The Old and New Institutionalism: Can Bridges Be Built?

By Rutherford, Malcolm | Journal of Economic Issues, June 1995 | Go to article overview

The Old and New Institutionalism: Can Bridges Be Built?


Rutherford, Malcolm, Journal of Economic Issues


The old and the new institutionalism are both programs of research that arose out of a concern with the almost complete lack of consideration given to institutions in conventional neoclassical economics. That institutions matter in shaping economic behavior and economic performance is a central tenet of both the old and the new institutionalism, as is the recognition that institutions themselves change over time and often respond to economic factors. This shared concern with incorporating institutions within economics is not, however, reflected in a common approach to the problem. For old institutionalists, the neoclassical approach with its emphasis on the rational economic actor is to be abandoned in favor of one that places economic behavior in its cultural context. For new institutionalists, or at least a good number of them,l the standard neoclassical approach based on the rational choice model is to be extended, perhaps modified, but not abandoned.

In previous discussions of old and new institutionalism, much has been made of this basic difference. Mayhew [1989] contrasts the "mankind as a product of culture" focus of old institutionalists with the "mankind as rational chooser" focus of the new. Hodgson [1993] claims the new institutionalism takes the self-interested, maximizing individual as a given though this is exactly what was rejected by Veblen and other old institutionalists. Eggertsson [1990] makes a similar point in his survey of what he calls "neo-institutional" economics. Many other points of contrast are closely related. Obvious examples are the "holism" and anti-formalism of the old as opposed to the methodological individualism and greater formalism of the new,(2) but the basic difference in outlook also shows up in the tendency of new institutionalists to see the development and functioning of institutions largely in efficiency and economizing terms (rational individuals are "economizing" in behavior), as opposed to the old institutionalist who tends to see many other social and political factors (status, group identity, ideology, and economic and political power) as also involved.

It is both tempting and very easy to turn these differences into a set of methodological incommensurabilities that would seem to rule out the possibility of useful communication. Indeed, new institutionalists have often dismissed the old institutionalism as lacking in theoretical rigor and containing few, if any, interesting insights, while old institutionalists have tended to be equally dismissive of the new institutionalism, finding it based on the same set of basic neoclassical assumptions they rejected long ago. Nevertheless, and as I have argued elsewhere [Rutherford 1994], the differences between the old and the new can, on closer examination, be revealed as less sharp than usually supposed. Moreover, certain key issues and problems are linked to the nature of the subject matter itself and tend to emerge regardless of the chosen initial approach or starting point. If attention is directed toward these common problem areas, a basis for dialogue is more likely to be found. The rest of this paper attempts to demonstrate this thesis through an examination of the history of the new institutionalist research program developed by Douglass North and a brief comparison of this material with that of some of the major contributors to the old institutionalism.

Douglass North: Rationality and Ideology

The obvious place to start in any consideration of North's institutional economic history is with The Rise of the Western World [North and Thomas 19731. As pointed out by Field [1981], this book attempts to endogenize institutions within a neoclassical framework. The implicit model is that institutions derive from the optimizing decisions of individuals and respond to changes in the set of relative prices that individuals face. Thus, under the conditions of the early Middle Ages, the manorial system was an "efficient institutional arrangement," but with population growth and the growth of trade it ultimately "involved lower transactions costs to set up a system of wages, rents, or shares by contract" [North and Thomas 1973, 22]. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

The Old and New Institutionalism: Can Bridges Be Built?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit OpenDyslexic.org.

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.