Expanding the Dialogue between Institutional Economics and Contemporary Evolutionary Economics: Veblen's Methodology as a Framework

Article excerpt

This paper addresses an enduring paradox in institutional and evolutionary economics since the 1970s: the exchanges between institutional economics (hereafter IE) and contemporary evolutionary economics (hereafter CEE) which has developed following the seminal works of Richard Nelson and Sidney Winter (1974; 1982) have been rather limited until now) This is paradoxical since we could expect the literature of these two schools of thought to be very closely linked. Needless to mention here, the main contemporary organization of institutional economists is precisely named the Association for Evolutionary Economics, in reference notably to the leading figure and inspiration of IE, Thorstein Veblen, and his famous appeal for an "evolutionary economics." One can thus wonder why there have been so few exchanges between IE and CEE until now.

The aim of this paper is to account for the nature of the relationships between IE and CEE, to try to explain the paradox previously emphasized, and to outline a framework allowing the expansion of a fruitful dialogue between the two. The framework I suggest rests on a reappraisal of Veblen's evolutionary economics through contemporary concerns and concepts (Brette 2004). It is in line with Geoffrey Hodgson's (2004) plea to "begin the reconstruction of institutional economics" on the foundations of "Veblenian institutionalism." I will thus show that Veblen's methodology could provide an appropriate framework for a convergence between IE and CEE, which could benefit both. Indeed, not only do the methodological bases for a dialogue between Veblenian IE and CEE exist but significant complementarities could be exploited all the more fruitfully as the two approaches diverge appreciably regarding their respective level of analysis.

An Interpretation of the Relationships between IE and CEE

During the last decades, evolutionary theses have experienced a sharp revival in economics. This resurgence has been significantly boosted by An Evolutionary Theory of Economic Change, the book Nelson and Winter published in 1982. From the beginning, contemporary evolutionary economists, namely the economists whose works lie within the perspective sketched by Nelson and Winter, have considered Joseph Schumpeter as their main inspiration. This heritage was claimed early by Nelson and Winter (1974) themselves and strongly reasserted in their classic book in which they described their approach as "neo-Schumpeterian" (1982, 39). On the contrary, contemporary evolutionary economists have widely neglected the contribution of the founders of institutionalism to the elaboration of an evolutionary economics. Admittedly, Nelson and Winter (1982, 38) alluded to some institutionalist economists like John Maurice Clark and John Kenneth Galbraith. Moreover, one can find the following footnote in their book's conclusion: "On questions of evolution in the larger system, we converge substantially with the older tradition of evolutionary thinking in economics that has had institutional evolution as its principal concern--a tradition maintained today by the Association for Evolutionary Economics and its journal, The Journal of Economic Issues" (404). However, the authors did not develop this remark. Furthermore and meaningfully, they did not even mention Veblen among the "allies and antecedents of evolutionary theory" (1982, 33-45). Obviously, this omission is most surprising as Veblen was one of the first who wanted economics to be turned into an "evolutionary science" ([1919] 1990, 56-81).

Many causes can explain this neglect and more generally the little interest that CEE has actually shown in IE, until recently at least. The previous quotation of Nelson and Winter suggests that an important reason may have been a difference in the respective subject matter of CEE and IE. However, this sole explanation is far from being satisfying, since it precluded neither the development of methodological debates nor that of synergies between the two schools of thought, rather the opposite. …