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Edited by John B. Davis, Alain Marciano and Jochen Runde
Chapter 5: Institutional Economics: From Menger and Veblen to Coase and North
Geoffrey M. Hodgson Introduction Institutional economics is now a major subdiscipline, with important applications to studies of business, developing economies, transitional economies, property rights and much else. Prominent names in this ‘new institutional economics’ include the Nobel Laureates Ronald Coase and Douglass North, as well as Oliver Williamson – the most highly cited economist of all time. In some respects their work continues a tradition which can be traced back to Carl Menger in the nineteenth century. Modern ‘new institutional economics’ was also preceded in America in the interwar period by another tradition of ‘institutional economics’, inspired by Thorstein Veblen, Wesley Mitchell and John Commons. For a time this was pervasive in leading American universities and research institutes. This entry surveys both the ‘new’ and the ‘old’ institutional economics, with a focus on some important theoretical and philosophical issues. Foremost among these are the questions of methodological individualism, the depicted relationship between individuals and institutions, and the nature of institutions themselves. These issues tie in closely with the question of the relationship between agency and structure, which is central to the philosophy of the social sciences. It is proposed here that there are distinguishing and characteristic theoretical approaches within both the ‘old’ and the ‘new’ institutionalism, and hence in some respects the two traditions contrast with each other. However, it is important to emphasize that there are not only important theoretical and philosophical differences between each camp, but also within each camp. Furthermore, these internal differences are no less great if...
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