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Moral Consequences of Institutional Structure

Rodney F. Hiser
Economics Instructor
Butler County Community College
901 S. Haverhill Road
El Dorado, KS 67042



This paper argues that there is a relationship between institutional structure and moral choice. Institutional structure is seen as sets of rules that constrain people's moral choices. Moral choices are seen as choices that benefit or harm others. Institutions generate incentives that affect the benefit - cost ratio of moral choices. Changes in institutional structure result in changes in the desirability of various moral choices. This relationship makes possible a general predictability regarding people's moral choices. The author concludes that moral choice in real-world societies takes on a character that reflects their relative position on an institutional continuum.


 Print VersionCONTENTS

  1. Introduction

  2. Developing a Model

  3. Moral Choice in the Private Property Order

  4. Moral Choice in the Bureau

  5. Criticisms of the Model

  6. Conclusions and Implications



I. Introduction

In this paper I argue that the prevailing institutional structure of any given social order profoundly influences the moral choices of the order's inhabitants, i.e., there is a tendency for human conduct to take on the character best able to advance personal interests and ambitions under the existing institutional structure. This phenomenon, on a superficial level, can be observed in students. Since young people do not have to provide for their own food and shelter, they have no requirement to conform to market institutions. Many, therefore, flaunt society's standards of propriety in their dress, hair style, speech etc. without repercussions. An overnight change occurs when these students take a job in order to purchase a car. Working at the local supermarket, most are clean-cut, neatly dressed, and polite. Students' differing choices may be attributed to the different institutional structures and the resulting incentive structures facing them.

I contend that this phenomenon is not restricted to students but operates in every social order however large or small, that people tend to adopt moral values because they are most beneficial to them given their institutional environment. This is not a new idea, of course, since much of the property rights literature suggests this (Alchian and Demsetz, 1973; Demsetz, 1967; Furubotn, 1972) and this idea is the mainstay of much sociology literature (e.g. Berger and Luckmann, 1966). There also is a small but growing body of economic literature (Benson, 2002; Hiser, 1999; Klein, 1998) that sees people's moral choices as endogenous to the institutional structure of society. Benson, for example, argues "that what most people (...) perceive to be moral behavior depends at least partly on the institutional setting of the relevant behavioral interaction. That is, individuals 'rationalize' their own 'selfish' behavior given the 'circumstances of time and place,' so in their own minds they are 'telling the truth,' not subject to 'blame,' 'meritorious,' and perhaps even morally superior ('the chosen people')" (Benson, 2002, p. 1).

The purpose of this paper is to attempt to give some kind of overall picture of the nature and the direction of change in people's moral choices given changes in their institutional environment. I argue that social order can be seen as an institutional continuum with minimal institutions on one end and maximum institutions on the other and that what people regard as morally acceptable behavior varies widely from one end of the spectrum to the other. I further propose that there is a kind of moral continuum that parallels the institutional continuum, and that changes along the institutional continuum result in a somewhat predictable change in people's moral choices.

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