Institutions, Politics and Culture: A Case for ‘Old’ Institutionalism in the Study of Historical Change

Abstract

Institutions are, as Jeffrey Nugent explains (in his paper in this volume), humanly devised rules that affect behaviour, constraining certain actions, providing incentives for others, and thereby making social life more or less predictable.¹ They are, as Geoffrey Hodgson puts it, ‘the stuff of socio economic reality’ (Hodgson, 2001: 302). It is in a way rather curious that so fundamental an aspect of social life should not have been a more important focus of study in the social sciences (outside anthropology) until relatively recently. This reflects the facts that, as Nugent says, mainstream, choice-theoretic economics has not previously problematised institutions, such even as those that are necessary for markets to function — and the expan sionary pre-eminence of this kind of economics amongst the social sciences. Hodgson, however, reminds us that the dominance of this particular style of economics, with its pretensions to universality, has overlain and led to the forgetting of a rich tradition of thought about institutions, associated both with the German historical school and with American scholars such as Veblen and John Commons (Hodson, 2001). I shall pick up some of his arguments in this short essay.

Such terms as ‘values’ and ‘culture’ are not popular with economists, who prefer to deal with quantifiable (more precisely definable) factors. Still, life being what it is, one must talk about these things …

David Landes (1998: 215)