Paul D. Bush

The Methodology of Institutional Economics: A Pragmatic Instrumentalist Perspective

Institutionalists engage in a very active, ongoing dialogue about methodological issues. Their preoccupation with methodology is motivated in part by their critique of mainstream economics. Since institutionalists attempt to steer economic inquiry in a direction quite different from that followed by mainstream economists, the institutionalist critique of neoclassical thought requires that institutionalists be concerned with methodological issues. But there is a more profound reason for the institutionalist emphasis on methodological discourse. It arises out of the influence of the philosophy of pragmatism on institutionalist methodology. A fundamental tenet of pragmatism is that all propositions are subject to revision as theoretical and empirical inquiry moves forward. In order to remain alert to the possibility that such revisions may be required at any given stage of inquiry, methodology must be under constant scrutiny. Consequently, institutionalists are as interested in methodological issues arising in their own work as they are in those arising in their critique of orthodoxy.

The Pragmatic Instrumentalist Perspective on the Theory of Institutional Change

The purpose of this paper is to explore certain implications of John Deweys pragmatic instrumentalist philosophy for an understanding of the meaning and significance of institutional change.1 It will be argued that the theory of institutional change that has emerged in the works of Clarence E. Ayres, J. Fagg Foster, and Marc R. Tool (as interpreted and extended by the present writer) manifests both methodological and substantive features uniquely grounded in Deweys philosophy. While this thesis is generally accepted in the institutionalist literature, there remains a certain vagueness, if not disagreement, with respect to the powerful normative implications such a theory entails both in its methodology and in its substantive analysis. Recent criticisms by prominent institutionalists of Tools social value principle are indicative of the confusion that continues to plague a straightforward application of pragmatic instrumentalist philosophy to the theory of institutional change.2 Although the debate over Tools social value principle is only one manifestation of this confusion, the following discussion will attempt to demonstrate how his social value principle emerges from a pragrnatic instrumentalist approach to institutional change.