The Meaning and Validity of Institutional Economics

Abstract

The dissenters from conventional economic theory have devoted the main part of their scholarly endeavours to analysing specific problems in regard to which they found this theory insufficient and faulty. But enough of us have from time to time taken up the general problem of why, how, and in what respects this conventional theory goes wrong and how an institutional theory, free from these systematic defects, should be shaped. As yet there are, however, no comprehensive treatises written by institutional economists where our thoughts on the whole range of economic problems have been systematised. But the concord among us in basic philosophy and approaches to theoretical and political questions is so great that even the task of writing institutional textbooks ought now to tempt some of our younger colleagues. The most fundamental thought that binds us together is our understanding that, in regard to practically every economic problem, scientific study must concern the entire social system, including, besides the so-called economic factors, everything else of importance for what comes to happen in the economic field. The reason why this is a methodological imperative is the fact that, among all conditions in that system, there is circular causation. This implies interdependence.