Ayres on Institutions - a Reconsideration
Klein, Philip A., Journal of Economic Issues
The core attitude of institutionalists toward institutions has been conditioned by the Veblenian dichotomy. From this vantage point, economic progress is essentially a process in which the cumulative force of dynamic technology ultimately overwhelms inherently static - therefore resistant - institutions.
This note is devoted to the proposition that behind this simple framework lies a misreading by Veblen of the role of institutions, a misreading that was exacerbated by Clarence Ayres but has at least partially been rectified by later institutionalists including Bush, Neale, Tool, and others. The question is whether more needs to be done. If the answer is affirmative, this paper is not so much a footnote to the history of economic thought as a call for further work.
The Veblen Inheritance
There is perhaps no more widely quoted comment in institutionalist literature than Veblen's remark, as quoted by Ayres: ". . . It still remains to be proved whether machine technology will prevail or whether our civilization will provide another tragic instance of 'the triumph of imbecile institutions over life and culture'" [Veblen 1964, 25; Ayres 1944, 176]. Veblen's system of thought and his withering dissection of the American economy were largely an outgrowth of his contrast of the pecuniary and industrial ways of life. The industrial way of life was Veblen's term for the technological process that embodied efficiency and greatly increased the production of goods and services. The pecuniary was an aspect of the institutional, and for Veblen the latter was the repository of all the repressive factors in economic and social life. "Institutional thinking" at its best in Veblen's view fits "the conditions of savage life." Despite the impact of the machine, individuals suffer "an irrepressible - in a sense congenital - recrudescence of magic, occult science, telepathy, spiritualism, vitalism, pragmatism" [Veblen 1941, 334]. While the basic Veblenian distinction remains valid, he did throw out the baby with the bath water. That is, the "pecuniary" subsumes both what Veblen so brilliantly exposed, as well as an important aspect that he ignored - the facilitating role that money - and indeed institutions generally - play in an industrial economy. The confusion was contagious.
Veblen nowhere spends much time contemplating the nature or characteristics of the arrangements necessary in any society to support and make feasible the deployment of "workmanship." He distinguishes "matter of fact" information gained through experience in industry from all the other human knowledge that results from experience (habituation with industry), which he refers to as "contamination of instincts" [Veblen 1941, 40]. It is the contamination process and the characteristics of contaminated knowledge that receive the bulk of his attention.
Accordingly, it is fair to say that from the very beginning that which is technology-thwarting in the institutional structure received much more attention than that which is technology-supportive or facilitating.(1)
Ayres's View of Institutions
Ayres's attitude toward institutions was almost entirely a relentless mirroring and elaboration of Veblen's view. Perhaps the kindest word he ever directed at institutions was to note that for five centuries the institutions that prevailed in Western Europe were "permissive, not dynamic, in accommodating the industrial revolution" [Ayres 1944, 177]. A more typical Ayres statement on institutions: "The history of the human race is that of a perpetual opposition of . . . the dynamic force of technology continually making for change, and the static force of ceremony - status, mores, and legendary belief - opposing change" [Ayres 1944, 176]. The adjectives Ayres applies to institutions are invariably meant to be pejorative: ceremonial, make-believe, status, feudal, taboo, mystic, legendary, mythic, superstitious, etc.
One may perhaps argue that in his later works Ayres on occasion offered a somewhat more balanced view of institutions. …