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3. Agency, Institution & Agent

Agency as Institution

  • In Agency, behavioral expectations within a society or group are expressed as norms. A norm is a general rule of conduct that links abstract values or goals to the concrete behaviors believed to advance those goals. Norms serve as explicit or implicit rules used by a group to determine which values, beliefs, attitudes, and behaviors are considered appropriate or inappropriate within the shared context.

  • Norms provide a way to express criteria for rightness and wrongness or correctness and incorrectness in agent behavior, defining acceptable patterns of action within a system. They can govern interactions much like social conventions - for example, the equivalent of greeting protocols in human relationships. Norms are shared at the community or system level and may exist without explicit representation in any single agent, instead emerging as collectively recognized standards that guide interaction within an agency.

  • In Agency, norms can be implemented and enforced by an institution, which is viewed both as an active participant and as an entity (such as a governing body, organization, or collective) that upholds and guarantees those conventions. From this perspective, the institution serves as the formal authority that legitimizes, maintains, and applies the agreed-upon norms within the system.

  • There are two main ways institutions apply norms in AgencyGrid:

    • Regimented Norms: Norms act as hard constraints. The system is designed so that breaking a rule is impossible. For example, metro gates prevent entry without a ticket. This is easier to build but reduces agent freedom.
    • Regulated Norms: Norms are enforced by institutions and their representatives. Agents can technically break the rules, but monitoring and enforcement encourage them to follow them. In this approach, an agent’s own motivations also affect whether it chooses to comply.

  • In multi-agent systems, institutions help regulate how agents interact by setting up and maintaining commitments between them. These institutions exist outside the agents themselves and act as tools for coordination. They serve as a bridge between an agent’s internal decision-making and the social outcomes of its actions, making it easier for agents to work together effectively.

  • Norms, both in their informal social form and their formal legal form, are the rules of the game in a society — the agreed constraints that shape how people or agents interact. Roles are an important part of institutions, as they describe what is considered proper for someone in a certain position or category to do.

  • Institutions can be thought of as the guidelines people use to organize repeated and structured interactions at any scale. Individuals still make choices about their actions and strategies, but these choices lead to consequences for themselves and others within the framework set by the institution.

  • In simple terms:

    • Institution – An established law, custom, practice, organization, or rule that serves the needs of a community or society.
    • Norm – A standard or pattern of behavior accepted or expected in a group.

  • Each institution has its own set of norms that give it a unique identity, allowing us to recognize it as a university, a bank, a club, or a company. These norms provide agents with a clear understanding of the rules of the game. An organization is usually built from an existing set of norms provided by an institution and adapts them to meet its own goals. Agents then bring the organization to life by taking on roles and performing actions that help achieve both individual and organizational objectives.

  • Agents in an agency can also drive change. They may refine, revise, replace, or even create new norms when requirements shift, the environment changes, or the society of agents evolves. This can lead to the establishment of new norms that shape institutions and organizations. Change can be bottom-up, where members update norms and organizational properties through agreed decision-making procedures, resulting in gradual change. Change can also be imposed from outside, requiring a complete overhaul of the norms and agency structure.

  • In reality, an agent is often governed by more than one institution at the same time. Norms from different institutions can sometimes conflict. The design permits resolving such conflicts or dissolving the operation altogether if conflicts are in deadlock. In the worst case, if this is not addressed in the design, an action that follows the rules of one institution might break the rules of another, leading to sanctions no matter what the agent does. While this may seem extreme, it can happen because institutions are often created independently without considering how they might work together later. This is when an agent’s ability to understand the possible consequences of their actions before making decisions is key.

Agency as Agent

  • As an agent, an organization can influence and be influenced by its environment and by other agents it interacts with.

  • In economics, agency theory looks at the challenges that arise when one party, called the principal, hires another party, called the agent, to do work. Problems can occur if their goals are different and it is hard or costly for the principal to check what the agent is actually doing.

  • Another challenge is risk sharing, which happens when the principal and the agent have different views about taking risks.