Radical Institutionalism: From Technological to Democratic Instrumentalism

Abstract

INTRODUCTION Institutionalists and social economists have always had much in common. Both dismiss the fact/value distinction as naive and adopt a problem-by-problem approach to economic inquiry. Moreover, radical institutionalists differ from traditional institutionalists in ways that bring them even closer to social economists, particularly in the area of social values. Radical institutionalism does not represent a break with the institutionalist movement, but an attempt to move it beyond its current, Ayresian philosophical foundation. Radical institutionalism involves the introduction of three new elements into the contemporary stream of institutionalist works. These three new elements include an emphasis on Veblenian fundamentals, a shift in research interests, and a reconsideration of the philosophical foundations of inquiry. MOVING BEYOND AYRES Instrumental Theory of Knowledge: Four Basic Formulations To understand how the philosopical foundation of radical institutionalism differs from traditional institutionalism, we must first explain the instrumental theory of knowledge common to both and then explain the different variants of the instrumental theory of knowledge espoused by each. Like most economists, institutionalists have not carefully examined their philosophical foundations - though to be fair heterodox economists are generally more aware and critical of their philosophical foundations than mainstream economists. What we are calling (by convention) the instrumental theory of knowledge is, in fact, a label for what more accurately should be thought of as a vague consensus on method within institutionalism. After presenting the elements of this consensus on method we will explicitly problematize the underlying philosophical foundations. We will argue that it is differences in the implicit understanding of the underlying epistemological foundations that constitute the core differences between radical institutionalists and institutionalists in the Ayresian tradition. Moreover we will argue that these differences are nontrivial and the use of the same expressions to mean very different things makes it difficult for institutionalists and noninstitutionalists alike to understand these differences. The problem of using the same term to mean several different things is not a new problem in institutionalism. (See Waller [1982] on the Veblenian dichotomy and Neale [1987] on Institutions.) In order to advance the discussion regarding the areas of difference, we will begin with a basic sketch of a formulation of the instrumental theory of knowledge that constitutes an underexamined component of the institutionalist's basic tool kit: Four formulations are included in the instrumental theory of knowledge: 1 the instrumental-ceremonial split, 2 the ceremonial resistance to instrumental knowledge, 3 the locus of value, and 4 the problems of the age. Both radical institutionalism and traditional institutionalism include these four formulations, but each uses elements in their formulation differently. 1. Instrumental-Ceremonial Split The instrumental theory of knowledge begins by distinguishing between two aspects of knowledge - instrumental knowledge and ceremonial knowledge. This basic distinction differs from the dualistic separation between positive and normative as traditionally accepted in neoclassical economics. In fact, the instrumental theory of knowledge does not accept the mutually exclusive categories of positive and normative. Instead, the two are understood to be inextricably intertwined, making the positive-normative split extremely difficult to carry out in actual practice - as difficult and as useful as the splitting of hairs. In practice the positive-normative dualism supposes the positive deals with evaluating means while the normative deals with evaluating ends. However, what is a means and what is an end depends entirely on how you look at them. …