Francesco Guala

Understanding Institutions proposes a new unified theory of social institutions that combines the best insights of philosophers and social scientists who have written on this topic. Francesco Guala presents a theory that combines the features of three influential views of institutions: as equilibria of strategic games, as regulative rules, and as constitutive rules.

Guala explains key institutions like money, private property, and marriage, and develops a much-needed unification of equilibrium- and rules-based approaches. Although he uses game theory concepts, the theory is presented in a simple, clear style that is accessible to a wide audience of scholars working in different fields. Outlining and discussing various implications of the unified theory, Guala addresses venerable issues such as reflexivity, realism, Verstehen, and fallibilism in the social sciences. He also critically analyses the theory of "looping effects" and "interactive kinds" defended by Ian Hacking, and asks whether it is possible to draw a demarcation between social and natural science using the criteria of causal and ontological dependence. Focusing on current debates about the definition of marriage, Guala shows how these abstract philosophical issues have important practical and political consequences.

Moving beyond specific cases to general models and principles, Understanding Institutions offers new perspectives on what institutions are, how they work, and what they can do for us.



Endorsements:

"This valuable and beautifully structured book reviews and explains the key idea of correlated equilibria and also offers a novel theoretical synthesis. Clearly written, but even better, clearly conceived, this book is a winner on many levels."--Stephen Turner, University of South Florida

"In this complex and sophisticated book, the unified view of institutions is original because it bridges two views that have been considered to be incompatible. Moreover, the unified view is linked with other key issues in the philosophy of social sciences. With its enormous scope, it will appeal to specialists in the philosophy of social sciences, as well as such social science practitioners as economists and theoretical sociologists."--Jack Vromen, Erasmus University Rotterdam

Table of Contents:

Preface vii
Analytical Table of Contents xiii
Introduction xvii
PART I UNIFICATION
1 RULES 3
2 GAMES 20
3 MONEY 33
4 CORRELATION 44
5 CONSTITUTION 57
6 NORMATIVITY 70
INTERLUDE
7 MINDREADING 89
8 COLLECTIVITY 102
PART II APPLICATION
9 REFLEXIVITY 119
10 INTERACTION 132
11 DEPENDENCE 146
12 REALISM 163
13 MEANING 177
14 REFORM 194
Bibliography 207
Index 219

The experimental approach in economics is a driving force behind some of the most exciting developments in the field. The 'experimental revolution' was based on a series of bold philosophical premises which have remained until now mostly unexplored. This book provides the first comprehensive analysis and critical discussion of the methodology of experimental economics, written by a philosopher of science with expertise in the field. It outlines the fundamental principles of experimental inference in order to investigate their power, scope and limitations. The author demonstrates that experimental economists have a lot to gain by discussing openly the philosophical principles that guide their work, and that philosophers of science have a lot to learn from their ingenious techniques devised by experimenters in order to tackle difficult scientific problems.

Recent debates on the nature of preferences in economics have typically assumed that they are to be interpreted either as behavioural regularities or as mental states. In this paper I challenge this dichotomy and argue that neither interpretation is consistent with scientific practice in choice theory and behavioural economics. Preferences are belief-dependent dispositions with a multiply realisable causal basis, which explains why economists are reluctant to make a commitment about their interpretation.

Game theorists have tried for decades to explain how rational or quasi-rational individuals are able to coordinate in situations in which there is more than one way to satisfy their preferences. In this chapter I focus in particular on the formation of common beliefs that supposedly sustain coordination in Hi-lo games. I review some attempts to solve the problem, such as bounded rationality, team reasoning , and solution thinking. Following their lead, I suggest that successful coordination is belief-less coordination, and that simple means-ends rationality explains how coordination problems may be solved using techniques of minimal mindreading.

Adam Morton has argued that a special kind of simulation, called 'solution thinking', explains successful coordination in games of strategic interaction. In this paper I develop Morton's idea arguing that (i) simulation explains how focal points generate common beliefs; and (ii) people engage in a special type of simulation when they reason as a team. An important feature of solution thinking is that common beliefs are an output, rather than an input, of coordination. This suggests that they may play a less central role in sustaining coordination than previous theorists have assumed.

Analytical philosophy has been challenged by experimental approaches that make use of, among other things, cognitive science methods. In this paper we illustrate the benefits of merging philosophy with neuroscience, using an example of research in the foundations of social science. We argue that designing novel experiments to answer specific philosophical questions has several advantages compared to relying passively on neuroscientists' data. In this particular case, the data redirect attention towards topics – such as inductive reasoning – that are relatively overlooked by mainstream social neuroscience.

According to “realists about commonsensibles” like Dan Hausman and Uskali Mäki, the existence of the theoretical entities of economics is a fact that no one should seriously doubt. But commonsensible realism is an unstable philosophical position, with a tendency to collapse into forms of behaviourism. In fact, behaviourism may turn out to be the only defensible interpretation of rational choice

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