Daniel R. Fusfeld

The Development of Economic Institutions

This interpretive essay seeks to clarify the questions that need to be asked about the development of economic institutions. The approach is macroeconomic in nature. That is, the object of inquiry is the economic system as a whole, concentrating on how a particular type of economy such as modern industrial capitalism changes over the course of time. In this context one of the chief issues is the process by which one type of economy is replaced by another type, for example, the transition from feudalism to capitalism or capitalism to socialism. The development of individual segments or elements of the larger economy is important in understanding the changes that take place in the larger economy, but they are not included in this inquiry. We do not consider, for example, the process by which subsistence farming is replaced by commercial farms, the emergence of fractional reserve banking, or even a topic like the rise of large enterprise in modern capitalism. These and similar microeconomic issues are important for an understanding of the changes that have occurred in modern capitalism, but we are after bigger game: We want to understand the theoretical principles that underlie the global shifts that take place in economic systems as a whole. Once those principles are understood the lesser dimensions of the problem can be fitted into the analysis of any specific case. In following this inquiry, then, we leave aside two very rich bodies of

The Rise of the Corporate State in America

Every society contains within itself the forces that create its own future. The social order is always in the process of becoming, and the future inevitably must be different from the past. The processes of change are rooted in the past, operate in the present, and thrust into the future. Social scientists have to develop a triple vision; they must look backward to the world we came from, analyze the world in which we live, and try to discern the future into which we will inevitably be cast. The crisis that came upon the world in the mid-i1960s -Black revolt, the youth culture, disaffection of the intellectuals, turmoil in Southeast Asia, continuing peasant revolts in many parts of the world, the breakdown of the international financial system -compels us to look for the sources of the crisis, and ask where are we going and what forces propel us. We must look at the past to understand the present and divine the future. The thesis of this paper is that the United States has moved well down the path toward a corporate state. Economic power is concentrated in the hands of a relatively few supercorporations that are now moving toward a dominance in the world economy to match their position in the domestic economy. Political power has shifted heavily into the hands of the executive branch of the federal government as the positive state has taken on an increasingly significant role. These two centers of economic and political power have developed a growing symbiosis. The self-selecting elite of the supercorporation dominates the decision-making process, while lesser centers of power in labor unions

Roundtable: The progress of heterodox economics

The central theme of this session is the changing relationship between “orthodox†(i.e., mainstream, neoclassical) and “heterodox†economics, especially in the USA, during the past two or three decades. Economics is such a large and heterogeneous discipline that it cannot be characterized both briefly and accurately. Alongside the growth of formalization and mathematization, and the high degree of uniformity in the undergraduate and graduate curricula and in the leading textbooks, there are also within the subject a number of dissenting or deviant doctrinal schools, rival methodological approaches, and innovative developments designed to remedy its defects and/or overcome its limitations. Moreover, many of the outspoken criticisms of the status quo, proposed remedies, and innovations, originate with or are endorsed by prominent economists with impeccable professional credentials. Indeed, in some cases their contributions threaten the disciplines foundations and can, therefore, be considered a species of “orthodox subversion.â€

A Manifesto for Institutional Economics: Remarks upon Receiving the Veblen-Commons Award

My dictionary defines a manifesto as a public declaration of principles or intentions. This manifesto begins by briefly recalling the work of the leading institutional economists of the 1920s and 1930s, when institutional economics last reached its peak of influence. The principles developed by the Texas, Wisconsin, and Columbia institutionalists created the foundations on which an institutional economics of the future can be built. Two themes united these three centers of institutional thought: criticism of economic orthodoxy and support of government to achieve social goals. We are in a new era today, in which both the institutional framework and economic orthodoxy have changed. We need to emphasize those same themes developed by the earlier institutional economists, in four ways.

Rationality and economic behavior

This paper rejects the idea that rationality can be defined as optimization, on theoretic, empirical and methodological grounds. It proposes instead a more general theory of rational action in the context of individual growth, change and development over time, in an uncertain world of social interaction, in which choices are part of a learning process. Such a theory of economic behavior is empirically testable, which is not true of either optimization or satisficing, involves conflict and tension rather than harmony, and leads to possible government action rather than laissez-faire. It also broadens economic theory to include relationships among individual behavior, institutions and values.

Economics and the Cold War: An Inquiry into the Relationship between Ideology and Theory

The cold war between the United States and the Soviet Union-a struggle for world hegemony between two great powers-was a political, diplomatic, economic, and ideological conflict. At times it became armed conflict. At the ideological level, it was, in a sense, a bowdlerized Adam Smith versus the bastard Marxism of the Soviet Union. Soviet Marxism described Western capitalism as unfair and exploitive, controlled economically and politically by big business and big finance, and subject to economic depression and unemployment. A counter argument was needed. Although almost all areas of economics were affected by the ideological conflict between the two great powers, this paper will examine only two: Military Keynesianism and mathematical general equilibrium theory.