The Main Stream vs. Institutionalism: A “Différance” at the Methodological Level

Today the dialogue between the main stream and institutionalism is an exception rather than a rule. Any exchange of views is further hindered by the fact that for institutionalists questioning the scientific status of mainstream economics seems to be a compulsory item. A thunderous proclamation to announce in order to declare one’s affiliation.[1] Manoeuvring at a lower level of generalization, old institutional economics did not establish a coherent and well-formalized theoretical system, which has been a standard for neoclassical orthodoxy from the very beginning. This is not a failure, of course, only a peculiarity that stems from a unique interest and some methodological decisions. It is undoubted that institutionalism applies more de-idealized concepts—notions that are created at a lower level of abstraction, so they can have a higher degree of direct descriptive relevance. However, the difference is more fundamental. Upon its birth, institutional economics did not show any interest in abstract deductive systems. Instead, institutionalists try to capture the historical trends experienced in real societies and the country-specific social phenomena emerging under the influence of complex causal structures (Veblen 1898). It is much more than an interest in social determinants[2] (i.e. the institutions) that are well beyond the scope of mainstream models.[3] Members of the old institutionalist camp positioned their interest to another area. For them individual and social behaviour was not controlled by timeless economic laws, so they did not need formalism which proved to be very effective in discovering the consequences of premises and axioms. Even though these effects can hardly be approached through less formalized methods, institutionalists categorically rejected formalism (Rutherford 1994: 9). On the basis of their concepts they made efforts to understand the particularities rather than the general features. The ultimate purpose was to understand historically and socially determined constellations and evolutionary processes tied to unique places and periods. Such an ambition evidently requires a methodology other than mainstream formalism.

[1] At the same time mainstream economics tends to apply passive resistance. In his famous Economics, Paul Samuelson did not even devote a single word to institutionalist achievements (Tsuru 1993: 59). As it is highlighted below, we can easily find examples for an open attitude towards institutionalism.

[2] Habits, norms, rules and their evolution, and the like. These factors jointly control human behaviour, the functioning and the evolution of real societies and economic sub-systems. By today, new institutional economics has arranged these social institutions into a complex, multi-level hierarchy (Williamson 2000).

[3] Mainstream economics put these factors under the care of sociology and psychology or even social psychology (Keizer 2007: 10). Consequently, interdisciplinarity has different meanings for both of the streams. Mainstream economics expects related branches of knowledge to succeed in exploring their own territories, so answering certain questions is transferred to these disciplines. The institutionalist purpose is an active utilisation of the achievements of the related fields (Brousseau – Glachant 2003: 5).

References

Brousseau, Éric – Glachant, Jean Michel (eds.) (2008): New Institutional Economics. A Guidebook. Cambridge: Cambridge University Press.

Keizer, Piet (2007): The Concept of Institution in Economics and Sociology, a Methodological Exposition. Tjalling C. Koopmans Research Institute Discussion Paper Series No. 07-25. Utrecht: Utrecht School of Economics.

Rutherford, Malcolm (1994): Institutions in Economics. The Old and the New Institutionalism. Cambridge: Cambridge University Press.

Tsuru, Shigeto (1993): Institutional Economics Revisited. Cambridge: Cambridge University Press.

Veblen, Thornstein (1898): Why Is Economics Not an Evolutionary Science? The Quarterly Journal of Economics, 12(4): 373–397.

Williamson, Oliver E. (2000): The New Institutional Economics—Taking Stock, Looking Ahead. Journal of Economic Literature, 38(3): 595–613.

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