The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America between the Wars

The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America between the Wars

The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America between the Wars

The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America between the Wars

Synopsis

This book provides a surprising answer to two puzzling questions that relate to the very "soul" of the professional study of economics in the late twentieth century. How did the discipline of economics come to be dominated by an approach that is heavily dependent on mathematically derived models? And what happened to other approaches to the discipline that were considered to be scientifically viable less than fifty years ago? Between the two world wars there were two well-accepted schools of thought in economics: the "neoclassical," which emerged in the last third of the nineteenth century, and the "institutionalist," which started with the works of Veblen and Commons at the end of the same century. Although the contributions of the institutionalists are nearly forgotten now, Yuval Yonay shows that their legacy lingers in the study and practice of economics today. By reconsidering their impact and by analyzing the conflicts that arose between neoclassicists and institutionalists, Yonay brings to life a hidden chapter in the history of economics.

The author is a sociologist of science who brings a unique perspective to economic history. By utilizing the actor-network approach of Bruno Latour and Michel Callon, he arrives at a deeper understanding of the nature of the changes that took place in the practice of economics. His analysis also illuminates a broader set of issues concerning the nature of scientific practice and the forces behind changes in scientific knowledge.

Excerpt

Science is obviously seldom or never … a single monolithic and unified enterprise. … Often, viewing all fields together, [science] seems instead a rather ramshackle structure with little coherence among its various parts.

(Thomas Kuhn, The Structure of Scientific Revolutions)

BECAUSE of the near-hegemony today of the modern neoclassical school, the written history of economics reflects neoclassical predilections and biases. Current historians of economics, who came of age in the post– World War II era, are more likely to focus on past economists who envisioned and contributed to lines of research which are practiced today by the vast majority of economists. It is not a reflection on their sincerity and professional integrity to expect them to judge rather negatively those approaches, such as institutionalism, that criticized and tried to block and replace those trends of thought which led to modern economics. It should therefore be emphasized from the very beginning that by speaking on the “biases” of modern historians, I have no intention of faulting their work.

However, we know today that there are many equally valid ways to tell the story of the past (White 1973, 1987; Gerrard 1993). Historians of science, who wish to say something about the contributions of past scientists, must use their own criteria of what is essential and what is good in the science they study. Hence, personal biases are inevitable. Our problem, as historians of economic thought, starts when virtually all of the practitioners in the field have similar biases and tell similar stories on the past. This may create a false impression that the conventional history, as told by those practitioners, is the only valid way to describe the past. Even though many of the stories told today by neoclassical historians are factually correct, their choices obscure important aspects of the past, including the nature, success, and fortune of institutional economics.

In order to understand the emergence of institutionalism, its message, and its struggle with neoclassical economics, one has to have a wider picture of the history of economics around the turn of the century. In this . . .

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