Institutionalism arose and began to develop as an opposition doctrine of neoclassical economic theory. Representatives of institutionalism sought to put forward an alternative concept. They tried to reflect not only formal schemes and logical models of the economy, but also the whole diversity of society. Consider the features of this teaching.
Conception
Representatives of the old institutionalism formed their doctrine under the influence of various economic trends, including Marxism. An alternative concept to neoclassical theory arose at the end of the 19th century. However, as a current, it took shape in 1920-1930. Representatives of institutionalism and their works were between Marxism and neoclassical "economics".
In 1898, Thorstein Veblen criticized one of the main representatives of the German historical school of Schmoller for excessive empiricism. Trying to answer the question why economics is not considered an evolutionary science, he proposed an interdisciplinary approach, involving the use of social philosophy, psychology, anthropology, instead of a narrowly economic one. It was an attempt to direct economic theory towards social problems.
The concept of "institutionalism" was first introduced in 1918 by Wilton Hamilton. The author defined the institute. He considered it a common way of acting or thinking, enshrined in the habits and customs of the population.
From the point of view of representatives of traditional institutionalism , established procedures are fixed in the institutes, the general agreement, the agreement that has developed in society are reflected. Institutions called the state, corporations, unions, customs, etc.
The main representatives of institutionalism were W.K. Mitchell, D.R. Commons, G. Myrdal, R. Heilbroner, C. Galbraith, etc.
Veblen Books
In 1899, the work The Idle Class Theory was published. This work was the first monographic study of a representative of institutionalism , based on a consistent methodology.
Veblen was greatly influenced by the ideas of social Darwinism. Inspired by this theory, the author considered in his work natural selection among institutions. The idle class is an elite that emphasizes its superiority with prestigious consumption. The author studied this institution, considering it a special case of the law of predation and parasitism. He believed that the presence of this class slows down social development due to inertia, waste, uneven distribution of goods.
In his Theory of a Business Enterprise, Veblen studied the dichotomy of business and industry, rationality and irrationality. The author contrasted behavior based on actual knowledge with actions conditioned by thinking habits. He considered the former as a source of change in progress, and the latter as a factor opposing it.
Mitchell's Activities
This representative of institutionalism studied at the University of Chicago and completed an internship at Vienna universities. He was subsequently hired by Columbia University. In 1920, Mitchell became the head of the National Bureau of Economic Research.
Mitchell, as a representative of institutionalism, in the economy was primarily interested in issues related to business cycles and market conditions. He became the first adherent of the theory to study processes through numbers. In his Business Cycles, Mitchell studied the gap between changes in industrial production rates and price dynamics.
In the following work on the backwardness in the art of spending money, the author criticizes the neoclassical "economics" based on rational human behavior. Mitchell did not accept Bentham's theory of the "blissful calculator" and showed various forms of irrationality of the individual. The author tried to prove the differences between real economic behavior and the hedonic norm type.
Mitchell represented the real economic subject as an ordinary average person. Studying the irrationality of expenses in family budgets, the author clearly showed that in America the art of making money ahead of the ability to spend it rationally.
John Commons Works
This person is considered one of the prominent representatives of institutionalism , who made a great contribution to the development of theory. He studied the specifics of the distribution of wealth. Commons sought a compromise between capital and organized labor. As tools for achieving it, the author proposes to establish an eight-hour shift, increase salaries, which will lead to an increase in the purchasing power of citizens.
Developing the basic ideas of the representatives of institutionalism , Commons offers the idea of a social agreement between employers and workers through mutual concessions. In his writings, he showed how the diffusion of property will ensure an even distribution of wealth.
Transaction concept
It was introduced by Commons in a book on institutional economics. This concept will subsequently be used by many representatives of institutionalism.
In economics, all transactions, according to Commons, are concluded according to certain laws. In the transaction, the author identified three key components: negotiations, the adoption of obligations and their implementation. In his work, he described different types of transactions: rational, trade, and managerial.
According to Commons, the transaction process is an operation to determine "reasonable value." It ends with the conclusion of a contract through which "guarantees of expectations" are realized.
In the last years of his life, Commons investigated the legal framework of collective behavior, the activities of the courts. His ideas were reflected in the work "The Economics of Collective Action", released after his death.
Wittfogel's writings
The interest in studying civilization as a complex social system was of great methodological importance for representatives of the institutionalism of the post-war period. Karl-August Wittfogel, an American historian and institutionalist, reflected his ideas in a rather peculiar way.
Despotism, caused by the functioning of the state, acted as a structure-forming element in his concept. The basis of power, according to the author, is a bureaucratic apparatus. The state suppresses the development of private property. The ruling class has wealth because it is at the top of the hierarchical structure. Wittfogel believed that external factors, including climatic conditions, affect the shape of the state. She, in turn, determines the type of social stratification.
Modern institutionalism: perspectives and prominent representatives
Today, institutions are seen as the "rules of the game", the "restrictive framework" created by man to organize relationships between individuals, and a system of measures to ensure their observance. Together, they form a model of incentives for relationships, organize everyday life, reducing uncertainty.
The domestic representatives of the new institutionalism can be attributed to Avdashev, Kuzminov, Mayevsky, Timofeev, Yakovlev, Afontsev and others. It is worth saying that there are quite a few domestic works that address neo-institutionalism. However, they are practically inaccessible to most students and teachers, since they are issued in very limited editions (up to 1 thousand copies). This negatively affects the spread of the theory among interested authors. In Russia there is no organized unity and specialized publications in which the principles of the concept could be systematically set out. In this regard, the prospects for establishing institutionalism in the country are extremely vague.
Formalization
Institutions can be formal and informal. The latter are traditionally understood as ethical codes, generally accepted norms and conventions established for people. Simply put, informal institutions are customs that have arisen as a result of the close interaction of people. Thanks to their presence, the individual easily understands what others want from him. Culture is based on these codes of conduct.
Formal institutions are the rules created by people specially authorized for this, that is, officials.
The formalization of restrictions is associated with an increase in the effectiveness of rules and a reduction in costs through the establishment of uniform standards. The costs of protecting the rules arise in connection with the identification of a violation, measuring its degree, choosing a punishment for the perpetrator, provided that the marginal benefit exceeds the maximum cost. The exercise of property rights is carried out using a system of incentives in the set of alternatives available to economic agents. The choice of the direction of behavior ends with the execution of the contract.
Monitoring compliance
He may be personified or non-personified. In the first case, it is based on personal fidelity, family relationships, common beliefs, beliefs, etc. Non-personalized control is based on the application of sanctions, supervision by third parties.
Comparative characteristics of neoclassicism and neoinstitutionalism
In 1960-1970 the so-called economic imperialism began to take shape. In this period, the concepts of "equilibrium", "maximization", "efficiency" and others began to be used in areas related to the economy (education, family relations, politics, etc.). As a result, fundamental neoclassical categories have gained wider application and deeper interpretation.
Each theory has a core and a so-called protective layer. Neoinstitutionalism is no exception. The main principles of this concept, as well as neoclassical theory are considered:
- Methodological individualism.
- Theory of the economic individual.
- Activity is an exchange.
Unlike neoclassicism, in neoinstitutionalism these principles were implemented more consistently.
Methodological individualism
As you know, economic resources are limited. In this regard, each person is faced with the need to choose one of the existing alternatives.
An analysis of the market behavior of an individual is carried out by universal methods. They can be successfully used in any field where a person needs to choose an alternative.
The main prerequisite for the emergence of neoinstitutional theory is the fact that people interact in any field where it is possible to satisfy their own interest. At the same time, in modern society there is no insurmountable line between entrepreneurship, the social sphere and politics.
Theory of the economic individual
It is considered another prerequisite for the emergence of neoinstitutionalism. The theory of an economic individual means that each person is guided in the commission of certain actions by economic principles. In other words, it compares the maximum benefits and marginal costs, primarily associated with the adoption of a decision.
But unlike the neoclassical theory, which primarily examines technological and physical limitations, neoinstitutionalism also examines transaction costs, that is, costs arising from the exchange of property rights.
Activity is an exchange
Representatives of neoinstitutionalism consider any area of an individual’s activity by analogy with the market. With this approach, the state, for example, becomes the scene of people's struggle for influence, access to the process of resource allocation, position in the hierarchical structure.
At the same time, the state is a specific market. Participants are vested with special property rights. So, the population can choose representatives of the highest authorities, deputies pass laws, officials control the implementation of norms. Politicians and voters can be called individuals exchanging campaign promises and votes.
It must be said that representatives of neoinstitutionalism more realistic assess the specifics of such an exchange. They take into account the limited rationality inherent in people, the risk and uncertainty associated with decision-making.