Learning, institutions, and economic performance
This article traces mental models as they affect individual cognition, collective learning, and ultimately societal change that affects economics.
- Individual learning
- Collective learning and change
- Collective learning and the emergence of institutions
- Economic performance
- Path dependence: Cognitive, institutional, and economic
Mental models, beliefs, and cognition
As individuals, we organize and store our knowledge and memories in mental models. We change our mental models as we learn. Over time, when a mental model is reconfirmed by experiences we consider it to be a belief, and a set of related beliefs becomes a belief system.
Shared mental models and collective learning
People within a community develop a common understanding of the world, and use the shared mental models to come up with collective solutions to problems. Knowledge is written down or recorded by other means, and thus transmitted to other regions and generations.
Shared mental models also exist within organizations: ‘As shared mental models evolve within organizations, collective learning takes place with respect to their goals’ (Mantzavinos et al., 2004, p. 77).
Institutions (laws and norms) are ‘shared mental models or shared solutions to recurrent problems of social interaction’ (Mantzavinos et al., 2004, p. 77).
- As people follow informal institutions (norms), this creates a social order. In small groups, the relationships and social order may be all that is needed to enforce the rules of the game.
- As a community grows larger, a state develops to enforce the rules of the game. This is important because there are not personal relationships among all members, and also because members may hold different beliefs (since individual beliefs are shaped and confirmed by societal feedback, which has more variation when the society is larger).
- As individuals within the state try to address the issue of free riders, they come to the conclusion that it is more efficient to have agencies do the rule enforcement than to have each person individually try to protect against them. Agencies lower the transaction costs.
Shared mental models, societal change, and cognitive path dependence
Change happens like this: We start with reality as understood by the human mind, which shapes beliefs. From beliefs come institutions, which create policies. Those policies produce outcomes, which change reality. Our minds then interpret this new reality based on the mental models that already exist.
If the mental models remain basically unchanged for a period of time, then they become belief systems. Belief systems are more rigid and resistant to change, and so they provide cognitive path dependence.
Cognitive path dependence affects institutions in that they follow the same mental models. ‘This institutional path dependence may structure the economic game in a standardized way through time and lead societies to play a game that results in undesirable consequences’ (Mantzavinos et al., 2004, p. 81).