ABSTRACT
One basic tenet of institutional economics is the existence and exercise of power and coercion in the community’s economic decisionmaking processes. 1 And three important corollaries emanate from the power and coercion tenet: (a) that production and distribution decisions are not determined by impersonal market forces, but rather, are determined through the exercise of power and coercion; (b) that the distribution of power between various groups within society is disproportional; and therefore, (c) that those who possess enormous coercive power should always be subject to democratic controls [Gambs 1946; Tool 1979; and Munkirs 1985]. This, of course, is in direct contrast to orthodox economics: orthodoxy assumes that economic decisions (decisions concerning what is produced, how it is distributed, and how much income is received by individuals) are, or should be, in the main, determined by impersonal market forces; that is, by supply and demand determinants within a social framework where no individual or organization commands excessive coercive power. Institutional economists grant the descriptive usefulness of supply and demand, but affirm that one approaches the frontier of irrationality by also insisting that supply and demand are determined in a free market environment where power and coercion are nonexistent; and that new states of equilibria are secured through the forces of supply and demand [Hamilton 1986].
