Presentation on the prerequisites for the emergence of institutionalism. Main methodological features of traditional institutionalism. J.R. Commons understood the value of goods as the result of a legal agreement between institutions, as a result of the resolution of conflict

Institutionalism

• 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.)

• . “Institutions” (from the Latin institutio - custom, instruction, direction) mean the state, corporations, trade unions and other organizational structures, customs and traditions, legal and moral norms, characteristic motives of behavior and ways of thinking.

Periods of institutionalism

• American institutionalism 20-30s (T. Veblen, D. Commons, W. Mitchell) - this is the first stage of the dissemination of institutional methodology, when the formation of research problems and basic ideas took place

• Late institutionalism 40-50s (positive school) is distinguished by its rejection of the critical attitude of the first stage and the development of economic policy

• Neo-institutionalism(which emerged in the 60-70s) is characterized by a desire for synthesis with other areas of modern economic theory.

To the general features of institutionalism of the 20-30s. include:

• 1) criticism of the abstract, formal nature of neoclassical analysis;

• 2) interdisciplinary approach, the desire for integration with other humanities;

• 3) the desire for empirical, factual research, for the analysis of topical, rather than universal problems;

• 4) increased attention to the macroeconomic level;

• 5) criticism of negative socio-economic phenomena and support for government intervention in the economy, “public control over business” for antitrust purposes.

The theory of the leisure class. Economic study of institutions

• “Any social community,” Veblen wrote, “can be considered as a production or economic mechanism, the structure of which is made up of what are called socio-economic institutions.”

In the struggle for existence in society, T. Veblen gives the leading place to instincts. According to Veblen, a person is guided by three main instincts: hereditary inclinations (coming from parents, members of the family circle); instinct of “good work”; instinct of curiosity, the desire to understand the world around us. Instincts determine the motives for economic behavior.

• In his work “The Theory of the Leisure Class,” Veblen shows that demonstrative idleness and demonstrative wastefulness become attitudes not only of the leisure class. The middle classes and various groups of the population strive to imitate the upper strata.

• The “law of conspicuous waste” is a kind of unchangeable element of monetary civilization. One of the tools of monetary waste is clothing. It quickly becomes outdated (fashion), good things are thrown away and replaced with new ones

"Veblen Effect"

• In a market economy, the ruling classes impose their views and behavior on the mass consumer. Norms and standards are fixed in society, distorting and complicating people’s behavior. They follow not rational principles and calculations, but “money canons”, principles of prestige and demonstrative behavior.

• J.R. Commons studied a wide range of collective institutions (family, trade unions, state, corporations), but focused primarily on legal institutions.

• The economy develops on the basis of legal transactions or “transactions”, the participants of which are collective institutions. Transactions go through three stages: conflict, interaction, resolution. Conflict resolution is possible through legal regulation of transaction rules

• J.R. Commons understood the value of goods as the result of a legal agreement between institutions, as a result of resolving conflicts in the process of concluding transactions.

• Regarding the evolution of the institution of private property; uses the concept of “property title” (legal registration of property)

• Distinguishes between tangible, intangible (represented by money and debt obligations) and intangible (securities) property.

• J.R. Commons emphasized that in the modern world the content of transactions with property titles is mainly intangible property.

• The main work is “Lectures on types of economic theory” (1935).

• Described economic progress as the development and improvement of social institutions. In his opinion, the evolution of institutions at the present stage is expressed in the development of state regulation of business.

W. Mitchell was one of the first researchers of cyclical phenomena in economics. He studied the factors that most influence finance, money circulation and credit, considering these subsystems to be decisive in cyclical fluctuations. W. Mitchell considered the cycles of economic conditions as a consequence of the interaction of a number of factors: prices, stock prices, money circulation.

• W. Mitchell's conjunctural-statistical institutionalism is distinguished by the use of methods of quantitative analysis in relation to extensive statistical material, with an emphasis on the collection and processing of factual data, and not on the development of new concepts, not on theoretical generalizations.

Using mathematical and statistical methods, W. Mitchell calculated the duration of “small” and “large” cycles. The so-called “Harvard Barometer” consisted of three curves characterizing the average indices of speculation, business and money market. It was considered possible to predict and prevent crises by calculating the time periods during which the dynamics of the curves do not coincide.

Classical institutionalism - late XIX - early XX centuries. Classical institutionalism originated at the beginning of the twentieth century in the United States. Thorstein Veblen is considered its founder. Followers of institutionalism sought to expand the scope of economic analysis, involving approaches and methods of related sciences. Representatives of institutionalism believed that the behavior of an economic person is formed mainly within the framework and under the influence of social groups and collectives.

Institutional approach 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. Institutions are the forms and boundaries of human activity. They represent political organizations, forms of entrepreneurship, and systems of credit institutions. These are tax and financial legislation, organization of economic support and much more related to business practice. The meaning of the institutional approach is not to be limited to the analysis of economic categories and processes in their pure form, but to include institutions in the analysis and take into account non-economic factors.

Methodology of institutionalism In the works of institutionalists you will not find a passion for complex formulas and graphs. Their arguments are usually based on experience, logic, and statistics. The focus is not on analysis of prices, supply and demand, but on broader issues. They are not concerned with purely economic problems, but with economic problems in conjunction with social, political, ethical and legal problems. Focusing on solving individual, usually significant and urgent problems, institutionalists did not develop a general methodology or create a unified scientific school. This revealed the weakness of the institutional direction, its unwillingness to develop and adopt a general, logically coherent theory.

Distinctive features of classical institutionalism First, institutionalists interpret the subject of economics in a very broad way. In their opinion, economics should not deal with purely economic relations. This is too narrow and often leads to bare abstractions. It is important to take into account the whole complex of conditions and factors influencing economic life: legal, social, psychological, political. The rules of government are of no less, and perhaps more, interest than the mechanism of market prices. Secondly, one should study not so much the functioning as the development and transformation of capitalist society. Institutionalists advocate more thorough solutions to social problems. The issue of social guarantees of employment may become more important than the issue of wage levels. The problem of unemployment becomes, first of all, a problem of structural imbalance, and here the relationship between economics and politics is becoming more and more apparent. According to J. Galbraith, the market is by no means a neutral or universal mechanism for allocating resources. The self-regulating market becomes a kind of machine for maintaining and enriching large enterprises. Their partner is the state. Relying on its power, monopolized industries produce their products in huge excess and impose them on the consumer. The basis of the power of large corporations is technology, not the laws of the market. The determining role is now played not by the consumer, but by the producer, the technostructure. Thirdly, we must abandon the analysis of economic relations from the perspective of the so-called economic man. What is needed is not isolated actions of individual members of society, but their organization. Against the dictates of entrepreneurs, joint, coordinated actions are needed, which are called upon to organize and carry out trade unions and government bodies. The state should take ecology, education, and medicine under its care.

The same thing, only in slightly different words. Institutionalism is characterized by a rather sharp criticism of the capitalist system, which is largely conducted from a moral and psychological position. Scientists in this direction insisted on the need to strengthen the economic role of the state and expand state social programs. They argued that the issue of social guarantees of employment for society is no less important than the issue of wage levels. The state is also obliged to take under its care such areas as healthcare, education, and public utilities. Institutionalists opposed the neoclassical doctrine of self-regulation of a market economy. The market cannot be considered a neutral and fail-safe distribution mechanism. The market, not controlled by the state, provides an opportunity for easy enrichment for large entrepreneurs. The basis of the power of large corporations is technology and technology, not the laws of the market. The decisive role in such a situation is played not by the consumer, but by the producer, the technostructure. It is also necessary, the institutionalists said, to abandon the analysis of economic relations from the perspective of “economic man.” Not only the individual is important, but also the whole society. The basis of economic development is the psychology of the collective. Institutionalists argued that economics should not be limited to the study of purely economic relations. For a complete and accurate picture of economic development, economists are obliged to study the most diverse aspects of human life, in essence, everything that in one way or another affects the evolution of the economy. Of the huge number of factors, they especially singled out such important factors for economic activity as the system of law and legislation, the political and social structure of society, and public psychology. Increased attention to factors of a non-economic nature led to frequent non-economic interpretation of the causes and results of economic phenomena and processes, which should be considered as the most important feature of institutionalism.

Thorstein Veblen The founder of the institutional direction is considered to be T. Veblen, the author of “The Theory of the Leisure Class” (1899). The main thesis of Veblen’s work “The Theory of the Leisure Class” reads: “Institutions are the basis of economic behavior.” Veblen opposed the one-sided interpretation of the motives of behavior of the “economic man”, which had become widespread since the times of the classics (A. Smith). He questioned two fundamental tenets of the classical school: the position of consumer sovereignty (the position according to which the consumer is the central figure of the economic system, demanding and receiving goods and services at the lowest prices); the provision on the rationality of his behavior (the provision according to which, a consumer with independent preferences, striving to maximize his own benefit). Veblen showed that in a market economy, consumers are subject to all sorts of social and psychological pressures that force them to make unwise decisions. According to Veblen, “institutions are the results of processes that took place in the past, they are adapted to the circumstances of the past and, therefore, are not in complete agreement with the requirements of the present.” Hence, in his opinion, the need to update them in accordance with the laws of evolution, i.e., habitual ways of thinking and generally accepted behavior. Veblen based his conviction in the evolutionary transformation of society on a peculiar refraction of Charles Darwin’s theory of the evolution of nature. Based on its postulates, he, in particular, tried to argue for the relevance of the “struggle for existence” in human society. At the same time, he uses a historical assessment of the development of the “institutions” of society, which denies the Marxist provisions on “class exploitation” and the “historical mission” of the working class. In his opinion, people’s economic motives are driven primarily by parental feelings, an instinctive desire for knowledge and high quality of work performed. Thanks to Veblen, the concept of “prestigious or conspicuous consumption”, called the “Veblen effect,” entered economic theory. Prestigious consumption is based on the existence of the so-called “leisure class”, located at the top of the social pyramid. A trait indicating membership in this class is large property. It is she who brings honor and respect. Characteristics of the owner class are demonstrative idleness (“not work” as the highest moral value) and conspicuous consumption, closely associated with a money culture, where an object receives aesthetic appreciation not for its qualities, but for its price. In other words, goods begin to be valued not by their useful properties, but by how much their possession distinguishes a given person from others (the effect of envious comparison). The more wasteful a given person becomes, the higher his prestige rises. And if conspicuous consumption is a confirmation of social importance and success, then it forces middle-class and poor consumers to imitate the behavior of the rich. From this Veblen concludes that the market economy is characterized not by efficiency and expediency, but by demonstrative waste, envious comparison, and a deliberate reduction in productivity.

Wesley Claire Mitchell Like T. Veblen, W. C. Mitchell rejected the view of man as a “rational optimizer.” He proceeded from the fact that human behavior is a mixture of following habits and what was later (by G. Simon) called limited rationality. Also, by analogy with T. Veblen, W. K. Mitchell believed that the monetary (market) economy is unstable. At the same time, he believed that business cycles are a manifestation of such instability. W. K. Mitchell went down in the history of economic science as a researcher of cycles. He was the founder of the famous National Bureau of Economic Research and, within its framework, was engaged in empirical research of business cycles, as well as forecasting future dynamics of economic conditions. He did not have a clearly developed model of cycles - he only had a “general view of the problem.” W. K. Mitchell believed that cycles were based on the desire of entrepreneurs for profit, which, in turn, depended on the interaction of a number of economic variables (wholesale and retail prices for consumer and industrial goods, the volume of credit, etc.). Because the market economy is decentralized, these interactions are not synchronized. Thus, various “leads” and “lags” arise - for example, “lags” of retail prices compared to wholesale prices, or “advances” of prices for raw materials compared to prices for consumer goods - which leads to an increase in profits in some periods and its reduction in others and, as a consequence, to fluctuations in real output, i.e. to cycles. The more fundamental cause of cycles is the same monetary system (within which the desire for profit is precisely the basis for the organization of economic activity). W. K. Mitchell never tired of repeating that “... a necessary condition for the emergence of economic cycles is the practice of building economic activity on the basis of monetary calculation, widespread among the entire population, and not just among a limited class of business people.” “Economic cycles become an essential feature of the economic life of a society only when a significant part of its population begins to live on the basis of the principles of a money economy, receiving and spending money income... between that developed form of economic organization, which we can call a “money economy” , and there is an organic connection between the repeating cycles of prosperity and depression."

John Maurice Clark Like T. Veblen and W. C. Mitchell, J. M. Clark interpreted human behavior as based on habits, and not on instantaneous calculations of benefits and costs, pleasures and pains. But he went further in his analysis of this area than other old institutionalists, for the first time in the history of economic analysis he explicitly pointed out the large role of information costs and decision-making costs. The fact is that in order to make an optimal decision, you have to incur costs associated with collecting and processing information. However, the benefits of this information are completely unknown in advance. In addition, direct decision-making also requires significant (psychological) costs (and the benefits of the efforts aimed at making a decision are also not known a priori). These costs create insurmountable obstacles to optimizing behavior and serve as the basis for people to form habits. Of course, such habits are not the result of some maximizing choice or optimization. Another scientific merit of J.M. Clark is developments in the field of microeconomics - the theory of costs and competition. He was the first to introduce the concept of overhead costs into economics. These are costs that cannot be attributed to any specific division of the enterprise, that is, they are not directly related to the production process. J. M. Clark believed that they were a consequence of large investments in fixed capital. Overhead costs are covered by prices, which, in his opinion, meant that pricing was not connected with the principle of equalizing marginal costs and revenues. J.M. Clark also criticized the concept of perfect competition and laid the foundations for the theory of “effective competition,” which is such a specific implementation of the elements of the market structure that is acceptable from the point of view of social welfare. The theory of "effective competition" is important because it provides realistic - in contrast to the concept of perfect competition - guidelines for public policy to stimulate competition. At the same time, J.M. Clark tried to give the theory of competition a dynamic character; for him, the degree of “effectiveness of competition” was determined by how quickly and to what extent the processes of creation, destruction and reconstruction of profits of varying sizes occur in different industries. Unfortunately, he did not explain the reasons for these differences.

John Commons Another famous representative of the old institutionalism, J. Commons, in his views stood apart from other adherents of this direction of economic analysis. In his research he placed great emphasis on legal factors. His main scientific achievement is transaction theory. This theory is based on the idea of ​​scarcity of resources, known from neoclassical theory. Due to this rarity, business entities have a conflict regarding their use. This conflict is resolved through transactions that represent the basic institutions of society. Without such institutions, the conflict of interests would degenerate into general violence of people against each other, which would lead to enormous economic and social damage. Transaction - which, according to J. Commons, is the main category of economic science - should not be confused with the ("simple") exchange of resources, goods or services. According to the definition of J. Commons, “a transaction is not an exchange of goods, but the alienation and appropriation of property rights and freedoms created by society”115. The distinction between exchange and transaction points to the difference between the physical movement of goods and the movement of property rights to those goods.

Transactions, in turn, are divided into market, managerial and rationing: A market transaction is the only type of transaction that presupposes the same legal status of its participants (counterparties). This means that in order to carry out a market transaction, mutual voluntary consent of the counterparties to complete it is necessary. In other words, a market transaction is an exchange of property rights to goods that occurs on the basis of a voluntary agreement of both parties to this transaction. Examples of market transactions include any transactions in free markets - purchases of consumer goods, provision of credit, hiring, etc. A management transaction, on the contrary, presupposes the legal advantage of one of the counterparties, who has the right to make decisions. This type of transaction is built on the basis of management-subordination relationships. Examples of such relationships are the relationship between slave owner and slave, boss and subordinate, master and apprentice, etc. Management transactions play a leading role in firms, government agencies and other organizations based on hierarchical relationships. A rationing transaction is similar to a management transaction because it also implies an asymmetry in the legal status of the counterparties. The specificity of a rationing transaction is that the party vested with exclusive decision-making powers is a certain collective body that performs the function of specifying property rights. This body is the state. Typical examples of a rationing transaction are taxes or court decisions that redistribute wealth from one party to another. At different stages of development of society, in different economic systems, the relative role of different types of transactions varies. For example, in a slave-owning, privately owned society, management transactions play the main role, while at the stage of the emergence of capitalism, during the period of “merchant capitalism,” market transactions play a major role.

Lecture plan1. The emergence of institutional
directions in economic science: general
characteristic. Ideas of T. Veblen, J.R.
Commons, W. Mitchell.
2. Problems of property and power in
Economics: A. Burley, G. Means.
Economic ideas of J. K. Galbraith.

OBJECTIVE OF THE LESSON

Explore
developmental features
American
institutionalism

RELEVANCE

INSTITUTIONS (5-I concept)
T. VEBLEN's warning
First Deputy Chairman of the State Duma Committee on Budget and Taxes Oksana
Dmitrieva: “...a characteristic feature of the modern economy is the contradiction between financial virtual capital and
real economy."

Two canons of economic science

Abstract
Practical
Physiocrats, classics,
neoclassical
Mercantilists, ISHG,
institutionalism
Physics, mechanics
Biology
Economic man
Multiple motivation
Interdisciplinarity
Deduction
Induction
No direct connection with
economic policy
Direct connection with
economic policy

Thorstey Veblen

Criticism of Economic Man: "Instant
calculator of pains and pleasures, a certain
a homogeneous ball that wishes happiness and
under the influence of stimuli moves to
space, but remains unchanged. He has
there is no past or future. Only one thing
present."

Context

USA – “Gilded Age” (70s – 90s XIX
century):
Rapid economic growth
Railway construction
Corporations: millionaire kings
Monopolization of the economy
Rapid change in economic reality

BROAD INTERPRETATION of “institution”

on the one hand - cultural norms, customs,
traditions, behavioral stereotypes of social groups
on the other hand, consolidating them in the form of laws
(legal norms), organizations and institutions
T. Veblen: institutions as established patterns of behavior,
habitually repeating...
W. Hamilton: institution - widespread and unchanged
a way of thinking or acting that is ingrained in habit
group or in the customs of the people

Main problems of early institutionalism

1) the relationship between labor and capital;
2) relationships between corporations and small and
medium-sized enterprises;
3) contradictions between private and public
interests (mechanism of social control over
economics and the problem of national interests).

Institutionalism of the late nineteenth - early twentieth centuries.

Institutionalism of the late nineteenth and early twentieth centuries.
VEBLEN
Thorstein Bunde
COMMONS
John Richard
(1857–1929)
(1862–1945)
Socio-psychological
direction
Socio-legal
direction
MITCHELL
Wesley Claire
(1874-1948)
Opportunistic-statistical
direction

Institutionalism: general characteristics

A) Denial of the principle of optimization. Business entities
are treated not as maximizers (minimizers) of the objective function, but
as following various “habits” (acquired rules
behavior and social norms).
B) Denial of methodological individualism. Actions
individual subjects are largely predetermined
the situation in the economy, and not vice versa.
C) Reducing the main task of economic science to
"understanding" of the functioning of the economy, and not to the forecast and
prediction.

Old institutionalism: general characteristics (continued)

D) Denial of the approach to the economy as a (mechanical) equilibrium
system, interpretation as an evolving system controlled
processes that are cumulative in nature.
D) Favorable attitude towards the state
intervention in the economy.
The principle of “cumulative causality” (T. Veblen):
economic development is characterized by cause-and-effect relationships between various
economic phenomena, connections strengthening
each other.

T. WEBLEN: “The Theory of the Leisure Class: An Economic Study of Institutions” (1899)

"the first systematic
American critic
capitalism"
Son of a Norwegian immigrant farmer
Yale, Cornell
university
University of Chicago
Coined the term
"neoclassical"

Ideological influences

Charles Darwin (all science must be evolutionary, but
selection is not directed, not necessarily towards progress)
Karl Marx (took a general approach to the development of capitalism,
I disagree: classes strive only for their material
benefit)
ISHG (especially Schmoller
American Pragmatic Philosophy (John Dewey,
observation of practice)

T. Veblen's theory: institutions, instincts

Institutions: habitual ways of behavior, actions.
Man is rooted in the past. Institutions influence and
predetermine human behavior
Instincts: stable human drives.
Favorable and unfavorable (for the development of society).
Favorable: mastery, parental (focused on
future), idle curiosity
Unfavorable: acquisitive, envious
comparison.
Habits

Theory of T. Veblen: contradictions of institutions-technologies, business-industry

Theory of T. Veblen: contradictions between institutions of technology, business and industry
Institute of Technology
Industry is based on technology, process
production
Business is the shell that industry has in
modern society (firm, corporation)
The purpose of industry: to produce necessary, useful
things, the goal of business is to make a profit (selfish,
connection with acquisition)!!!
Explores private property and the leisure class

T. Veblen's theory: private property and the leisure class

Property - appears as a trophy, a sign of victory over
less successful neighbor (there were wars, conflicts)
Whoever has more property is respected,
prestige. (Conquest activity - property
labor)
Property accumulates as property, monetary
amount - you don’t have to work... The value of an idle life
Conspicuous consumption (consumer sovereignty)
Veblen effects

T. Veblen “The Theory of Business Enterprise” (1904)

Industry dichotomy (lean production) and
business (irrational institution)
Subordination of industry to the goals of increasing monetary
wealth - crises
The idea of ​​a political organization of engineers
"Absentee Property (1923)
(excessive swelling of fictitious capital - part
capital is diverted from productive
usage, credit criticism)

W.K. Mitchell

Veblen's student
Capitalism is an economic system that
characterized by the spread of the beginnings among the population
cash settlement
Criticism of the “blessed calculator”

W.K. Mitchell "Business Cycles" (1927)

Researched:
business cycles (wave-like economic development)
1920 – National Bureau of Economic Research for
forecasting economic fluctuations
Crisis theories: physical (natural factors),
emotional (psychological factors),
institutional (source of fluctuations in
functioning of modern economic institutions,
or in changing them)
The need for government planning

The most important institutionalized custom
is a transaction (contract). Transaction means acceptance
both parties have specific obligations,
psychological ability to persuade.
distinguishes three types of transactions:
market (trading),
administrative (managerial),
distribution (rationing).

J. Commons: "Institutional Economics" (1934)

Rationing transactions: (taxation,
budget, government price regulation)
Pressure groups
COLLECTIVE ACTIONS (corporations,
trade unions, political parties)

J. Commons: "The Economics of Collective Action" (1951)

“The best manufacturing enterprise is
technical factors are used most
proportionally...
The best acting collective
an institute is one where, in the correct ratio
there are equipment and business"

Common features in the works of the “old”
institutionalists
VEBLEN
Social
conflict
Between
economic
agents
COMMONS
MITCHELL
Solution
conflict
Institutes
solutions
conflict
Legal
regulation
rules of the transaction
"rules of the game"
"Rules of the game",
money institute
state

Adolph Burley (1895-1971), Gardiner Means (1896-1988)

1932 – “Modern
corporation and private
own"
"The Managers' Revolution"
600 largest corporations
control 2/3
US industry
Cumulative share 10 million
small firms – 1/3
US industry

John Kenneth Galbraith (1908 – 2006)

1958 – “Society”
abundance"
1967 – “New
industrial
society"
Convergence theory

LITERATURE

Blaug Mark. 100 Great Economists
after Keynes. M., 2008.
Heilbroner R. Philosophers of this world.
M., 2008.
Kholopov V. History of economic
exercises. M., 2009.

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 that both researchers made 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.

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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

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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

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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 rate difference. 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.

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... 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

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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

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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

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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

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... 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

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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

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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, 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.

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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

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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

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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