Abstracts from the 2007 AFIT Conference
William Barnes
University of Portland
“Keeping it Simple, Voluntarily: Alternative Consumption in Portland, Oregon”
Utilizing institutional analysis, this case study focuses on the voluntary simplicity movement within Portland, Oregon, a city in the United States with a growing reputation for environmental awareness. The questions driving the case are 1) the character of voluntary simplicity in Portland and the motivations of its participants, 2) the challenges faced as consumers alter their behaviour, and 3) the lessons that can be learned from this case. The case draws from interview data collected within Portland, from participant observation in the city itself and in a voluntary simplicity course administered in Portland by the Northwest Earth Institute, and from secondary literature. Results thus far point to the supporting role of Portland’s larger community and institutions. Individuals undertaking these consumption changes in Portland are empowered because community peer pressure generally supports the underlying ideals of voluntary simplicity – namely, to live more with less and to willingly swim against the tide of a consumer culture. In the context of Portland, alternative consumption is to a certain extent “institutionalized.” The paper concludes by documenting and analyzing some of the key supporting institutions and their potential to be replicated elsewhere.
W. Robert Brazelton, emeritus
University Of Missouri-Kansas City
“An Interdisciplinary Study for a Broader Economic Analysis”
The paper deals with the contributions that less orthodox economic analysis may have to contribute (1) to economic analysis to broaden the scope of economic theory: and (2) the contributions of other social science fields such as sociology, psychology, social psychology, history, etc. may have to contribute to also broaden the scope of economic analysis. The above is done by (1) a survey of the relevant literature; and by (2) interviews with practitioners in (less mainstream) areas of economics itself such as socio-economics, social economics, post Keynesian economics expectations analysis, Evolutionary economics, rational expectations, etc. The purpose is to give a summary analysis of these areas; and to suggest a combining of them into a more interdisciplinary and broader analytical scope for economic analysis and it’s relevancy for both economic theory and policy.
Christopher Brown
Arkansas State University
“Why Do Consumers Borrow? An Application of the Institutional Theory of Habit Selection.”
If most of what people do is a function of habit, an admissible explanation of human behavior is not possible without a theory of habit selection. Habits are established as a resulted of repeated behaviors. Institutions, by prescribing or reinforcing some behaviors and proscribing others, shape the structure of habits and give them a social character. The emergence of a social habit structure amenable to the issue of IOUs to finance all types of consumption expenditure is a significant development. This paper seeks to make sense of pervasive changes in household spending and saving routines by the application of the institutional theory of habit selection. Consumerism—a habitude wherein the pursuit and maintenance of class status is a primary driver of spending—is a cultural adjustment to the cash flow requirements of modern business enterprise. As privileges of all kinds are restricted by class, worldly success (partly) depends on the assimilation of consumption routines (in dress, food and alcohol, travel and leisure pursuits, and so on) that signal class affiliation. Borrowing to acquire non-necessities or goods of superior quality is interpreted as a strategy for inclusion in vital social networks.
Dell P. Champlin
Western Washington University
Janet T. Knoedler
Bucknell University
“The Media on the ‘Race to the Bottom’: Why they won’t ask the right questions about who is killing the middle class”
In the lead-up to this past fall’s midterm election, some segments of the mainstream media seem suddenly to have discovered the middle class. Lou Dobbs routinely rails about the war on the middle class, and other members of the punditocracy have mused about whether the economy is working well for all members of the labor force. In this paper we will further examine the falling fortunes of the middle class as depicted in the master narrative created by the mainstream press. We will consider the elements of the story that seem to be widely agreed upon as well as those elements of the story that have been ignored. We will use neoclassical, propaganda, and institutionalist models of the media industry to assess the inadequacy of the coverage of the middle class, focusing in particular on coverage of economic issues during this past election cycle. We will conclude that the mainstream media fails to capture the long-term nature of the declining fortunes of the middle class and thus fails in its key mission of informing the citizenry about the news they need to know.
J. Dennis Chasse
State University of New York, College at Brockport (ret)
“Updating the Commons Tax”
In 1907, John R. Commons criticized protective tariffs for not benefiting workers. Working conditions had deteriorated in protected industries while improving in industries that were not protected. As a remedy, Commons proposed an excise tax equal to less than the tariff imposed at first on all industries, but administered by a special commission with power to remit the tax for industries that satisfied legislatively stipulated working conditions.
This paper argues that Commons’s objection to rules governing tariffs in his day is valid against rules governing today’s free trade and that his proposed remedies still make sense, both within the United States and internationally. Finally, the paper takes up the criticism that the tax is not currently politically feasible. After mentioning how Commons’s thinking about taxes, though politically infeasible in 1907, influenced later successful public policies, the paper reconsiders Commons’s proposal in the context of his approach to policy formation. It concludes that like the Tobin tax and taxes on pollution, the Commons tax merits consideration in current policy deliberations.
Brian Donahoe
Siberian Studies Centre, Max Planck Institute for Social Anthropology
“Situated Bounded Rationality: Linking Institutional Analysis to Cognitive,
Processual, and Phenomenological Approaches in Anthropology”
This paper is an attempt to further develop anthropological applications of institutional analysis. Institutional analysis has been successfully used to study changes in property rights and the negotiation of the collective-action problem inherent in managing common-pool resources under a variety of property regimes. It is particularly well-suited to the analysis of socio-ecological systems, and is compatible with theories coming out of ecological and economic anthropology. Yet despite the pioneering work of Acheson and Ensminger, institutional analysis remains unfamiliar to most anthropologists, primarily because of its theoretical foundations in rational choice and game theory, which many anthropologists see as irreconcilable with anthropology’s humanistic, reflexive and relativistic biases. Institutional analysts circumvent the problems inherent in strict definitions of rationality through the concept of bounded rationality. This is a necessary first step, but still assumes the existence of an abstract Rationality as the underlying motivation behind human behavior, and as the normative baseline from which to measure deviations. This paper is a step toward elaborating a more nuanced understanding of situated bounded rationality, based on humans’ evolved reliance on heuristics and situated cognition. I suggest this can reconcile institutional analysis to processual, cognitive, and perhaps most surprisingly, phenomenological and practice-based approaches in anthropology.
Quentin Duroy
Denison University
“The Embryonic Stem Cell Research Debate: Minority View and Ceremonial Encapsulation”
It has been argued that embryonic stem cell research (ESCR) is in conflict with the conventional morality of the American population. However, public polls have found a majority of the American public supports ECSR and its potential future medical benefits. It is argued here that the stem cell debate in the USA has been encapsulated in a ceremonially warranted pattern of behavior which has led to a situation in which a minority view dominates policy-making. In this paper, the main issues raised in the stem cell debate are examined through an institutional economics’ lens. In particular I posit that the technological innovation associated with ESCR has led to a cultural lag expressed in a minority view whose institutional response has been to ban further federal funding. While research in biotechnology warrants strict ethical guidelines, it is contended here that a minority view should not continue to influence policy-making without taking into account the scientific consensus. In other words the debate and policy-making on stem cell research should reflect instrumental rather than ceremonial values in accordance with both the expert and the majority views.
Justin A. Elardo
Ohio State University
“Economic Anthropology and the Evolution of Institutionalist Thought since the Great Debate.”
In the 1960s Institutionalist thought was thrust to the forefront of economic anthropology during the substantivist/formalist debate, otherwise known as the “Great Debate.” By the close of the 1960s, with the substantivist/formalist debate having passed unresolved, the role of Institutionalist economics in economic anthropology reached a crossroads. Institutionalist thought could follow the path of what would become “new” institutional economics or, to the contrary, continue the legacy of the “old” institutionalists of Veblen, Commons, Ayres, and Polanyi. Embarking on a historical review, this paper examines the evolution of Institutionalist thought in economic anthropology from the time of the substantivist/formalist debate through the present day. The paper begins by briefly revisiting the history and arguments central to the “Great Debate.” The paper then proceeds to evaluate the contributions to economic anthropology made by Institutionalist thinkers in the aftermath of the debate. The primary goal of the paper is to identify the various strengths and weaknesses of the evolution as defined by the “old” Institutionalists and by continuation, the substantivist argument of the 1960s.
Paul Fudulu
University of Bucharest, Faculty of Political Studies
“Rules and Institutions as Opportunity Cost Patterns”
The non-inclusiveness of the current definitions of rules and institution is obvious. It is hardly deniable that institutions of slavery, of a church or even of a school do not quite fit the standard uncertainty decreasing perspective. This paper’s assumption is that new institutional economics, despite its valid technical tools, lacks a trans-cultural perspective on maximand that entails the inability to depict institutional variation within different cultural contexts. Repetitive actions are patterned or ruled because their opportunity costs are patterned. Rules are opportunity cost patterns for alternative courses of action while institutions are opportunity cost patterns for the all-inclusive mega goods wealth and power. The assumption of a single-component maximand –wealth -, which is a Western-culture biased extreme perspective, makes impossible the opportunity cost perspective. Individuals under rules are still choosing individuals, not automata. The more comprehensive principle guiding rules is: Choose that alternative action which has the lowest opportunity cost. This principle becomes a particular rule for an individual confronting two courses of action, A and B, when most often the opportunity cost of one course of action is smaller than the other one.
John Hall
Portland State University, USA
Udo Ludwig
Leipzig University, and Head of Macroeconomics, Halle Institute, FRG
“Institutions and Relatively High Rates of Persistent Unemployment in Eastern Germany”
This paper commences with a critique of neoclassical theory buttressed by neo-liberal suppositions, leading to the assertion that relatively high rates of persistent unemployment in Germany’s eastern region are based on union power and public sector entitlements that fetter competition in the labor market. As a critique, we trace persistent unemployment to three institutions, especially, that cause insufficient levels of effective demand as well as insufficient levels of labor demand relative to labor supply. These include 1) the curious pattern of rapid Treuhand privatization that was followed by cross regional capital flows, resulting in high levels of capital intensity and a dramatic shedding of labor. 2) the curious pattern that business headquarters were moved to the west of Germany, resulting in a pattern of reindustrialization and the eastern region’s shift to an economic periphery, evinced through its specialization in intermediates vis-à-vis finished goods, engendering weak labor demand. 3) Adjustment lags for female labor force participation rates in transition to a Christian democratic family model generated slack demand relative to female labor supply.
Éric Tymoigne
California State University, Fresno
John F. Henry
University of Missouri, Kansas City
“Primitive Trade Relations: A Proposed Solution”
Major institutionalist theorists such as Karl Polanyi and George Dalton have argued that early trade was not prompted by self-interested behavior nor conformed to “rational” market-driven rates of exchange based on cost-benefit calculations. Yet, neither these nor other economists have been able to explain primitive trade relations in a satisfactory fashion. In this paper, we draw on the work of institutionalist economists, anthropologists, archaeologists, and historians in order to attempt an explanation of such trade patterns based on the economic and social organization of primitive societies themselves. We also demonstrate why neoclassical explanations of early trade must necessarily be invalid. We argue that the seemingly chaotic or random trade patterns observed all have their roots in the central organizing principle of tribal and pre-tribal society, that of hospitality. Given an understanding of hospitality and its interrelationship with almost all societal relations of early humans, trade relations can be explained and seen as rational within a non-calculating, non-self interested form of social organization.
John F Henry
University of Missouri, Kansas City
“A Marxist View of the State and Government”
Abstract: Marx’s position on the nature of the state distinguishes state and government. While these organizations are intertwined in class society, governments can exist independently of a state (tribal society), though states cannot exist in the absence of governments. In class society, both state and government exist to serve the interests of the dominant economic class, though governments must be open to reformist measures within the constraints of the principal property relations of such societies. This presentation will develop Marx’s position on these matters, will demonstrate its fundamental distinction compared to other theoretical constructions of state and government, and show the relationship of Marx’s position to that of Veblen.
P. Sai-wing Ho
University of Denver
“Contrasting Myrdal’s ‘soft state’ with the Neoclassical notion of ‘government failure’”
The Neoclassical notion of ‘government failure’ has since the 1980s been employed to characterize the failure of those less-developed countries that allegedly rely heavily on import-substitution to promote development. This is a challenge to the ‘early development literature’, which allegedly expects “a benevolent state, acting solely in the societal interest, and equipped with needed information, knowledge and policy instruments, … [to] intervene in an optimal way to correct any market failure, … [bringing about] rapid development” (Srinivasan). Careful re-examination of the works of Myrdal suggests that he cannot be labeled as favoring conventional import-substitution. He coined the term ‘soft state’ to underscore the failure of many states to promote development. He noted some of the same problems as the Neoclassical economists, but he sought to comprehend them through an historical analysis of why certain societies emerged from colonial rules as lacking a system of community obligations. He further hinted at temporarily supporting a certain degree of authoritarianism with the aim of increasing social discipline, hence his continued support of social planning to achieve internal reforms. The differences with the Neoclassical conclusion following from government failures are in some respects immense.
Clare Hushbeck
AARP
“Lessons Learned from Fighting TABOR (Taxpayer Bill of Rights)”
Radical conservatives have long been trying to build support for state initiatives setting strict caps on revenues and expenditures, based on a formula of inflation plus population growth. By early 2006, a dozen states faced TABOR (Taxpayer Bill of Rights) and related SOS (Stop Over Spending) initiatives. Until now, Colorado has been the only state to live with TABOR, which was placed in the Constitution in 1993. By November 2005 TABOR had done such damage to the state’s budget and economy—primarily roads, schools, health care, and higher education--that the citizens voted to suspend the law for 5 years. Despite this well-documented experience, a dozen states faced TABOR ballot initiatives in 2006—most in the form of Constitutional amendments as in Colorado. But by election time, because of irregularities in signature gathering, only 3 still qualified for the ballot. All went down to defeat following an extensive and expensive campaign waged by public interest groups and public sector workers. These losses have if anything only energized the forces pushing for these strict limits. This paper explores the dynamics of state budget limit initiatives and offers suggestions for why many Americans support TABORs contrary to their own interests.
Robert KempBluffton University
“The Business School in the Corporation of Higher Learning in the USA” One hundred years ago, in The Higher Learning in America, Veblen speculated on the prospects of the schools of commerce within the American university. Specifically he postulated that (a) “the instruction in the field of commercial training may be expected gradually to fall into a more rigidly drawn curriculum, which …will diverge more and more widely from the ways of scientific inquiry …[for} its chief purpose of training expert men for the higher business practice; and (b) “the college of commerce, if it is to live and thrive, may be counted on to divert a much larger body of funds from legitimate university uses, and to create more of a bias hostile to scholarly and scientific work in the academic body, than the mere numerical showing of its staff would suggest.” This paper uses the Veblenian framework of the juxtaposition of business enterprise and the state of the industrial arts as a method to examine a) the evolution of the business curriculum in relation to the social sciences, b) “the consequences which an habitual pursuit of business in modern times has had for the ideals, aims and methods of the scholars and schools devoted to the higher learning”, c) the growth and economic impact of business school graduates on the society as a whole, and d) the limitations that the strength of the business school puts on society in an era of globalization of business enterprise.
Thomas Kemp
University of Wisconsin - Eau Claire
“Individual Discretion, Custom, Law, Technology, and Institutional Change”
This study attempts to define the relationships between the range of discretion available to the individual and the social confines of law, custom, and technology. This study is part of a broader piece which formalizes these relationships using a series of algorithms. The intent of this work is to create a framework from which policy decisions can be made based upon user preferences. This section of this work lays out in diagrammatic and literary form the hypothesized relationships between the above variables. In the most basic sense this section of the work builds on the institutional economics of John Commons. Similar to Commons this work attempts to bridge the gap between theories of institutional change based wholly upon individuals and those based upon culture.
John Marangos
Colorado State University
“The “Discouraged-Business-Major Hypothesis”: Empirical Evidence”
The “Discouraged-Business-Major” hypothesis is the phenomenon where students who are screened out of the business curriculum often make an economics major their second choice. The paper explains how this screen worked and how we identified those economics majors who were discouraged business majors. I compiled a data set which could be used to assess the validity of the ‘discouraged-business-major’ theory and to evaluate the potential implications of this phenomenon for economics departments. The data set is compiled using the transcripts from all economics majors at Colorado State University who graduated during the time span from spring 1999 to spring 2005, a total of 436 students over 19 terms. Important policy implications are derived from this research, the findings of which may have implications for other institutions.
Ted Oleson
University of Nevada, Reno, Department of Economics
“Toward an Institutional Theory of the Firm: Commons, Coase, and Chandler”
In recent years, the New and Old Institutionalists have engaged in a debate over their differences and similarities. While some Old Institutionalists argue for greater cooperation (Hodgson 1998) others contend that the differences remain significant (Pitelis 1998). Within the field of business and organizational history, there has been a similar debate over the nature of the firm and the extent to which transaction costs affect organizational structure. Leading this debate is the business historian Alfred Chandler who has criticized the focus on isolated transactions and encouraged emphasis on the firm as a unit. In this paper, I argue that Chandler’s concept of the firm has many similarities to Commons’ conception of the transaction as part of the going concern that represents a firm. I argue that synthesizing Chandler and Commons helps us understand the dynamics and evolution of organizations. This is not so much contrary to New Institutionalism and the transaction costs approach as a more complete and realistic understanding of the nature of organizations. Thus, the fields of business history and Institutional economics may have arrived via different paths at a common understanding.
Jairo J. Parada
Universidad del Norte
William R. Baca
Universidad del Norte
“Fiscal Policy in Colombia: Procyclical or Countercyclical?”
This paper attempts to identify time periods for which fiscal policy in Colombia was countercyclical or pro-cyclical. The periods under examination go from 1950-2004 and 1962-2004. For the first period we studied the Non-Financial Public Sector Deficit (SPNF) and for second period we examined the Central National Government Deficit Spending (GNC). Based on this we found that countercyclical fiscal policy periods have been accompanied with low unemployment rates and those pro-cyclical periods were correlated with high unemployment rates. The econometric estimation through VAR models show us that budget deficits in SPNF or GNC, have real positive effects in output and employment in the short run without price destabilization This paper shows, against orthodox claims, that fiscal policy should be discretionary to reactivate the economy when Growth Domestic Product is being decelerating and the foreign sector does not present restrictions like currency devaluation originated in external negative imbalances. Likewise, it argues that fiat and sovereign money represents the key for a macroeconomic program that guarantee full employment and prices stability.
Janice Peterson
California State University - Fresno
"Developing a Learning Community in Math and Economics"
Crossing disciplinary borders and boundaries is an important part of teaching and pedagogy as approached by many Institutional economists. One way in which students may be introduced to the important interconnections between traditional disciplines is through their participation in a learning community. While learning communities may take different forms, one approach is to link two courses from different disciplines around a common theme and enroll a common cohort of students. This spring, I will be teaching in a new learning community which links a math course and an economics course, both of which are designed for prospective public school teachers. The emphasis placed on not only learning the material but learning how to teach it to others as well is a unique feature of both courses and will serve as a common theme for the learning community. It is hoped that this format will enhance the coordination and integration of the material covered in the two courses, and will provide an opportunity for students to form valuable academic and social relationships. This paper will describe the structure and content of this learning community in more detail, and offer an early assessment of its strengths and weaknesses.
C. S. Poirot Jr.
Shawnee State University
“Piercean and Deweyan Perspectives on Policy”
Institutional Economics has a historical tie and close affinity to the classical pragmatism of Charles Saunders Pierce and John Dewey. Dewey agreed with Pierce (in general) on science as a form of inquiry yet departed from Pierce by focusing on instrumentalism. In adapting Dewey’s instrumentalism, Clarence Ayres’ and other Institutional Economics viewed the goal of economics as promoting policies that were instrumental to ameliorating human suffering. Dewey’s and Ayres’ concerns are echoed by authors such as Amartya Sen, Hillary Putnam and Martha Nussbaum. In this paper I propose a reconciliation between pragmatism as pure inquiry and pragmatism as the search for instrumental reforms. Pierce’s dictum that he would remain in need of the conclusions of genuine scientific inquiry before he would propose reforms retains its force. However, this still allows space for instrumental applications of warranted knowledge. There can however be no “social values” test” test for science (including economics and other social sciences). Nor can economics be grounded in the search for a priori conceived utopias.
Robert E. Prasch
Middlebury College
“The Economics of Fraud”
Economists have long taught and written in the area of monetary economics without taking seriously the idea that fraud could be an important economic category. Yet the evidence of experience and history strongly suggest that this is an oversight – one that has repeatedly contributed to an environment in which fraud can prosper and spread. In the case of the 1980s Savings and Loan crisis this was an important cause of a widespread financial crisis (an interpretation that already runs against the conventional wisdom that has held that deposit insurance created a perverse incentive structure). By drawing upon the recent work of William Black (2005) this paper presents a critique of the neoclassical approach to monetary economics and the implicit reasons why it has ignored fraud for so long. It will also propose that Black’s category of “control fraud” represents an important recasting of the issue of fraud that should be incorporated into the theory and teaching of monetary economics. A policy consequence is that it is doubtful that we can rely upon the “invisible hand” for adequate regulation of malfeasance in a market-based financial regime.
Steven Pressman
Monmouth University
“A Post Keynesian Approach to Crime”
This paper sets forth a Post Keynesian approach to the problem of crime, and compares the Post Keynesian approach to the neoclassical approach. Post Keynesians have generally focused on macroeconomic issues; but the basic principles of Post Keynesian economics can be applied to microeconomic policy issues. In contrast to neoclassical theory, Post Keynesians focus on uncertain outcomes, on income effects rather than substitution effects, and on institutional factors that affect individual behavior rather than on agent rationality. This distinct approach to economics yields policy proposals for dealing with the problem of crime that are very different from the standard policy proposals that stem from the work of Gary Becker. Rather than relying on severe punishment to deter crime, the Post Keynesian approach would focus on generating adequate incomes for all individuals so that people are not tempted to engage in criminal activities. In addition, when penalties are generally regarded as being too harsh by a community, there will be less cooperation with law enforcement officials, and so harsh penalties will not be effective as a crime deterrent.
Jack Reardon
University of Wisconsin, Stout
Glen Atkinson
University of Nevada, Reno
“Accounting for Energy in a Renewable Age”
National income accounts measure wealth and act as a proxy for economic development. Countries with access to abundant energy have amassed wealth while countries without access have been stymied in poverty. As we prepare to move from fossil fuels to renewable energy many facets of our economy will fundamentally change. National income accounts reflect underlying values and assumptions; thus it is important for institutionalists to articulate and offer our values. Section one of this paper will briefly recount the important role of institutionalists in formulating the national income accounts; section two will discuss how income accounts measure conventional energy use and section three will suggest how national income accounts can incorporate institutional values that foster sustainability and renewable energy.
Geoffrey Schneider
Bucknell University
Paul Susman
Bucknell University
“Trade, People and Places: An Institutionalist, Social Economic and Geographic
Approach to Comparative Institutional Advantage”
This paper examines the theoretical underpinning of contemporary trade policies through an institutionalist, social economic and geographic lens. The paper offers a critique of the theory of comparative advantage and the recently-developed theory of comparative institutional advantage. Subsequently, the paper develops a more comprehensive and general theory of comparative institutional advantage consistent with the principles and methodology of institutional and social economics. Furthermore, it suggests ways in which this institutional—social economic—geographic version of the theory of comparative institutional advantage can be used in the construction of trade policies which are more likely to have a beneficial impact on the welfare of communities and to foster the fulfilling of human needs and potential. This version of the theory serves to reorient the focus of economic policy to the welfare of the community and the income-generating possibilities of trade. And, it serves as a superior guide to policymaking because it is better able to define the root causes of regional success than standard trade theories.
Eric A. Schutz
Rollins College
"Inequality, Power and Distributive Justice"
This paper considers the applicability of theories of distributive justice to economic inequality due to structures and exercises of social power. The standard economic theory of the distribution of income and wealth supposes individuals making choices about investment in the accumulation of capital and human capital, subject to constraints constituted in their initial individual endowments of non-human and human capital, the prices of the available investments and labor, and their endowments of and abilities to accumulate further social and cultural capital and other kinds of relevant information. Social power consists in some individuals being able benefit by non-reciprocally influencing constraints effective upon others making choices. Exercises of power thus lead to “redistributions” of income and wealth from those subject to it; and the inequalities generated further bolster positions of power. This paper considers the three major contenders in distributive justice theory: libertarian, welfare liberal, and socialist. Do these theories address inequalities that are due to social power as described here, and precisely how so?
James L. Webb
University of Missouri, Kansas City
“The Marginalist-Antimarginalist Controversy and Peirce's Semiotics”
Original Institutional Economics has long criticized formalism in mainstream economics as deductivist and has offered realism as an alternative basis for analysis. This paper uses the marginalist (Friedman, Stigler et al.)/antimarginalist (Means, Lester et al.) controversy on the theory of the firm as an exemplar of institutionalist criticism of formalism. The marginalist-antimarginalist controversy is examined in light of C. S. Peirce’s semiotics and his concept of diagrammatic reasoning. Peirce asserts that reflective inquiry necessarily involves irreducibly triadic relations between the object of knowledge, the representation of this object and the effect of the representation. Peirce’s analysis shifts the focus from the misguided notion of realistic models to the effectiveness of representations as tools of inquiry about existent relationships. This preserves the intuition of institutionalists and avoids the muddle resulting from debate over the realisticness of assumptions or models. Peirce’s approach has anticipated a number of new directions in philosophy of science and could be beneficial: (1) as a positive heuristic for institutionalist use of appropriate types of formalism; (2) in providing more effective critiques of formalism as used in the mainstream; (3) and in fostering cross-communication with those in other schools of thought.
Charles J. Whalen
Perspectives on Work
“Toward ‘Wisely Managed’ Capitalism: Keynes, Post-Keynesianism and the Creative State”
During the Great Depression, John Maynard Keynes divided economists into two groups: those who believe the capitalist system “has an inherent tendency toward self-adjustment” and those who do not. Keynes placed himself in the latter category. His goal was capitalism “wisely managed,” an objective that remains central to post-Keynesianism. This paper probes the roots of the post-Keynesian conception of the state via the writings of Keynes, Joan Robinson, and others. It also outlines the post-Keynesian notion of the creative state and distinguishes it from other views of the public sector. A look at specific policy areas demonstrates post-Keynesianism’s strengths as a guide to the resolution of real-world problems. The paper closes by discussing similarities between institutionalist notions of the pragmatic state and the post-Keynesian creative state. Similarities should come as no surprise: In a letter to John R. Commons, Keynes wrote, “There seems to me to be no other economist with whose general way of thinking I feel myself in such genuine accord.” Although bringing coherence to institutionalism has always been difficult, a post-Keynesian institutionalism seems to be emerging. Its aim is wisely managed capitalism, and its approach to public policy is rooted in the notion of the creative state.
Matthew C. Wilson
The University of Denver
“The Institution of Public Investment: The Rise of American Municipal Enterprise During the Nineteenth Century”
In mainstream economics, the topic of public investment is usually approached from the standpoint of constrained optimality, with little or no regard for social and political institutions. In reality, public investment patterns bear little resemblance to standard economic theory. The assets that are publicly developed are those that the populous and its leaders deem to be legitimate enterprises of public undertaking. Entrenched views regarding the legitimate role of government then are institutions, which are fundamental to the undertaking of public investment.
The early American republic was an extreme form of laissez faire. However, the end of American laissez faire was part and parcel of the rise of the market system during the mercantile period, followed, of course, by industrialization and urbanization. Hand in hand with the emergence of American capitalism was the rise of activist municipal government. State and local government emerged as planner, promoter, investor, and regulator of economic activity. Municipalities became heavily involved in canal and railway construction. Later these speculative activities were superseded by regularized investment in street paving, fresh water and sewer systems, school buildings, and more. The paper will examine this massive transformation, including its political and social context.
Jon D. Wisman
American University
Talip Kilic
American University
“Savings, Class Identity, and Conspicuous Consumption”
American save less than their counterparts in other countries, in spite of the fact that American incomes are among the world’s highest. This poses a paradox: it is generally expected that as incomes rise, people save an increasing proportion of their incomes. The hypotheses that will be explored in this article is that the rate of savings within a society is related to the perception of the degree of vertical mobility and the degree of inequality in the distribution of income and wealth. These hypotheses are motivated by Thorstein Veblen’s conception of conspicuous consumption, which held that above a certain level of subsistence, humans consume in order to demonstrate a level of social status. A belief that the potential for vertical mobility is high inculcates a sense that one is responsible for one’s social status. Therefore, individuals are more prone to internalize responsibility for their successes or failures. This places considerable pressure on people to demonstrate high status. The easiest way to show this success is through consumption. The higher the level, the presumed greater one’s success. Where income and wealth inequality is greater, the amount that must be consumed to create the impression of higher status is greater.
Mary V. Wrenn
Weber State University
Ron Stanfield
Colorado State University and Bowling Green State University
Mike Carroll
Bowling Green State University
“Critical Analysis of Capitalism: Marx, Veblen, Galbraith”
There is much to separate the work of Marx, Veblen, and Galbraith, beyond the obvious dimensions of time and place. The differences notwithstanding, we propose that there is much in common among these three political economists beyond their dissent from the orthodoxy. In terms of method, all called for an evolutionary economics. All recognized the important force of technological change and the importance of power and consciousness in the governance of this process. All foresaw a struggle between social forces that systematically opted for waste and repression and those that sought fundamental institutional change to secure sane human use of affluence. In light of the space available we shall be very selective in elaborating our case. We first emphasize the evolutionary outlook Marx set out in the “Introduction” to the Grundrisse and Marx’s well-known depiction of the forces and relations of production and the laws of motion of capitalism. Second, we review Veblen’s famous essay on evolutionary economics and summarize his famous dichotomy and the cultural incidence of the machine process. Third, we examine the implicit evolutionary outlook in Galbraith’s work and his declamations as to the squandering of affluence under the discipline of the conventional wisdom.
Timothy Wunder
Valparaiso University
“An Institutional Perspective on Government”
The title of this paper is prefaced with the word an rather than the word the since it seems unrealistic to argue that there is a unified conception of the purpose of government in the institutional tradition. Like most concepts within institutional thinking the perceptions on the proper role of government changes between each institutionalist you observe. Yet there does seem to be a common thread running through the institutional literature that argues that the government is like most other organizations and it can change and serve multiple purposes as it evolves. The organization of the social safety nets under the New deal seems to come from this practical envisioning that reflects an institutional perspective. This paper will explore the concepts of government in several works emphasizing Veblen, Commons, and others to draw out and make explicit this unifying thread.