A short but useful interview with Professor Geoffrey Hodgson, whose politics blog can be found here, on the needs and potential development of the current discipline of economics. Hodgson’s work draws great inspiration from the Institutionalist tradition of Thorstein Veblen, which should be distinguished from the more mainstream theory of New Institutional Economics.
“It is strange that two authors that have provided us with the deepest understanding of the workings of modern capitalism, Marx and Hayek, have little to say about specific economic policies. Marx advocates the broad but undetailed policy of central or collective planning and public ownership. Hayek’s policy stance is diametrically opposed to that of Marx but is hardly less bland: we are offered the generalities of more market competition and extended private ownership. Hayek, like Marx and his followers, has very little to say in detailed, policy terms. The common blindness to varieties of capitalism disables their theoretical systems in policy terms.
The way out of this difficulty is to place the detailed analysis of capitalist institutions and of national and corporate cultures at the centre of the stage. Institutional economics thus provides a fruitful approach to the formulation of relevant and operational economic policies. With the notable exception of Veblen, many leading institutionalists in the past have been deeply involved in the development of economic policy. Much of this work was based on empirical study, but there is no reason why work in the future should not be guided by the deepest theoretical and methodological insights. Instead of empty formalism there is the possibility that economics may thus be capable of providing inspiration and sagacious guidance for those in government, finance and business.”
Geoffrey M. Hodgson (1999), Economics and Utopia, p.148
There is much to admire and draw on in Hodgson’s reboot of ‘old institutionalist’ economics, Continue reading →
Some more clear words of inspiration about the potential directions for capitalism from institutionalist economist Geoffrey Hodgson:
“Thatcherism was seen by many Marxists as the only rational response by the capitalists to the crises of the 1970s. Hence the viable choices were either Thatcherism or a workers’ revolution to overthrow capitalism.
This view was profoundly anti-institutionalist. An institutionalist would argue that there is no reason to presume that Thatcherism is (or was in Britain at that time) the only viable version of capitalism. There are other versions of capitalism, and these can begin to develop at any point in time. After all, there are manifest varieties of capitalism throughout the world. The consequence is that we do face very real choices, even within capitalism. We are not confined to these rather narrow political alternatives proposed by many Marxists: either socialist revolution or accept an extreme and exploitative version of capitalism.
In contrast, there is the possibility of a politics that engages with the present more directly. It talks about real, immediate alternatives and opens up areas for discussion. These areas would include, for example, about different kinds of market, different degrees to which the market may operate, different kinds of planning, the role and limits of the state, different planning agencies, a pluralism of structures and agencies operating at the economic level, different types of mixed economy and so on. This debate becomes possible once you escape from the false dichotomy of accepting either the most rapacious version of capitalism or socialist revolution. This dichotomy disables serious discussion and analysis about what is possible in the present.”
Geoffrey M. Hodgson (2006), Economics in the Shadows of Darwin and Marx
A recent rereading of a 1995 chapter by the SOAS economist Mushtaq Khan, ‘State Failure in Weak States: A Critique of New Institutionalist Explanations’ has given me new hope that national economies can achieve their goals in terms of the material progress represented by economic growth and social justice. Continue reading →