Institutional Realism: Social and Political Restraints on Rational Actors.

Grafstein begins his introduction: "Institutions are puzzling. If they are just human creations, how can they coerce us? If they are not, what else could they possibly be?" The problem has puzzled many people. Nevertheless, we are aware of the existence of institutions and those of us who have had contact with Southern Baptists know that these institutions play a major role in many people's lives.

Most people have deferred further consideration of this problem on the grounds that it's too hard. Grafstein is to be commended for taking it up. From an economic standpoint, the fact that he is strongly critical of the sociological models and turns to rational choice models as his favorite area is encouraging. Unfortunately, he is not very happy about the existing economic rational choice models. Indeed he devotes almost ten pages to criticizing the institutional "model" of The Calculus of Consent. This might make me a biased reviewer, but by coincidence the criticism is mainly of the chapters that Jim Buchanan wrote. The reader may recall that in the Preface to The Calculus of Consent, the responsibility for the chapters is allocated. In practice, I do not disagree with Buchanan on these matters, but both of us have changed our minds to a considerable extent since that book was written.

Grafstein's book is a very careful, well done, discussion of the general problem, but I cannot say that he has actually solved it. He points out that we should accept the reality of institutions and that they do control our lives in many ways. He also points out that they are human constructs and that individuals normally are free to leave a great many institutions. You may not be able to leave the Marine Corps at will, but you can stop being a Southern Baptist.

In essence, he argues that a rational person in dealing with these institutions would normally prefer to continue carrying out the instructions of the institution to breaking with it, although there would be exceptions. The fact that they are human constructs re-enforces this but it is very rare that an institution was set up as a result of conscious planning. It just grows.

I presume that most economists will agree with Grafstein that institutions are real entities and that they have great affect on human beings. I don't think that we can say that he has solved the problem he posed in the beginning. Nevertheless, he has made a good deal of progress and the book can be recommended to those who find the conventional wisdom insufficient.

Grafstein is a political scientist, but is knowledgeable on sociology and economics. He is familiar with such things as the "Prisoner's Dilemma" and "The Nash Equilibrium" and makes use of them in his discussion. He also makes use of moderately complicated mathematical models. The problem with the book is I do not think he has finally solved the matter but since I can't solve it myself, and I know no one else who can, this is not a severe criticism. At the very least it pushes the discussion forward.