Thorsten Bunden Veblen

The study of Thorstein Veblen's work can be useful also for interpreting it in the light of the subsequent debate between Keynesians (see Chapter 5) and Austrians. Although only implicitly, both Keynesian economists and Austrian economists took from Veblen some important insights, related to Veblen's fundamental critique of the neoclassical view of instrumental rationality. In the History of Economic Thought, Veblen's critique is probably one of the first and most effective. As will be shown, Veblen maintains that economic behaviour is driven by institution, i.e. habits of thought, which cannot enter the neoclassical picture of an optimising homo oeconomicus. Both Keynesians and Austrians share this fundamental point. Moreover, while the emphasis on innovations will be present in the Austrian school (and relevant in Veblen), Veblen's emphasis on the role of demand - although not conceptualised as the standard Keynesian aggregate demand - will be crucial for the development of Keynesianism. Finally, Veblen's view that contemporary markets are not perfectly competitive will enter current post-Keynesian economics. Born on 30 July 1857, Veblen was raised in the isolated Norwegian township of Wheeling, Rice County, Minnesota, and entered Carleton College Academy in 1874; he graduated three years later. He continued his studies at Johns Hopkins University, and then at Yale. As an undergraduate, he worked under John Bates Clark. In 1884, he finished his final dissertation for his PhD in philosophy (The Ethical Grounds of a Doctrine of Retribution), studying Immanuel Kant with Noah Porter and economics with the Social Darwinist William Graham Sumner. In 1892, after futile attempts to find teaching positions, he moved to Chicago and worked as a teaching fellow at the University of Chicago, mainly thanks to the interest of J. Laurence Laughlin, head of the economics department. In 1906, he became assistant professor of political economy. Because of his inability to keep his courses well organized (or more generally, because of his non-academic attitude), he had a difficult academic career: in December 1906 the Chicago administration forced him out for flagrant marital infidelities. In 1918 he worked for the Food Administration in the US government. He was one of the founders of the New School of Social Research in New York City and, from 1896, managing editor of the Journal of Political Economy. On 3 August 1929 he died from heart disease in the Menlo Park area (California).