Economy as Instituted Process: Change, Transformation, and Progress

By Adams, John | Journal of Economic Issues, June 1994 | Go to article overview

Economy as Instituted Process: Change, Transformation, and Progress


Adams, John, Journal of Economic Issues


In this year of 1994, we celebrate the fiftieth anniversary of the Publication of two oracular cornerstones of our common intellectual lineage: Karl Polanyi's The Great Transformation [1944] and Clarence Ayres's The Theory of Economic Progress [1944], both of which appeared in 1944.(1) In this extraordinary, double-demicentennial anniversary year, it gives me special pride to stand here and address you in our grand shared tradition, as a comrade from the ranks of the second postwar generation of institutional and evolutionary economists.(2) The influence of Polanyi's insights remains formidable: reciprocity, redistribution, the household, and the market as alternative modes of exchange;(3) the embeddedness of the economy in society; the fictitious commodities: land, labor, and money; the myth of the anti-liberal conspiracy; and the double movement that ensues from societies' strivings to protect human livelihoods and habitats against the consequences of an untrammelled, self-regulating market system. Likewise with Ayres. One cannot look at history, or at the predicaments of modem economies, without observing in everyday life the constant interplay of progressive technology and ideas with the restraints of past-binding customs, ceremonies, and beliefs. Nor can one fail to see at play the process of experimental validation of working rules in the world's political and legal arenas.(4)

My ambition today is not to riffle through the dog-eared pages of our sacred texts, intoning our accustomed chants.(3) Quite to the contrary-I leave the priestly role to others. Strong currents are flowing in our favor, and we are at a propitious juncture for institutional and evolutionary economists-an opportunity to work toward the reconstruction and widening of economics as the profession moves toward the twenty-first century. Concretely, I intend to argue that process is a concept that has the potential to resolve at least some of the divergences between methodological individualism-embodied in the rational economic agent presupposition -and institutionalism. I will first discuss some of those differences, with an accent on the rationality premise. Then, after clarifying what I mean by process, I will apply that construct in an exploration of the institutional basis for international exchange. Last, I will examine the meanings of transformation and progress by briefly appraising some features of recent economic and demographic trends in the Third World.

The words in my title have been chosen with solicitude. Institutional economics is evolutionary economics because it is concerned with economic and social change. As Polanyi's title avers, since roughly 1800, the world's peoples have been passing through an all-encompassing and unparalleled systemic transformation. This transformation has been driven by individual and collective actors involved in clashing political and intellectual movements of sweeping importance. In slightly different language: the great transformation is holistic, and it involves the remaking of self and society-the conjunction of person and institution. As Ayres most discerningly reminded us, this process is not without meaning because through instrumental valuing it yields grudging progress-the amelioration of the human condition; hence, the denotiveness of change, transformation, progress.

Individualism, Holism, and Change

The great divide in economic science is between proponents of methodological individualism and advocates of holistic institutionalism. In the first, or orthodox group, the selfish, rational, fully informed, and maximizing individual is taken as the starting point for analysis. In the second, or heterodox group, the preference is to begin inquiry by considering the matrix of culture and the institutional structures that provide a context for personal behavior. The challenge for the orthodox practitioners is to generate collective action and patterns of integrated economic, political, and social conduct from the bare bones of self-interest. …

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Economy as Instituted Process: Change, Transformation, and Progress
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