Is There a Link Between Complementary Economic Institutions and Ideologies?

Abstract:

Since the publication of Max Weber’s “Protestant Ethics and the Spirit of Capitalism” in 1904, the author’s idea about the positive relationship between Protestantism and capitalism has taken root in social sciences. Even though since then, multiple authors have questioned Weber’s idea, it still remains popular. Douglass C. North’s theory of institutions is interesting in this respect. He pointed to the intentionality behind the emergence of institutions. For North, institutions are an attempt to reduce the uncertainty by providing a structure to our everyday life, including interactions. The forms of these interactions depend not only on the climatic, demographic, technological and other factors, but also on people’s ethical attitudes. In our study, we proceed from the assumption that there is a relationship between institutions and ideologies in the broad sense of the term, on the one hand, and, on the other, from the concept of complementary institutions. The latter implies the presence in the institutional environment of two or more complementary institutions. Complementary institutions determine the structure of contractual relations between agents pursuing simple tasks, which means that there are various systems of stimuli and principles of how these agents should deliver on their obligations. In this respect the question arises as to how such institutional complementarity fit into the ideologies prevailing in this or that society? Is it possible for complementary institutions to coexist? In this study we focus on two cases from Chinese history to show that institutional complementarity is possible only if the adherents to the dominant ideology are ready to accept the possibility of flexible interpretations of such ideology and of the existence of complementary ideologies. The first example is the popularity of Taoism as a complementary ideology of Confucianism among the merchants in Qing China. Since Confucianism could not create the necessary ethical incentives for those people who were engaged in trade, Taoism filled the ethical void with its magical practices. The second case relates to the era of the Han Dynasty and the dispute about the limits of the state’s influence on the economy between the representatives of different philosophical schools. In both examples, complementary ideology creates necessary incentives for building complementary institutions.

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