ABSTRACT

Institutionalism, an American creation, is another of the heterodox alternatives to the neoclassical mainstream. As a movement in the decades both before and after the start of the twentieth century, it was the dominant school of thought in economics departments in the US. Institutionalism considered the economy in

evolution and asked how its defining features came to be and how they came to change. It is the quintessential B mode school of thought and offers an interesting comparison to what Oliver Williamson has named New Institutional Economics of recent decades. This seeks to extend the neoclassical framework to encompass an explanation of institution formation and development and to what has been called historical and comparative analysis (Greif 1998), which identifies relevant institutions and sets of self-enforcing expectations and social structures relevant to a political economy understanding of particular episodes under consideration. Because of its historical and comparative approach, respect for historical specificity, and examining of the limits of rationality, cognition, and knowledge and incentives for and obstacles to institutional innovations, such an approach being developed by contemporary economists seems to capture much of the earlier institutionalist project, but it remains to be seen how such tendencies develop. What is clear is that at the end of the twentieth century, as at its start, there is broad ferment within the social sciences that is indebted to the early institutionalism, which will be discussed in this chapter.