Much of this discussion comes from the Methods and Hume and Peirce chapters in Institutional Economics. (pages 80-157)
Commons spent a significant amount of time addressing idealism versus investigation. Commons argued that previous theories attempted were based on idealism in creating harmony out of conflict of interests. His examples were that individualistic theories based their addressing conflicts of interest through private property and collective economics such as Marxism based on collective property.
The problem in Commons view is that these theories are based on ideals or some state of nirvana and not an investigation of the reality on the ground. Commons then discusses that there are thousands of natural experiments occurring in collective action to create order not a harmony out of conflict of interest. Another manner in which Commons classifies various schools is by a summary of their of how to address conflicts:
Do nothing schools
Exploitation schools
Pragmatic schools
Commons believes that while we can build off the first two schools of thought, the best approach remains the pragmatic school. A key focus is on investigation versus simply relying on ideals and blackboards to address problems related to conflict of interest. Commons is relying on David Hume, C.S Peirce and John Dewey and an overall understanding of pragmatism.
Hume gives us that belief is important as the mind actively organizes and reorganizes impressions about the external world in contrast to the view of John Locke where the internal mind is simply a mirror of the external reality. But in Hume, this process is biased at the individual level. Pierce brings forward the idea that it is a common or social understanding that can be agreed upon where we next move to go beyond the individual bias of Hume. Commons translates Piece into the idea of custom as opposed to habit. Haibt is related to Hume and individual perceptions whereas custom is a form of social compulsion based on a social understanding of a situation and expectations of others actors behavior. But with Peirce, we are stuck with a physical science view of the world and thuse Commons turns to John Dewy. Dewey talks about the desirable social consequences as the test of truth of an idea. Combining all three of them, institutional economics fro Commons is the “its subject matter is the whole concern of which individuals are members and the activities investigated are their transactions as governed by an entirely different, not a law of nature, but a working rule for the time being of collective action”. (Commons, pg. 157, 1934)
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