That is, institutions are regular habits of behaviour and legitimising folkviews regarding those habits that provide regularity to social interactions which allows people to function. They are at their most fundamental level supported by our need to make ourselves understood if we want to mobilize any social activity -- they provide the grammer and syntax to social interactions that make people's actions comprehensible to others.
Institutions are intrinisically part of those things we take for granted as we make the routine decisions of our day to day life.
Institutions are not completely rigid, but institutional change normally involves a substantial investment in effort and quite often an intrinsically risky appeal to sovereign authority to resolve disputes over what rules are applicable ... so there has to be a more than trivial pay-off to changing institutional rules, and there is of course no guarantee that a "socially optimal" choice will be made when there is a fight over the institutional rules in force in a given setting.
Further, once a change is achieved in a given social setting, it is easier to win change in a neighbouring setting by appeal to the precedent of the change that has already been established, rather than winning support for a novel institution, so institutional change often runs in "tracks", as decisions are won based on innovations already established in what are seen as similar social settings.
And of course, the more dramatic the institutional innovation, the more dramatic the unexpected consequences of the change are likely to be.
Indeed, a major appeal of this mix of all-equity finance and right-to-output finance is the institutional conflict between debt finance and Islamic prohibitions on fixed debt obligations ... this is a structure of finance that can be quite readily approved as not falling foul of those prohibitions.
As far as why banks are not aggressively pursuing this form of financial partnership, note that under existing capital adequacy requirements, the same amount of money put into fixed nominal debt obligations of the same credit rating would be allowed to back more obligations than this form of direct participation stake in revenue or profits or output. That is, the fixed interest obligation is assured income until it can no longer be serviced, at which point it collapses, while this form of finance degrades gracefully when faced with system-level adverse impacts (like, say, a synchronized global recession mixed together with an international financial meltdown). I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
I see no future for institutions or organisations in the emerging post-Internet "Peer to Peer" economy. I see the future in networked self organisation within consensually negotiated legal framework agreements.
BruceMcF:
As far as why banks are not aggressively pursuing this form of financial partnership, note that under existing capital adequacy requirements, the
In my own simplistic language, banks lend: they do not tend to invest. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Maybe you are reading "institutions" in a derivative sense, rather than its fundamental sense? EG, the often described "financial institutions"? I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
institutions as far back as our history stretches, the idea that Peer to Peer networks will eliminate regular habits of behavior and suddenly people will start making conscious decisions for each and every one of their actions, a la neoclassical fantasy economics, is just an outlandish claim.
..and it's not a claim I'm making.
Maybe you are reading "institutions" in a derivative sense, rather than its fundamental sense?
Possibly. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Since a legal framework is a formal institution, supported by informal institutions, and consensual negotiations rest in part on informal institutions, often supported by formal institutions, this is saying there is no role for social institutions because the future will be dominated by activity in the context of a named list of social institutions. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
Financial enterprises may be more to the point ... there will be going concerns engaged in providing the peer to peer networks, but under your thesis, they will finding ways to make money off of the communications traffic they generate, rather than from taking a financial stake in the process of extending credit, so they would not be financial enterprises as such. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
That is not obvious, necessarily true or even (in my view) likely to be true: it seems to me that you've managed to hide institutions and organisations away in the details of your peer-to-peer network.
When it comes down to it, everything in human society is a peer-to-peer network with some structure on top.
Your assumption seems to be that the nodes in a network will be of somehow comparable size and power.
Where do you get that idea from?
Colman:
Correct.
Our current conflicted and obscure legal and financial overlay or "structure" is the problem, and it is here that changes are not just necessary, but already taking place.
I see a decentralised and non-hierarchical network of networked partnership protocols coming about bottom up to gradually make the existing system redundant. But it's not a case of "either/or", rather of organic evolution. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Is this just a reformulation of libertarianism then?
That is, the fixed interest obligation is assured income until it can no longer be serviced, at which point it collapses, while this form of finance degrades gracefully when faced with system-level adverse impacts (like, say, a synchronized global recession mixed together with an international financial meltdown). (My bold)
