially visible goods (Sauder 2002).
In order to obtain clothing to their liking, deviant members of the Kibbutz increasingly went outside the
Kibbutz’s communal distributional channels and procured clothing from outside sources (Rosenfeld 1952:
170-1). The Kibbutzim, which had renounced the use of any material sanctions, was powerless to suppress
this deviant behavior as it spread to more and more members. As Kibbutzniks developed more favorable
attitudes towards the less communalized institutions, more and more members of the Kibbutz evaded the rules
governing acquisition of after-work clothing. What was once “deviant” behavior became more socially
acceptable for all members (Chong 2000: 193-5, 203-4, Merton 1957). The process of “norm substitution”
(Sztompka 1993: 254) that took place during this period did not meet much resistance. As Rosenfeld explains,
the Kibbutzim of this era did not hold its members accountable for wasting the communal resources, nor did
they hold members accountable for their acts of noncommunal consumption. Any institutionalized
sanctioning, it was felt, would violate the spirit of “voluntary commitment” (Rosenfeld 1952: 177) which
animated the founding of the Kibbutzim. When the “voluntary commitment” to austerity began to erode, the
Kibbutz had no other means of arresting the growth in consumer aspirations in the area of clothing and
averting a transition to less communalized modes of consumption (Rosenfeld 1952: 269).
The increasing demand for status-communicating clothes imposed a heavy burden on the distributional
institutions of the Kibbutzim during the 1930s and the 1940s, institutions designed only to furnish members
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with very basic goods. In this period it became more and more common for members to contest the mahsan’s
decisions if she rejected their requests for specific items of clothing (Rosenfeld 1952: 155). The communal
system of distributing a standardized package of clothes thus began to break down during the 1930s and 1940s.
This system was not equipped to satisfy the vastly increased demand for higher quality clothing. Nor could it
accommodate the desire to exercise “choice” in the domain of clothing acquisition. In the late 1940s,
institutional innovators within several leading Kibbutzim proposed to replace the fully communalized system
with a more effective “private credit account” system. Under this new system every Kibbutz member would
receive a share of the total clothing allowance apportioned by the Kibbutz leadership. They could then spend
this clothing allowance in whatever manner they pleased, either within the Kibbutz or outside it (Rosenfeld
1952: 188-9, 207). The institutionalization of the private account system spelled the end of communalized
provisioning for after-work clothing. Members no longer had to entrust their clothing “choices” to the Kibbutz
representative, but could request any garment of any kind whose “cost” did not exceed the limits of their credit
account. Thus, each member had a generalized claim on the group’s consumable resources in the area of
clothing. But this claim was limited; members could not overdraw their account, no matter their circumstances
(Rosenfeld 1952: 207). In addition, members were now authorized to procure clothing through market
channels in the outside society.
It is apparent, when one compares the Kibbutzim with other communalistic societies where decommunalization has not proceeded as far, that communes which can escape the reference-group pressures can
also resist the de-communalization forces more successfully. The Hutterites, for example, have not adopted
anything like the private account system with regard to clothes, partially because there is little demand in the
Hutterite commune for access to a wide variety of high quality clothing equal to the clothing available to an
urban bourgeoisie (see Barkin & Bennet 1983:355-6, 360-1). As far as consumption goods are concerned, the
relation of the commune to external status systems does play a major role in deciding the viability of
communal resource-allocation institutions. The success of the Kibbutzim were increasingly perceived as
related to their capacity to support consumption standards equal to the standards of individuals belonging to
the “reference category” in the wider Israeli society (Rosenfeld 1952: 241).
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DISCUSSION AND CONCLUSIONS
As the evidence shows, the rapid decommunalization of consumption facilities (clothes, furniture) in the
Kibbutzim took place in response to changes in preferences. The privatization of consumption outputs was
due to the rise in consumer preferences incited by changes in the status system. We can understand these
preference changes as the results of transformations in the status order of the wider society. Thus, the role of
social incentives in the transformation of the Kibbutzim’s property arrangements overshadowed the role of
economic incentives in initiating the process of institutional transformation. But if changes in status and
signaling systems (Sauder 2002, Chong 2000: 45), an aspect of social systems that does not enter into NIE
models, can set in motion changes in institutional structures, the NIE model is incomplete as a general theory
of institutional reproduction and change. It is incomplete even if its scope of application is restricted to
economic institutions.
Now, a proponent of the NIE model could argue that one cannot demonstrate the limitations of the NIE model
of institutional change by presenting evidence relating to Kibbutzim. After all, in the Kibbutzim, demand-side
pressures for goods were originally managed without recourse to prices (see Berliner 1999: 170). Since
consumption output in the Kibbutz was not allocated on the basis of prices, the mutual adjustment of supply
and demand was not accomplished through price equilibration, but took place through non-economic control
mechanisms. More specifically, the Kibbutzim managed demand by encouraging voluntary self-restraint in
consumption, a principle which has never orchestrated consumption in open differentiated societies (even state
socialist societies [Berliner 1999: 43]). Thus, any social mechanisms affecting the capacity of consumers to
exercise voluntary self-restraint would make it difficult to manage consumer demand, and ultimately
compromise the integrity of the Kibbutzim’s distributive institutions. If the Kibbutzim had originally used the
price method to allocate consumption goods, these social mechanisms would not have had the same effect. If
the Kibbutzim had originally utilized the price method for allocating clothes, consumers’ capacity to restrain
their wants would not have made a difference for the integrity of the system. As soon as consumption goods
like clothes acquired prices (whether monetary or not), the question of voluntary self-restraint was no longer
an issue for the Kibbutzim’s distributive institutions. At first glance, it seems hard to refute this reasoning. It
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is plausible that the transformation of RMI’s in the Kibbutzim of the 1940s would not have occurred if the task
of managing demand had been performed by prices instead of voluntary self-restraint. However, if we accept
this argument, then we can only apply the NIE model to societies in which prices are already the primary
means of solving allocation problems. Thus, the NIE cannot be a general model of institutional change
capable of explaining the trajectories of property institutions in all socio-economic settings, including
collectivized corporate societies where the price method is not the primary means of solving allocative
problems.
But this is not the only problem with the NIE model, considered as a universal theory of foundation-level
economic institutions. When it comes to closed-system societies like Fiske’s Moose, the NIE analysts’
unwillingness to countenance social mechanisms other than those postulated in the choice-theoretic framework
creates problems in explaining the trajectories of systemwide resource management institutions. These
problems are especially apparent in their attempts to identify the roots of inertia and change in institutions
governing the management of resources in corporate societies, whether primordial corporate societies or
intentional communities. In the previous section of the paper we examined the case of the Moose, a primordial
“archaic” society afflicted with chronic scarcity of productive resources. We saw that the stability of the
Moose’s resource management institutions was rooted not in the unchanging character of the choice
environment, but derived from the collective attachment of the Moose to a particular institutional template.
Economic incentives and opportunities could not loosen the grip of this model on the society. In this case, the
social mechanisms (Hedström & Swedberg 1998) postulated by the NIE model are inadequate for a full
understanding of inertia in the institutions responsible for handling resources. The NIE inventory of
individual-level and aggregate-level social mechanisms has no room for supervening institutions like the
systemwide template of communal sharing theorized by Fiske (Fiske 1991: 60). For this reason it has trouble
explaining the absence of demand for institutional transformation in a society where the status quo property
institutions perform poorly in all economic capacities. If the social context is sufficiently collectivized
(Thompson et al 1990: 44), then the NIE model may fail to accurately predict institutional transformations in
property arrangements.
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When analysts predicate their accounts of property institutions on NIE premises, they disregard those aspects
of property systems which cannot be subsumed under the choice-theoretic framework. The NIE model can
bring to bear only individual-level and aggregate-level transactional mechanisms in its explanatory ventures,
and has no interest in higher-order institutions or “symbolic forces” (Turner 2001: 106) irreducible to these
mechanisms. The NIE model cannot accommodate Fiske’s social grammars or models, because they exist not
as private interests but only as relational forms sustained in and through the interaction of mutually attuned
social actors. Thus, it cannot explain why, in some social environments, social actors care more about
preserving the relational forms in the society than about their economic welfare and productivity.
Of course a skeptic could object that Fiske’s theory of social grammars does not enable us to identify the
specific circumstances under which one particular relational template is likely to supplant another one. If we
say that stability, inertia, and change issue from a higher level of the social system, haven’t we simply
replicated the puzzle of institutional reproduction and emergence at the meta-level of higher-order institutions
(see Zucker 1988: 27)? To put the point in more concrete terms, why did the communal sharing model give
way to the market pricing model (a model which encourages actors to proprietize resources) in Ensminger’s
East African society but not in Fiske’s West African society? If we cannot look to economic conditions to
explain why the hold of the communal sharing model weakened among the Orma, what kinds of conditions
should we look to? If the NIE model does not offer a satisfactory answer to this question, neither do
“normative” theories of social action (Chong 2000, Therborn 1996). Thus, this challenging puzzle should
occupy the attention of all social theorists interested in institutions, regardless of their disciplinary allegiance
or theoretical orientation.
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