The Institutionalists and on the Origin of Species: A Case of Mistaken Identity

Abstract

In 1898, when Thorstein Veblen raised question, Why is economics not an evolutionary science? [29, 56-81] he sparked a controversy among American academic economists which, while far less intense than in years past, remains today a basis for criticism against economic orthodoxy [9, x-xi]. The critics have been loosely identified under rubric of institutional economists. While it is beyond present intent to explain many and varied forms of institutional economics, it is important to observe that in its Veblenian version it claimed to be under influence of Charles Darwin [13]. My approach here is to raise Veblen's question again, to probe reasons why economics has not become an evolutionary science. The arguments advanced are not supportive of institutional economics. If anything they are strengthening to conventional economic theory. The major point to be advanced is that Veblenian form of institutionalism rests upon a seriously flawed understanding of roots of Darwinian methodology. Support for this argument rests on a recent and rather extraordinary body of literature, which may be characterized as the origin of 'The Origin'. Biologists and historians of science have over past few years penetratingly explored Darwin's intellectual links to political economy, and in so doing they have without intent revealed structural flaw in use institutional economists made of Darwinian thought. Moreover, for present day economists, new literature has greatly expanded largely unknown influence of classical economics as scaffolding for evolutionary biology. The paper is organized as follows. The first section documents reliance Veblenian institutionalists placed upon work of Darwin. The reliance is traced through Veblen and through one of his major disciples, C. E. Ayres, who certainly was for second and third quarters of twentieth century one of more prominent and prolific exponents of institutional economics.' In section two linkages between Darwin and classical economists are established. The final section discusses consequences which new evidence on Darwin's intellectual development poses for institutionalists. The implications new literature poses for historians of economic thought is also set forth.