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.

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Some Basics

Commons most cited article is "Institutional Economics" from the American Economic Review of December 1931. He defines an institution as "collective action in control, liberation and expansion of individual action". Many of us imagine that collective action of any group against an individual is inherently negative or restrictive. In Commons view however, collective action can both restrict or liberate individuals. In fact, in any transaction or relationship between two individuals, the rules of the collective may liberate one party and restrict the other. This is a critical point to understand. Traditional economics views the individual as being set against nature or the market and not any other individual. Any rules are by definition restrictive in this view of the world. In the Commons view of the world, the rules that help restrict one party may provide a liberation or expansion of activity for another party. This begins to help u...

Commons Futurity pg.526-528

Commons Futurity VII. The Margin for Profit pg 526-528 In this section, Commons turns to thinking about a specific aspect of modern banker capitalism addressing the question of profit's role in the economy. He starts with some terminology regarding profit share - the share of national income that goes to profit earners and the profit margin - the dynamic aspect that drives a going concern forward. We then move into another set of terms that are rate of profit and profit yield. The rate of profit is related to the par value of stock and yield is related to market value of stock or outstanding equity. The social question to Commons is what the role of profit in keeping the overall economy and does society or community pay too much or too little for this service. Economists have long thought about the role of profits in driving the economy up or down. Commons believes there are profit share theories and profit margin theories as two diction categories in economic thinking...

Commons Futurity pg. 510-526 VI. The Transactional System of Money and Value

VI. The Transactional System of Money and Value The overall objective of this section is to understand money and its role and relationship to economic value in the institutional economics of John R. Commons. Commons writes that, "It is because Value is a two-dimensional concept (omitting futurity)—with two different causations, the one being the scarcity-value, or price, determined by supply and demand, the other being the greater or smaller output of use-value which will be created in the labor process that follows the transaction. " (Commons, pg. 517, 1934). The point here is again Commons is fighting against what he observes are the limits of other definitions of economic value such as simply individual utility or the classical case of exchange value only. In this section, Commons make an important move on pages 520 and 521. He states that for a thing to be objective it needs to be independent of any objective will as opposed to other competing definitions. He will ...

A Discourse on John R Commons

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