Development and Underdevelopment in the History of Economic Thought

The notion of macrofoundations in the American Institutionalist School of Economic Thought

Stefanis Georgios, PhD Student

The purpose of the paper is to provide an insight regarding the notion of macrofoundations in the writings of the American Institutionalism or Old Institutionalism. Macrofoundations is concerned with the admittance of the existence of social wholes and collectivities within an economy, which are not simply a mere aggregation of the individuals’ actions, but instead occur as emergent properties, which are capable of shaping, constraining and motivating individual behaviour. These social wholes and collectivities, which constitute the role of macroeconomic foundations, can be found in institutions. The focal point of the American Institutionalist School of Economic Thought was the role of institutions in shaping economic behaviour. According to its leading scholars, like Thorstein Veblen, Wesley Mitchell, John Commons and Clarence Ayres, institutions mould, constrain and enable individual behaviour. Therefore, individuals are considered as a part of a socially institutionalised whole. Furthermore, American Institutionalism commits itself towards a more historically defined economic science, which studies economic phenomena within a temporal and geographically oriented framework. In particular, Veblen, who is generally considered to be the founder of the American Intuitionalist School, claims that human nature should not be taken for granted for a theory of the development of human nature in terms of cumulative growth of habits of thought is needed. For Mitchell, individual rationality gets its character from the institutions under which he is reared. Commons adopts a less holistic approach than Mitchell, although he acknowledges that the institutional framework, which can be described by conflict of interests and hierarchical relations, moulds and shapes individualist thought and actions. As for Ayres, the history of human race is that of perpetual opposition between the dynamic forces of technology and the static forces of social institutions.

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Keywords: Macrofoundations, Institutions, American Institutionalism, Individual, Social Wholes