econ434notes24 - History of Economic Doctrines Lecture 24 G...

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History of Economic Doctrines Lecture 24 German Historicism Rejected utility theory Favored Protectionist policies [Friedrich List was nine years old when Alexander Hamilton died.] Made mercantilists mistakes about wealth of nations, etc American Institutionalism In many ways, American institutionalism was a school of economic thought that developed as a reaction against the behavior of such ‘successful’ people as JP Morgan, John Rockefeller and the Astor and Vanderbilt families. It was also a revolt against neoclassical theory and hyper-rational decision making. The most notable of the traditional American Institutional economists were Thorstein Veblen, John Rogers Commons, and John Kenneth Galbraith. The institutions in ‘institutionalism’ refer to technical and ceremonial institutions. Maybe much of economic activity is based, not in self-interested optimization per marginalism, but is instead based in culture and institutions? Institutionalist rejected the idea of hyper-rational decision making by ordinary people (i.e., lightning-quick calculations and taking derivatives in one’s head so as to maximize profit). Institutionalists also objected that orthodox economics ignored interdependence on other people in society. (Neoclassical economics views environment [e.g., culture, institutions, social norms and mores] as not affecting the motives and decisionmaking characteristics of people.) Aside: Public Choice analysis may be a somewhat right wing modern version of American institutionalism? … Effect of government on the search of self-interest Thorstein Veblen (1857-1929) Veblen was a first generation Norwegian-American who was born on his parents’ farm in Wisconsin, just before the Civil War. He was a child prodigy who read book after book while his siblings did the chores. Veblen’s parents recognized his intellect and sent him to Carleton College, where he wrote on such topics as “A Plea for Cannibalism” and “An Apology for a Toper.” Veblen bounced around academia, never studying or teaching in the same place for long. His lectures were a mix of ramble and mumble, deserved his bizarre reputation. All
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students, regardless of attendance or performance, received “C” grades, however, when one student protested that anything below an “A” would ruin his eligibility for a Rhodes Scholarship, Veblen gave him one without much fuss. Veblen had shorts teaching stints at many universities, however, they were marred by bitter fights with many of his colleagues and sordid affairs with their spouses. He died broke at 72, filling a slot as a visiting assistant professor at the University of Missouri. 1. Veblen’s views of human nature and economic behavior in many ways echo Darwinian evolutionary thought 2. Veblen developed an evolutionary economics based on human adaptations to ever- changing institutions, and categorized institutions as either technological or ceremonial 3. Veblen viewed show-offs who flaunt the extravagance of their spending patterns as
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econ434notes24 - History of Economic Doctrines Lecture 24 G...

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