September 22, 2024
In a 2017 paper that I hope gets more attention in institutional, Austrian, and rational choice circles, Dick Langlois argues against economic explanations that overlook process and evolution. You can learn a lot of economics from reading this methodological paper.
Langlois in “one lesson”: A rational choice functionalism that focuses exclusively on static snapshots might get lucky in any given instance—but it will often err compared to an approach which takes process seriously. From the abstract:
“…revised conjectures that best withstood criticism and revision were those that saw the phenomena not as static snapshots of economic agents confronting an economic problem but rather those that embedded the phenomena within a larger economic problem and within a process of economic change.”
He illustrates this point by way of two classic examples: The “open fields” agricultural system of the Middle Ages and the “putting-out” production system on the eve of the Industrial Revolution, concluding with more methodological food-for-thought:
“In both of these episodes, economic just-so stories advanced our understanding of history. What animated intellectual innovation in both cases was a bold conjecture about the raison d’être of a puzzling institutional structure. But what ultimately enriched our understanding was the process of conjecture and revision those conjectures set off. In both episodes, the revised conjectures that best withstood criticism and revision were those that saw the phenomenon not as a static snapshot of economic agents confronting an economic problem but rather those that embedded the phenomenon within a larger economic problem and within a process of economic change.”
Rather than rehash the paper’s examples, I want to illustrate these points by way of another classic example. I’ve long been fond of Margaret Brinig’s thought-provoking paper, “Rings and Promises,” and would submit that her approach is an exemplar of what Langlois advocates.
In Brinig’s telling, the informal social norm of gifting a diamond engagement ring originated to solve a credible commitment problem. Before 1935, a woman could sue a suitor to whom she had become betrothed, but who later developed cold feet. (The question of whether such an arrangement was just is another matter entirely). When the courts struck down such “breach of promise” laws, women sought another means of eliciting credible commitment from suitors. Having a credible commitment was important. To begin, a broken betrothal reduced a woman’s prospects in the marriage market. What’s more, her prospects in 1920’s labor markets weren’t promising. Thus, marriage was her surest path to financial stability—but saying yes to a suitor who might prove flaky was risky. The “breach of promise” laws—rightly or wrongly—had reduced this risk. After 1935 in Indiana, and after the coming years for other states, legal recourse for jilted brides was no more.
Enter costly engagement rings. As Brinig contends, they filled the legal void left by the abolition of the “heart balm remedies.” Rings were a substitute means of sifting the masculine wheat from the boyish chaff. Only serious suitors would incur the cost of a diamond ring, jewelry which would pass into the woman’s possession should he change his mind.
My point here is not to rehash Brinig’s insightful article. But I want to point out that a process-oriented, evolutionary approach is necessary to generate the story of why engagement rings originated and why the practice persists.
Consider a static, snapshot approach that came to the “rings problem” in 2024—or, even in 1990 when Brinig’s paper was published. Langlois urges us to always ask “what problem were they solving?”—but to do so in a historically informed, process-oriented manner. Asking that question in 2024 about engagement rings is at best fruitless at best, and at worst misleading. You could artfully plumb the depths of existing incentives and constraints, but without knowledge of long gone informal norms, labor market realities, and formal rules of the game, you’ll come up emptyhanded. For a number of reasons, some of which Brinig covers, 21st century women do not demand the same sort of signal that early 20th century women did.
It is precisely because of this shift that the “static snapshot” approach would fail to render the practice comprehensible.
As Brinig notes, rates of engagement ring-giving fell somewhat in the years after the Sexual Revolution and the mass entry of women into labor markets. But the practice didn’t vanish. Proposing with a ring remains prevalent. One might reasonably ask why engagement ring-giving persists, if the original rationale for its emergence is obsolete.
I don’t know for certain. Here’s a guess. Ring-giving arose to convince the receiver of honest intentions; it persists because some informal norms are highly “sticky.” Some “routines” outlive their origin story. Oliver Williamson famously argued that informal institutions are the slowest-changing form of social rules. Oftentimes, change visible to the scholar’s “naked eye” is visible only on the order of centuries.
As Pete Leeson and Chris Coyne write:
“Just as norms often emerge through a long, evolutionary process, they often only change through a long, evolutionary process. Norms are legal fossils. They’re part of culture. Thus they display tremendous inertia.”
Rings emerged for one reason; they “stayed” because they acquired new significance and symbolic value. As women came to expect rings as a commitment device, the ring assumed new meaning. It indicated the intensity of a man’s love and affection. Only cads would think of proposing, ringless. These days, the ring is a Schelling point—even if no one remembers where it came from.
Leeson and Coyne again:
“Once norms are established they tend to be self-perpetuating. This is because people expect others to follow and enforce them (Lewis, 1969). In creating shared expectations, norms serve as ‘focal points’ that coordinate the activities of diverse individuals seeking their ends together or independently (see Leeson et al., 2006 2006). Norms accomplish this by defining commonly understood and anticipated behaviors in situations of uncertainty where a range of potential responses—a multitude of equilibria—are possible.”
Ring-giving will persist unless the costs and benefits of the practice change enough to elicit a new practice. Until then, ringless boyfriends will find their functionalist, “static snapshot” excuses (”that custom isn’t solving an obvious problem right now!”) will fall on deaf ears.