The aim of this book is to re-establish custom in economics. Current economic theorizing largely neglects the forces of custom that underpin market exchange. Economic sociologists have stressed this repeatedly by referring to the 'embeddedness' of all kinds of economic processes. However, while it is true that market transactions hinge critically on elements of custom, economic processes shape shape custom in turn. This other causal direction needs more attention
than it has hitherto received. The way modern institutional economics has developed points to the same deficiency. Institutional economics initially tried to analyse economic institutions as arising from market processes and competition while avoiding reference to all elements of custom, but it became
increasingly clear that the answers so obtained were critically dependent on tacit assumptions about the customary infrastructure. One aim of the book is to provide the necessary link between customary elements and market processes.
A current strand of thought, notably originating with game theory, has tried to understand the emergence of customs by interpreting them as routines that have been adopted because they were competitively successful. This approach takes customs essentially as conventions that solve coordination problems. It is driven by the economic paradigm that interprets behaviour as fully reducible to the interplay of (given) preferences and constraints while neglecting the direct motivational impact of
custom. A second aim of the book is thus to systematically harmonize the motivational significance of custom with institutional theorizing in a systematic way. The re-establishment of custom in economics will provide foundations for institutional thinking and will help in reducing the arbitrariness of
Ekkehart Schlicht is Professor Emeritus of Economics at the University of Munich. He studied at the universities of Kiel and Regensburg, where he obtained his "Diplom-Volkswirt" (1969) and his doctorate (1971). Previous positions include professorships at the universities of Bielefeld (1976-80) and Darmstadt (1980-93), fellowships at the Institute for Advanced Study in Princeton (1985-86) and the Institute for Advanced Study in Berlin (1997-98), and visiting professorships in Europe, the United States, and Australia. From 1994 to 1999 he edited the Journal of Institutional and Theoretical Economics. He published on many topics, including labour economics, institutional economics, and methods. His current research focuses on labour economics and institutional economics.