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21 - What Is the Essence of Institutional Economics?

Published online by Cambridge University Press:  05 June 2012

Daniel M. Hausman
By
Geoffrey M. Hodgson
Daniel M. Hausman
Affiliation:
University of Wisconsin, Madison
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Summary

Geoffrey M. Hodgson (1946–) is a Research Professor in Business Studies at the University of Hertfordshire (UK), the Editor-in-Chief of the Journal of Institutional Economics and was 2006 President of the Association for Evolutionary Economics. He is the author of more than a dozen books and nearly two hundred scholarly articles. His research has focused on institutions, and he also has had a long-standing interest in the history and methodology of institutional and evolutionary economics.

The term “institutional economics” was announced by Walton Hamilton at a meeting of the American Economic Association in 1918 [Hamilton 1919]. Institutionalism dominated American economics, at least until the 1940s. Listing a number of perceived attributes of this school, Walton Hamilton [1919, 309–11] claimed that institutional economics alone could unify economic science by showing how parts of the economic system related to the whole. Institutional economics was not defined in terms of any normative stance. Hamilton [1919, 313] declared: “It is not the place of economics to pass judgments upon practical proposals.” However, its appeal as a theory was that allegedly it could be used as a basis for policy. According to Hamilton [1919, 314–18], institutional economists recognized that:

The proper subject-matter of economic theory is institutions…. Economic theory is concerned with matters of process…. Economic theory must be based upon an acceptable theory of human behavior …

This was expanded by the following observations:

neo-classical economics … neglected the influence exercised over conduct by the scheme of institutions … Where it fails, institutionalism must strive for success … it must discern in the variety of institutional situations impinging upon individuals the chief source of differences in the content of their behavior [1919, 318].

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Chapter
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The Philosophy of Economics
An Anthology
 , pp. 399 - 412
Publisher: Cambridge University Press
Print publication year: 2007

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References

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