One of the classes I am currently taking right now is called Institutional Economics. At first, I was having a hard time putting my finger on what exactly we were studying in the class. After all, in one of Thorstein Veblen’s essay asking “Why is Economics not an Evolutionary Science?,” the complexity of the paper makes it hard to follow along, yet there are so many great ideas hidden within it . Many of the articles that we have read in the class come from writers who have this similar writing style so there is a huge learning curve in understanding what exactly they are trying to argue.
The first and most pressing matter is to define Institutional Economics, which is a very broad field of economics. Thorstein Veblen defines an institution as “settled habits of thoughts” while John Commons defines it as “collective action in control, liberation and expansion of individual action.” If you are scratching your head and wondering what the heck that means, don’t worry (as a side note, i was told Veblen and Commons aren’t in conflict with one another. They were looking at institutions in different ways; as a matter of fact, one could say their ideas complement each other). Wikipedia’s definition of Institutional Economics is more lucid: “Institutional Economics focuses on the understanding the role of human-made institutions in shaping economic behavior.”
According to my class syllabus, Institutional Economics “represents a significantly different way of thinking about man, the economy, social activities generally, and human economic and social potentials.” Institutional Economics is considered a heterodox approach to Economics, which from my understanding means that one cannot simply study numbers or supply vs demand curves. One must look at other factors that are studied in the other social sciences including: psychology, sociology, political science, anthropology, biology, management science/operations research and the natural/physical sciences.