Can We Save Veblen and Ayres from Their Saviors?
Hamilton, David, Journal of Economic Issues
Can we save Veblen and Ayres from those currently trying to save them? Philip Klein  argues from a well-established perspective in which social structure is considered to be composed of social institutions. The terms seem almost synonymous. All socially organized behavior is referred to as an expression of institutionally organized behavior. When one uses the term "institution," it is assumed that some specific part of a more general social structure is the referent; it can almost be said that institution is the singular of the plural social structure. And although it is taken for granted that institutions constitute habitual social responses to which we have been conditioned, they are also viewed as a kind of restraint to which we are forced to conform. This way of viewing things leads to a view of society as something outside ourselves and as a restraint to what would otherwise be unrestrained individual human action. The individual and society are seen as being at odds with one another.
Confusion is compounded when we add to this a view of technology perceived as consisting of things that have an inert existence that, somewhat like sticks and stones, may disrupt our passage through the social environment. Obviously, these inert elements must be socially organized and thus removed from their inert state. But even though they may be viewed as inert, somehow or other they expand, accumulate, and change the social environment within which we operate as human beings. And in this process they force consciously created institutions to become out of date. The obsolescence of the institutions is a function of the onward march of the mobilized technology. Although inert, technology does have the capability to grow, expand, and burst out of its institutionally organized confinement. As with human beings, technology must be somehow restrained by social boundaries. Here, too, institutions perform a restraining role.
This perception of social and economic matters has a long history. The philosophes of the French Revolution expressed some such notion. The ancien regime, because of technological change, no longer was fit to reign (function?). In almost any discussion of social matters one takes up, no matter how ancient, such a perception seems to underlie the analysis most prevalent in history and in historical interpretation of social change. Technology is things that defy the best laid efforts to tame. By their resistance to domestication, they cause social problems.
Institutions that once were efficient social organizations become fetters to the attainment of the well-being of the folk. Such a notion runs through everything from analyses of feudalism to the American and French revolutions and to Marx's analysis of capitalism. All of us have been inured to this perception of social matters. And, of course, it has some elemental truth, in the sense that institutions are justified by reference to some immemorial past when ancestral heroes gave us our way of life (status/roles/institutional complex). They are past binding, and since evidence of this fact can be found throughout history, part of the picture is correct.
But this perception of matters seems to endow us with an almost total inability to understand that which we refer to as technology is no less social and socially organized and socially derived than are the myth-derived accounts of the past to which we ascribe what success we have coping with life today.
Human beings are differentiated from other species by an ability to think in abstract symbols and hence to develop tools and the mytheopoeic imagination [White 1949]. Being human means participating in both of these processes - tool-making and myth-making. But the means by which human beings put bread and butter upon the table is by the tool process. V. Gordon Childe  shows how the tool-making dimension essentially defines what is meant by being human from early hunting and gathering societies to the eve of today's industrial society. In a more limited way Kenneth Oakley in Man The Tool-Maker  makes the same point made by Childe. And every time archaeologists reconstruct the lifeway of people by studying the "junk" or rubbish left behind, they make the same point [Rathje and Murphy 1992].
The question to which Veblen called attention was this: was it by virtue of the ceremonial that preceded the buffalo hunt or was it the hunt, the skinning of the buffalo, the making of clothes from the hides, the making of tepees from the skins, the processing of the meat, the development of hunting instruments, horsemanship, or the knowledge of the ways of the buffalo that had the largest bearing on and partially defined the lifeway of the Sioux? Was it the ceremonial that conferred rights and honor on the participants in the Kula trade of the east Bismarck Sea, or was it the knowledge of sailing, the knowledge of the seas and tides and weather, the knowledge of canoe manufacture, the knowledge of production of the trade items, and even of the ceremonial armshells and necklaces that contributed to the lifeway of the Trobriand Islanders? And similarly, is it buying and selling in the market that defines our economy as Frank Knight  insisted, or is it the knowledge, skill, and tools that produce all of that which is being bought and sold that defines our industrial way of life?
The French anthropologist Maurice Bloch, in the late 1970s in a lecture honoring Bronislaw Malinowski titled "The Past and the Present in the Present," said that our beliefs were made of knowledge and ideology [Bloch 1977]. The ideology is used on a timeless past and functions to uphold an "instituted hierarchy." In this part of culture, there is a sense of endless time. But in our knowledge, which is tool-related, there is endless change and development. And this latter is the stuff that defines the well-being of the group. Bloch insisted that many anthropologists stay among the people they study just long enough to learn about the ceremonial associated with canoe budding, but they do not stay for the canoe building itself. And in doing so, they miss the major parts of the lifeway of the people under observation. They miss all of that tool-oriented social activity by virtue of which well-being secured.
In a way, both Veblen and Ayres were saying the same thing about traditional economists. They did not stay for the canoe building. Veblen obviously meant this when he wrote that "there is the economic life process still in great measure awaiting theoretical formulation." And Ayres repeatedly stated that it was not by virtue f the "free market" that we maintain today's industrially based way. Our well-being is derived from all of those integrated technological activities from which came the real gross national product.
The decisive factor or creative force - or germinal force - in our economy and in every economy is what Adam Smith called the "division of labor." Veblen called it "workmanship," and I shall call it the technological process. But as Veblen realized, this process, simple and obvious as it is, can be preserved only when the whole classic misconception of the market-guided economy has been cleared away. That is why Veblenian institutionalism is by its very nature a theory of dissent [Ayres 1966].
What traditional economic theory is up tight about is, who gets the kudos? Who gets credit for the outpourings of an industrial economy, and having been assigned credit, lays a claim for a large share of the final product? In actuality, the product is a function of a total group process and effort within which personal authorship is in determinate [Ayres 1967]. Which is more important to the forward locomotion of an automobile, the wheels, the drive shaft, or the carburetor? Just as with an automobile, the productive system must be taken as a whole, and the individual contribution of any one part is indeterminate. What we receive by way of income is determined by the customs of the tribe.
The institutions of the tribe perform a distributional and justificatory function. Ayres argued that institutions simulated the technological activity, and in doing so "established" authorship of the technologically derived output. Bill Gates makes software, and Donald Trump builds hotels and gambling casinos. Lee Iacocca builds Mustangs. But do they? Only figuratively. We know that when we say "Donald Trump builds a hotel" that it is something different from when we say that we built a birdhouse at the workbench in the garage or that the robin in the tree outside the garage built a nest. Other than, perhaps, at the cornerstone laying where Donald appeared with a silver trowel, he was never near the building site until he arrived to perform the mandatory, final ceremonial "inspection" and participate in the equally mandatory picture taking. "Participation" was a simulated one just as was that of the chief of Omarakana in the Trobriands during taro planting, cultivation, and harvesting. In both instances, participation established an institutionally authenticated claim to some part of the proceeds.
And furthermore, no one else served as a surrogate worker for Donald in his absence. The building of the building was a function of the technological process, of all the accumulated knowledge, skills, and tools and organized tool-activity derived from the continuous technological process, from the building that preceded that of Egyptian pyramids through that of the pyramids through that of the Roman aqueducts and later the cathedral at Chartres to the World Trade Center. The building, in other words, was a function of what Edwin Cannan called the "heritage of improvement." Any notion that all of these are a function of some extraneous institutional organization in the absence of which no such products would have eventuated wholly misses the social nature of technology. Technology is socially organized as every archaeologist knows well.
We have two accounts of one event. The institutional simulation of the technological process is an account of events in individual heroics. The difference between business school courses in entrepreneurial skills and an engineering course in civil engineering is the difference between night and day, but both purport to explain the same process. A product of civil engineering and architectural training can contribute to the construction of a building in a way that a graduate of entrepreneurial arts can only simulate. But when the former participates in the building, it is as one link in a continuous process, whereas the latter does so as a cultural hero doing great deeds as did the cultural heroes of the past. It is similar to a head of state taking credit for all that occurs technologically in the realm.
In the Trobriand Islands, the total taro crop was ultimately attributed to the ritual performances of the village chief of Omarakana, the supreme holder of power on the islands [Malinowski 1935]. But had the tribe followed all of the meticulous matter-of-fact tool skills essential to taro production, the magic of the chief was indeed dispensable. And if the Trobrianders were determined to produce an abundance of taros, their first attention should have been on the first.
In The Theory of Business Enterprise, Veblen said the same thing about our economy. If we wanted to enlarge the nation's wealth, we needed to pay attention to industry and only secondarily to business. This proposition was contrary to the attitudes of the Trobrianders and the acculturated members of our tribe who hold that without the magic in the Trobriands, and without the pecuniary ceremonial in our tribe, no taros would be produced in the Trobriands and no steel would be produced in our society. In fact, at the present time the primary attention seems to be the contentment of the bond and stock markets, and by keeping those two legalized forms of gambling secure, technological activity will be encouraged to proceed. But this emphasizes the permissive role of ceremonial activity; it still does not explain how potatoes get on the table.
Klein seems to be saying that Veblen and Ayres viewed technology as an autochthonous social process. And indeed they did, and indeed they should have. In one of his last essays, from which the above quote was taken, Ayres contended that Adam Smith was emphasizing the primacy of technology when he referred to the division of labor. But Smith fell into ancient ways of thought when he insisted that the growth of the "division of labor" was limited by "the width of the market." He thereby made pecuniary activity primary and technological secondary. The former is primary, not permissive. Veblen and Ayres were contending the opposite, and the weight of the evidence would seem to be on their side.
Klein's call for greater attention to "ideal institutions" can only obscure the simple message that Veblen and Ayres offered. One can only hope institutionalism can resist the urge to embellish the straightforward economic analysis of Veblen and Ayres. The introduction to the analysis of something called ceremonial institutions and technological institutions and the creation of a categorical imperative, whereby the one can be distinguished from the other, seems to be in the direction of clutter.
Some of the contemporary critics of Ayres who chastise him for failing to see the need for embellishment find in rather vague quotations from Toward a Reasonable Society that he was about to recant: that solacing hope may derive from the fact that the book can be confusing because in places he reverts to the common usage of institution as a part of social structure. The book was not one on economics; its focus was more general. In the 1950s when the book was being written, there was much soul-searching among such writers as Jacques Maritain, Reinhold Niebuhr, F. S.C. Northrup, and even Joseph Wood Krutch concerning the "ends of life." This produced much existential brooding and agonizing. Charles Frankel of Columbia University got into the act in the same effort as did Ayres with his The Case for Modern Man . Both Ayres and Frankel were essentially restating the pragmatic philosophy that the others were attempting to refute, or at least embellish, by adding some kind of spiritual dimension. A new and sometimes secular higher authority delivering a new set of values was all the rage, the very kind of thing pragmatism stood against. It rejected ultimate goals whether sacred or secular.
Toward A Reasonable Society (TARs) was a part of a much larger general discussion concerning the purpose of life and other such esoteric subjects. TARS was an effort to introduce some clarification and to simplify what had become a very murky discussion. If one reads only the table of contents of TARS, the impression could be secured that it was a part of the larger general agonizing over "whither mankind?" But if one tarried long enough to read the book more than casually, it would quickly become clear the analysis of "freedom," "equality," "security," "abundance," "excellence," and "the social values" did not offer anything more than a definition of these as processes by virtue of which things called "excellent" might be judged from the consequences. Pragmatism at its best! In addressing this audience, given the context in which the discussion had been proceeding, it was very appropriate to use "institution" in its "street version" or vulgar form. To have used it in its "institutional economics" meaning might very well have misled the audience. Is this recantation?
That Ayres did not consider it so should be clear from three essays contemporary with or later than Toward A Reasonable Society [Ayres 1960; 1966; 1967]. One in particular appeared in The Antioch Review in summer 1966 and was titled "The Nature and Significance of Institutional Economics." It is an excellent read for those who feel that something is missing from Veblen and Ayres.
Ayres, C. E. The Theory of Economic Progress. Chapel Hill: University of North Carolina Press, 1944.
-----. "Institutionalism and Economic Development." The Southwestern Social Science Quarterly (June 1960): 45-62.
-----. Toward A Reasonable Society. Austin: University of Texas Press, 1961.
-----. "The Nature and Significance of Institutionalism." The Antioch Review (Spring 1966): 70-90
-----. "Ideological Responsibilities." Journal of Economic Issues (June 1967): 3-11.
Bloch, Maurice. "The Past and the Present in the Present." MAN (August 1977): 278-292.
Childe, V. Gordon. Man Makes Himself, London: Watts & Co, 1936
Frankel, Charles. The Case for Modern Man. New York: Harper, 1956.
Klein, Philip. "Ayres on Institutions: A Reconsideration." Journal of Economic Issues 29 (December 1995): 1189-1196.
Knight, Frank. The Economic Organization. New York: Harper Torchbooks, 1951.
Malinowski, Bronislaw. Coral Gardens and their Magic. Bloomington, Ind.: University Press, 1935.
Oakley, Kenneth. Man the Tool-Maker. Chicago: University of Chicago Press, 1967.
Rathje, William, and Cullen Murphy. Rubbish. New York: Harper Collins, 1992.
White, Leslie. The Science of Culture. New York: Farrar Straus, 1949.
David Hamilton is Emeritus Professor of Economics, University of New Mexico, Albuquerque.…
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Publication information: Article title: Can We Save Veblen and Ayres from Their Saviors?. Contributors: Hamilton, David - Author. Journal title: Journal of Economic Issues. Volume: 31. Issue: 4 Publication date: December 1997. Page number: 1051+. © 1999 Association for Evolutionary Economics. COPYRIGHT 1997 Gale Group.
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