Principles of institutional-evolutionary political economy--converging themes from the schools of heterodoxy.

Author:O'Hara, Phillip Anthony

Over the past forty years there has been a considerable revival of heterodox political economy throughout the world. Heterodoxy has experienced a renewal in the form of several schools of thought. (1) Institutionalists and evolutionary economists have proffered the significance of institutions and technological change. Post Keynesians have re-established the role of aggregate demand in a circular and cumulative framework. Neo-Marxists have sought to bring to the fore the importance of class analysis and economic surplus. Feminists have been active in fostering an integrative analysis of class, gender and ethnicity. Social economists have examined the role of justice, ethics and trust in institutions. Development and international political economists have recreated an interdisciplinary focus on the uneven forces operating in the global economy. In addition, ecological economists have linked the laws of thermodynamics with strong sustainability and the precautionary principle to create a durable edifice on the environment.

Several associations and journals have been established with a view to making heterodox political economy a viable scholarly undertaking. Institutionalists and evolutionary economists organized the Association for Evolutionary Economics in 1965 and began publishing the Journal of Economic Issues two years later. The Association for Institutionalist Thought has been active for twenty-five years now, and the European Association for Evolutionary Political Economy began operating in 1989. Recently the Journal of Institutional Economics commenced publication; while the International Schumpeter Society began their affiliation with the Journal of Evolutionary Economics in the early 1990s. Post Keynesians commenced the publication of the Cambridge Journal of Economics and the Journal of Post Keynesian Economics in the late 1970s. Marxists and radicals formed the Union for Radical Political Economists in 1968, and begun publishing the Review of Radical Political Economics a year later. Several other radical journals emerged, such as Capital and Class, Studies in Political Economy, the Journal of Australian Political Economy, and Rethinking Marxism. The International Association for Feminist Economics was instituted in 1992, three years before their journal, Feminist Economics, was created. Social economists changed the direction of the Review of Social Economy in the early 1970s under the impact of the 1960s reform movements, and established the International Journal of Social Economics in 1972 along with the Journal of Socio-Economics in the mid-1990s. Those with a penchant for the environment created the International Society for Ecological Economics in 1989, along with Ecological Economics; while Capitalism, Nature and Socialism has been published quarterly since 1990. Several other journals also emerged with a political economy agenda, such as the Review of Political Economy, New Political Economy, Economy and Society, plus the Review of International Political Economy, World Development and the Journal of Human Development. (2)

In addition, heterodox political economy has been supported by an array of publishers, conferences and academic institutions. Most academic and University publishing houses have a section in their catalogue on political economy. Some have an explicit mandate or interest in heterodox themes, such as Monthly Review Press, Zed Press, and Pluto Press. Commercial publishers that have been especially supportive include Edward Elgar, M.E. Sharpe, Greenwood, Transaction, Palgrave/Macmillan, Routledge and Cambridge. Conferences have blossomed, the main ones being associated with the Allied Social Science Associations, the Association for Institutional Thought, Post Keynesian Workshops, World Congress of Social Economics, the Association for Heterodox Economics, the summer conference of the Union for Radical Political Economics (URPE), the annual European Association for Evolutionary Economics meetings, and the Triennial International Confederation of Associations for Pluralism in Economics (ICAPE) Conference. Numerous academic institutions have "supported" political economy programs. They are so numerous as to defy simple numeration, but include Cambridge University, Colorado State University--Fort Collins, the New School for Social Research, Santa Fe Institute, Sussex University, Sydney University, University of California--Riverside, University of Leeds, University of Massachusetts--Amherst, University of Missouri-Kansas City, University of Notre Dame, University of Sienna, and the University of Utah. (3)

With all this activity, one would expect several clear statements of the main concerns of political economy to have emerged over the past couple of decades. One would also expect the emergence of a fairly clear set of theoretical propositions, culminating in the evolution of certain principles, to provide a setting for empirical analysis and future development. Indeed, the individual schools of thought have produced something approaching this; and several scholars have sought to provide some unifying threads for an overall political economy perspective to emerge, such as Marc Lavoie (1992), Jason Potts (2000), Charles Clark (2001), and Phillip O'Hara (2001). (4) No one to date, however, has produced or come close to producing the magnum opus--equivalent to Veblen's Theory of the Leisure Class ([1899] 1965), Keynes's The General Theory of Employment, Interest and Money (1936), Marx's Capital ([1867] 1976; [1885] 1978; [1894] 1981), or Schumpeter's Theory of Economic Development ([1911] 1938)--to impact the profession as a whole and set a standard for teaching, research and policy-making.

Some may maintain no such magnum opus is feasible in a decentered, postmodern world; while others may posit that the great masters of political economy (Veblen, Keynes, Marx, Schumpeter) have already produced them. Some skeptics suggest that major advances have already been incorporated into a healthier, non-Walrasian, non-neoclassical economics (see Bowles 2004); while other skeptics may suggest that there is little uniting these disparate schools of heterodox thought except perhaps a disdain for (especially Walrasian) orthodoxy, and perhaps that even the individual schools of heterodoxy have trouble promoting conceptual clarity. (5) The argument of this paper is what may be called a "minimalist argument" for convergence, namely, that many sub-schools of institutional-evolutionary political economy, but not all, have been converging in the institutional-evolutionary direction, and that there is much to indicate the evolution of a relatively coherent set of institutional-evolutionary principles in motion to help comprehend modern society and governance. The objective of this paper is to present a set of such principles, which are becoming coherent and evolving over time.

There is a clear thread of institutional-evolutionary conceptualization running through many writers and sub-schools within institutional evolutionary political economy (IEPE). The history of the linkages between these sub-schools goes back to the classical economists, especially Adam Smith, Thomas Malthus, and Karl Marx; and the work of the historical school and institutionalists such as Thorstein Veblen, Gardiner Means, Wesley Mitchell, Gunnar Myrdal and Karl Polanyi. It also encompasses the Cambridge and latterly post Keynesian work of Nicholas Kaldor, Michael Kalecki, Joseph Steindl, and J.K. Galbraith; and the institutional trend in neo-Marxian economics that weaved a threat from Rudolf Hilferding through to Paul Sweezy and Samir Amin. Further linkages include the radical-Schumpeterian trend that enriched the study of long waves, institutions-technology interface and industrial metamorphosis; successive waves of feminist thought that impinged on social and economic thought; and the revival of political economy since the 1960s. This revival, of special relevance to this paper, saw the emergence of a degree of convergence that emphasized realism, holism, circular and/or cumulative causation, institutions, and the role of values and social factors in economic life. Institutional-evolutionary themes thus provided a critical basis for this recent convergence.

Figure 1, provides a summary of the main authors and concepts discussed in this paper, showing there to be seven (interacting) sub-schools of IEPE that have relatively close network densities vis-a-vis convergence. (6) Through these seven subschools, institutional-evolutionary political economy led the trend away from mere formal theory to a realistic analysis of the institutional evolution of capitalism through historical time. The first is the sub-group of "Major Heterodox Convergers" who have persistently written about the theme of linkage and convergence around institutional-evolutionary concepts. They include, among others, Charles Clark, Marc Lavoie, Tony Lawson, Phil O'Hara, Jason Potts, and Bill Waller, and provide the main arguments for a high degree of convergence. The second are the "Radical Institutionalists" within original institutionalism, including John Elliott, Daniel Fusfeld, Ron Stanfield, Bill Dugger, Rick Tilman, and their followers. The radicals have been especially notable in promoting linkages between certain heterodox schools, including instrumentalists such as Marc Tool and Dale Bush and many of the other six sub-groups.


The third group is the "Institutional Marxists," or radical political economists, who have persistently argued for an institutional-evolutionary trend in political economy. They include scholars such as Howard Sherman, David Gordon, Michel Aglietta, Robert Boyer and their followers. Howard Sherman and David Gordon have especially linked their trend to other schools of heterodoxy, and the radical institutionalists have been singing the praises of this group for decades. The fourth group, with a...

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