7 May 2015

Your relations on multiple levels

I sent an email to my students explaining how I understood this figure:

Think of the concentric ovals (Individual in the middle, Societal on the outside) and relate those to the "scale" of the institutional structures we've been exploring, i.e.,
  • A society (like the market) contains many people who may not know each other or interact often. We coordinate via laws and traditions (or prices) but cannot "depend" on each other too much.
  • A community (like a collective) contains fewer people who can know each other and depend on each other. We coordinate via feedback, promises, communications, shame because we're "stuck with each other"
  • A relation (like a principal-agent) involves a few people who help and depend on each other in varying degrees. Relations work better when we care about each other, but they can be tragic if one side does not.
  • Individuals face and make choices that affect themselves. These choices must be made and sometimes (bounded rationality; limited "capabilities") they can be worse than we'd like.
The important thing is to remember that we operate within all these structures -- and all those ovals -- simultaneously. We cannot easily isolate ourselves from collective actions, just as we cannot isolate ourselves from our communities.