2. • Radi Shafiq – 03
• Rifat Tareq - 08
• Tazia Hossain -
• Sadya Islam - 34
3. A MERE DISSENT???
• No charge is leveled more consistently at institutionalism
(when it is referred to at all) than that it has nothing positive to
offer—it is "mere dissent."
• BUT…
• There are intuitionalist applications to a number of the
conventional fields in economics - from development
economics to public sector
4. ROOTS OF INSTITUTIONAL ECONOMICS
• Veblen, Mitchell, and Commons
• All hostile to neoclassical theory, particularly micro theory.
• But …
• None made the formation of a new school of economic
thought a prime focus, however inflexible they may have
considered the American Economic Association to be.
• Regarded the difference as stemming from basic postulates:
neoclassical economics was "mechanistic," attempting to
"encompass industrial activity within a formula, a set of
principles, an equilibrium of forces.”
5. INSTITUTIONALIST PERSPECTIVE
• Nowhere is the institutionalist perspective clearer than on the
fundamental question whether economics is a normative or a
positive science.
• Economics has been a "positive science" concerned with
"what is" as distinct from a "normative science" concerned
with what "ought to be." The pricing process is the stated
mechanism for expressing all the allocative decisions about
which economists need to bother.
6. INSTITUTIONALIST PERSPECTIVE
• For institutionalists, economics must be a positive science
and remaining independent of ethical positions is not only
wrong but also impossible.
• HOW?
• Mainstream economists are devoted to a heavy emphasis on
deductive reasoning based on a series of assumptions (the
"givens"). Then, having already made the assumptions, they
insist the subsequent analysis is positive. In reality places all
the factors included in the assumptions off limits for debate
purposes/
7. ECONOMICS: A SCIENCE OF PRICE OR
OF VALUE?
• The institutionalist perspective can clearly be contrasted with
the neoclassical perspective by noting that for neoclassical
economics pricing is the operative mechanism in the market.
• For institutionalists the operative mechanism is emergent
valuation as it is effected in allocative judgments.
8. THE PUBLIC SECTOR
• All modern economies include a public sector as well as a
private sector.
• The staunchest conservative can see this when resources are
being allocated to national defense.
• All societies today have a category called "Welfare" to which
resources are allocated. But we do have endless debate
about how much to allocate. The debate is obfuscated by an
increasing tendency to refer to the public sector as "they."
9. THE PUBLIC SECTOR
• Institutionalists would argue that the public sector, no less
than the private sector, is not "they" but "we."
• A giant firm with monopoly power that negotiates a secret
price-fixing agreement is doing "us" in quite as surely as the
government bureaucrat who signs a bloated contract.
10. JUDGING ECONOMIC PERFORMANCE
• Humaneness or compassion cannot be banished to a
different part of society.
• Mainstream economists are fixated on narrow allocative
efficiency, carried out in markets via price, output
adjustments, or both.
• Institutionalists argue that the total allocative thrust of society
is revealed by all the characteristics mentioned: efficiency,
security, equity, freedom, and compassion.
—from development economics, through business cycles, to industrial organization and public sector economics.
The modern version of the Ricardian Model assumes that there are two countries, producing two goods, using one factor of production, usually labor. The model is a general equilibrium model in which all markets (i.e., goods and factors) are perfectly competitive.
