What then is production, what is consumption, what is an institution, and what does “facilitate and organize” mean?

Notice, we are already conceptualizing—that is, we are taking the world and finding within it aspects that we want to focus our attention on, and refining our clarity about these highlighted aspects by giving them concept names such as “economy,” “production,” “consumption,” “institution.”

Production

When production happens something new generally emerges, not from nothing but from stuff combined together in the act of production. Think about any workplace, such as a bicycle shop. The shop has inputs and outputs. The inputs are combined, the outputs result. The action in the middle, is called work. The place where this happens we call a workplace, such as Sally’s Bike Repair Center. But…

This is the first question you/we need to answer before lecture two. I'll get us started. In Sally’s Bike Repair Center surely bikes come out and rubber and steel go in, but what about Sally herself and her state of being? Or consider an auto plant. One thing that goes in is glass. One that comes out is a Chevrolet. But doesn’t much more actually enter the plant and leave it? You might want to think about it for a few minutes before continuing...and I hope many readers will answer in your own way, before you read my own answer as part of the opening section of next lecture. For now, however, if you are ready, let’s just go on as if we already have the answer.

So, knowing what the inputs and outputs of production are, how do we describe workplaces? They are institutions you might say. Fine. But what is that? If institution is to be a concept we use in our thinking, envisioning, etc., as I indeed I think it ought to be, what is the critical attribute that defines institutions, and that distinguishes one from another?

(This is arguably the hardest part of theorizing—reaching out into the familiar world and settling on basic concepts, including clarifying for ourselves just what, in fact, we mean by them and doing it in a way that helps us later rather than narrowing our perceptions so that try as we might, we never make further progress. Our concepts draw us toward some facets, highlight some relations, attune us to seeing some features, but they also inevitably leave out other facets, obscure other relations, and turn us away from other features. If our concepts efficiently focus us on what matters for our investigative, analytic, or visionary purpose, they are good. But if they turn us away from what matters, or include so much that is peripheral that we can’t ever get to the core of things, then fail us.)

So, again, what is an institution? Is it the floor plan? Is it the size of the building, or even the existence of a building? Is it the speed things happen at? The quality of the results? These characteristics are often important, of course, for various concerns that one might have, but I think we can all agree they are not at the heart of the matter from a broad economic and social perspective. But if they are not at the heart of what we want to focus on when we use the concept “institution,” what is?

Well, we know that there is something similar about, say, GM, Microsoft, and the local cannery that makes them all workplaces, and that this is presumably what we want to get a grip on when addressing issues of work and production. It isn’t their specific size, products, buildings, or locales. GM, Microsoft, and the local cannery have almost nothing in common on these axes. What they do have in common is instead something about the relations that exist, day in and day out, among the actors who get together in these institutions—something about their motivations, interests, behaviors, and choices. And this is what we implicitly have foremost in mind, it seems to me, when we refer to an institution. We are not referring so much to material structures as to role structures. So let’s just make this explicit. That is, to define our basic concept “institution” suppose we say that:

But now, with this concept in our toolbox, we can easily see that the critical thing linking the businesses mentioned above is that they all embody the same basic defining role structures having to do with capitalists, workers, managers, and so on, whose character we will investigate shortly. More, in different economies it follows that we will have qualitatively different types of economic institutions, due to their having qualitatively different role structures. Feudalism has serfs and lords and what not, capitalism has its own roles, and any new economic vision we come up with will have its own unique roles as well.

So here are some more questions to consider as you proceed with this lecture and preparatory to the next one. As usual; my own answers will appear at the start of next lecture.

Consumption

Now, taking up a new component of economics, we already have something to organize and discipline our thinking, at least a little. That is, have defined one type of economic activity, which we have called production. We have said it has inputs and outputs (which you are supposed to be thinking about and we will get to in more detail soon), and have said that it is carried out in production institutions, or workplaces, and that these have role structures (that you are also hopefully thinking about, and that we will also address further shortly). One important part of the art of doing theoretical, explanatory, or visionary work is to develop concepts and then build on them by only adding new ones when they are really needed. No sense adding more things to remember unless they really help us. Before adding to our conceptual toolbox, therefore, we should always try to make do with what we already have in it. So what about consumption? Do we need some new concepts to handle it, or not?

We immediately recognize that consumption is another economic activity. It too has inputs and outputs that we can further conceptualize. It too is carried out in context of institutions which have role structures we can discern and describe. Since these few concepts go a long way, we already have some more questions to deal with as we proceed:

See what comes to mind for these questions, if you have some time for it, and we will get to them shortly. And always try at first to answer using just the conceptual toolbox we are developing. If you can’t, then add more concepts until you can. But don’t leap to answer from prior common sense or school knowledge, etc. Try to answer only from the concepts we are developing, and then appeal to your knowledge more broadly only insofar as you must to augment what you can say within our new conceptual framework.

Allocation

Now we turn to the sticky question of facilitating and organizing the economic activities production and consumption. What does this entail (in addition to another concept, allocation)?

Well, we know that there are a whole lot of people consuming and producing, and we know that there are a whole lot of places where all this activity goes on.

In each production institution, that is, we can ask what is produced, how much, with what steps, by whom? And for each person and group of people, we can ask what is consumed, how much, and how is it gotten? Moreover, how does what is produced come to match what is sought for consumption and vice versa? How do outputs match up with inputs?

The answer to all these queries is that all this mixing and matching and determining is called allocation and is mediated by allocation institutions whose character may differ, of course, from economy to economy.

The market, for example, is an allocation institution. And so is central planning. And we might dream up some other allocation institutions as well, including say, decentralizing the economy into little separate self-sufficient units so that allocation is carried on entirely face-to-face by some type of barter. Each of these means of allocation, the market, central planning, and face-to-face barter, for example, are structural ways of determining who does what, where, in what quantities, for whom. They are institutions, which tells us, given our growing conceptual toolbox and its lengthening insights into underlying economic components, that they embody particular roles that people must fill to benefit from the institution’s offerings.

Once we think of markets as an institution, that is, we know that we need to describe the associated role structure. Likewise if we think of central planning this way, again, we have to describe the roles associated with central planning.

For markets, for example, we have buyers and sellers. There may be other refinements in a particular market economy, but we could go a long way toward figuring out the defining features of markets if we revealed the institutionally determined motivations and behaviors of these buyers and sellers and how their behaviors combine to influence allocation. For central planning we have order givers (planners) and order takers (workers) and about these roles we should ask, supposing that we want to understand central planning, what motivations do they impose, what implications do they have? Moreover, for any economic vision we will need to do the same thing:

In light of our new concept, allocation, some new questions arise for our consideration:

So we have now gotten to the point where we can somewhat clarify what we are trying to do.

How do we know, however, what it is that we like? Suppose someone asked you what you think an economy ought to do to be a good economy. This is not so easy to answer. So, to proceed with defining an economic vision, we need to focus in on the valuative issues.

Evaluating Economies and Determining What We Want

Economies affect people. This is pretty obvious but nonetheless important to understand in more detail. Economies influence what we do (by providing roles we have to fill) and what we get from their productive output (by their allocation outcomes). These two facts in turn have much to do with our possible life stories. Are we doing interesting or boring things at work? Do we have power over our circumstances or are we bossed around by others? Do we starve, get by, or enjoy luxury? What happens to our personalities and potentials in the work we do and the consuming we opt for?

If the economy propels anti-social attitudes or distorts and under utilizes human capabilities, or if it rewards people unjustly, these would be issues to take up in evaluating it. To make a judgment we must have some view of what is good and bad in the built-in dynamics of the economy and their inevitable implications for people’s lives. So we have to broadly decide what we would like an economy to achieve.

There are many possible answers:

I don’t like any of these options, however, for pretty obvious reasons. The first could yield a gigantic pile of garbage, weapons, or other stuff unsuited to human fulfillment and development. The second is elitist, enriching some at the cost of others. The third is mindlessly egalitarian; we all have different interests, tastes, and inclinations so that this type of homogeneity is not an aim, but a nightmare.

I am going to instead propose some broad goals: equity, solidarity, diversity, participatory self management, plus efficiency, and, by implication, classlessness.

We could argue about these, I suppose, forever. My reasons for choosing these as the economic aims I want to see embodied in an economy probably stem from all manner of influences on my own thinking and values. But, I think among people concerned about social change, these broad goals should be pretty uncontroversial, save insofar as we might wonder if a system can address them all simultaneously or if they are sufficiently comprehensive to give us a system we will like.