The Book: Knight. 1992. Institutions and Social Conflict [Political Economy of Institutions and Decisions]. Cambridge University Press.
The opening words: “Institutions matter.”
The Preface: Institutional effects on social life could be studied by the relationship between rational action and institutional constraints. Knight’s book is a theory of institutional emergence, stability and change [shedding light on old macro-micro debates].
The Point: “The emphasis on distribution leads to the following explanations: Development and change are functions of the distributional conflict over substantive social outcomes; maintenance and stability are functions of the continuing ability of institutional rules to provide distributional advantages. Such explanations, which apply to both informal and formal institutions, conceptualize social interactions as bargaining problems and invoke the asymmetries of power in a society as a primary source of explanation” (210).
The book: Informal conventions form a base on which formal institutions organize and influence economic and political life. Think of the workplace and the boardroom. Economic institutions do incorporate the systems of property rights defining economic exchanges. Political decision making is framed by institutional rules and procedures. The force of law is important and pervasiveness should be measured. Also, international treaties influence international trade, alliances, environmental pacts, rules of war (e.g. Geneva Conventions), and are important to an institutional analysis.
Knight focuses on the basic network of conventions, norms, rights, and rules on which a society is based. In doing so, the book describes how an informal network develops and changes, as well as the costs transitioning an informal network into law [and backed by the state]. A social institution is complex, and even though many political scientists have thoroughly explained different aspects of it, there is still much to discover. Some have shown a social institution as a formal organization with explicit rules for the game. Others have illuminated when a social institution was a stabilized pattern of human relationships and actions (March and Simon 1958).
The common features of institutions in various contexts are: First, “an institution is a set of rules that structure social interactions in particular ways. Second, for a set of rules to be an institution, knowledge of these rules must be shared by the members of the relevant community or society” (italics in original, 2-3). Private constraints, idiosyncratic to the individual actor, do not comprise an institutions. Knight’s approach shatters the strict law-society dichotomy; such as legal anthropology analysis and jurisprudence. Social interactions are not always determined by laws (or even rules). Further, institutions are not coterminous with organizations. Even though a firm, government bureaucracy, a church, or a university may be classified as both, organizations generally showcase an internal structure, which is governed by an institutional framework of networks between actors.
If institutions are independent political actors with their own goals and interests (Evans, Rueschemeyer, and Skocpol, 1985; Katzenstein, 1978; Skowronek, 1982), then “state capacities” may be determined by the ability of the state to implement its goals in light of opposition and adverse conditions (4). Knight brilliantly examines a critical juncture: the former mostly observes the effectiveness of state organizations as collective actors; but in another direction, social institutions are distinctive.
Classical accounts of institutional change across intellectual traditions have culminated in at least two schools of thought. In the first, development and change in social institutions are observed as collective benefits for the community [as a whole]. The second articulates discriminatory benefits, such as the disproportionate advantages of one sector over other(s). Scientists may observe distinctions between coordination of interests and competition among interests (e.g., coordination and conflict).
According to the first school, which Knight relays as the coordination-for-collective-benefits conception of social institutions, there are four central mechanisms for institutional change. M1: The contract enforces intentional development (Hobbes). The evolution of social mechanisms are apparent in [M2] spontaneous emergence (i.e. repeated interactions between actors works under scarce resources, whereas the community seeks to prevent other from interfering in the enjoyment of the benefits of one person’s property) (see Hume and Smith); M3: exchange coordinated by the market (i.e. the market prevents ill-intentioned behavior and rewards pareto-optimal solutions through bargaining, and, an efficient market encourages development and growth in economic institutions); and M4: social selection (i.e. fitness) (Spencer).
Other influential writers include Marx (e.g., historical materialism, class conflict), and Weber (competition and institutional change in economic and social environment may create new forms of behavior). Knight explains that the Marxian approach fails to adequately explain the mechanism of institutional change, and the Weberian approach fails to elaborate the mechanism for change regarding conflict and distributional effects.
Knight categorizes contemporary theories of social institutions by two criteria: (1) the institutional effects used to explain stability and maintenance, and (2) the mechanism for institutional change. The former shows how collective goods and benefits for the community are developed which allows for the possibility of the creation of suboptimal institutions, while the latter distinguishes the form of change (e.g., evolutionary theories, theories of intentional design, micro-level and macro-level competitive selection). For example, Hayek’s theory of cultural evolution enables political scientists to examine the framework for “spontaneous order” explanans, which includes the Humean mechanism (i.e. learning by imitation).
“In this book I argue that the emphasis on collective benefits in theories of social institutions fails to capture crucial features of institutional development and change” (13).
If social outcomes are the process of social conflict, then political scientists may develop answers through rational choice theory (RC). RC, as a subset of intentional explanations, is generally associated with self interested desires and goals, assuming that individuals act intentionally and optimally to achieve a goal. Actors choose different strategies depending on their circumstances. Interdependencies may be studies through strategic situations; such as (1) the reward of each depends on the reward of all, (2) the reward of each depends on the choice of all, and (3) the choice of each depends on the choice of all (Elster 1986). Again, actors must be aware that their choices affect the choices of others and the social outcome.
Social institutions are a resource in forming expectations. Institutional rules provide the researcher with (1) the nature of sanctions for noncompliance and (2) the likely future action of others. Criticism of the [rational choice] research has focused on the actual capturing of institutional effects. For example, some accounts do not ascertain the changing nature of preferences. Also, some examinations fail to determine how individually motivated self-interest encompasses two features of society: the historical experience of a society, and, cohesion within the commonality of social experience. Additionally, the choice of suboptimality and inefficiency may be overlooked. Finally, rational choice has not yet developed the tools to analyze the institutional power relations effecting maintenance and development. Knight provides a few useful answers to these criticisms.
Knight focuses on distributions. Instead of studying social institutions as efforts to constrain actors as a collectivity, Knight recommends:
“social institutions are conceived as a product of the efforts of some to constrain the actions of others with whom they interact… The main consequence of this analysis is that the ongoing development of social institutions is not best explained as a Pareto-superior response to collective goals or benefits but, rather, as a by-product of conflicts over distributional gains” (Italics in original, 19).
Knight proposes that bargaining theory of institutional emergence and change can capture the inherent conflict in the development and maintenance of social institutions. The benefits of social institutions should account for measures of time and space, property rights, marriage and other rules governing the family, the organization of economic production and distribution, and the political institutions of the state. Economic and political failure and/or success of a community may very well have come from the structuring of various political and economic institutions. And those varying institutions may be related to the realized collective benefits, or at the other end, collective benefits may be produced regardless of the actors’ intentions.
Knight’s distributional account of institutions helps us understand what happens in social life. It also provides a blueprint for determining what kinds of institutions society should embrace, because it seeks to answer whether or not society’s institutions manifest the goals and benefits sought by society. Social institutions have the capacity to stabilize social expectations through information provision and sanctions. Thus, “institutions stabilize expectations and structure social action in the direction of equilibrium outcomes” (210). The distributive theory does offer a micro-level account for the emergence of rules that impose a normative force in a community, even if a general framework for the political scientists’ toolkit.
 Think of “substance.” The “sub” part is the structural foundation—for what “stance” you observe.