Skip to main content

Evolutionary and Institutional Economics as the New Mainstream?

Evolutionary and Institutional Economics Review volume 4, pages 7–25 (2007)Cite this article

Abstract

Mainstream economics has changed radically since the 1980s, offering greatly enhanced opportunities for intervention by evolutionary and institutional economics. This article surveys the extent of this transformation and the extent that mainstream economics has moved in an evolutionary and institutional direction. There are also signs of a possible gestalt shift in the social sciences, where rules are seen as constitutive of social relations and social reality. This contrasts with the former emphasis in mainstream economics on incremental change and equilibria. On the other hand, mainstream economics has a preoccupation with technique over substance, and the barriers between disciplines impair appropriate conceptual developments.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

USD 39.95

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

References

  • Akerlof, G. A. and W. T. Dickens (1982) “The Economic Consequences of Cognitive Dissonance,” American Economic Review 73.3: 307–319.

    Google Scholar 

  • - and R. E. Kranton (2005) “Identity and the Economics of Organizations,” Journal of Economic Perspectives 19.1: 9–32.

    Article  Google Scholar 

  • Aoki, M. (2001) Toward a Comparative Institutional Analysis, MIT Press, Cambridge, MA.

    Google Scholar 

  • Arrow, K. J. (1995) “dViewpoint: The Future,” Science 267: 1617.

    Article  Google Scholar 

  • Arthur, W. B. (2006) “Out-of-Equilibrium Economics and Agent-Based Modeling,” in K. L. Judd, L. Tesfatsion, M. D. Intrigilator and K. J. Arrow (eds) Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics, North-Holland, Amsterdam.

    Google Scholar 

  • Blaug, M. (1997) “Ugly Currents in Modern Economics,” Options Politiques 18.17: 3–8. [Reprinted in Uskali Mäki (ed) (2002) Fact and Fiction in Economics: Models, Realism and Social Construction, Cambridge University Press, Cambridge and New York.]

    Google Scholar 

  • Bowles, S. (1998) “Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions,” Journal of Economic Literature 36.1: 75–111.

    Google Scholar 

  • - (2004) Microeconomics: Behavior, Institutions, and Evolution, Princeton University Press and Russell Sage Foundation, Princeton and New York.

  • Camerer, C. (1997) “Progress in Behavioral Game Theory,” Journal of Economic Perspectives 11.4: 67–88.

    Google Scholar 

  • - (2003) Behavioral Game Theory: Experiments in Strategic Interaction, Princeton University Press, Princeton.

  • au]-, G. Loewenstein and M. Rabin (eds) (2004) Advances in Behavioral Economics, Russell Sage Foundation and Princeton University Press, New York and Princeton.

    Google Scholar 

  • Colander, D. C. (2005a) “The Making of an Economist Redux,” Journal of Economic Perspectives 19.1: 175–198.

    Article  Google Scholar 

  • - (2005b) “The Future of Economics: The Appropriately Educated in Pursuit of the Knowable,” Cambridge Journal of Economics 29.6: 927–941.

    Article  Google Scholar 

  • -, R. P. F. Holt and J. B. RosserJr. (2004a) “The Changing Face of Economics,” Review of Political Economy 16.4: 485–499.

    Google Scholar 

  • — (2004b) The Changing Face of Economics: Interviews with Cutting Edge Economists, University of Michigan Press, Ann Arbor, MI.

    Google Scholar 

  • Commons, J. R. (1925) “Marx Today: Capitalism and Socialism,” Atlantic Monthly 136: pp. 682–693.

    Google Scholar 

  • - (1934) Institutional Economics—Its Place in Political Economy, Macmillan, New York.

  • Davis, J. B. (2003) The Theory of the Individual in Economics: Identity and Value, Routledge, London and New York.

    Book  Google Scholar 

  • - (2006) “The Turn in Economics: Neoclassical Dominance to Mainstream Pluralism?” Journal of Institutional Economics 2.1: 1–20.

  • Dequech, D. (2002) “The Demarcation Between the ‘Old’ and the ‘New’ Institutional Economics: Recent Complications,” Journal of Economic Issues 36.2: 565–572.

    Google Scholar 

  • Dopfer, K. (2004) “The Economic Agent as Rule Maker and Rule User: Homo Sapiens Oeconomicus,” Journal of Evolutionary Economics 14.2: 177–195.

    Article  Google Scholar 

  • -, J. Foster and J. Potts (2004) “Micro-Meso-Macro,” Journal of Evolutionary Economics 14.3: 263–279.

    Google Scholar 

  • Fehr, E. and U. Fischbacher (2002) “Why Do Social Preferences Matter—The Impact of Non- Selfish Motives on Competition, Cooperation and Incentives,” Economic Journal 112: C1–C33.

    Article  Google Scholar 

  • Field, A. J. (1979) “On the Explanation of Rules Using Rational Choice Models,” Journal of Economic Issues 13.1: 49–72.

    Google Scholar 

  • - (1981) “The Problem with Neoclassical Institutional Economics: A Critique with Special Reference to the North/Thomas Model of Pre-1500 Europe,” Explorations in Economic History 18.2: 174–198.

  • - (1984) “Microeconomics, Norms and Rationality,” Economic Development and Cultural Change 32.4: 683–711.

  • Gintis, H. (2000) Game Theory Evolving: A Problem-Centered Introduction to Modeling Stategic Interaction, Princeton University Press, Princeton.

    Google Scholar 

  • Groenewegen, J., F. Kerstholt and A. Nagelkerke (1995) “On Integrating the New and Old Institutionalisms: Douglass North Building Bridges,” Journal of Economic Issues 29.2: 467–475.

    Google Scholar 

  • Haavelmo, T. (1997) “Econometrics and the Welfare State” (1989 Nobel Lecture), American Economic Review 87 (supplement): 13–17.

    Google Scholar 

  • Hahn, F. H. (1991) “The Next Hundred Years,” Economic Journal 101.1: 47–50.

    Article  Google Scholar 

  • Hammond, P. J. (1976) “Changing Tastes and Coherent Dynamic Choice,” Review of Economic Studies 43.1: 159–173.

    Article  Google Scholar 

  • Haltiwanger, J. and M. Waldman (1985) “Rational Expectations and the Limits of Rationality: An Analysis of Heterogeneity,” American Economic Review 75.3: 159–173.

    Google Scholar 

  • Hargreaves, H., P. Shaun and Y. Varoufakis (1995) Game Theory: A Critical Introduction, Routledge, London and New York.

    Book  Google Scholar 

  • Hayek, F. A. (1960) The Constitution of Liberty, Routledge and Kegan Paul and University of Chicago Press, London and Chicago.

    Google Scholar 

  • - (1978) New Studies in Philosophy, Politics, Economics and the History of Ideas, Routledge and Kegan Paul, London.

  • - (1988) The Fatal Conceit: The Errors of Socialism. The Collected Works of Friedrich August Hayek, Vol. I, Routledge, London.

  • Hirsch, F. (1977) Social Limits to Growth, Routledge, London.

    Google Scholar 

  • Hodgson, G. M. (1988) Economics and Institutions: A Manifesto for a Modern Institutional Economics, Polity Press and University of Pennsylvania Press, Cambridge and Philadelphia.

    Google Scholar 

  • - (1993) Economics and Evolution: Bringing Life Back Into Economics, Polity Press and University of Michigan Press, Cambridge UK and Ann Arbor MI.

  • - (1997) “The Ubiquity of Habits and Rules,” Cambridge Journal of Economics 21.6: 663–684.

  • - (2004) The Evolution of Institutional Economics: Agency, Structure and Darwinism in American Institutionalism, Routledge, London and New York.

  • - (2006) Economics in the Shadows of Darwin and Marx: Essays on Institutional and Evolutionary Themes, Edward Elgar, Cheltenham.

  • - (2007) “The Revival of Veblenian Institutional Economics,” Journal of Economic Issues 41.2 (forthcoming).

  • - and T. Knudsen (2004) “The Complex Evolution of a Simple Traffic Convention: The Functions and Implications of Habit,” Journal of Economic Behavior and Organization 54.1: 19–47.

    Google Scholar 

  • Judd, K. L., L. Tesfatsion, M. D. Intrigilator and K. J. Arrow (eds) (2006) Handbook of Computational Economics, Vol. 2: Agent-Based Computational Economics, North-Holland, Amsterdam.

  • Kagel, J. H. and A. E. Roth (eds) (1995) The Handbook of Experimental Economics, Princeton University Press, Princeton.

    Google Scholar 

  • Kahneman, D. (1994) “New Challenges to the Rationality Assumption,” Journal of Institutional and Theoretical Economics 150.1: 18–36.

    Google Scholar 

  • Kirman, A. P. (1989) “The Intrinsic Limits of Modern Economic Theory: The Emperor Has No Clothes,” Economic Journal (Conference Papers) 99: 126–139.

    Google Scholar 

  • - and L. A. Gérard-Varet (eds) (1999) Economics Beyond the Millennium, Oxford University Press, Oxford.

    Google Scholar 

  • Knight, J. (1992) Institutions and Social Conflict, Cambridge University Press, Cambridge.

    Book  Google Scholar 

  • Lane, D. A. (1993) “Artificial Worlds and Economics,” Journal of Evolutionary Economics 3.2: 89–107 and 3.3: 177-197.

    Article  Google Scholar 

  • Lawson, T. (1997) Economics and Reality, Routledge, London and New York.

    Book  Google Scholar 

  • Loomes, G. (1998) “Probabilities vs Money: A Test of Some Fundamental Assumptions About Rational Decision Making,” Economic Journal 108.1: 477–489.

    Article  Google Scholar 

  • - (1999) “Some Lessons from Past Experiments and Some Challenges for the Future,” Economic Journal 109.2: F35–45.

  • Mäki, U. (1992) “On the Method of Isolation in Economics,” in C. Dilworth (ed) Idealization IV: Intelligibility in Science, Rodopi, Amsterdam, pp. 317–351.

    Google Scholar 

  • Mantzavinos, C. (2001) Individuals, Institutions and Markets, Cambridge University Press, Cambridge and New York.

    Book  Google Scholar 

  • McMillan, J. (2002) Reinventing the Bazaar: A Natural History of Markets, Norton, New York and London.

    Google Scholar 

  • Nelson, R. R. (1995) “Recent Evolutionary Theorizing About Economic Change,” Journal of Economic Literature 33.1: 48–90.

    Google Scholar 

  • - and S. G. Winter (1982) An Evolutionary Theory of Economic Change, Harvard University Press, Cambridge, MA.

    Google Scholar 

  • North, D. C. (1991) “Institutions,” Journal of Economic Perspectives 5.1: 97–112.

    Article  Google Scholar 

  • - (1994) “Economic Performance Through Time,” American Economic Review 84.3: 359–367.

    Google Scholar 

  • Ostrom, E. (2005) Understanding Institutional Diversity, Princeton University Press, Princeton.

    Google Scholar 

  • Pagano, U. (1999) “Is Power an Economic Good? Notes on Social Scarcity and the Economics of Positional Goods” in S. Bowles, M. Franzini and U. Pagano (eds) The Politics and the Economics of Power, Routledge, London and New York, pp. 63–85.

    Google Scholar 

  • Pagano, U. (2000) “Bounded Rationality, Institutionalism and the Diversity of Economic Institutions,” in F. Louçã and M. Perlman (eds) Is Economics an Evolutionary Science? The Legacy of Thorstein Veblen, Edward Elgar, Cheltenham, UK and Northampton, MA, pp. 95–113.

    Google Scholar 

  • Pålsson Syll, L. (1992) “Notes on Neoinstitutional Economics,” Scandinavian Economic History Review 40.2: 21–33.

    Article  Google Scholar 

  • Parra, C. M. (2005) “Rules and Knowledge,” Evolutionary and Institutional Economics Review 2.1: 81–111.

    Article  Google Scholar 

  • Potts, J. (2000) The New Evolutionary Microeconomics: Complexity, Competence and Adaptive Behaviour, Edward Elgar, Cheltenham.

    Google Scholar 

  • Pylyshyn, Z. W. (ed) (1987) The Robot’s Dilemma: The Frame Problem in Artificial Intelligence, Ablex, Norwood, NJ.

    Google Scholar 

  • Rizvi, S. A. T. (1994) “The Microfoundations Project in General Equilibrium Theory,” Cambridge Journal of Economics 18.4: 357–377.

    Google Scholar 

  • Rutherford, M. H. (1995) “The Old and the New Institutionalism: Can Bridges be Built?” Journal of Economic Issues 29.2: 443–451.

    Google Scholar 

  • Schotter, A. R. (1981) The Economic Theory of Social Institutions, Cambridge University Press, Cambridge.

    Book  Google Scholar 

  • Schumpeter, J. A. (1912) Theorie der wirtschaftlichen Entwicklung: Eine Untersuchung uber Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzylkus (in German), Duncker und Humblot, München und Leipzig.

    Google Scholar 

  • - (1934) The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle, Harvard University Press, Cambridge, MA.

  • Sened, I. (1997) The Political Institution of Private Property, Cambridge University Press, Cambridge.

    Google Scholar 

  • Simon, H. A. (1957) Models of Man: Social and Rational. Mathematical Essays on Rational Human Behavior in a Social Setting, Wiley, New York.

    Google Scholar 

  • Smith, V. L. (1982) “Microeconomic Systems as an Experimental Science,” American Economic Review 72.5: 923–955.

    Google Scholar 

  • - (1991) “Rational Choice: The Contrast Between Economics and Psychology,” Journal of Political Economy 99.4: 877–896.

  • Stigler, G. J. and G. S. Becker (1977) “De Gustibus Non Est Disputandum,” American Economic Review 76.1: 76–90.

    Google Scholar 

  • Sugden, R. (1986) The Economics of Rights, Co-operation and Welfare, Basil Blackwell, Oxford.

    Google Scholar 

  • Vanberg, V. J. (2001) “Markets and the Law,” in N. J. Smelser and P. B. Baltes (eds) International Encyclopedia of the Social and Behavioral Sciences, Elsevier, Amsterdam, pp. 9221–9227.

    Chapter  Google Scholar 

  • - (2002) “Rational Choice versus Program-Based Behavior: Alternative Theoretical Approaches and Their Relevance for the Study of Institutions,” Rationality and Society 14.1: 7–53.

    Google Scholar 

  • - (2004) “The Rationality Postulate in Economics: Its Ambiguity, Its Deficiency and Its Evolutionary Alternative,” Journal of Economic Methodology 11.1: 1–29.

    Google Scholar 

  • Veblen, T. B. (1898) “Why Is Economics Not an Evolutionary Science?” Quarterly Journal of Economics 12.3: 373–397. [Reprinted in Veblen (1919).]

    Article  Google Scholar 

  • - (1899) The Theory of the Leisure Class: An Economic Study in the Evolution of Institutions, Macmillan, New York.

  • - (1919) The Place of Science in Modern Civilization and Other Essays, Huebsch, New York.

  • Webb, S. J. and B. Webb (1935) Soviet Communism: A New Civilisation? Longmans Green, London.

    Google Scholar 

  • Williamson, O. E. (1975) Markets and Hierarchies: Analysis and Anti-Trust Implications: A Study in the Economics of Internal Organization, Free Press, New York.

    Google Scholar 

  • - (2000) “The New Institutional Economics: Taking Stock, Looking Ahead,” Journal of Economic Literature 38.3: 595–613.

  • Winter, S. G. (1990) “Survival, Selection, and Inheritance in Evolutionary Theories of Organization,” in J. V. Singh (ed) Organizational Evolution: New Directions, Sage, London, pp. 269–297.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. The Business School, University of Hertfordshire, De Havilland Campus, Hatfield, Hertfordshire, AL10 9AB, UK

    Geoffrey M. Hodgson

Authors
  1. Geoffrey M. Hodgson
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Geoffrey M. Hodgson.

About this article

Verify currency and authenticity via CrossMark

Cite this article

Hodgson, G.M. Evolutionary and Institutional Economics as the New Mainstream?. Evolut Inst Econ Rev 4, 7–25 (2007). https://doi.org/10.14441/eier.4.7

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.14441/eier.4.7

Keywords

  • evolutionary economics
  • institutional economics
  • endogenous preferences
  • bounded rationality
  • mainstream economics

JEL

  • B0
  • B52
  • D0