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Quotation of the Day…

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… is from page 36 of Douglass North [2]‘s 1990 volume, Institutions, Institutional Change and Economic Performance [3]:

Yet formal rules, even in the most developed economy, make up a small (although very important) part of the sum of constraints that shape choices; a moment’s reflection should suggest to us the pervasiveness of informal constraints.  In our daily interactions with others, whether within the family, in external social relations, or in business activities, the governing structure is overwhelmingly defined by codes of conduct, norm of behavior, and conventions….

That the informal constraints are important in themselves (and not simply as appendages to formal rules) can be observed from the evidence that the same formal rules and/or constitutions imposed on different societies produce different outcomes.

Formal rules such as legislation, administrative directives, written legal codes, and written judicial decisions are easy to see.  They are literally visible, for all to read in black and white.  And they do indeed constrain, direct, and shape human choices.  For example, the U.S. and Virginia tax codes cause me to act differently than I would act if those codes did not exist or were altered.  But I fear that our minds’ now-long-established habit of equating legislation with law causes us not to see both the depth, width, and importance of informal rules: the largely unwritten and highly nuanced array of norms and expectations that we hold ourselves and others to.  If – or to the extent that – these norms and expectations (which, as I see them, are laws) are unseen when we do social science, the risk is that observed patterns of actions and outcomes will be attributed directly to the “laws” (mostly legislation) that are seen, with too little recognition that those patterns of actions and outcomes are heavily influenced also – and perhaps predominantly – by the vast array of unseen laws.

The resulting mapping from formal, written “laws” to outcomes will be inaccurate.  Outcomes in fact ’caused’ by some unwritten laws will be mistakenly attributed to written legislation.  Failures of written legislation to bring about expected results will be too quickly attributed to some easily correctable defects in the written legislation rather than understood to be unforeseen consequences of the attempt to mix consciously designed, written legislation with unwritten laws.