Toward a Theory of Smart Institutions
Journal of Economic Structures, 5:15, (2016)
23 Pages Posted: 23 May 2016
Date Written: May 20, 2016
We present an analytical approach to institutional analysis that draws inspiration from control process engineering in the physical sciences. We characterize smart institutions as having three foundational features. First, smart institutions are context sensitive and expressly allow for a unified consideration of social, political and economic factors, thereby providing a richer and more eclectic approach to their operation. Second, smart institutions are forward-looking in their operation rather than deriving from their past functions and purpose in contrast to most generic institutions. Third, as opposed to generic institutions, smart institutions emphasize the role of information and specifically that of subjective social feedback on institutional performance. A theory of smart institutions, consequently, presents distinct advantages over traditional institutional analysis.
Keywords: Institutional analysis, Institutional development, Control process engineering, Information entropy, Fuzzy feedback
JEL Classification: D02, E02, O43, P0
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