The Reconstruction of Economics: An Analysis of the Fundamentals of Institutional Economics

The Reconstruction of Economics: An Analysis of the Fundamentals of Institutional Economics

The Reconstruction of Economics: An Analysis of the Fundamentals of Institutional Economics

The Reconstruction of Economics: An Analysis of the Fundamentals of Institutional Economics

Synopsis

"Allan Gruchy, the elder statesman of the institutionalist school of economic thought, has written a book which is important because it is both insightful and profound. Gruchy seeks to identify and to describe the essential unity of institutionalist economic thought. He finds the essence of institutionalism in the paradigmatic shift away from the old scientific paradigm of orthodox economics, which emphsizes static equilibrium, to the new scientific paradigm of institutionalist economics, which emphasizes dynamic process. . . . Gruchy cal; ls for a reconstruction of economics which is long overdue." Review of Social Economy

Excerpt

It is the thesis of this book that, after eight decades of institutionalist thought, one may come to some conclusion as to what may be described as the fundamentals of institutional economics. The key to an understanding of this type of economics is a grasping of the nature and significance of the processual paradigm or framework of interpretation that conditions the work of all institutionalists. This does not mean that the institutional economists dispense with all the contributions of orthodox economists since the time of Adam Smith and David Ricardo. It does mean, however, that the institutional economists see these earlier contributions from the non-orthodox point of view associated with their processual paradigm. They add to much of inherited economics their own views, which take the economic system to be an ongoing economic process.

The institutional economists have arrived at their processual paradigm or framework of analysis by incorporating in their economic studies the contributions of the cultural anthropologists and the pragmatic philosophers of the second half of the nineteenth century and the early decades of the current century. The institutionalists' paradigmatic shift from the concept of static equilibrium to the concept of dynamic process occurred long after the foundations of orthodox economics were laid in the second half of the eighteenth and the first half of the nineteenth centuries. This paradigmatic shift of the institutionalists leads them to take economics to be a cultural science that deals with the flow of goods and services required by society to meet the needs of its human participants. In studying the economic aspect of culture the institutionalists define economics to be the science of social provisioning.

The significance of working with a processual paradigm in place of an equilibrium paradigm in the area of economic analysis is revealed in the institutionalists' views with respect to the subject matter of economics, its definition, its methodology, the value problem, the actual performance of the advanced industrial economies, and possible ways of improving their performance.

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