THE ENGINEERS OF THE PRICE SYSTEM

THE ENGINEERS OF THE PRICE SYSTEMPresidential Address, Association for Institutional Thought (AFIT)My talk this evening intends to celebrate the economic planning and policy tradition in and around institutionalist economics. Those who have contributed to this work have sought to devise ways to improve and transform the economythus, The Engineers of The Price System. Rather than go into the specifics of these policieswhich range from management of public utilities and industrial policies to full employment and other macroeconomic policies and full-blown economic planningI want to focus on the background of this workthe underlying motivations, vision, method, and gestalt.In this work, one finds features and characteristics that distinguish it from the mainstream and gives it its strength. This is economicsor political economywith a public purpose. 1. One common feature of this work regards its underlying motivation. This work is motivated by a desire to increase quality of life and standard of living, to address poverty, unemployment, and inequalityfairness, justice. One does not find here the mathematical gymnastics or theorizing for its own sake that seems to have appeared with increasing frequency in the discipline. This is workmanship, not sportsmanship.2. Even the definition of economicsthe object of study, is different in this work. Economics here is concerned with how societies organize themselves to provide for their material well-being. Material provisioning rather than allocating scarce resources among competing endsIt is ironic that, while markets may do some things well (e.g., induce technical change), one of them is definitely not allocating resources.3. This work is therefore concerned with basic needs, rather than utility. Utility theorists might argue that individuals provide for their basic needs because they derive utility from it. But providing for basic needs is a prerequisite for experiencing utility. Maslows hierarchy of needs should be taught in the first week of every principles course. Of course, one does not find either utility functions or production functions in this work.4. Another important feature of the institutionalist tradition in policy and planning is the historical approach. Not just history of economic thought and economic history, although both are very important, but moreover that theory itself must be approached historically. There are no universal laws. Even capitalism itself has historical stages.5. This work is also interdisciplinaryrecognizing that to deal with complex real world problems requires drawing on multiple disciplinary frameworks. 6. The comparative approachand the importance of case studies. Stanford historian George Fredrickson argues this point well in his book The Comparative Imagination.7. The institutional approachhopefully this is one I dont have to argue here, and all of these characteristics fall under the larger umbrella of institutional economics.8. Embedded-ness of the economya few years ago, Dell Champlin and Janet Knoedler did a paper here at the AFIT meetings on dis-embeddedness, which I did not understand at first, but I now think was really exceptional. The argument was not that the economy is in any way dis-embedded, quite the contrary, but that there is an ideology of the dis-embedded economy or dis-embedded market which needs to be recognized.9. This tradition takes a systemic approachthe economy does not equal the market; capitalism does not equal marketscapitalism is a social system, a regime, an historical society, a social formation, a mode of production. 10. This tradition makes usebut also understands the limitsof formal analysis. Models may be used as heuristic devices, but used with great caution.11. Qualitative, not just quantitative, methods, including empirical work; one may also speak of a qualitative quantitative approach.12. This tradition rejects the positive/normative dichotomy.13. In its analysis, the structure/agency or structure/behavior relationship is dealt with carefully. The failure of the mainstream to distinguish between behavior and motivationoften erroneously conflating the twois one of the great failures of economics. And effective policies require the recognition of the ways in which social structure creates the context for behavior.14. The institutionalist tradition in policy and planning recognizes the importance of theory, but ultimately for the purpose of practical application praxis is a word that used to get thrown around and now has all but disappeared. But it is what this work is all about.15. This work recognizes that there are possible alternative forms of capitalism and post-capitalisms. What would we do and where would we be without visions of alternative futures, including utopian and dystopian scenarios? Perish the thought.These are the fifteen features of this tradition that came to my mind. I am sure that there are those in the audience tonight, many of whom have contributed to this tradition, who can think of others, and if we have a few minutes, I would be happy to hear your thoughts.

Before that, though, let me express my appreciation for this opportunity, and to serve the organization over the last couple years.PAGE 1