econ434notes24a - History of Economic Doctrines Session 24...

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History of Economic Doctrines Session 24 German Historicism and American Institutionalism German Historicists Rejected utility theory Favored Protectionist policies Made mercantilists mistakes about wealth of nations, etc American Institutionalism Institutional Economics: Seen as a revolt against Neoclassical Economics. A revolt against neoclassicalism neoclassicalism = marginalism Against hyper-rational decision-making -it looked at the idea of marginalism and contested that people don’t just behave in a hyper-rational decision-making process (lightning-quick calculators and taking derivatives in one’s head so as to maximize profit) Era of robber barons -said that marginalism doesn’t bring into consideration preferences correctly nor interdependencies between others Common response to criticism… “That’s their problem”, if they can’t adjust to such a system they will be eliminated from the gene pool in a Darwinist sense Institutionalist: They were rebelling against the idea of hyper-rational decision making by normal people. They argued that formulas don’t bring in interdependence on other people in society. (Neoclassical Economics doesn’t address the actions of people in different environments) Maybe much of economic activity is based, not in marginalism, but in culture and institutions? -Public Choice analysis may be a somewhat right wing modern version of American institutionalism? … Effect of government on the search of self-interest Thorstein Veblan: Iconoclast Biography: Education: B.A from Carleton College (1880) Ph.D. in philosophy from Yale (1884) Ph.D. in Economics at Yale in 1884 Personal Facts:
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-A first generation Norwegian-American from Wisconsin. -He had bad hygiene and looked somewhat simian [apelike]. -He taught at the University of Chicago -He opposed grade-grubbing and competition (especially honor societies) -He was a ladies man, which cost him several jobs. -Lazy but very bright -Thorstein always remained Asst. Professor (was never promoted) and was rumored to give every student a C, independent of academic performance. However, the story goes that Veblen gave one A to a student who begged for the grade so that he might be eligible for a Rhodes scholarship (all he did was ask!). -Alleged inventor of the automatic washing machine Philosophy and Ideas: He looked at issues like a cultural anthropologist, had an outsider view. Saw progress from science and technology Income distribution, puncturing icons, going after symbolism Father of Institutionalism Defined instincts of humans -Parenthood, workmanship and idle curiosity-produce high quality efficient products. -Called Industrial Employments -Acquisitive Instinct-behavior that benefits one self “The Place of Science in Modern Civilization” Assaulted the basic assumptions of neoclassical theory -Opposed the idea of Invisible Hand (assumed long-run) -Challenged fixed prices, resources, tastes, technology are constant *Velban wanted to study these factors that were held constant
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This note was uploaded on 01/12/2010 for the course ECON 434 taught by Professor Byrns during the Spring '09 term at UNC.

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econ434notes24a - History of Economic Doctrines Session 24...

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