Institutional Economics and the Formation of Preferences

Institutional Economics and the Formation of Preferences

The Advent of Pop Music

New Horizons in Institutional and Evolutionary Economics series

Wilfred Dolfsma

The formation of preferences is an elusive subject that many social scientists, and especially economists, have tended to avoid. In this original new book, Wilfred Dolfsma combines institutional economics with insights from the other social sciences to analyse the way in which preferences are formed in a social context.

Chapter 6: The Social Construction of Value

Wilfred Dolfsma

Subjects: economics and finance, evolutionary economics, institutional economics

Extract

As David Hamilton (1987, p. 1531) succinctly observes, noting the centrality to economics of value theory yet the almost complete absence from discussion of that theory: ‘All economic theories of value have consumption implications . . . [b]ut these are often only implicit, rather than explicit, and hence obscured’. In a text critically discussing the contributions that the Austrian economist Shackle has made in light of Adam Smith’s and Alfred Marshall’s work, Loasby (1996, p. 20) succinctly and perceptively relates discussions in economics of ‘value’, ‘knowledge’ (or learning), and ‘conventions’ (or institutions) in the following quote: ‘the incompleteness and dispersion of knowledge is a constant source of opportunities for creating new knowledge and for entrepreneurship, thus contributing to the complex dynamics of economic evolution.’ The discussion thus far has covered many issues, further developing a social value theory in the process. I now discuss how such a theory relates to other theories of value in economics. Contributions to a social value theory by others will be reviewed as well. Since scholars in economics who have contributed to a social theory of value are few and far between, and since discussions of value generally have not stirred the science of economics recently, the remainder of the text will rely to some extent on the curiosity of the reader for the history of economic thought. Still, this discussion is of interest to understand the context of the discussion as well as the methodological and theoretical objections that may be raised as an economist against...

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