Institutional Analysis and Economic Policy

By Leathers, Charles G. | Journal of Economic Issues, September 2004 | Go to article overview
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Institutional Analysis and Economic Policy

Leathers, Charles G., Journal of Economic Issues

Institutional Analysis and Economic Policy, edited by Marc R. Tool and Paul Dale Bush. Boston: Kluwer Academic Publishers. 2002. Cloth, ISBN 1402073089, $159.00. 598 pages.

To demonstrate that "[i]nstitutional economics is a policy-oriented science" (p. 2), Marc R. Tool and Paul Dale Bush asked seventeen leading institutional economists to address specific policy issues related to macroeconomic stabilization, equity in income distribution, health and welfare programs, concentration of economic power in the hands of multinational corporations, education reforms and employment in the new information economy, environmental protection, and globalization. Collectively, the essays reveal the policy goals that institutional economists advocate, provide examples of how institutional analyses can be applied to determine the nature of a variety of socio-economic problems, and identify policies for viable long-term solutions to those problems.

In chapter 1, Tool and Bush provide a substantial discourse on the foundational concepts of institutionalism. They explain that the analyses in the essays reflect the tradition that is rooted in the original American institutionalism of Thorstein Veblen and John R. Commons and has evolved (and continues to evolve) under the influence by economic scholars such as Wesley C. Mitchell, Clarence Ayres, John Kenneth Galbraith, John Maynard Keynes, Gunnar Myrdal, Karl Polanyi, and Hymann Minsky. Within that tradition, the essays reflect the institutionalist recognition that the complexity of economic performance and problems necessitates sophisticated analytical thinking that gives critical attention to theory, facts, and social values in the search for viable policies. Because there are eighteen essays that address specific policy issues, the topics and authors can only be briefly mentioned here.

In chapter 2, Phillip A. Klein develops a powerful Keynesian economics rationale for the use of fiscal policy in macroeconomic stabilization and demonstrates once again the compatibility between institutional economics and Keynesian macroeconomics. In chapter 3, L. Randall Wray provides an equally powerful assessment of the importance of monetary policy, critiquing the orthodox approaches and demonstrating the compatibility between institutionalism and Post Keynesian economics. In chapter 4, Peter S. Fisher develops a strong case for progressive income taxation based on equity considerations.

In chapter 5, Charles M. Clark presents an institutionalist argument for greater income equity through a basic income system that is universal in application. In chapter 6, Janice Peterson offers a highly informed assessment of welfare policy reform based on accomplishing the goals of reducing poverty and facilitating the participation of low-income families in the economic mainstream. Her analyses reveal that the changes under congressional consideration threaten to impose more hardships on welfare recipients. In chapter 7, Michael Keaney critiques the current U.S. health care system in making a case for universal health insurance. In chapter 8, L. Randall Wray returns to present a most intelligent and realistic analysis of the U.S. Social Security system. He refutes the claims of those who are attacking it as being in a crisis state and explains that it only requires progressive reform to remain strongly viable. In view of Alan Greenspan's February 2004 call for cuts in Social Security benefits to facilitate continuing Bush's minimal taxation of the wealthy and privileged, this essay could not be more timely or on target. Wray is the perfect candidate to replace Greenspan as chairman of the Federal Reserve Board!

In chapter 9, Edythe S. Miller offers a powerful and timely critique of the existing neoclassical beliefs that prevent effective policies to counter and contain the concentration and centralization of economic power by multinational corporations.

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