Tuesday, February 9, 2010

A New Moment For Institutionalist Economics?

Two evenings ago I had dinner in Madison, Wisconsin with Daniel Bromley, editor since 1974 of Land Economics, who retired in December from the UW Dept. of Agricultural and Applied Economics, agreeing that he is "the last living embodiment of the Wisconsin Old Institutionalist Tradition," which dates back in a line through John R. Commons to Richard Ely in the late 1800s, who founded both the Economics Dept. at UW and the Ameican Economic Association. Institutionalists were largely replaced in the regular econ dept. by the 1970s, with policy-oriented econometricians led by the late Arthur Goldberger taking over (and such an orientation can be seen as an extension of the empirically based policy orientation of the old institutionalists and the empirical fixations of their predecessors in the German Historical School).

It has been usually argued that the New Institutional Economics applies neoclassical optimization theory by emphasizing the Coasean idea of the minimization of transactions costs as the central key to determining institutional forms and structures, with Oliver Williamson famously arguing for this view, also supported by fellow Nobelist, Douglass North. However, Bromley and I agreed that we may be a point where a new synthesis between the two branches may be at hand. This is symbolized by the work of Williamson's co-recipient this past fall, Elinor Ostrom. She does not dismiss the matter of transactions costs, but she does not emphasize it, and focuses more on how groups can arrange themselves to cooperate, which may involve matters of trust and so on that may not be so easily covered by a pure transactions cost approach. She also slides between the competing older biases of favoring government or favoring privately owned management of the economy by urging for local community group control of activities.


Travis said...

It is interesting back when I was doing my masters work at York University they had a professor in the economics department who was in the process of retiring: the last old school institutionalist.

Sometimes I would go into his office and he would ask me what I was doing in political science and I would tell him about this or that course paper I was doing for this or that class. On one occasion I mentioned that I was doing a paper on Gramsci and fordism and we got to talking about Gramsci's specific take on Fordism and the dynamics of American political economy circa 1920s-1930s. He then gave me a series of books written by old school institutionalists doing American economic and social history of that time. What became apparent was the degree to which Gramsci was inventing an ideal type American history as a foil through which to make his intervention in the Italian debates over industrialization.

When the Grad students eventually went on strike, for the longest recorded duration in the education sector in history, the old retiring institutionalist once crossed the line where I was a picket captain. He looked at me and said "I am sorry but my department would never forgive me for respecting your line and I enjoy teaching so much I do not want to jeopardize my emeritus status."

Given what he taught me in that short period of time and given what I knew he could teach others I gave him the obligatory recrimination and lifted the line for him.

It will be a long time before Ostrom ever gets taught let alone becomes the core of the curriculum. Economics departments did not spend the better part of a century burning out heretics to allow them back in: Nobeled-up or not. Hell Krugman can't get a fair hearing and he is milk toast.

Barkley Rosser said...

Travis, I suspect you are right that despite her Nobeling, we shall not see Ostrom becoming centrally read in the mainstream graduate curriculum. One of the arguments on that economicjobmarketrumor blog when they were complaining about her Nobel was those grad students had not had her work assigned on their graduate school reading lists, which of course to that gang proved that she did not deserve the Nobel supposedly.