Toward a holistic nonprofit economics: insights from institutionalism and systems theory

The main thrust of the current nonprofit economics literature is that nonprofit organizations exist to correct market failures. However, the methodological individualism of the market failure theories of nonprofit organizations makes these theories unable to take account of the complex institutional embeddedness of the nonprofit sector. To fill this gap, the present paper outlines an approach of holistic nonprofit economics by building upon the insights from Thorstein Veblen’s institutionalism and Ervin Laszlo’s contribution to the general systems theory. From the Veblenian dichotomy, holistic nonprofit economics benefits by recognizing the limitations of the profit motive in ensuring a high quality of community life. From the systems theory conception of the multi-level universe, holistic nonprofit economics borrows the insight that the key to a high quality of community life is in the integration between man, society, and nature. Accordingly, holistic nonprofit economics locates the role of the nonprofit sector in ensuring this integration by counteracting the profit motive. Thus, in contrast to the market failure theories of nonprofit organizations, holistic nonprofit economics generates a research program exploring the embeddedness of the nonprofit sector into the encompassing societal and natural systems.     

The place of education in W. S. Jevons's political economy

The paper begins with the question of what became, in Jevons's new economics, of the imperative in classical political economy to educate the masses. Much of the core of classical thought, including the Malthusian principle and the wages-fund theory, together with Mill's new arguments about market failure, rationalized the need for state-supported general education as a benefit to both the labouring classes and society at large. Jevons's strong claim that Ricardo-Mill economics must be abandoned would seem to leave education policy without a strong mooring. However, he re-anchored it in his productivity approach to wage theory, his utility maximization approach to value theory and public works spending, and his empirical analyses of business cycles, the potential of long-term austerity, and poor consumption-saving behaviour of the working classes. The end result was similar to that of classical political economy, a multi-dimensional rationale for a policy of State-supported general education.     

What Economists Do about Values

The paper explores the way the work of classic institutionalist authors can inform modern nonprofit economics. From the Veblenian perspective, nonprofit organization is explained as an institutional consequence of the pecuniary-industrial dichotomy. The Ayresian theoretical system is used to highlight nonprofit organization as a particular form of the progressive weakening of the institution of private property in response to technological imperatives. Based on these arguments, the societal meaning of nonprofit organization is shown to be in realizing instrumental value that is unattainable through pecuniary ceremonial behavior embodied in the for-profit sector. At the same, in line with the Veblenian analysis of American universities, the ability of nonprofit firms to attain instrumental value is recognized as potentially limited by the corrupting effects of the embedding pecuniary culture.     

The Issue of Efficiency and the Role of State in New Institutional Economics: A Critical Perspective

ABSTRACT

This article scrutinises and criticises the notion of efficiency and the role of state in the emergence and evolution of institutions and property rights within the tradition of new institutional economics. Specifically, the attempt is to criticise the efficiency view of the formation of property rights and institutions. It is shown that the efficiency concept cannot provide a sufficient rationale for explaining the origins of private property. Additionally, some recent developments of North's thought are critically scrutinised, showing that his theoretical apparatus could be conceived as a paradise for the eclectic. Further, the role of the state in different versions of the theory of property rights – with a special reference to North's treatment of the notion of state – is, also, critically examined. Although North’s work has virtues compared to the ‘naïve model’ of property rights by recognising and addressing the role of the state and the issue of power in the formation of property rights and institutions, he does not succeed in fully accounting for the existence of institutional arrangements, due to his adherence to an individualist framework.     

Technology and Oliver Williamson's transaction cost economics

Oliver Williamson has greatly contributed to refining neoclassical economics by incorporating transaction costs and internal organization; yet, his new institutional economics too easily dismisses the role of technology. In doing so, he has replaced the determinism of technological production efficiencies with the determinism of transaction cost efficiencies. A review shows that Williamson's new institutionalism has evolved through three stages in terms of the focus of his analysis and his views of transactions. Throughout this evolution, however, his proposed solutions to organizational failures have actually continued to rely heavily upon technology.     

Japanese Consumption,External Disequilibrium and their Statistical Measurement

Georgescu-Roegen's work is usually divided into two categories, his earlier work on consumer and production theory and his later concern with entropy and bioeconomics beginning with his 1966 introductory essay to his collected theoretical papers published in the volume Analytical Economics. Most economists usually praise his earlier work on pure theory and ignore his later work which is highly critical of neoclassical economics. Those economists sympathetic to his later work usually take the position that he “saw the light” and gave up neoclassical theory some time in the 1960s to turn his attention to the issues of resource scarcity and social institutions. It is argued here that there is an unbroken path running from Georgescu's work in pure theory in the 1930s, 1940s, and 1950s, through his writings on peasant economies in the 1960s, leading to his preoccupation with entropy and bioeconomics in the last 25 years of his life. That common thread is his preoccupation with “valuation.” The choices our species makes about resource use and the distribution of economic output depends upon our valuation framework. Georgescu-Roegen's work begins in the 1930s with a critical examination of the difficulties with the hedonistic valuation framework of neoclassical economics, moves in the 1960s to the conflict between social and hedonistic valuation, and culminates in the 1970s and 1980s with his examination of the conflict between individual, social, and environmental values. This paper traces the evolution of Georgescu-Roegen's thought about valuation and the environmental and social policy recommendations which arise out of his bioeconomic framework.     

‘My Own Utopia’. The economics of Bentham's Panopticon

The paper analyses Bentham's theory of the economic management of the Panopticon prison he projected in 1786 and which was approved by the British Parliament in 1794, but never constructed. Its focus is on the economic arguments employed to justify the principles of management, most of which amount to the modern economic notions of market policies and principal-agent relationships. Bentham's way of conceiving these notions can be summarized in the problem of the junction of interest and duty. This paper shows that many modern notions concerning the economics of organizations and public economics are clearly foreshadowed, and sometimes even explicitly formulated, in Bentham's writings on prison management. Bentham was conscious of the important economic dimension of the Panopticon scheme and was persuaded, albeit illusorily, that an accurate economic theory of its management could favour its approval. Well before Charles Babbage's On the Economy of Machinery and Manufactures (), he went into a detailed theoretical analysis of the requirements and dilemmas of a complex economic organization oriented towards the joint fulfilment of the goals of a variety of stakeholders: taxpayers, the government, contract managers, keepers, taskmasters, subcontractors and prisoners. He also recognized that some institutional limits must be opposed to profit-oriented management in order to preserve the life, health and mental equilibrium of subordinates.     

Equal Pay for Comparable Worth: A Policy for Eliminating the Undervaluation of Women’s Work

This article reviews and assesses Elinor Ostrom's Institutional Analysis and Development (IAD) framework and Paul A. Sabatier's Advocacy Coalition Framework (ACF) to determine their usefulness to institutional economics with regard to the theory of normative criteria and policymaking. The conclusions are that (1) Ostrom's IAD is not of assistance to institutional economics, (2) Sabatier's ACF and institutional economics have four important ideas in common, (3) the different levels of normative beliefs found from ACF studies have not been integrated into institutional economics, and (4) the technological and ecological criteria found in institutional economics have not been integrated into ACF.     

Instrumentalism and Economic Policy: The Quest for Reasonable Value

Neuroeconomics and behavioral economics (NEBE) is one of the most dynamic fields in contemporary economics. However, from the viewpoint of economic methodology there are still substantial reasons why NEBE is irrelevant for economic theory. This paper argues that they will only become an essential part of economics if they are embedded into a fully-fledged institutional and evolutionary paradigm. I develop a Neo-Veblenian theory of the individual that starts out from the observation that modern brain sciences do not support the notion of the brain to be an integrated and consistent rational decision apparatus. An evolutionary explanation is offered for this, which reinstates Veblen's distinction between adaptation as engineering optima and social selection. Individual identity does only emerge through communication and interaction among brains, in particular via language. The concept of the "extended brain" is proposed, which is applied to define human individuality as a social phenomenon. Thus, the systematic unity of neuroeconomics and institutional economics is established.     

John Stuart Mill's Theories of Wealth and Income Distribution

Although he was much influenced by David Ricardo when he wrote the classical part of his Principles , John Stuart Mill was not a Ricardian when he penned his theories of wealth and distribution. They are based on a triple foundation. First, a belief that economics is a moral discipline. Second a theory of custom-driven human behavior. Third, an empirically formed conviction that the institutions of state, education and business cooperate to structure the distribution of income. On the basis of these presuppositions, Mill formulated 1) an institutional theory of the formation of human and non-human wealth and 2) an even more institutional theory of distribution demonstrating how the aforementioned institutions malignantly skew the distribution of income to the advantage of the propertied classes and to the extreme disadvantage of the working class. As a social economist, Mill recommended institutional reforms designed to eradicate the poverty of the working class.     

Trade Unions Face a New Western Capitalist Society

Nicholas Georgescu-Roegen was hostile to work in economic theory that is based on the notion of a continuum of agents. In this essay, I use this hostility as a point of departure for an exploration of his views concerning representation, language and theory as they pertain to what he saw as economic science. In particular, I view his methodological stance to the "doing of economics," as expressed primarily in his epistemological writings, in the light of Richard Wollheim's reflections on "art and its objects."     

The Diaries of a Cabinet Minister,Volume One,Minister of Housing 1964–66

While John R. Commons often referred to third sector organizations, such as associations, cooperatives, and trade unions, it is unclear how these organizations can be fitted into his transactional typology. This paper clarifies this problem by identifying two dimensions of bargaining, managerial, and rationing transactions: 1) the extent of legal equality of transactional participants, and 2) the extent of commonness of these participants' transactional interests. These dimensions enable defining the identity of the third sector in terms of a distinct variety of rationing transactions combining legal equality of transactional participants with significant commonness of their interests. The paper further explores several implications of this argument for new institutional economics, concerning the citizenship aspect of markets and hierarchies and the possibility of viewing third sector organizations as hybrids between markets and hierarchies. The paper concludes with a discussion of the implications for further research.     

GLOBALIZATION AND WOMEN'S PAID WORK: EXPANDING FREEDOM?

In Development as Freedom , Amartya Sen takes expanding freedom to be the primary end and the principal means of development. I discuss his emphasis on women's agency as central to development theory and practice and the strategies he advocates for enhancing it. Recent work in feminist economics and postcolonial studies tests Sen's complex account of freedom. Further levels of complexity need to be added when we examine how global forces of power interact with local systems of oppression in ways that often limit women's freedom. This argument rests on an analysis of how globalization affects a domain of freedom that is a central concern for Sen, that of increasing women's freedom to work outside the home as a way of strengthening their agency. Attending to elements missing in Sen's account will enhance freedom in women's lives.     

Theory of Competition Policy: A Confrontation of Economic,Political and Legal Principles

Thorstein Veblen was a founding father of original, or old, institutional economics. The social and evolutionary usage of things and thoughts are at the center of Veblen's approach. In his studies, he dealt with psychological, social, anthropological and economic issues. The psychological content of Veblen's writing takes instinctive and habitual issues into consideration. The proposal of this paper is to revisit the psychology of Veblen's conspicuous consumer. In such a task, this paper discusses the role of observation and cognition in habit building, and their influence on the conspicuous consumer. It also introduces a psychological explanation of the importance of the leisure class to the conspicuous consumer. In order to build the analysis, this paper takes into account elements of Albert Bandura's vicarious learning. These elements are introduced to highlight vicarious observation as a key component of Veblen's conspicuous consumer.     

中国电信业的制度变迁及其路径选择

本文用新制度经济学的制度变迁理论研究了中国电信产业的制度变迁的必然性。从制度需求和制度供给的变化探讨电信制度变迁的必要性和可能性,认为技术变革、市场需求、相对价格变化以及其它制度的变化导致了制度需求的变化,而制度环境变迁、社科知识的进步以及对其它制度的吸收借鉴引起了制度供给的变化。在审视已有的制度变迁的现状的同时,本文提出营造有效的市场竞争环境、产权制度改革以及产业管制重建是今后中国电信业制度变迁的路径选择。     

Vilfredo Pareto on Labor: A Critical Re-examination

This article comprehensively examines Vilfredo Pareto's thoughts on labor and highlights their significance within his body of work. Like the other pioneers in neoclassical economics, Pareto disregarded worker subjectivity toward labor performance and the resulting variability in the substance of labor. Thus emasculating the human traits of labor, in his theory of pure economics, Pareto identified the nature of labor exchange with that of the exchange of nonhuman objects, thereby subsuming the former under his general equilibrium system. This neoclassical principle of rationalizing the market determination of labor exchange on its deindividuation governed Pareto's speculations throughout his work. Even his arguments in applied economics in favor of worker solidarity and strikes were grounded on this principle. It remained the basis for Pareto's opinions on actual labor relations. Pareto's frustration here turned him into an anti-unionist, but it also helped to mold his prime ideas regarding sociology and his awareness of the limits of economics. However, Pareto's adherence to his former concept of labor exchange contradicting its nature became a chief cause of his failure to integrate his economic thinking with its sociological counterpart and occasioned his sympathy with Fascism. Thus, this article concludes that Pareto's thoughts on labor profoundly affected his entire body of thought and that their flaw is not exclusive to him but inherent in neoclassical economics.     

Socialism after Hayek: A Post Keynesian Contribution to Burczak's Theory of Social Justice

The paper presents a brief overview of the basic premise of the Burczak's Socialism after Hayek, and shows that Burczak's “applied epistemological postmodernism” presents a unique unifying ground for heterodox economics, breaking down traditional barriers between right and left. This new approach allows us to revisit the Marx-Keynes-Hayek debates in a more constructive way for a unified theory of social justice. However, we argue that Burczak's system does not automatically guarantee full employment, so it cannot be considered an ideal theory of social justice. A Post Keynesian contribution is presented in the form of the Employer of Last Resort (ELR) program which we argue is compatible and complementary to Burczak's theory of social justice. Finally, we argue that an adequate system design of the magnitude proposed here must be infomed by the principles of institutional adjustment as outlined by J. Fagg Foster.     

Lost in translation – a revival of Wolfgang Stützel's Balances Mechanics

Wolfgang Stützel was a prominent German economist who coined a very special terminology in national accounting and in international economics. Therefore, it can be said that his contributions to economics got lost in translation. Especially, the Balances Mechanics approach and the paradox of competition are his biggest achievements in economic theory, but he never received international recognition. The objective of this paper is to pay tribute to his work by applying his analytical frameworks to the balance of payments crisis in the Eurozone and to the distributional impacts of austerity policy.     

Contrived desires,affluence, and welfare: J.K. Galbraith's Pigovian redistribution argument reconsidered

I argue that John Kenneth Galbraith's theory of the “dependence effect” in The Affluent Society provides a way to rescue A.C. Pigou's argument for wealth redistribution from a powerful objection. The objection is based on the unprovability of statements making interpersonal comparisons of utility. Galbraith's dependence effect theory allows him to present a version of the Pigovian argument that requires no such statements to be made. I argue that Galbraith's main piece of advocacy in The Affluent Society was for income redistribution, despite the fact that he claimed to be in favour of greater spending in the public sector rather than redistribution as such. I then show how my reading of the dependence effect theory helps to defend it against objections from Hayek and Rothbard. I end by discussing what improvements in economics a proper test of the theory would require and showing how my reading of it helps to reveal the ongoing importance of The Affluent Society to the understanding of political economy.     

Institutionalism and the “Common Man” Through the Lens of Philip Klein: Business Cycles,the Public Sector,and Keynes’s Economics

This article reviews and assesses Philip Klein’s work on business cycles and macroeconomics, the public sector, and the economics of John Maynard Keynes. The article makes several findings. First, Klein built on the pioneering efforts of Wesley Mitchell to advance the development of cycle indicators and to outline an eclectic theory of cycles that remains useful for synthesizing a broad literature. Second, Klein’s essays on macroeconomics contain enduring discussions of the malleability of the “natural” rate of unemployment and the value of a behavioral approach to expectations. Third, he refocused the institutionalist attention on the public sector by introducing “higher efficiency” and other concepts to help explain how government policy plays a role in economic life. Fourth, Klein emphasized the role of fiscal policy in moderating business cycles. Fifth, his work points in the direction of today’s post-Keynesian institutionalism, both by stressing that Keynes was “profoundly institutionalist” in his approach and by arguing that conjoining Keynes and institutionalism would provide a stronger foundation for macroeconomic theory and policy.