Academic journal article Journal of Economic Issues

Veblen and the Problem of Rationality

Academic journal article Journal of Economic Issues

Veblen and the Problem of Rationality

Article excerpt

Despite the substantial body of literature interpreting the works of Thorstein Veblen, his theory of rationality is rarely discussed. Analyzing his theory of rationality is not just important for understanding the nature of his critical stance on the mainstream economics of his time, it is also important for focusing on reconstructive elements in his analysis.

In order to clarify Veblen's theory of rationality, the concept of rationality should be discussed at a two levels. The first level concerns the nature of human action and its rationality; called "the problem of individual rationality." Veblen's rejection of rational calculative action is well known. Although he never formulated an alternative theory of action in a standard form, implicit pragmatism in his analysis gives us a chance to define his theory of action in pragmatic terms. The evidence of pragmatism in both his intellectual roots and his work should be analyzed in detail to clarify his theory of rationality in terms of the theory of action.

The second level of rationality, which in Veblen's work is related to his assessment of the fate of the machine age, could be called "the problem of social rationality" (Tilman 1999, 93). To Veblen, the machine process represents the distinctive characteristics of modern industry. It both pervades modern society and determines all types of social action within that society. The habits of thought disciplined by the machine process lead society to rationalize the irrationalities of the price system. For critics, this kind of rationalization process implies the universalization of instrumental rationality. In this manner, his works are perceived to both universalize technology and as an instrumentalistic conception of action.

The reduction of Veblen's individual rationality to the mere rejection of a calculating rationality of mainstream economics, or to interpret his rationalization process as just a vulgar mechanization of society would undermine two important opportunities for understanding Veblen's theory of rationality. The first one is the opportunity for defining Veblen's individual rationality in terms of contemporary pragmatic literature on human action. The second opportunity is the attempt to establish a connection between Veblen's individual rationality and his social rationality.

The distinctions between individual and social actions (and their corresponding forms of rationalities), like the other traditional distinctions, for instance between macro and micro, agency and structure, action theoretical and systems theoretical approaches, represent two extreme approaches to theorizing about the actor. Rational choice theory, the paradigmatic core of neoclassical economics represents one extreme, in which only the individual matters. The individual and his/ her rationality are viewed as separate or isolated from the rest of society and social relations. This is an "undersocialized conception of human action" (Granovetter 1985, 483). At the other extreme is an approach in which only society matters. This is an "oversocialized conception" of action where "actors acquire customs, habits, or norms that are followed mechanically and automatically, irrespective of their bearing on rational choice" (Granovetter 1985, 485).

Veblen's conception of action lies between these two extremes. The creative action in Veblen's thought, representing a pragmatistic conception of action, provides a framework with which to ground and connect the individual-society discussion. Veblen's action theory both criticizes the neoclassical model of action and constructs a wider framework by referring to the question of how to conceive of economic action.

The first and primary goal of this paper is to argue that the problem of rationality in Veblen's work should be discussed on these two levels, and that the compatibility of individual rationality and social rationality in Veblen's work should be clarified. …

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