Economy and Society in Europe
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Economy and Society in Europe

A Relationship in Crisis

Edited by Luigi Burroni, Maarten Keune and Guglielmo Meardi

While an economy is always ‘embedded’ in society, the relationship between the two is undergoing profound changes in Europe, resulting in widespread instability which is emphasised by the current crisis. This book analyses these changes, and in particular pressures of intensifying international competition, globalization and financialization within Europe.
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Chapter 11: Social Institutions Among Economists in the Wake of the Financial Crisis

Henry Farrell


Henry Farrell Much of Colin Crouch’s recent work focuses on the relationship between institutional diversity and change. It argues against overly ideal-typical (Varieties of Capitalism) and deterministic (crude path dependence) accounts of how economies and societies function. Instead, Crouch (2005) argues for the importance of diversity and redundancy in explaining institutional adaptation. Actors who have access to diverse institutional frames, whether because these institutions exist (in suppressed or occasional form) among them, or because they have access to the lessons of others, are likely to adapt better to unexpected change than actors who do not have such access. Moreover, Crouch offers the beginnings of an account of the order in which actors are likely to draw on diverse resources. Drawing an analogy with cognitive misers, Crouch’s actors are cognitively lazy. They are likely to adopt the institutional form that (a) provides some solution to the problem posed by the existing environment, while (b) being easy to access, even if other solutions would be superior. In the language of heuristic science, they are likely to converge on local optima and stick there – even when there might be better global optima available if only they searched harder and more extensively. This set of arguments stands in sharp distinction to those of economists (although see Bednar and Page (2007) for an interesting reconciliation of game theory with learning across different cultural contexts), who typically discount heuristics in favor of assumptions about optimizing actors in a world of complete information. However, even while economists’...

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