Geoffrey M. Hodgson. Economics and Institutions: A Manifesto for a Modern Institutional Economics. Philadelphia: University of Pennsylvania Press, 1988. xxii, 365 pp. $39.95

Abstract

"Institutional economics" is generally understood to be an exclusively American school of thought. This is not an entirely accurate presumption. Gunnar Myrdal and K.W. Kapp, for example, are well-known European economists of the last generation who each associated his own work with the institutional school. Still, as a self-conscious movement with both a negative and a positive agenda, the negative being the invalidating of "orthodox" economic theory and the positive being the construction of a non-Marxist alternative, institutionalism clearly has had its center of gravity in the United States. There are signs, however, of a growing interest in institutional economics among Europeans. The recent formation of the European Association for Evolutionary Political Economy is an objective manifestation of this development. This book, by Geoffrey Hodgson of Newcastle upon Tyne Polytechnic, is another. Indeed, as the title suggests, it is Hodgson's intent in this volume to give direction to the theoretical endeavors of those who seek to construct an institutional theory which incorporates "modern" knowledge about human behavior, economic institutions, and scientific practice. As is customary among writers seeking to outline the fundamentals of an "institutional" conception of economic theory, Hodgson's positive arguments emerge out of a critical examination of the fundamental preconceptions underlying "mainstream" economic theory. Critiques of mainstream theory are of course not in scarce supply. Hence one might suspect that Hodgson is simply rehashing familiar arguments. Such is not the case. For even though Hodgson does reach conclusions regarding the inadequacies of conventional economics that will be anticipated by all who are familiar with the writings of American institutionalists-to wit, that neoclassical economics is legitimized through a specious epistemological argument and that it embodies a fallacious understanding of human action as well as an erronous interpretation of economic processes, he makes his case through a somewhat different line of attack made possible by recent research findings in the areas of cognitive development and information theory. Moreover, Hodgson's critique is far more comprehensive than any I have seen, extending to all "approaches" premised even on a subset