​Individuals and institutions

For the past semester, I chose to organize my columns around the theme of “individuals and institutions” and will continue to do so in the fall. Therefore, I thought it might be helpful if I clarified the meaning and the assumptions behind this theme (although this goal might have been accomplished more easily with a group text to my parents).

First, at the level of the individual, it is my belief that there is nothing more important than happiness.In other words, the best possible outcome for a given person is to live the life that will bring them the greatest amount of happiness. Thus, I do not entirely share the Aristotelian conception of happiness as a state of wellbeing that must be justified according to some objective parameters. Instead, each person is almost alwaysthe best judge of his or her own happiness, which will come from very different sources from one individual to the next. That being said, it is possible to make some generalizations about what these sources will tend to be (such as physical and mental health, strong relationships andfinding enjoyment and meaning in one’s work).

Second, while this may be the naïve economist in me, I also believe that, by and large, individuals make decisions and conduct their lives to maximize their happiness (although cognitive flaws that are rampant in humans complicate this endeavor).

From these first two assumptions comes a third from which my column’s theme is derived: the purpose of society is to discover and adopt the institutions that maximize the extent to which an individual’s pursuit ofhappiness also promotes the happiness of others. These institutions broadly fall into three categories: markets, civil society, and government (the set of social practices, arrangements and norms that govern the “interactions among individuals that occur outside the context of government and outside the context of explicit market prices").

The free market system has been enormously successful in achieving the purpose of society mentioned above. Partiality (an intractable characteristic of humans) and fairness (a requisite for any form of robust voluntary cooperation) can often be at odds with each other. Market exchange has become the most universal form of cooperation because it often allows individuals to be both partial to themselves and fair to others. However, I suffer no illusions about cases of market failure and my columns, in addition to extolling the benefits of free enterprise, will also address these problems and possible remedies.

Similarly, a suite of civil society institutions can either guide individuals to behave in a way that is socially beneficial or harmful or even both. Religion, for example, is an institution that allows humans to solve many collective action problems. In his book God is Watching You: How the Fear of God Makes Us Human, Dominic Johnson argues that the fear of divine punishment may be an evolutionary adaptation which allowed humans to mitigate the problems created by their selfishness. However, religious doctrine can also promote dangerous beliefs that result in destructive actions.

Government policy and law can both enforce institutions and upend them. It is unlikely that an institution of property rights would be as robust without government enforcing it. However, when government enacts policies, it can upend social norms and institutions that had emerged to solve certain problems. For example, there is good evidence that the government’s implementation of the welfare state is at least partly responsible for the breakdown of the institution of marriage among low income individuals. The reason is that welfare payments deal with one of the social problems marriage evolved to solve, namely, the support of children. Evaluating the impact of government policies and political institutions will also be a major focus of this column.