THE UNIVERSITY OF LEIPZIG

as goods and certain services, and intangibles, such as information and knowledge. The
psychological content of interactions in turn has both cognitive and social sides. 455
Can human cognition structure institutions?
In the foregoing treatment it is imperative to ask this rather simple but complex question. Can
human cognition structure institutions? Human cognition is hereunder defined as all processes
by which the sensory input is transformed, reduced, elaborated, recovered, and used. 456
Cognitive scholars view the representation of the world as an active construction that involves
transformation of sensory input through reduction and elaboration. Because human attention
is limited in capacity, we need to be selective in order to prevent an overload of
information. 457 Even so, only a small part of what we attend to can be remembered. In respect
to the reduction of information, we use elaboration by adding to the sensory input through the
recovery of information from the long-term memory. The learning process occurs with the
transfer of information to the long-term memory. 458
Based on the internalization process of information from their social setting and contexts,
individuals develop personal collections of assumptions about the way things happen, why
they are happening and the way things should happen. These collections can be compared to
institutions on social levels. Even though individuals need such intuition to mitigate with their
bounded rationality, the cognitive processes of reduction and elaboration can lead to choice
biases. For example, individuals tend to overestimate the likelihood of events that are
available or easy to recall or imagine from experiences. 459 When individuals continually
create such notions on how to act within the constraints of their bounded rationality, they are
governed by experiences or prior knowledge. This apriority knowledge, which results from
exogenous processes of social interaction influences sensory inputs. This also implies that
individuals need to pay attention to other external process because these provide us with an
opportunity to create meaning out of the things that have to be paid attention to. 460 As a
result, apriority knowledge tends to be used as a basis for verification of individual knowledge
processes. This verification is borne out of the bounded capacity to process information, but
there is a difficulty in handling too many radical changes in our thought structure.
It has been proposed that our knowledge is organized around routine activities. What we
know and what we see about such activities that are script-like. These script-like activities
make humans to focus their attention on how to fulfil such a routine. 461 In here, we use the
455
Geoffrey, M. H. 2004. The Evolution of Institutional Economics: Agency, Structure and Darwinism in
American Institutionalism. Journal of New Political Economy 10(1):133-137.
456
Anderson,J.R Opcit
457
Neisser, U. 1967. Cognitive Psychology. New York: Appleton-Century-Crofts.
458
Ibid.
459
Reed, S. K. 1988. Cognition: Theory and Applications. Pacific Grove, Calif.: Brooks/Cole Publishing.
460
Posner, M. I and C. R. Snyder. 1975. Attention and Cognitive Control. In Information Processing and
Cognition, edited by R. L. Solso, 55-85. Hillsdale, N.J.: Erlbaum.
461
Leighton, J.P., M.J, Giel and S, Hankas. 2004. The Attribute Hierachy Method for cognitive Assesment: A
variation on Tatsuoka’s Rule-Space Approach. Journal of Educational Management 4:205-236.
95