Habit,Decision-Making,and Rationality: Comparing Thorstein Veblen and Early Herbert Simon

The article aims to contribute to the convergence between institutional and neo-Schumpeterian evolutionary economics. It intends to help unify the behavioral foundations of these two strands of thought by returning to the original views of their main historical inspirations. It thus proposes a comparative analysis of the theory of human behavior developed by Thorstein Veblen and Herbert Simon, respectively. The article notably discusses how Simon’s early work links together the notions of habit, rationality, and the decision-making process, and explores the extent to which his views are consistent with, complementary to, or divergent from Veblen’s. The article highlights several commonalities between Simon and Veblen’s views on habits. However, Simon departs from Veblen in developing a dual model of human behavior which clearly differentiates habit-based from decision-based behaviors. The article argues that neo-Schumpeterian evolutionary economists should go beyond this binary model and build on the pragmatist-Veblenian approach, in which these two dimensions are intimately entangled. This process could allow the economists in question to take advantage of the most valuable insights of institutional economics regarding the interactions between individual choices and habits and institutions.     

Financialization in the American Pharmaceutical Industry: A Veblenian Approach

Thorstein Veblen’s theory of the business enterprise holds that business interests come to dominate industrial interests, with pecuniary returns being the dominant mindset under which economic activity is conducted. Under moneymanager capitalism, this is reflected in the increasing importance of profits from financial channels and the accumulation of intangible rent-generating assets to serve as the basis for capitalization — a process known as financialization. I examine this process of intangible asset accumulation within the context of the American pharmaceutical industry using Veblen’s theory of the business enterprise as a lens. I show that intangible assets have come to dominate productive capital on pharmaceutical enterprise balance sheets, suggesting that pharmaceutical profits are accumulated through rent-seeking channels rather than productive ones, in line with Veblen’s theory, and provide evidence of the financialization of this industry.     

Thorstein Veblen’s Financial Macroeconomics

The purpose of this article is to provide an exposition of Thorstein Veblen’s contribution to financial macroeconomics. I argue that Veblen conceptualizes and contextualizes how the financial structure of effective demand is predisposed to endogenous non-sustainable leverage processes, manipulation, and speculation. I stress that Veblen advances a cultural-financial theory of investment and brings forward the role that pecuniary and emulation instincts play in institutionalizing predatory and fraudulent activities which destabilize the macroevolution of monetary production economies. I underline that Veblen patterns financial macroeconomic fragility and instability within the institutions of the business enterprise system.     

The Institutionalist Roots of Macroprudential Ideas: Veblen and Galbraith on Regulation,Policy Success and Overconfidence

One consequence of the global financial crisis has been to prompt debate over macroprudential regulation – meant to limit private risk-taking that threatens systemic stability. In this paper, we stress the roots of macroprudential ideas in the Institutionalist economics of Veblen and Galbraith in a way that highlights both unrecognised policy possibilities and underappreciated impediments to policy effectiveness, arguing in particular that regulatory success can breed overconfidence. First, we argue that while Veblen's views anticipated macroprudential arguments, they also obscured tensions between the technocratic acumen of policy ‘engineers’ and popular legitimacy. Second, we argue that while Galbraith's views similarly shaped the postwar Keynesian policy mix, they also echoed Veblen in underrating the potential for populist resentment of an intellectual ‘technostructure’. We conclude that while this analysis can be seen as highlighting an overlooked century of macroprudential debate, it also demonstrates the potential for technocratic overconfidence – which can eventually undermine policy legitimacy and effectiveness.     

Cognition,Social Impulse,and the Principle of Adaptation: Insights into the Peirce-Veblen Connection

This article seeks to offer insights into the connections between Charles S. Peirce and Thorstein B. Veblen regarding their understanding of the logic of scientific thought and cognition. In this sense, this work explores how both Veblen and Peirce dismissed the Cartesian notion of unmediated cognition and how they sought to depict cognition as a process. Furthermore, this article presents Peirce’s concept of “social impulse” and Veblen’s “principle of adaptation” as complementary perspectives on science and cognition that have strong evolutionary content.     

Herbert J. Davenport on Conspicuous Consumption and the Economics of Feminism

This article analyzes Herbert J. Davenport’s discussions of conspicuous consumption and feminism. Even though these (typically) Veblenian topics represent two “episodes” in many respects disconnected with the central body of Davenport’s theoretical interests, the assessment of Davenport’s views on these matters enlarges our knowledge of the development of his thought. Our analysis shows how Davenport can be enrolled among the forerunners of the modern theory of positional goods. Moreover, our article offers some new findings on the impact of Veblen’s ideas on one of his closest students at the Chicago University.     

Veblen’s Imperial Germany and the Industrialization of Latin America

Veblen’s Imperial Germany is a theory of development and industrialization, and the role the business enterprise played in these processes. Through a reassessment of Veblen’s Imperial Germany, this paper explores the main aspects that Veblen considered about the industrialization of England and Germany, deriving theoretical implications for the preconditions of a successful industrialization and development, based on an evolutionary Institutional perspective. Veblen’s analysis is then used to analyze the current state of the industrialization of Latin America, evaluating the last two decades since the 1990s, and comparing the orthodox approach, the neostructural view and the Veblenian perspective, arguing for the validity of a policy framework not reduced only to targeted protectionism but emphasizing the necessity of generating the institutional preconditions suggested by Veblen in his seminal work.     

Original Institutional Economics and Political Anthropology: Reflections on the Nature of Coercive Power and Vested Interests in the Works of Thorstein Veblen and Pierre Clastres

Our inquiry advances a comparison of the anthropological content of Thorstein Veblen’s evolutionary perspective with the foundations of the political anthropology drawn from selected works of Pierre Clastres. We seek to establish that what can be referred to as a clastrean reference can simultaneously offer new perspectives on institutionalism, while maintaining a radical and emancipatory understanding of Veblen’s writings. In this sense, we seek to reconsider and reevaluate the role of economic surplus drawn from Veblen’s anthropology, while also offering a general and critical perspective for understanding the emergence of coercive power within societies.     

Joseph Schumpeter and Thorstein Veblen on technological determinism,individualism and institutions

This article investigates Joseph Schumpeter's affinities with Thorstein Veblen with respect to technological change and determinism, the future of capitalism, individualism and institutions. From a methodological point of view, a common point in their analysis is their anti-teleological view regarding economics as a discipline. Also, in the Schumpeterian system, technology is the cornerstone of economic evolution and appears as the making of new combinations. In the Veblenian theoretical framework, the bearer of change is to be found, inter alia, in technology, just like in Schumpeter's works, although not without differences. They also share the opinion that technology revolutionises capitalism and has serious implications for its future as a system. Furthermore, regarding individualism, in his work Schumpeter stresses the importance of the social milieu on individual action, a fact which bears strong resemblance to the Veblenian notion of evolution as ‘depersonalized evolution’. In this sense, Schumpeter is very close to Veblen, although Schumpeter's approach could be classified in what is called institutionalist individualism, whereas Veblen could be classified as holist. Undoubtedly, the role of institutions is of great importance in both Schumpeter and Veblen. Ιnstitutions in the Schumpeterian schema play a central role closely related to the future of capitalism. Institutional and non-institutional factors enter into complex forms of interaction just like in Veblen's approach. There, institutions are part of the social milieu and their underlying framework, much wider than mere economic and social. Of course, the theoretical analyses of Schumpeter and Veblen are not devoid of differences springing mainly from their methodological approach such as the role of the individual in the capitalist process which is probably the most significant difference regarding the importance attributed to it in Schumpeter's early works. Also, the way technical change appears constitutes another difference. However, his views are quite close to Veblen's. After all, Schumpeter began to write in a social, political, theoretical and ideological environment at a time when evolutionary ideas dominated social thought.     

Veblen’s Two Types of Instinct and the Cognitive Foundations of Evolutionary-Institutional Economics

In this article, I provide a detailed examination of Thorstein Veblen’s conception of instincts, what he believed were the “prime movers in human behavior.” I outline the meaning of his division of instincts into simple and complex forms, and also document his account of their operational function and evolutionary origins. I then evaluate this understanding in relation to the new field of evolutionary psychology, and demonstrate how Veblen conceived of these instincts as interacting with habits and institutions. Finally, I illustrate one method of how the bio-cognitive level of behavioral reality could be integrated with the socio-institutional level of behavioral reality, and how an intermediate-interactive level between these two could have been generated. By doing so, I emphasize the need for scientifically accurate cognitive foundations to evolutionary-institutional economics (EIE)     

Contracts between a Firm and Its Constituents during Bankruptcy Crises

Thorstein Veblen highlighted a number of human instincts, one of which was the “parental bent.” In contrast to the other “positive” instincts, the parental bent is specifically other-regarding in that Veblen described it in terms of utilizing knowledge for the betterment of society. Veblen’s “parental bent” stresses the social embeddedness of humanity and the human instinct to care. Our ability to care is partially predicated on our social roles and the values embedded within those roles. Critically, this is influenced by the configuration of institutions within a society. Care is grossly under-valued. By drawing upon recent contributions to care in the context of an increased financialization of the economy and society, we seek to expand upon Veblen’s insight, and to argue that the most significant deficit confronting our capitalist society is not of the fiscal variety, but resides in care.     

The Culture of (Dis)Contentment

John Kenneth Galbraith’s 1992 The Culture of Contentment was written to assess the long-term impact of the Reagan/Bush era on American culture and politics. In light of recent electoral politics and outcomes, this article revisits Galbraith’s central argument to consider how the culture of contentment influences our discontented politics today. To do so, the author briefly examines the recent findings of sociologists and political scientists to examine the culture and politics of discontent in the United States at present. The article concludes with a brief examination of Veblen’s views of democracy as a lens through which to examine the foregoing.     

The 2017 Veblen-Commons Award Recipient: John F. Henry: “Brutus Is an Honorable Man”

The question I pose in this article is just why, from its egalitarian foundations, inequality first arose. There is good information regarding how inequality has been defended over the millennia, but no answer as to why, from an egalitarian ideological foundation, some began to assert a superior position, while others — the vast majority, in fact — accepted this. In this historic process that leads to the current period, it appears that those asserting a superior position are of an “honorable” nature. That is, they tend to be mass murderers, fundamentally dishonest, hypocrites, and generally anti-social. Just why is this? Why are these “honorable men” of the Brutus type at the top of the social hierarchy? While Thorstein Veblen and Karl Marx have developed cogent analyses of inequality itself, neither has explained the origins of inequality in its break and separation from the original state of equality. I propose that this is a task for institutionalists, basing their argument on Veblen’s understanding of “institutions.”     

Thorstein Veblen as Evolutionary Feminist Economist of the Progressive Era

Abstract

Just prior to the turn of the twentieth century, Thorstein Veblen advanced an evolutionary approach to feminist economics. A host of scholars considered in this inquiry are noted to have endorsed and also furthered his tradition. What distinguishes Veblen’s evolutionary approach to feminist economics is that he emphasizes that the roots of private property can be related to women being taken captive through warfare during the Age of Savagery. Instincts affecting behavior are viewed as relative constants, but which take on an evolutionary character when considered against what Veblen defines as four stages of social and economic development.     

What If There Are No Conventional Price Mechanisms?

Inspired by Frederic (“Fred”) S. Lee’s theoretical contribution to institutional-heterodox economics, I make the case that the neoclassical price mechanism is not only flawed, but also irrelevant for the study of actual coordination mechanisms, hence the price mechanism — as a theory as well as a way of thinking — should be discarded. While this position was addressed by early institutionalists, starting with Thorstein Veblen, later institutionalists have not completely rejected the price mechanism. The sympathy for the price mechanism has prevented institutionalists (and other heterodox economists) from fully developing an alternative theoretical framework concerning how actual economic activities are organized. I, therefore, provide an institutionalist-heterodox framework of the provisioning process focusing on business enterprise activities. This framework shows how institutional economics becomes more refined and useful when it is married to other traditions in heterodox economics, in particular, Marxian, social, and post-Keynesian economics. Such an integrative approach is what Fred Lee showed through his work toward producing a better theory and policy for the underlying population.     

"The Reality of the Present and the Challenge of the Future": J. Fagg Foster for the Twenty-First Century

This paper revisits J. Fagg Foster’s early assessment of the relevance of John Maynard Keynes’s theory of institutional economics. In his view, neither institutionalists nor most of Keynes’s followers really recognized the importance of Keynes’s theoretical insights. I examine Foster’s views on economic theory, with a particular focus on monetary theory. I apply Foster’s approach to what is now called modern money theory, an approach developed by heterodox economists working in the institutionalist and post-Keynesian traditions. I argue that this approach is consistent with Foster’s, and it offers a way forward to policy formation for the twenty-first century.     

The Last Gasp of Neoliberalism

The ideas of both Thorstein Veblen and Karl Polanyi shed light on understanding the last gasp of neoliberalism. The last gasp refers to Donald Trump’s abandonment of free trade, long considered a cornerstone of the neoliberal agenda, and his overt attacks on democratic institutions. In Trump, neoliberalism’s attempt to overcome the gridlock of liberal democracy has revealed its fascist leanings. Both Polanyi and Veblen warned about the trend towards fascism. Trump was elected, in part, by filling the void left by the factioning of neoliberalism, in part by the injustice felt by people in rural areas, those with stagnant incomes, white males, and others. Trump has transcended the neoliberal agenda, approaching market relations from the point-of-view of the fight. The emergence of a predatory culture, in both the domestic and international realms, resembles the culture outlined in Veblen’s The Theory of Business Enterprise. Trump’s actions reveal the need to extend Polanyi’s idea of social protection given the negative effects of modern technology and Trump’s efforts to dismantle or reduce some regulatory agencies. Changing demographics and the adverse reaction to Trump’s fascist leanings may yet see the emergence of a new progressive era, suggesting, at least, that Trump represents the last gasp of neoliberalism.     

Corporate Giantism,Degradation of the Plane of Competition,and Countervailance

Thorstein Veblen argued, in The Higher Learning in America, that universities were at risk of being captured by the same pecuniary aims as business enterprise. His argument remains relevant today, given that many observers claim that higher education is headed for fundamental transformation. These changes are occurring in response to a number of challenges facing higher education in the United States — financial, demographic, and cultural, aiming both to reform what is seen by many as a system resistant to change and accountability, and to take advantage of new technologies seen as improving accessibility and convenience for its consumers, the students. I briefly review Veblen’s argument by using its general contours as a lens for the major disruptions occurring in higher education today, and specifically the rise of for-profit universities, the expansion of online learning and massive open-online courses (MOOCs), and the growing movement to unbundle the educational experience.     

Thorstein Veblen’s 1904 contributions to q and insider/outsider analysis

The early 20th century saw the first steps in a tradition of leading economists explaining the link between corporate finance, investment and capital valuation. The writings of Keynes, and Tobin deal with the development of an investment theory based on the financial structure. However there is no mention Veblen, whereas he made an early American analysis of corporate governance structure. Our work is based on a critical review of the literature, which is guilty of omissions, lack of accuracy and errors of formalization. So that, we focus on the reasons why Veblen’s corporate financial analysis should not be forgotten.