Materials for presentation on the topic of institutionalism. Presentation on the topic "Founders of Institutionalism"
INSTITUTIONALISM
Presentation
Korchagina Anastasia
Student of State Budgetary Educational Institution Lyceum No. 1571
Moscow
- Institutionalism- direction of socio-economic research, in particular considering the political organization of society as a complex of various associations of citizens - institutions(family, party, trade union, etc.)
- The concept of institutionalism includes two aspects: “institutions” - norms, customs of behavior in society, and “institutions” - consolidation of norms and customs in the form of laws, organizations, institutions.
- Institutionalism originated in the United States and then became widespread in many countries around the world.
- Institutionalism went through 3 stages in its development. The founders of the first stage of institutionalism are T. Veblen, John Commons, Welsey Mitchell.
- T. Veblen came up with a program for the transfer of power to the engineering and technical intelligentsia, considering it an independent driving force of socio-economic growth.
- D. Commons believed that with an increase in the role of the state and its intervention in the economy, the government will be able to ensure a balance of interests of various sectors of society.
- W. Mitchell defended the possibility of eliminating crises through the use of government spending and advocated the organization of national planning.
- Since the 60-70s, the influence of institutionalism has increased again and is currently one of the theoretical foundations of state economic policy in many countries of the world.
- Its representatives are American economists J. Galbraith, James Beau Kennen, J. Clark, Means and others.
BASIC DIRECTIONS OF DEVELOPMENT OF INSTITUTIONALISM
There are 3 main currents of institutionalism:
- 1. Socio-psychological institutionalism of T. Veblen
- 2. Socio-legal institutionalism of D. Commons.
- 3. Conjunctural-statistical institutionalism of W. Mitchell.
- The founder of old institutionalism is an American of Norwegian origin, T. Veblen.
- A person, according to T. Veblen, is not “a calculator that instantly calculates the pleasure and pain” associated with the acquisition of goods, i.e. benefits and costs of obtaining them.
- John Commons created a legal version of institutionalism, in which law takes precedence over economics. For him, an institution is, first of all, rules of law.
- Mitchell's personal contribution to institutional theory is to identify the influence on economic factors (in the categories of money circulation, credit, finance, etc.).
- He replaced the term “crisis” with the term “business cycle”. In his opinion, cyclical development is not an accidental phenomenon, but a permanent feature of the capitalist economy. They determine the dynamics of production. It is influenced by investments, money circulation, stock prices, trade, savings, etc.
Slide 2
Main questions
1. Predecessors of institutionalism 2. Thorstein Veblen - founder of institutionalism
Slide 3
German historical school and Marxism
The German historical school proclaimed the specificity of the country's socio-economic conditions as the most important factor in the functioning and development of the national economy. The main method of this school was empiricism, that is, the derivation of scientific generalizations based on a dispassionate study of social practice, analysis of objective statistical data. The German historical school opposed the thesis of the classics about “ invisible hand" concept of national interests, which involves active government intervention in the economy
Slide 4
Friedrich List
1789-1846 - national economy; -association of individual forces; -productive forces: moral and social; -role of the state
Slide 5
Slide 6
Werner Sombart
1863-1941 Economic spirit: pre-capitalist and capitalist
Slide 7
Max Weber
1864-1920 Ideal type The spirit of capitalism
Slide 8
ThorsteinVeblen
Slide 9
Phases of development of institutions according to Veblen
Peaceful savagery (formerly primitive society); Predatory society (late primitive society); Quasi-peaceful society (slave system, feudalism); Peaceful phase (capitalism)
Slide 10
Altruistic instinct; Instinct of mastery; Instinct of curiosity
Slide 11
Slide 12
Slide 13
Living standard Consumer preferences Fashion Aesthetic views Sports Gambling tendencies
Slide 14
3. The theory of monopoly capitalism by J. Hobson
Slide 15
Slide 16
Slide 17
4. W. Mitchell and J. Clark
W. Mitchell: the market economy is unstable; The cause of instability is business cycles; Government intervention; Unemployment insurance. J. Clark: anti-crisis measures are the prerogative of the state; increased government spending; diffusion of benefits (benefits for everyone)
Slide 18
5. J. Commons' theory of collective action
1862-1945 Institutions as collective action
Slide 19
A transaction as an economic phenomenon is characterized by four factors: 1) transfer of property, 2) monetary price, 3) obligation to be fulfilled, 4) payment. Courts must consider all four of these factors simultaneously. From the point of view of sequence in time, the transaction process contains three stages: 1) negotiations, 2) acceptance of an obligation, 3) its implementation.
Slide 20
Slide 21
6. New industrial society J.K. Galbraith
John Galbraith (1908-2006) - American institutionalist, author of the theory of a new industrial society. In the book “Economic Theory and the Goals of Society,” J. K. Galbraith notes that corporations governed by a technostructure constitute the planning subsystem of the economy, and small firms constitute the market subsystem. At the same time, the planning subsystem exploits the market one, thereby generating inequality in profits. J.C. Galbraith believes that in the economy of the USSR the technostructure also took a leading position, which ultimately should have led to the evolutionary convergence of market and planned economic systems. In this book, he introduces the category of “self-exploitation” - this is how he calls the activities of an employer or an entrepreneur working in his company.
Slide 22
A contract is a necessary mechanism for coordinating production plans between various firms included in the planning system.
Slide 23
Galbraith argues that power in the modern large corporation is gradually shifting from capital owners to managers. The need to obtain and evaluate information from many people in the decision-making process in modern industry is determined by three main points: Technological needs; Planning needs Coordination needs
Slide 24
conclusions
Galbraith emphasizes the group of those who contribute to the information used to make a group decision. He calls this group a technostructure. It is this group of people, and not the administration, that directs the activities of the enterprise and is its brain. The main goal of a technostructure, like any organization, is self-preservation. An organization is a system of consciously coordinated actions of several individuals. Galbraith identifies four types of incentives
Slide 25
Slide 26
7. J. Schumpeter and the theory of the entrepreneur-innovator
One of the supporters of institutionalism, an American economist of Austrian origin, Harvard professor Joseph Schumpeter (1883–1950), considered entrepreneurship and the firm in the conditions of developing capitalism, when the economy had already begun to be shaken by economic crises. He came to the conclusion that the system itself, while developing, was heading towards collapse. In his opinion, the capitalist system does not die from economic collapse, but its very success undermines the social institutions that protect it and inevitably creates conditions in which it cannot survive.
Slide 27
The subject of development is an entrepreneur who creates new consumer goods, methods of production and transportation to consumers, new markets and other forms of economic organization. At the same time, new elements displace and replace the previous ones, i.e. such an innovative entrepreneur unwittingly performs the function of creative destruction. However, the existing development mechanism could not function sustainably if it did not have institutions that perform compensatory functions. Such institutions are patents, licenses, and trade secrets, which restrain and control the spread of innovations.
Slide 28
8. Economic direction of institutionalism
R. Coase: gave the basis for a new institutional economics, exploring the firm and the market as alternative forms of economic organization, considering the relationship between property rights and the structure of production, justifying the right to carry out certain actions as a factor of production. Douglas North: proceeds from the fact that relations between private and equal individuals always develop as relations of dominance and subordination and are implemented in the form of various contractual relations. Institutional changes, which D. North considered, consist in improving the rules, the general direction of which is determined by the competition of various forms of economic organization. In fact, he argued that organizational change plays a more significant role in human history than technological change. They are associated with the identification and awareness by social groups of their special interests, which presupposes a volitional choice and the subsequent formulation of these interests in the form of rules.
View all slides
Slide 1
Slide 2
The next stage in the development of economic science is the marginalist revolution, which occurs in the 70-90s. XIX century How marginalism supplemented the principles of the original Ricardian economic theory - the principle of natural behavior, i.e. rationality and individualism, and the principle of the invisible hand of the market? Neoclassical economic theory clarified the provisions of the classics of political economy, creating models of perfect competition and economic equilibrium. It cannot be said that in the theories of Adam Smith, David Ricardo or John Stuart Mill there were no prerequisites for perfect competition, i.e. competition without any interference, and economic equilibrium. However, the approach of the classics was purely speculative, while the neoclassics formulated these premises more strictly, which made it possible to use the mathematical apparatus and move on to calculations. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 3
Origins…. In order to give a concrete forecast (as opposed to the abstract forecast of the classics), the neoclassicists went to create more rigid formal models, for which they no longer implicitly, but completely publicly cut off a whole series of economic phenomena, considering them external to economic theory. Neoclassicists included such dynamic phenomena as population growth and technological progress. In addition, they did not consider phenomena associated with the passage of time (generational change, depreciation of funds). Finally, they did not take into account the legal institutions that dominate the economy. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 4
Features of the marginal revolution Having thus limited the scope of research to the pure market, marginalists achieved greater rigor of the model and for the first time achieved its calculability. They were content to describe the interaction of a few continuous variables and explain small marginal changes in these variables (hence the name “marginalism”). Marginalists did not consider all other factors in market theory. This is a very significant limitation in comparison with Smith or Ricardo, who nevertheless wrote about economic growth, about the comparison of different economic systems, about economic culture and much more. But it was precisely this that allowed the economic science of the late 19th and early 20th centuries, which was summarized in the principles of Alfred Marshall, to become considered and provide the necessary forecast.
Slide 5
Marginal revolution However, this was the first theory that made it possible to make not some qualitative ideological forecast, but an absolutely specific forecast for a specific economic agent. And this is the greatness of marginalism. Of course, such a calculation is only possible in a specific market. It allows you to determine what the future equilibrium price for cotton will be for given parameters of demand in the cotton market, given the strength of competition. From this I can decide whether I need to buy a lot or a little cotton under given conditions. Price theory was limited. It did not take into account force majeure circumstances that could arise as a result of a change in ideology (for example, people suddenly captured by a certain religious idea stopped buying cotton and began to wear linen clothes) or as a result of technological progress (for example, the price of a manufactured product could be reduced from -for the appearance of some improvement or some substitutes - for example, rubber products instead of tarred fabrics). Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 6
Criticism of marginalism At the same time, marginalism cut off, and cut off explicitly, a number of factors that had a huge impact on economic life. Naturally, these factors were noticeable both to members of the academic community and to people outside science, but who felt the need for it. And since the marginalist revolution, a movement began that can be called institutionalism. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 7
Origins... Institutionalism did not champion the interests of the suppressed class, like Marxism. It developed within the Western academic community itself. The first institutionalist was Thorstein Veblen. In his works, he first of all begins to criticize the principle of rationalism - the principle underlying classical economic theory. Veblen shows that there are mass movements in economics that cannot be explained rationally. In particular, this is the so-called “induced consumption”, when people start spending a lot of money on completely meaningless things, following a certain example, some kind of fashion. “They act irrationally,” says Veblen. - Look, this is a mass phenomenon. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 8
Veblen proposes the following model. He says that economic behavior is dominated by the herd mentality, the so-called. race for the leader. He introduces the concept of “conspicuous consumption” and argues that the richer a person is, the more purely conspicuous consumption he has. People, according to Veblen, produce a significant amount of costs simply because someone has already produced them. They want to reach from a stratum in which, say, there is no car, to a stratum in which there is a car. They prefer not to expand their business, but to buy a car (or a yacht, or something else). Veblen considers this behavior irrational. He criticizes economic science, but, as an economist, he actually has nothing to offer in return. He only proposes to study these movements, explaining them by the principle of following someone else's example. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 9
However, sociology, not economics, studies the mechanisms of herd consumption... But sociology does not study the optimal distribution of resources, while with the economic approach it is necessary to return every time to the idea of the optimal distribution of resources and it is from these positions that we evaluate each new theory, be it Marxism , or the “new historical school” that arose next, which was engaged in the empirical study of facts, or Veblen, who then appeared. All of them criticized classical economic theory, and yet their criticism was not perceived by the economic community, which was able to accept criticism of specific postulates, but still considered its most important task to predict development in the future, and this forecast should consist of the optimal allocation of resources . Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 10
Origins... As a result, the criticism of classical political economy by Marxists, and then by early institutionalists, was absorbed mainly by the social sciences - sociology and social history - and not by economics. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 11
economic science since the 30-40s. XX century E-ka began to develop differently, and this is primarily due to the merit of two researchers - John R. Commons and Ronald Coase. Commons's works were written in the 20-30s, he was very famous then, then he was completely forgotten. Coase's works appeared in the second half of the 30s, he was absolutely unknown to anyone, and much later (in 1991) he received the Nobel Prize for the totality of his works. The criticism of neoclassical theory made by both researchers significantly complemented this theory itself and could already be accepted by the economic community. Commons and Coase recorded some incompleteness of the premises of neoclassical economic theory, which had a decisive influence on the forecast itself, modifying it so that it became non-operational. In order to compensate for this incompleteness, they proposed to take into account the factors of incomplete information, expectations and the influence of collective actions and institutions in the analysis.
Slide 12
The factor of incomplete information As is known, the hypothesis of a perfect market is that each person has complete information about all the players operating in a given market. It is quite obvious that in any complex market - and any imaginable real market is already complex - this hypothesis does not work. We must replace it with the hypothesis of incompleteness (imperfection) of information. Some know more than others, and they win; others - less, and they lose, they are deceived. The economic equilibrium model, built on the hypothesis of completeness of information, also does not work. After all, for forecasting we need not static, but dynamic economic equilibrium. We need to show what the equilibrium will be in a week, in a month, in five years. And this kind of balance clearly suggests that people begin to evaluate not the current, but the expected state of affairs. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 13
The expectation factor Let us note that along with Commons and Coase in the 30s. John Maynard Keynes dealt with expectations. The main contribution of these scientists is that they began to formulate the theoretical foundations of the economics of expectations. It is obvious that people take economically expedient actions based, firstly, on incomplete information and, secondly, on certain expectations of the actions of others in relation to themselves. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 14
What are "expectations"? A classic example of the influence of expectations that we now regularly encounter is futures: people are interested in what the ruble exchange rate will be against the dollar at a certain point in time, and they actively play on the difference in rate. These are pure expectations, not associated with any movement of material objects. Any economic action is associated with expectations. Let us turn to the situation at the end of August - September on our foreign exchange market. Why did the dollar begin to cost 15 and even 20 rubles and still1 remains somewhere around 15, although in terms of commodity mass, in terms of gold and foreign exchange reserves (no matter how you count it!) it should cost from 9 to 12 rubles? Why do people buy it for such a price? Are they acting irrationally? No, they act based on certain expectations. The mechanism of these expectations is based on the fact that people do not have all the information, which leads to panic. This is a completely economic action.
Slide 15
... And we make all our decisions based on our expectations of how market players will behave, whether there will be inflation or not, whether we will retain jobs or not. Those. the economy is shaped primarily by expectations rather than by fixation of the current state of affairs. And no one takes any economically conscious action based solely on extrapolation. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 16
Factor of influence of collective actions and institutions According to institutionalists, when considering any real economy, it is necessary to replace the principle of individual (atomized) actions with the principle of collective actions. “Collective action,” said Commons, “is simply a framework for individual action.” The institutional structure of society is the framework within which we are allowed or not allowed to do something. These may be boundaries set by laws and our expectations about how strictly those laws will be enforced. This may be a framework set by customs and our expectations of whether people around us will ignore our failure to observe those customs, or will they react harshly and stop doing business with us. Finally, it may be the limits set by technology (the most stringent of all limits). All these are some kind of framework actions. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 17
Origins... Institutionalism, which has now become the main direction of development of economic science, is based precisely on the fact that we supplement the solid core of classical and neoclassical economic theories with the concepts of incomplete information, the economy of expectations and collective actions and institutions. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 18
ideas of John Commons... Commons introduces the concept of transaction. Suppose there are two individuals Vanya and Petya. Vanya has a chair and wants to sell it. But Petya has money and he wants to buy this chair. Classical economic theory considers Vanya’s relationship to the chair and money in one act (preferring money, Vanya agrees to exchange the chair for it). Then classical economic theory examines Petya’s attitude to money and to the chair (Petya agrees to give the money he has for the chair). Commons argues that it is not the physical objects “chair” and “money” that change and that balance is achieved not between the named individuals, but between certain forms of ownership of these individuals (Vanya and Petit) for the chair and for the money. Therefore, he believes it is necessary to consider the relationship not between Vanya and the chair and Petya and the money, but between Vanya and Petya. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 19
... A simpler example: you are buying a car. It costs a lot of money, and when purchasing, you will naturally consider not only the car, but also the selling company itself. You might wonder: how are things going with the service? What if it is not cleared through customs correctly? You will have a lot of “what ifs.” Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 20
According to Commons... These “what ifs” are included in the scope of consideration of institutional economics, in the scope of consideration of the theory of transactions. Commons is right in all cases of a complex market - either a monopolized market, or a market for goods that do not reveal their value immediately, but gradually, which you use for a long time and which make up the majority of your income. Of course, a person doesn’t care where to buy a box of matches. This purchase is simple, and even if it is unsuccessful (the matches don’t light), you can throw away the box without regret and buy another one in any other place. However, in the overwhelming majority of cases, some kind of “person-to-person” or “firm-to-firm” mechanism is assumed. According to Commons, we must consider how this relationship works, i.e. how it is regulated. We must analyze property rights and the mechanism of their transfer. It is precisely the mechanisms for changing property rights and ensuring guarantees of property rights that, according to Commons, constitute the main content of economic analysis to a much greater extent than simple exchange as such. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 21
According to Coase….. Before Coase, two approaches to the “firm” were dominant. First: a company is a black box, i.e. something that exists sets a certain supply and demand, but its structure does not belong to the subject of economic science. Second: the company has a technological nature and is based on a certain related production process. Starting from the manufactory described by A. Smith (the production of pins) and to the factory described by K. Marx, economists considered a certain production process and, within the framework of this process, the firms carrying out it. It is clear that it is best when one production process belongs to one owner. However, when the production process exceeds the capacity of one person, he has to hire other people.
Slide 22
According to Coase... Coase approached this problem quite differently. He suggested that a firm arises when a person is inconvenient to purchase something on the open market. Usually, within the framework of a single company, not one, as would follow from the previous theory, but several technological processes are carried out. But by isolating a production process into a separate area, we increase its efficiency. Then why not separate production processes that are under the same ownership? Mironenko N.V., Ph.D. economy Sciences, Associate Professor Slide 24 
According to Coase... “There is no continuous technological process that would determine the existence of the vast majority (from two-thirds to three-quarters) of existing firms, the combination of completely heterogeneous industries in them. And yet they exist. This cannot be explained on the basis of perfect information theory. Consequently, the market mechanism itself contains certain additional costs that make it profitable to separate certain industries, to separate them into separate companies.” Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 25
Therefore... the market is imperfect, that the transaction described by Commons is not free in itself, it leads to some costs... transactional Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Slide 26
transaction costs Firstly, these are transaction costs that arise before the transaction is concluded. Since the buyer (person or company) does not have complete information about the product he needs, he is forced to collect it, i.e. evaluate the market. Mironenko N.V., Ph.D. economy Sciences, Associate Professor
Institutionalism, its history and characteristic features At the beginning of the 20th century. Institutionalism emerged in the United States. Institutionalism is one of the modern trends in economic thought, which was formed in the 1960s. XX century as an alternative to the neoclassical direction of economic thought; its main feature is the study of the entire set of socio-economic factors (institutions), as well as the idea of social control of society over the economy. Other characteristic features of institutionalism are support for the idea of the need for state regulation of the economy, recommendations for the widespread use of mathematical methods in the analysis of psychological and economic phenomena and processes. At the end of the 19th - beginning of the 20th centuries. capitalism of free (perfect) competition has grown into a monopolistic stage. The concentration of production and capital increased, and a massive centralization of banking capital occurred.
The most prominent representatives of institutionalism: Thorstein Veblen () was the founder of this movement. Veblen criticized “big business” and financial capital, examined the behavior of his contemporary “leisure class,” which was characterized by “conspicuous” consumption, that is, consumption not to satisfy one’s needs, but in order to impress others. Veblen described the institutional structure of capitalist society. He believed that the main factor characterizing modern industrial society is the conflict between “monetary” and “industrial” pursuits, i.e. between those who "make money" and those who produce goods. He connected the basis of the economy with the action of the psychological factor, thereby forming a socio-psychological direction.
John Commons () placed the main emphasis on legal categories, legal institutions that, in his opinion, determine the development of the economy. He developed procedures for peacefully resolving conflicts and achieving social harmony through legal procedures. He believed that improving legislation makes it possible to overcome the contradiction. Commons was a proponent of social control and increased government intervention in the economy. At the end of his research, he created a new direction - socio-legal. Wesley Mitchell () had the idea of creating a system of state unemployment insurance and indicative planning of the American economy; he also studied and predicted economic conditions based on econometric models, which is a task of an empirical or institutional-statistical direction.
Institutions as the driving force of social development: public institutions, i.e. family, state, monopolies, trade unions, competition, legal norms, etc.; social psychology, i.e. motives of behavior, ways of thinking, customs, traditions, habits. Economic categories are also forms of manifestation of social psychology: private property, taxes, credit, profit, trade, etc.
Stages of development of institutionalism: The first stage of the 20th century. Its founders were Thorstein Veblen, John Commons, and Wesley Claire Mitchell. The second stage is the post-war period until the mid-s of the 20th century. The main representative of this period is John Maurice Clark (). Also its representatives of that period are A. Burley, G. Means. Representatives of this stage, studying demographic problems, developing the theory of the trade union labor movement, etc.. The third stage in the development of institutionalism since the 1990s. It entered the history of economic thought as neo-institutionalism. Its representatives are the American economists A. Nou, J. Galbraith, R. Heilbroner, R. Coase (born in 1910), winner of the Nobel Prize in Economics in 1991.
Literature used: 1. Blaug M. Economic thought in retrospect. – M.: Internet resources
