The Concept of Equilibrium in Old Institutional Economics:
J. M.Clark, T.B.Veblen and J.R.Commons.
Abstract The term “institutionalism” was first introduced by Hamilton in a 1918 Conference paper (Rutherford, 2002). Among the founders of this new “approach to economic theory”, as Hamilton explained it, (1919, p. 309) we find: Thorstein B. Veblen, Wesley C. Mitchell, John R. Commons, J. Maurice Clark and Walton Hamilton himself (Phillips R.J and Kinnear D., 2004). Even though it was acknowledged that “an appeal for institutional economics implies no attack upon the truth or value of other bodies of economic thought” (Hamilton, 1919, p. 309), certainly institutionalism was proposed mainly as the approach that could be able to overcome “the preconceptions of economic science” (Veblen, 1899a, 1899b, 1900). Institutionalism could be defined “in terms of certain characteristic conceptions of the nature of institutions and certain attitudes toward them” (Clark and others, 1932, p. 105). Its main characteristic aspects was not to take institutions “for granted” (Clark and others, 1932, p. 105) and its clear divergence with neoclassical school. Old Institutionalists did not want to give rise to a controversy on method. Nonetheless, one of the more debated aspects by old institutionalists was just the (proper) methodological approach in economics and their point of view was remarkably in contrast with that of neoclassical school. Institutionalists criticized traditional neoclassical economics mainly since it was static, teleological, and based on an equilibrium framework. They concentrate upon continuous change, upon evolution rather than equilibrium”. This is certainly true. The essence of institutionalism is the consideration of the economic system from an evolutionary point of view (Hodgson, 1998). Institutionalists were interested in explaining the evolution of institutions, they carried out inductive research and based their conclusions on the found data. We have here chosen the concept of equilibrium as “litmus paper” in order to inquire if and how there is a theoretical ground in the writings of old institutionalists. In the paper, the main exponents of old institutionalism are considered with the aim of underlining if, how and where they use the concept of equilibrium, counted as a “proof” of the presence of a theoretical structure in their writings. Such a theoretical structure allows (or would allow) them to deal with the topics of their reasoning in analytic way, albeit without the use of mathematics.
Keywords : Institutionalism, Neoclassical School, equilibrium, evolution, methodology.
JEL classification: A11; A12; B13; B15; B41