------ EH.NET BOOK REVIEW ------
Title: The Institutionalist Movement in American Economics, 1918-1947:
Science and Social Control

Published by EH.NET (September 2011)

Malcolm Rutherford, /The Institutionalist Movement in American Economics,
1918-1947: Science and Social Control/. New York: Cambridge University Press,
2011. xii + 410 pp. $95 (hardcover), ISBN: 978-1-107-00699-7.

Reviewed for EH.NET by Robert Van Horn, Department of Economics, University
of Rhode Island, and Richard McIntyre, Honors Program and Department of
Economics, University of Rhode Island.

Malcolm Rutherford has written a superb book.  Not only is it well written,
but it also makes a number of path-breaking contributions to the history of
economics that are based on meticulous archival work.  The number of
archives Rutherford delved into is astounding, and his archival work provides
a solid base of support for an account that departs from much of the previous
wisdom about the institutionalists.

Rutherford provides a detailed picture of the importance of institutionalism
in American economics from 1918 to 1947, principally focusing on the interwar
years.  1918 marks the year of Walter Hamilton’s original institutionalist
manifesto, and 1947 is when major universities resumed hiring academic
economists following World War II and manifestly hired legions of
non-institutionalist economists.  This is also the year of the Cowles
Commission’s salvo on the National Bureau of Economic Research (NBER), and
the publication of Paul Samuelson’s /Foundations of Economic Analysis/.
Although Rutherford’s title suggests that he confines his analysis to the
period 1918-1947, his work focuses on the factors leading to the development
of institutional economics, stretching as far back as the 1880s.  Moreover,
he chronicles the changing development of institutionalism in the post-World
War II period.

Rutherford demonstrates that institutional economics should be understood as
a “movement” that shared core ideas and beliefs and as a network of
people with a self-conscious unity, and Rutherford marvelously shows how the
self-conscious unity of this network shaped institutionalist economics and
American economics more generally in the first half of the twentieth
century.  By doing so, Rutherford betters the previous standard references
on the history of institutionalist thought.  For example, Yuval Yonay, in
/The Struggle over the Soul of Economics/, promised a network analysis of
institutional thought, but did not deliver one. Rutherford does, and we now
have a more complete picture of the internal dynamics of the institutional
movement.  Rutherford also demonstrates that Joseph Dorfman’s claim that
Veblen, Mitchell and Commons were the founders of institutionalism was a
post-hoc reconstruction, and certainly not how institutionalists understood
their own movement in its heyday.

Rutherford’s book has four parts.  Part one provides an introduction to
the institutionalist movement.  Here Rutherford debunks a number of standard
contentions about the history of institutional economics.   First, he
challenges the notion that institutional economics was only a critique of
neoclassical economics and that institutional economics disappeared because
it did not make any substantial contributions to economics.  Second,
Rutherford successfully assails the idea that institutional economics was
just a set of facts and bereft of theory.  Third, Rutherford dispels the
notion that institutional economics was Veblenian; he shows that Veblen was
an intellectual inspiration to the movement but not central to the networking
process.  Part two explores the role of two oft-overlooked
institutionalists, Walter Hamilton and Morris A. Copeland, thereby elevating
two figures often ignored in the history of institutional economics.
Rutherford argues that even though Hamilton favored qualitative and Copeland
quantitative research methods, they shared “the same set of overall
ideals” and “their careers interlace” (p. 349).  Part three examines
the different centers of institutional economics in the interwar years.
Rutherford especially focuses on the University of Chicago, Amherst, the
Brookings Graduate School, Wisconsin, Columbia, and NBER and explores the
interconnectedness of these research centers.  Part four explores the
challenges and changes to institutional economics after its interwar heyday
as well as the reasons for its decline.  Rutherford’s exploration
includes: the rise of Keynesian economics, the failures within key
institutionalist research programs, the loss of interdisciplinary
connections, the new concepts of “scientific” work in economics, and the
development of econometrics.

Like any good book, Rutherford’s book raises questions for further
research.  First, Rutherford suggests that Chicago was one of the earliest
stomping grounds for fledgling institutionalists -- he points out the spate
of hiring in the 1900s and 1910s that resulted in a number of
institutionalists migrating to Chicago, including Thorstein Veblen, Robert
Hoxie, Walter Hamilton, John M. Clark, and Harold Moulton.  Even though
Rutherford points out that many of the key players vital for institutional
economics were at Chicago together prior to 1918, he does not offer an
explanation of why they left Chicago before the institutionalist movement
coalesced and why the institutionalist movement did not emerge earlier due to
the concentration of institutionalists at Chicago.  Moreover, he does not
explain why Chicago hired relatively neoclassical economists to replace the
institutionalists who left (or committed suicide in Hoxie’s case).
Second, although Rutherford provides a good summary of the factors that led
to the decline of institutional economics, his analysis feels incomplete.
It would be useful to know more about the relative importance of these
factors, and it would probably be useful to contrast institutional economics
with other movements in economics that became successful.  Perhaps another
reason for the decline of institutionalism is that it lacked a good
synthesizer a la Alfred Marshall or Paul Samuelson. Because institutionalism
was a movement (as opposed to a school of thought), such a synthesis may not
have been possible, but this question deserves further exploration in our
view.

With an unprecedented balanced engagement of archival and secondary sources,
Rutherford provides the definitive history of institutional economics from
1918 to 1947.  It will be many years before anyone can provide a more
compelling history of institutional economics than Rutherford has.   Bravo.


Robert Van Horn is co-editor of /Building Chicago Economics/ (Cambridge
University Press, forthcoming 2011) and has recently published articles in
/History of Political Economy/ and /Journal of the History of the Behavioral
Sciences.
/
Richard McIntyre is the author of /Are Worker Rights Human Rights?/
(University of Michigan Press, 2008).

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Geographic Location: North America
Subject: History of Economic Thought; Methodology
Time: 20th Century: Pre WWII, 20th Century: WWII and post-WWII