Varieties of Institutionalism

21 May 2007 at 12:14 pm 3 comments

| Peter Klein |

The new institutional economists have not been kind to their “old institutional” predecessors. Coase’s dismissal of J. R. Commons, Wesley Clair Mitchell, Thorstein Veblen, Clarence Ayres, and their associates is typical: “Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire.” Like its older counterpart, the new institutional economics is interested in the social, economic and political institutions that govern everyday life. However, the new institutional economics eschews the holism of the older school, adopting strict methodological individualism and some kind of rational choice framework. (See former guest blogger Dick Langlois’s 1989 paper, “What Was Wrong with the ‘Old’ Institutional Economics? (And What Is Still Wrong with the ‘New’?),” for a more sophisticated treatment of these differences.)

Among political scientists there is a similar distinction: “historical institutionalism” versus “rational choice institutionalism.” The differences, as discussed in Preferences and Situations, edited by Ira Katznelson and Barry Weingast (Sage, 2005), revolve mainly around the concept of preference. Rational choice institutionalists — like mainstream economists — take preferences as given, while historical institutionalists take preferences as endogenously determined by historical circumstance, rendering attempts to understand historical phenomena in methodologically individualistic terms impossible.

The historical approach has many problems, however. Mike Munger objects to its relativism: It tends “to presume that theory — any general theory — is wrongheaded: everything is different in various ways from one case to another. The central thesis of much of the work reported in Preferences and Situations seems to be that it is difficult to say anything interesting about persuasion, and the authors go on to demonstrate this claim persuasively.” (Jean Baudrillard, call your office!) More generally, is historical institutionalism, in its modern variant, much of an advance over the crude historicism smacked down in prior generations by the likes of Mises and Popper?

Entry filed under: - Klein -, New Institutional Economics. Tags: .

Craft Production Is Fun What Would Genghis Do?

3 Comments Add your own

  • 1. jonfernquest  |  22 May 2007 at 3:31 am

    I thought these guys were the new institutional economics:

    http://en.wikipedia.org/wiki/Avner_Greif

    http://en.wikipedia.org/wiki/Daron_Acemoglu

    I guess they are the new, new institutional economics?

    Moreover, the influence of institutional economists spread to political science a long time ago:

    http://en.wikipedia.org/wiki/Bruce_Bueno_de_Mesquita

    And insofar, as these theories result in clear hypotheses applicable to historical data, historians too. Surely, differential access to information (information assymetry), for instance, has had historical effects.

  • 2. LF  |  22 May 2007 at 12:19 pm

    I don’t think I can say something on interest on the topic (among the cited books, I just read POpper’s and Mises’s), but I try.

    Several years ago on the Review of Austrian Economics a scholar called Gloria Palermo raised the point that methodological individualism couldn’t cope with changes in beliefs (it was may be called “Necessity and impossibility of a theory of institutions”).

    Historical institutionalists make a similar claim, I read.

    But when Mises wrote Omnipotent Government, he explained step by step how nationalism and impairments of international markets went hand-in-hand (some sort of a positive feedback). He claimed that institutions can change beliefs and viceversa, by changing incentives in peaceful/aggressive behaviors.

    Wasn’t he a methodological individualist? Surely he was, and of the most radical kind. That is why I can’t understand Palermo’s and Katznelson & Weingast’s claims. May be there is some fundamental limitation with the formal theory of choice, the one of the first chapters of Microeconomic textbooks. And I’m not at all suprised, I’ve never considered myself a function, nor I consider my fellows that way. :-D

  • 3. LF  |  22 May 2007 at 12:25 pm

    “it is difficult to say anything interesting about persuasion, and the authors go on to demonstrate this claim persuasively”

    In Mises’s words, there is no theory of persuasion (not a rich one, at least), even though it plays a great role in history.Did I get it right?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authors

Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts

Guests

Former Guests | posts

Networking

Recent Posts

Categories

Feeds

Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

Follow

Get every new post delivered to your Inbox.

Join 256 other followers