The Institutionalist Movement in American Economics, 1918-1947: Science and Social Control

Published by EH.NET (September 2011)

Malcolm Rutherford, The Institutionalist Movement in American Economics, 1918-1947: Science and Social Control. New York: Cambridge University Press, 2011. xii + 410 pp. $95 (hardcover), ISBN: 978-1-107-00699-7.

Reviewed for EH.NET by Robert Van Horn, Department of Economics, University of Rhode Island, and Richard McIntyre, Honors Program and Department of Economics, University of Rhode Island.

Malcolm Rutherford has written a superb book.? Not only is it well written, but it also makes a number of path-breaking contributions to the history of economics that are based on meticulous archival work.? The number of archives Rutherford delved into is astounding, and his archival work provides a solid base of support for an account that departs from much of the previous wisdom about the institutionalists.

Rutherford provides a detailed picture of the importance of institutionalism in American economics from 1918 to 1947, principally focusing on the interwar years.? 1918 marks the year of Walter Hamilton?s original institutionalist manifesto, and 1947 is when major universities resumed hiring academic economists following World War II and manifestly hired legions of non-institutionalist economists.? This is also the year of the Cowles Commission?s salvo on the National Bureau of Economic Research (NBER), and the publication of Paul Samuelson?s Foundations of Economic Analysis.? Although Rutherford?s title suggests that he confines his analysis to the period 1918-1947, his work focuses on the factors leading to the development of institutional economics, stretching as far back as the 1880s.? Moreover, he chronicles the changing development of institutionalism in the post-World War II period.

Rutherford demonstrates that institutional economics should be understood as a ?movement? that shared core ideas and beliefs and as a network of people with a self-conscious unity, and Rutherford marvelously shows how the self-conscious unity of this network shaped institutionalist economics and American economics more generally in the first half of the twentieth century.? By doing so, Rutherford betters the previous standard references on the history of institutionalist thought.? For example, Yuval Yonay, in The Struggle over the Soul of Economics, promised a network analysis of institutional thought, but did not deliver one. Rutherford does, and we now have a more complete picture of the internal dynamics of the institutional movement.? Rutherford also demonstrates that Joseph Dorfman?s claim that Veblen, Mitchell and Commons were the founders of institutionalism was a post-hoc reconstruction, and certainly not how institutionalists understood their own movement in its heyday.

Rutherford?s book has four parts.? Part one provides an introduction to the institutionalist movement.? Here Rutherford debunks a number of standard contentions about the history of institutional economics.?? First, he challenges the notion that institutional economics was only a critique of neoclassical economics and that institutional economics disappeared because it did not make any substantial contributions to economics.? Second, Rutherford successfully assails the idea that institutional economics was just a set of facts and bereft of theory.? Third, Rutherford dispels the notion that institutional economics was Veblenian; he shows that Veblen was an intellectual inspiration to the movement but not central to the networking process.? Part two explores the role of two oft-overlooked institutionalists, Walter Hamilton and Morris A. Copeland, thereby elevating two figures often ignored in the history of institutional economics.??? Rutherford argues that even though Hamilton favored qualitative and Copeland quantitative research methods, they shared ?the same set of overall ideals? and ?their careers interlace? (p. 349).? Part three examines the different centers of institutional economics in the interwar years.? Rutherford especially focuses on the University of Chicago, Amherst, the Brookings Graduate School, Wisconsin, Columbia, and NBER and explores the interconnectedness of these research centers.? Part four explores the challenges and changes to institutional economics after its interwar heyday as well as the reasons for its decline.? Rutherford?s exploration includes: the rise of Keynesian economics, the failures within key institutionalist research programs, the loss of interdisciplinary connections, the new concepts of ?scientific? work in economics, and the development of econometrics.

Like any good book, Rutherford?s book raises questions for further research.? First, Rutherford suggests that Chicago was one of the earliest stomping grounds for fledgling institutionalists — he points out the spate of hiring in the 1900s and 1910s that resulted in a number of institutionalists migrating to Chicago, including Thorstein Veblen, Robert Hoxie, Walter Hamilton, John M. Clark, and Harold Moulton.? Even though Rutherford points out that many of the key players vital for institutional economics were at Chicago together prior to 1918, he does not offer an explanation of why they left Chicago before the institutionalist movement coalesced and why the institutionalist movement did not emerge earlier due to the concentration of institutionalists at Chicago.? Moreover, he does not explain why Chicago hired relatively neoclassical economists to replace the institutionalists who left (or committed suicide in Hoxie?s case).? Second, although Rutherford provides a good summary of the factors that led to the decline of institutional economics, his analysis feels incomplete.? It would be useful to know more about the relative importance of these factors, and it would probably be useful to contrast institutional economics with other movements in economics that became successful.? Perhaps another reason for the decline of institutionalism is that it lacked a good synthesizer a la Alfred Marshall or Paul Samuelson. Because institutionalism was a movement (as opposed to a school of thought), such a synthesis may not have been possible, but this question deserves further exploration in our view.

With an unprecedented balanced engagement of archival and secondary sources, Rutherford provides the definitive history of institutional economics from 1918 to 1947.? It will be many years before anyone can provide a more compelling history of institutional economics than Rutherford has.?? Bravo.
???

Robert Van Horn is co-editor of Building Chicago Economics (Cambridge University Press, forthcoming 2011) and has recently published articles in History of Political Economy and Journal of the History of the Behavioral Sciences.

Richard McIntyre is the author of Are Worker Rights Human Rights? (University of Michigan Press, 2008).

Copyright (c) 2011 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator (administrator@eh.net). Published by EH.Net (September 2011). All EH.Net reviews are archived at http://www.eh.net/BookReview.