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MacLeod and Commons

Henry Dunnings MacLeod was an important figure in the work of John R. Commons. He is cited particularly throughout chapter nine, Futurity, of the book Institutional Economics.  MacLeod was a banker, lawyer and a sort of economist who was the first to think about credit and money.  The important distinction that Macleaod was between the physical thing and the ownership of the thing.  He eliminated the problem of two meaning in economics a thing and the ownership of a thing.  He also believed that exchangeability of things that matters to economics. We will explore further the ideas of Macleod and Commons over the next few blog posts.

Business versus industry

Throughout the series “Institutional Economics”  Commons emphasizes the difference between industry and business.  He even quotes Thorstein Veblen in this regard with “business activities are lucrative without necessarily being serviceable to the community” (pg. 663, Commons).  Here we can note that is not automatic but perhaps probably that business can be lucrative without being socially lucrative.  This was of course noted earlier by other figures in history.  It is major theme of Commons in his magnum opus. Further in various parts of the nearby text, he writes that business is the abilit to withhold supply and industry is the abilit to be productive or increased supply.  This is repeated so often throughout institutional economics that it must be noted as a major theme of the book.  He also writes of Vebln that, “intangible assets are pecuniary privileges of business arising only from control of supply and power to withhold supply if prices are ...

Working Rules and Commons

On page 134 of the Legal Foundations of Capitalism (section VI), Commons focuses on the idea of working rules.  He first states that the human will operates within certain limits and within these limits there is a degree of opportunity within which we can operate.  Working rules are defined as "collective will", "social mind" or " government of laws and not men".  Commons acknowledges  that there are other rules including mechanism and scarcity.  Mechanism and scarcity operate through physics and the reality of a limited amount of resources between humans and the natural world.  Working rules is the relationship between human beings not mediated by mechanism and scarcity. Commons is critical of the idea that we start with individual liberty and freedom that are pre-existing rights and then move towards what rules will respect these pre-existing rights from nature. Instead. Commons finds that the working rules are established by human beings to mediate co...

Max Weber, Ideal Types and Commons

In the chapter Reasonable Value in Institutional Economics, Commons spends a significant amount of time on thinking about the sociologist Max Weber.   One point emphasized is Weber being interpreted by  Commons as saying that, "it converts the whole process of economic theorizing from a theory in the older sense of the logical consistency of reality, to a mere methodology of constructing intellectual tools to be used in investigation." Here we see a very clear statement of how Commons views the role of abstractions and general principles that are set outside of the empirical reality.  I don't believe commons uses the word "mere" to trivialize the statement but rather as an expression that theory is not meant to reflect reality per se, as it might in the physical or biological sciences, but rather it is a mental model for the systemic understanding of goings on in the world. Weber talks about ethical ideals, some of which are attainable and unattainable.  Commo...

ch. 8 efficiency and scarcity

Having just finished the almost 200 pages of ch. 8 of institutional economics, it seems like a good time for a few reflections. This enormous chapter with a lot in it, some of which I discussed earlier.  The perhaps key point that Commons is trying to make is that economists have gotten their thinking very mixed up on some issues related to use value and scarcity value and efficiency and scarcity which have hampered overall economic thinking. Summarizing the 200 pages, it seems to come down to that there is an engineering economy and a proprietary economy.  The engineering economy way of thinking is based on the creation of wealth, labor power and managerial transactions, power over nature, human to nature relationships, output/input ratios and efficiency.  This is the economy as thought of by Ricardo, Marx and Taylor of scientific engineering.  It is based on the maximizing output and overcoming the difficulties of nature. The proprietary economy, on the other h...

commons and theories of the business enterprise from Tae Hee Jo of SUNY Buffalo

Tae Hee Jo, from SUNY Buffalolo, just published a working paper on the institutionalist theory of business enterprises. It can be found at: https://mpra.ub.uni-muenchen.de/84036/1/MPRA_paper_84036.pdf. In the paper Jo covers some thoughts on Common's contributions.  Starting on page 4, Jo discusses Commons idea of a going concern.  According to Jo, Commons view is of a business as an ongoing concern facing the conflicting needs between employers and employees and the working rules and  addressing of these conflicts over time.  The good will value of the business occurs as long as the working rules intermediate between conflicts and ensure the ongoing operation of the concern. An important point of commonality between Commons and Veblen is that the business is a social enterprise and not simply a single production function as Jo writes. Jo also writes that, "ITBE pioneered by Commons and Veblen should never remain fixed because capitalism and its master institut...

turning to current policy from moden Commons scholar

Charles Whalen is a well known commons scholar who has now decided to throw his hat in the ring for the 23rd congressional district of New York in the Ithaca area.  While we don't endorse candidates here, it is important to hear about how people are translating some of commons thinking into policy today. We will highlight other ideas across the political spectrum across the rest of the campaign. see this link to hear more about Charles thinking...... https://www.facebook.com/Whalen23NY/posts/409427929477414

Schmid, Commons and Transactional Types

The various types of transactions are crucial to a Commons-Schmid type approach to institutional economics.  Here we will briefly explore the various types of transactions proposed by Schmid and Commons. Schmid 1. Bargaining Transactions - a mutual consent of transfer of property rights between legal equals; this could include individuals or groups of individuals; there are crucial issues regarding who has what power or authority relative to the other parties 2. Administrative Transactions - a superior and inferior relationship; position of superiority can be a public administrator, legislator, police officers or a private owner; can be confusing because it can change rights but also be subject to rights as well; may be between two parties but for the benefit of third party; source of authority can be be a private contract or public law 3. Status and Grant Transactions -  there is no bid or command, a one way movement of rights based on habit or benevolence of the giver...

A First Idea from Schmid. Knowledge, psychology and power

Schmid believed that institutional analysis must include knowledge, psychology and power.  He took some of these original ideas from Vilifredo Paerto's writing.  Schmid states that neoclassical economics has been very narrowly focused on knowledge via knowing cost and productions functions and psychology via use of the consumer utility function. He states that power is rarely if ever addressed in neoclassical economics and the only real issue of concern is monopoly power and concentration of the ownership of resources.  Schmid believes that human interdedpendence is much richer and more interconnected that simply monopoly power.  his analysis will focus on the issue of power because it has been neglected in traditional analysis.  Schmid also wants to expand our understanding of how knowledge and psychology are used in analysis. He writes that "rights and rules govern access to and use of power" (pg. 6)

Looking at A. Allan Schmid's Work ....and Commons

Today a diversion from John R. Commons.  Al Schmid was a student at the University of Wisconsin Dept. of Agricultural Economics  and thus has a direct intellectual tie to Commons.  Al certainly grew up in the Commonsonian tradition but branched off and developed his own unique approach to institutional economics. I am going to devote some of the following entires to schmid's work via his most important book "Property, Power and Public Choice". I will also tie in my understanding of the relationship between Commons and Schmid.

A Review of the Economics of the Lost Cause by J. Dennis Chasse

Chasse starts with a review of monetary issues in the 1920's and 1930's.  The conventional wisdom at the time was that in times of panic or economic crisis a deflationary period was necessary to wring the system clean of problems.  Commons and others such as Fisher and Keynes were associated with a counter movement known as stable money. In the 1920's Commons, better known as a labor economist, was thrust into the monetary arena serving as President of the National Monetary Association.  Commons recognized that monetary issues were critical to the future of labor and he needed to turn his attention to these issues as argued by Chasse. One interesting point in Chasse's article was that commons was an originator of the idea that expectations play an important role in firm behavior related to monetary variables such as interest rates.  This is reflected in his concept of futurity. In 1926, Commons was directly drawn into federal legislation regarding stable money....

A review of Dutraive and Theret's article on Commons, Money and Sovereignty

A summary and review of Veronique Dutraive and Bruno Theret's article in the Journal of Economic Issues (March 2017) entitled, "Two Models of the Relationship between Money and Sovereignty: An Interpretation based on John R. Commons Institutionalism". This article was very enlightening and expanded the way of thinking about Commons using his ideas of sovereignty and money, which the authors point out he did not directly discuss himself or at least connect these ideas directly.  They take his notions of sovereignty from his articles in the early twentieth century and his ideas on money from his book Institutional Economics.  The authors rightly point out that Commons is less well known for his work on money.  The result of this analysis is an very useful framework for thinking about money in the Commons framework and how his ideas relate to modern money theory through folks like Randall Wray. Commons developed several ideas related to sovereignty.  His concep...