Traditionally, economists have attributed consistency and rational calculation to the actions of `economic man'. In a challenge to orthodox thinking, Geoffrey Hodgson maintains that social institutions play a central and essential role in moulding preferences and guiding action: institutions are regarded as enabling action rather than merely providing constraints. From this perspective, the author takes on the `free marketeers' such as Milton Friedman and the `new institutionalism' of Oliver Williamson. He argues against the neo-classical and Austrian views of the operation of markets, offering instead a new synthesis of the work of Keynes, Veblen, Simon and Marx. Taking up the implications of his argument, Hodgson calls for a new policy perspective based on structural reform and institutional intervention.
Geoffrey Hodgson is Research Professor in Business Studies at the University of Hertfordshire.
PART 1 PRELUDE: Introduction and Outline; On Methodology and Assumptions. PART 2 A FAREWELL TO `ECONOMIC MAN': Behind Methodological Individualism; The Maximisation Hypothesis; The Rationalist Conception of Action; Action and Institutions. PART 3 ELEMENTS OF AN INSTITUTIONAL ECONOMICS: Contracts and Property Rights; Markets as Institutions; Firms and Markets; Expectations and the Limits to Keynes; Directions and Policy Implications.