Veblen, institutions and ideas

Veblen: The Making of an Economist Who Unmade Economics by Charles Camic isn’t a biography of Thorstein Veblen so much as an intellectual history. Although there is biographical detail, its purpose is to situate Veblen in his milieu, not only from an immigrant midwstern farming family but also in at the birth of academic economics in the United States in the later decades of the 19th century. This was an era when universities were being founded, some on the model of research universities imported by men who had studied in Germany. It was also a time when economics was in flux, with a progression from classical economics – and Mill’s textbook – to institutionalism on the German historical model to the new marginalism.

Camic makes two central arguments. One is that – contrary to the firm impression shaped by the only major biography to date – Veblen was far from being an outsider. On the contrary, he studied with the leading economists of the day (such as John Bates Clark, or Richard Ely), spent years on the faculty at the University of Chicago where he edited the Journal of Political Economy, wrote many academic articles and was invited to give lectures at other top departments. He was, Camic very convincingly argues, at the heart of the academic economics of the day until late in his career. Only at the end did he fall off the top rungs of this ladder, and then because of his personal entanglements and not for any intellectual reason.

The other claim is that Veblen’s economics, and indeed his entire intellectual formation, was due to an environment in which the idea of evolution pervaded everything. Hence it was not surprising that the evolution of institutions should play such a major part in Veblen’s economics. It was not because he was an outsider that Veblen condemned the ‘nonproductive’ rich in Theory of the Leisure Class, but because he considered American social and economic institutions had evolved in a parasitic, an extractive, direction. Consistent with this argument, when he wrote about economic theory, he firmly condemned the new marginalist approach as ahistorical: how could the marginalists fail to see that the marginal productivity of the rich nore no relation to the value they could extract from the economy? One might today readily agree the same point about the monopoly capitalists of big tech, but the subtitle of the book is odd – far from Veblen successfully unmaking economics, the marginalists went on to hold sway until relatively recently and are hardly down and out even now.

Nevertheless, this is a really interesting book, in effect a sociological study of the formation of the top US economics departments still dominating the profession globally today, the years when they separated from other disciplines, and were characterised by a pluralism reflecting the ferment of debate within the profession. It left me thinking what a shame it was that Veblen had left the academic world before the end of his career – he ended up writing for popular publications – because although individuals rarely turn the tide by themselves, he might have influenced what became a close-to-monoculture in economics (to borrow the evolutionary metaphor). For example, in his final academic post at Stanford he published (in 1908 and 1909) significant articles – unknown to me before this – about the “intangible assets of the community” and their role in production, the “storehouse of knowledge”. How modern this sounds. But he was kicked out of Stanford for an indiscreet relationship, and that was that. I have read Theory of the Leisure Class, and found it almost unreadable. Nevertheless, I’ll be toddling off to have a look at these two late articles.

I enjoyed reading Veblen – one for anybody interested either in the man himself or in the history and sociology of economics. It certainly succeeds in over-turning the prevailing myth that Veblen was an outsider. Iconoclast perhaps, but from within the heart of academic economics for much of his career.

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10 thoughts on “Veblen, institutions and ideas

  1. Veblen is the progenitor of a whole school of American economics isn’t he, the “institutionalist” school, people like Clarence Ayres, Commons and contemporaries like F. Gregory Hayden.
    It is a marginalized school of thought nowadays, but wasn’t it quite a powerful force in what were in bygone days the progressive states like Wisconsin ?

      • I was pressed into teaching a course in history of thought a few years back and so had to get up to speed on his works . I think he wrote about 10 books and of course many articles

        So definitely not an expert on him but intrigued by his ideas and how he might be situated in the US economic progressive movements like the Granger movement

        The noted historian of thought EK Hunt called him one of the most penetrating social theorists America produced.

    • His most influential student was Wesley Mitchell, who (acknowledging that he was firmly inside of the Veblen tradition which stated that one should look at evolving facts) stood at the cradle of:

      * the national accounts (Developed in the twenties by himself and from the thirties onwards by his student Kuznets)
      * the Flow of Funds (developed by Morris Copeland)
      * as well as of the Friedman/Schwartz book ‘A monetary history of the USA’.

      All authors mentioned worked under supervision of Mitchell at the NBER (which he established). Nowadays, economists often pay attention to (real) GDP, Mitchell however focused on sectoral and nominal developments as well as distribution. This is not a marginalized school of though even when the non-neoclassical roots of the national accounts (GDP is NOT ‘utility’ related but a nominal variable…) are often forgotten.

  2. Don’t you think that the recent book “Makers and Takers” is something of an echo of Veblen’s contrast between the predators (leisure class) and producers (industrialists) ?

  3. from the Cambridge article above
    “Counter to the neoliberal Chicago School pretense that the American institutionalists “led to nothing,” this article contends that the extraordinary intellectual (as well as political and legal) output of this distinctive generation of economists—from Henry Carter Adams and Thorstein Veblen to Richard T. Ely and John Commons to Walton Hamilton and Robert Lee Hale—underwrote one of the more fundamental governmental revolutions in modern times.”

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