Institutionalism in the Early 20th Century

Institutionalism's Prestige in the Early 20th Century

• Analysis rooted in understanding the world in context, making it relevant for policymakers
• Provided credibility for positions in government, contrasting with more abstract theories
• Extensive empirical work on business cycles, contributing significantly to the National Bureau of Economic Research
• Key figures like John R. Commons and Thorstein Veblen developed influential concepts impacting our daily lives

Institutional Values

• Ceremonial Values: Focus on past traditions, defining social status and acceptable behavior, often rooted in authority
  • Example: Racial segregation policies (Jim Crow South)
• Instrumental Values: Goal-oriented, open to experimentation and evidence-based solutions
  • Example: Implementing evidence-based laws to improve education
• Purpose of the distinction: To determine whether an economy is primarily driven by ceremonial or instrumental values

Intellectual Influences on Institutionalism

• Anthropology: Emphasized the learned nature of human behavior over instinctive reactions, highlighting cultural influence on economic activity
• Evolution: Questioned whether economic systems change over time and in response to pressures, recognizing the adaptable nature of economic structures
• Pragmatism: Believes that truth is evaluated through the outcomes of actions and emphasizes goal-oriented policymaking.

Veblen's Conspicuous Consumption

• Term coined to describe lavish spending used to display social status, not for practical needs
• Reflects ceremonial values, highlighting the importance of social hierarchy in economic behavior.

Neoclassical Economics' Rise

• Institutionalism's prestige declined due to its struggles in predicting and addressing the Great Depression
• Increased focus on mathematical models, general equilibrium theory, and microfoundations in neoclassical economics (NCE) resulted in a shift away from institutionalism

Institutionalist Paradigm's Building Block

• Focus on cultural context, incorporating social norms, historical influences, and learned behaviors in understanding economic behavior
• Challenges the idea that economic actions are solely rational and individualistic

Ceremonial and Instrumental Values Examples

• Ceremonial: Segregation laws in the Jim Crow era reinforced racial hierarchies through tradition
• Instrumental: Anti-discrimination policies which use research to show effectiveness in promoting equality and economic growth

Feminist Economics Critique of Gary Becker

• Becker's theory regarding gender wage differences is criticized for circular logic, assuming house work's specialization is related to its superiority, and underestimating its market values.

Genuine Progress Indicator (GPI)

• Combines economic, social, and environmental factors to measure a nation's well-being, providing a more comprehensive view than GDP
• GPI adjusts GDP by incorporating factors such as the value of unpaid labor, volunteer work, and ecosystem services, but also taking into account social and environmental costs

Feminist Economics' Inspirations

• Marxism: Analysis of class conflict and exploitation, extended to include gender as a critical factor
• Institutionalism: Recognition of sexism as a ceremonial value influenced by existing norms
• Neoclassical Economics: Recognizing shortcomings in ignoring gender differences and biased assumptions about economic behavior

Key Element of Feminist Economic Methods

• Focus on recognizing inherent values throughout research methods instead of trying to be neutral; acknowledging the potential for values to affect research results

Feminist Economics' Purpose

• Aims to improve quality of life through policy recommendations, in contrast to theories focused on understanding behavior.

Questioning Fundamental Economic Assumptions

• Feminist economists emphasize the need to question traditional economic assumptions to better understand the economic realities of gender inequality
• Traditional models often ignore gendered roles in work and home life

Ecological Economics' Critique of Environmental Economics

• Environmental economics often relies on market-based solutions, which ecological economists view with skepticism.
• Traditional models are deemed inadequate for addressing complex ecological problems

Ecological Economic Models

• Mainstream Model: Represents goods, services, and factors between firms and households.
• Ecological Model: Adds natural inputs / outputs to the model, emphasizing the finite nature of ecosystems, the need for recycling, and recognizing the importance of environmental impact.

This quiz explores the significance of institutionalism during the early 20th century, focusing on key figures like John R. Commons and Thorstein Veblen. It highlights the contrast between ceremonial and instrumental values in policymaking and their impact on society. Understand the empirical work that shaped economic thought and its implications for modern governance.