By Issam K. H. Halayqa
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The theory can be used to produce knowledge to better inform the choice of institutions so that different people with different interests can work to achieve the institution that provides the performance that they want. However, analysts should not overestimate their ability to predict impact. There are inescapable uncertainties and surprises. One of the important impacts of institutions is how they affect how the costs and benefits of inevitable surprises are shared. Structure describes the relationships between people that define their relative opportunity sets.
Socialized, transacting individuals are subconsciously doing what the analyst is trying to do – make sense out of institutional impact, plus creating themselves. They cannot be conscious of all the situation variables that the analyst may find explicitly useful, but these same interdependence creating characteristics of goods are out there. People will necessarily find some simplifying conception that will be the basis for their sharing informal institutions and working toward altering formal institutions.
For example, in the household sector, a parent provides for children and adult children care for elderly parents. A richer person provides emergency help for a poor friend. People give blood to those who need it. An employee identifies with the goals of the organization even if opportunistic behavior is possible. People contribute to the production of goods even if free-ridership is possible. When these norms are violated, the person’s conscience produces guilt. It may also produce disapproval and social pressure from others.