The Twentieth Century Trend Of Institutionalism In Mainstream Economics Journals

In 1978, Philip Klein wrote about institutional economists of the Veblen-Commons-Mitchell-Ayres variety: Whatever we call ourselves, we are not given much credit generally among our fellow economists, but I think there is evidence that an ever-wider group of economists has begun to hear what we are saying and to accept a number of our premises…institutionalism must be viewed as either never having died or as being in the process of a resurrection which I suggest will endure (Klein, 1978, p. 252).Klein’s optimism seems justified by the following quote from Joseph Stiglitz’s new book,Globalization and its Discontents: Old-fashioned economics textbooks often talk about market economics as if it had three essential ingredients: prices, private property, and profits. Together with competition, these provide incentives, coordinate economic decision making, ensuring that firms produce what individuals want at the lowest possible cost. But there has also long been a recognition of the importance ofinstitutions(Stiglitz, 2002, p. 139; emphasis in original).Klein and other original institutionalists should be buoyed when they hear such a statement from a recent Nobel Prize winner. One problem, however, is that the “old-fashioned textbooks” are still being published in 2003. The quote also raises a question: justwhorecognized the importance of institutions andwhendid they recognize it? Statements such as the above by Stiglitz irk original institutionalists, but why? Is it because he underestimates the prominence of perfect competition in current texts, because he is understating original institutionalists’ positions as “keepers of the faith,” or both? In any case, we may not be able to hoist the V(eblen)-C(ommons) banner and claim total victory but, increasingly, more of economics today isinstitutional economics. A recent article by Allan Schmid demonstrates that indeed though everyone is not an institutionalist in the Veblen-Commons mold, “good economists find it useful to embrace some of its various elements” (Schmid, 2001, p. 281).