THE ENGINEERS OF THE PRICE SYSTEM

Presidential Address, Association for Institutional Thought (AFIT)

My talk this evening intends to celebrate the economic planning and
policy tradition in and around institutionalist economics. Those who have
contributed to this work have sought to devise ways to improve and
transform the economythus, The Engineers of The Price System. Rather
than go into the specifics of these policieswhich range from management
of public utilities and industrial policies to full employment and other
macroeconomic policies and full-blown economic planningI want to focus
on the background of this workthe underlying motivations, vision,
method, and gestalt.
In this work, one finds features and characteristics that distinguish it from
the mainstream and gives it its strength. This is economicsor political
economywith a public purpose.

1. One common feature of this work regards its underlying motivation.

This work is motivated by a desire to increase quality of life and
standard of living, to address poverty, unemployment, and inequality
fairness, justice. One does not find here the mathematical
gymnastics or theorizing for its own sake that seems to have appeared
with increasing frequency in the discipline. This is workmanship, not
sportsmanship.

2. Even the definition of economicsthe object of study, is different

in this work. Economics here is concerned with how societies
organize themselves to provide for their material well-being. Material
provisioning rather than allocating scarce resources among competing
endsIt is ironic that, while markets may do some things well (e.g.,
induce technical change), one of them is definitely not allocating
resources.
3. This work is therefore concerned with basic needs, rather than utility.
Utility theorists might argue that individuals provide for their basic
needs because they derive utility from it. But providing for basic
needs is a prerequisite for experiencing utility. Maslows hierarchy of
needs should be taught in the first week of every principles course. Of
course, one does not find either utility functions or production
functions in this work.
4. Another important feature of the institutionalist tradition in policy and
planning is the historical approach. Not just history of economic
thought and economic history, although both are very important, but
moreover that theory itself must be approached historically. There are
no universal laws. Even capitalism itself has historical stages.
5. This work is also interdisciplinaryrecognizing that to deal with
complex real world problems requires drawing on multiple
disciplinary frameworks.

6. The comparative approachand the importance of case studies.

Stanford historian George Fredrickson argues this point well in his
book The Comparative Imagination.
7. The institutional approachhopefully this is one I dont have to argue
here, and all of these characteristics fall under the larger umbrella of
institutional economics.
8. Embedded-ness of the economya few years ago, Dell Champlin and
Janet Knoedler did a paper here at the AFIT meetings on disembeddedness, which I did not understand at first, but I now think
was really exceptional. The argument was not that the economy is in
any way dis-embedded, quite the contrary, but that there is an
ideology of the dis-embedded economy or dis-embedded market
which needs to be recognized.
9. This tradition takes a systemic approachthe economy does not
equal the market; capitalism does not equal markets
capitalism is a social system, a regime, an historical society, a social
formation, a mode of production.
10.This tradition makes usebut also understands the limitsof formal
analysis. Models may be used as heuristic devices, but used with
great caution.
11.Qualitative, not just quantitative, methods, including empirical work;
one may also speak of a qualitative quantitative approach.
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12.This tradition rejects the positive/normative dichotomy.

13.In its analysis, the structure/agency or structure/behavior relationship
is dealt with carefully. The failure of the mainstream to distinguish
between behavior and motivationoften erroneously conflating the
twois one of the great failures of economics. And effective policies
require the recognition of the ways in which social structure creates
the context for behavior.
14.The institutionalist tradition in policy and planning recognizes the
importance of theory, but ultimately for the purpose of practical
application praxis is a word that used to get thrown around and
now has all but disappeared. But it is what this work is all about.
15.This work recognizes that there are possible alternative forms of
capitalism and post-capitalisms. What would we do and where would
we be without visions of alternative futures, including utopian and
dystopian scenarios? Perish the thought.
These are the fifteen features of this tradition that came to my mind. I am
sure that there are those in the audience tonight, many of whom have
contributed to this tradition, who can think of others, and if we have a few
minutes, I would be happy to hear your thoughts.
Before that, though, let me express my appreciation for this opportunity, and
to serve the organization over the last couple years.
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