Anne Mayhew, "Some Old But Good Ideas"

Post-Autistic Economics Network

www.paecon.net

from post-autistic economics review : issue no. 10, December, 2001

Some Old But Good Ideas
Anne Mayhew (University of Tennessee, USA)

As Post-Autistic Economics moves beyond criticism and on to the task of building a more
relevant and robust economic science, one challenge is to develop a theoretical framework
that will guide pluralistic borrowing from a variety of disciplines and approaches. Some
useful guidelines for development of such a framework may be found in the history of
American economic thought as it developed and flourished in the first half of the 20^th
century. During the first five decades of that century a group of economists who taught at
a number of the major American Universities created the reasonably coherent, pluralistic
and non-autistic approach to the study of economies and economic issues known as
institutionalism, an approach that dominated American economic thought during the
interwar years.

Four basic themes characterized this approach:

(1) Regularities in the organization of both production and distribution are the same as all
other social regularities in that they are human creations and are subject to change by
human intervention. In other words, there is no “natural economy” and there is no reason to
assume that an idealized market system is historically or morally prior to other social
systems.   This perception was rooted in American pragmatic philosophy which saw
individuals as recipients of inherited ideas, but also as active agents capable of perceiving
problems and imagining new possibilities. The basic autistic assumption of isolated
individuals interacting from the beginning of human history through exchange, but little
changed by it, was rejected in favor of the notion that humans are always social beings.
Mind, thought, and consciousness are products of active processes of human interactions,
processes that do not end, but evolve through time.

This understanding of the social and inquiring nature of humans is crucial to two tasks that
must confront post-autistic economic analysis: the understanding of variation in economic
organization across time and space, and variation in human understanding and behavior
across the lifetime of individuals. The idea that we all start with a set of inherited ideas and
perceptions is crucial to explaining economic and all other forms of social behavior. A
simple example: young American children learn at an early age that food can be acquired
by spending money and that money is acquired by “hard work and thrift.” They may learn
that beggars without money for food are victims of hard luck; they are as likely to learn that
such beggars are undeserving of receiving money because they have not worked hard or
been thrifty. In this process the idea of a market economy with justified and even desirable
income inequality is instilled.   Young children in other times and places have learned
different things and have different understanding of distribution and its relationship to
production.

What the pragmatists and institutional economists also stressed is that all people are
capable of questioning the ideas that they inherit.   We all know that many Americans
come to question the conventional wisdom that the poor have earned their own economic
fate, but note that the questioning itself is via a social process of questioning, of contact
with others with different ideas (contact that is now global as well as local), and of formal
learning. In the process, ideas of what constitutes justice and injustice are changed, as
are ideas of how to achieve justice.    It is this active process that produces the evolution
of thought and consciousness and that leads to change in human culture and organization.

(2) It follows from #1 that as humans create their economies, they can change those
economies to solve perceived problems. A central part of economic analysis should
therefore be the identification of problems, which is to say to patterns of production and
distribution that do not accord with the goals of society.   This analysis should lead to
reasoned advocacy of reform through normal political and social processes. This aspect
of pragmatism underlay the reform activities of the 1920s and 30s in the United States,
activities that included creation of the Federal Trade Commission, the Social Security Act
that provided income security to the elderly, unemployment compensation, regulation of
securities trading and much, much more.

(3)   While the Institutional economists saw their role as one of criticism and advocacy,
they did not purport to offer permanent solutions or design of utopias. They were reformers,
not revolutionaries who could advocate permanent solutions. Instead, the pragmatic
solutions to problems were offered with the sure knowledge that these solutions would
create new problems, and with the sure knowledge that as science and technology
changed the interaction of humans with the physical world so too would that change alter
the relationship of humans with each other. Central to institutionalist thought was the
perception that the advent of industrial as opposed to craft production had altered the
relationship of producers of products and of producers to consumers. New rules,
regulations and patterns of interaction were required and those very rules, regulations and
patterns of interaction themselves created new conflicts that would lead to more change
via a process of cumulative causation. Not only was the path of change difficult to predict,
but it was impossible to formulate an ideal toward which such change tended. In other
words, it was futile to speculate on the conditions that would prevail in an ideal economy.

(4) In order to understand the processes of ongoing change, and in order to understand the
human organization of production and distribution, a variety of tools were found to be useful.
Wesley Mitchell, one of the most active of institutionalists and founder of the National
Bureau of Economic Research was a strong advocate of descriptive statistics and of
statistical analysis as a way of discovering the actual (as opposed to idealized) patterns of
economic behavior.   Others borrowed the methods of anthropology and sociology to
discover patterns of behavior through rough observation and participation.   Studies of the legal
system as a working system of evolving human rules was central to the approach taken by
John R. Commons and his students. The study of economic history was vital for
understanding patterns and processes of change. In all of the institutionalist work, the
tools were just that: ways to achieve the goal of understanding the patterns of human
behavior and how they changed.   The tools did not define the discipline.

There is much to be learned about the early 20^th century American economy from reading
Thorstein Veblen, John R. Commons, Wesley C. Mitchell, John Maurice Clark, Rexford
Tugwell and the others who brought the pragmatist approach to the study of economics.
What is more important is that these authors and others offer rich examples of how to
build an economic science that would, in the words of Tony Lawson, describe and explain
event regularities.   They can teach us much about how to do non-autistic economic science.

SUGGESTED CITATION:

Anne Mayhew (2001) “Some Old But Good Ideas”, post-autistic economics review : issue no. 10, December, article 1. http://www.btinternet.com/~pae_news/review/issue10.htm