Institutional economics

branch of economics about how institutions affect the economy

Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behaviour. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" sphere of society on the other. Its name and core elements trace back to a 1919 American Economic Review article by Walton H. Hamilton. See also new institutional economics.

"Institutional economics" alone meets the demand for a generalized description of the economic order.
- Walton H. Hamilton, 1919
CONTENT : A - F , G - L , M - R , S - Z , See also , External links

Quotes edit

Quotes are arranged alphabetically by author

A - F edit

  • American institutionalists were not theoretical but anti-theoretical.... Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire.
    • Ronald H. Coase (1984). "The New Institutional Economics." Journal of Institutional and Theoretical Economics 140 (March): 299-231; p. 230; As cited in: Malcolm Rutherford (1996), Institutions in Economics: The Old and the New Institutionalism. p. 9
  • The smallest unit of the institutional economists is a unit of activity — a transaction, with its participants. Transactions intervene between the labor of the classic economists and the pleasures of the hedonic economists, simply because it is society that controls access to the forces of nature, and transactions are, not the "exchange of commodities," but the alienation and acquisition, between individuals, of the rights of property and liberty created by society, which must therefore be negotiated between the parties concerned before labor can produce, or consumers can consume, or commodities be physically exchanged.
    • John R. Commons. "Institutional Economics" American Economic Review, vol. 21 (December 1931), pp. 648–657.
  • I do not overlook the important contributions to economic theory in the past whether orthodox or heterodox I correlate them with institutional economics. The classical and communistic economists used as their measure of value the man hour of labor. This is evidently since the incoming of scientific management the engineering economics of efficiency. The Austrian and hedonistic economists deriving from Bentham used as the measure of value the diminishing marginal utility of consumption goods. This is evidently the home economics recently introduced in the college curriculum.
But institutional economics is the field of the public interest in private ownership, which shows itself behavioristically in buying and selling, borrowing and lending, hiring and firing, leasing and renting. The private interests become the field of intangible yet quantitative and measurable rights, duties, liberties and exposures to the liberties of others. These are various aspects of rights of ownership. What we buy and sell is not material things and services but ownership of materials and services. The correlation of engineering economics, home economics, and institutional economics makes up the whole of the science of political economics.
    • John R. Commons. "Institutional economics." in: The American economic review. Vol. 26 (1936), p. 242

G - L edit

  • "Institutional economics" alone meets the demand for a generalized description of the economic order. Its claim is to explain the nature and extent of order amid economic phenomena, or those concerned with industry in relation to human well-being. In the words of Edwin Cannan, it attempts to tell "why all of us are as well off as we are" and "why some of us are better off than others." Such an explanation cannot properly be answered in formulas explaining the processes through which prices emerge in a market. Its quest must go beyond sale and purchase to the peculiarities of the economic system which allow these things to take place upon particular terms and not upon others.
  • Institutions is a verbal symbol which for want of a better describes a cluster of social usages. It connotes a way of thought or action of some prevalence and permanence, which is embedded in the habits of a group or the customs of a people.
    • Walton H. Hamilton, (1932), "Institution," in Edwin R. A. Seligman and Alvin Johnson (eds), Encyclopaedia of the Social Sciences, Vol. VIII, New York: Macmillan, pp. 84–89.

K - R edit

Circuit flow of money by William T. Foster, 1922
  • [We may view the] economic organization as a system of prize relations. Seen in the large, free enterprise is an organization of production and distribution in which individuals or family units get their real income, their "living," by selling productive power for money to "business units" or "enterprises", and buying with the money income thus obtained the direct goods and services which they consume. This view, it will be remembered, ignores for the sake of simplicity the fact that an appreciable fraction of the productive power in use at any time is not really employed in satisfying current wants but to make provision for increased want-satisfaction in the future; it treats society as it would be, or would tend to become, with progress absent, or in a “static” state.
  • This book provides a detailed picture of the institutionalist movement in American economics concentrating on the period between the two World Wars. The discussion brings a new emphasis on the leading role of Walton Hamilton in the formation of Institutional economics, on the special importance of the ideals of “science” and “social control” embodied within the movement, on the large and close network of individuals involved, on the educational programs and research organizations created by institutionalists, and on the significant place of the movement within the mainstream of interwar American economics.
    • Malcolm Rutherford (2011). The Institutionalist Movement in American Economics, 1918–1947 : Science and Social Control, Cambridge University Press.

S - Z edit

  • It has been the failure of American institutionalists to develop an adequate theory of institutions that has caused their work to remain largely fragmentary and without much cohesion. Professor Mukerjee's study of institutional economics is the only work of its kind to make an appearance since John R. Commons published in his well-known Institutional Economics in 1934. It gives the reader a much clearer understanding of the nature of institutional economics than does Commons' pioneering study.
    • The Journal of political economy, Vol. 51 (1943), p. 84

See also edit

External links edit

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