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The Struggle over the Soul of Economics

The Struggle over the Soul of Economics: Institutionalist and Neoclassical Economists in America between the Wars

Yuval P. Yonay
Copyright Date: 1998
Pages: 304
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  • Book Info
    The Struggle over the Soul of Economics
    Book Description:

    This book provides a surprising answer to two puzzling questions that relate to the very "soul" of the professional study of economics in the late twentieth century. How did the discipline of economics come to be dominated by an approach that is heavily dependent on mathematically derived models? And what happened to other approaches to the discipline that were considered to be scientifically viable less than fifty years ago? Between the two world wars there were two well-accepted schools of thought in economics: the "neoclassical," which emerged in the last third of the nineteenth century, and the "institutionalist," which started with the works of Veblen and Commons at the end of the same century. Although the contributions of the institutionalists are nearly forgotten now, Yuval Yonay shows that their legacy lingers in the study and practice of economics today. By reconsidering their impact and by analyzing the conflicts that arose between neoclassicists and institutionalists, Yonay brings to life a hidden chapter in the history of economics.

    The author is a sociologist of science who brings a unique perspective to economic history. By utilizing the actor-network approach of Bruno Latour and Michel Callon, he arrives at a deeper understanding of the nature of the changes that took place in the practice of economics. His analysis also illuminates a broader set of issues concerning the nature of scientific practice and the forces behind changes in scientific knowledge.

    eISBN: 978-1-4008-2252-2
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
  3. Acknowledgments
    (pp. xi-2)
  4. One Introduction: A Sociological Interpretation of the Modern History of Economics
    (pp. 3-28)

    This book analyzes a struggle between two schools of economics in the period between the world wars. The two schools are the neoclassical school, which emerged at the last third of the nineteenth century, and the institutionalist one,¹ which had started with the works of Veblen and Commons at the end of the nineteenth century and had enjoyed a short period of prosperity in the interwar period before rapidly declining after the Second World War. Current historians of economic thought usually ignore the institutionalists or consider their movement to be an ephemeral and inconsequential episode in the history of economics....

  5. Two The Neoclassical Era (1870–1914) from a Different Angle
    (pp. 29-48)

    Because of the near-hegemony today of the modern neoclassical school, the written history of economics reflects neoclassical predilections and biases. Current historians of economics, who came of age in the post–World War II era, are more likely to focus on past economists who envisioned and contributed to lines of research which are practiced today by the vast majority of economists. It is not a reflection on their sincerity and professional integrity to expect them to judge rather negatively those approaches, such as institutionalism, that criticized and tried to block and replace those trends of thought which led to modern...

  6. Three Reconstructing the History of Institutionalism
    (pp. 49-76)

    Institutionalism is one of those “unorthodox” approaches which are either totally glossed over or treated all too briefly by common textbooks on the history of economics. Most writers refer to this school as a unique and exceptional theory, which challenged the mainstream but did not derail it from its course. The conventional history texts doubt that institutionalism was indeed “a school,” in the sense that it had a unified, coherent, and consistent approach to which all the institutionalists subscribed (Mirowski 1981, 593). The alleged lack of coherence and unity is brought as a proof that institutionalism has never been a...

  7. Four The Struggle over the Meaning of Science
    (pp. 77-99)

    The traditional views of science assume the existence of one fixed set of rules, the Scientific Method, that unifies all sciences, distinguishes between production of scientific and nonscientific knowledge, and ensures the validity of the former. Dispassionate observation, controlled and replicable experiments, logical calculations, and unassailable mathematical proofs make scientific knowledge objective, universal, and independent of individual and social interests. Of course, different scientific fields adjust the concrete components of the Scientific Method to their own special requirements and circumstances, but such adjustments themselves are determined according to the logic of the Scientific Method. They do not reflect the variety...

  8. Five Bringing People and Institutions Back In: The Struggle over the Scope of Economics
    (pp. 100-114)

    When economists consider the meaning of science, they often draw on the leading and most prestigious domains: physics, chemistry, and biology. But the question of what science is quickly gives its place to the more concrete question of how to apply the meaning of science for the unique subject matter of economics. The answer to this question depends to a large extent on the way human beings are perceived (cf. Lawson 1994). That is why human nature and social organizations were marshaled into the struggle between institutionalists and neoclassical economics and used to defend the positions of both parties. Institutionalists...

  9. Six The Free Market on Trial: The Struggle over the Gap between Reality and Theory
    (pp. 115-135)

    When two camps compete in science, each party tries to show the inadequacy of the black boxes of its rival in order to undermine the whole network of allies assembled by that rival. This, however, is not an easy task. In the complex and abstract domain of science, the meaning and significance of each black box can be comprehended only in the context of the whole enterprise. Uncommitted practitioners or uninitiated novices whose souls the contenders wish to conquer cannot be convinced in the validity of the black boxes before they choose one party and undergo its training course. Yet...

  10. Seven The Struggle over Social Relevance and the Place of Values
    (pp. 136-162)

    Scientific validity measured in terms of logical analysis and compatibility with reality is not the only criterion for choosing among scientific approaches. When there are two competing approaches, which are both valid, or when scientists cannot agree which approach is valid, they can resort to a criterion of an entirely different character. This criterion is the usefulness of the competing approaches and their relevance to practical needs.¹ The way we have defined black boxes, they include more than conventions of how to do research (i.e., methods), accepted facts, and agreed upon explanations (i.e., theories). They include also shared goals of...

  11. Eight Evolution or Revolution? The Struggle over the History of the Discipline
    (pp. 163-183)

    This chapter deals with the way in which contenders in a scientific conflict relate their contentions to past works in their field. There are three dimensions to the connection between the past and ongoing scientific struggles. First, scientists have to decide whether to present their ideas as continuing the past or as a break-away from it. Second, the contenders construct the history of the field in such a way as to make their contributions look like natural developments from the past. They may emphasize the work of selected practitioners in the past and downplay the role of others, or they...

  12. Nine Epilogue: The Fall of Institutionalism and the Rise of Modern Economics
    (pp. 184-195)

    Before World War II, institutionalism was well established in major universities and the government, and its influence on New Deal legislation was substantial. Nevertheless, by the late 1950s it was already considered outdated. The explanation of this rapid decline requires another study, but based on my research I can offer some preliminary thoughts on this sudden change of fate. I hope that these thoughts, as sketchy as they are, would complete the story about institutionalism and demonstrate the ability of the actor-network analysis to account for both its rise and decline.

    My argument in this chapter is, in a nutshell,...

  13. Ten Conclusions: The Evolution of Economic Analysis
    (pp. 196-222)

    The conventional view on the history of economics perceives a straight development from Adam Smith and classical economics, to Alfred Marshall and neoclassical economics, and then to the Keynesianism of the 1930s. The developments of the postwar period are depicted as the logical conclusion of this long development. Mathematical economists have merely “translated” Marshall into rigorous mathematical models that have enabled them to correct mistakes and to deduce more rigorously the implications of specific conditions and assumptions. Similarly, rigorous econometrician models of the whole economy allowed macroeconomists to put the Keynesian and rival theories in exact form and test their...

  14. Notes
    (pp. 223-250)
  15. Bibliography
    (pp. 251-278)
  16. Index
    (pp. 279-290)