Global Contentions – East and West
Edited by Geoffrey M. Hodgson, Makoto Itoh and Nobuharu Yokokawa
Chapter 5: The evolution of capitalism from the perspective of institutional and evolutionary economics
Geoffrey M. Hodgson INTRODUCTION The terms ‘institutional economics’ and ‘evolutionary economics’ are now widely used, each to refer to a variety of theoretical approaches and perspectives.1 The term ‘institutional economics’, however, was ﬁrst applied to the broad approach engineered by American economists such as Thorstein Veblen, John Commons and Wesley Mitchell. Non-Americans such as Karl Polanyi, William Kapp, Gunnar Myrdal and Shigeto Tsuru also came to identify themselves with this institutionalist tradition. Furthermore, this same tradition of institutional economics was the ﬁrst to adopt the ‘evolutionary’ label and to argue that ideas from Darwinian evolutionary biology could be usefully transplanted into economic science. Accordingly, it is very appropriate that the term ‘institutional and evolutionary economics’, or just ‘institutional economics’, should be applied to this post-Veblenian legacy. Institutional economics was actually the dominant intellectual approach in America in the ﬁrst few decades of the twentieth century. However, institutionalism never completed a systematic approach to economic theory of the stature or compass of that of Adam Smith, Karl Marx, Léon Walras or Alfred Marshall. Furthermore, institutionalism itself contained a diversity of approaches and there was a failure to obtain widespread agreement on its deﬁnition, boundaries and common core. Another reason why American institutionalism failed to develop a systematic theory was because it was partially disabled by a combined result of the profound shifts in social science in the 1910–40 period and of the rise of a mathematical style of neoclassical economics in America in the 1930s. Without going into...
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