Institutional Economics: Contributions to the Development of Holistic Economics Essays in Honor of Allan G. Gruchy

251 Pages·1980·7.12 MB·English

by  John Adams (auth.)

INSTITUTIONAL ECONOMICS
Contributions
to the Development
of Holistic Economics
Essays in Honor of
ALLAN G. GRUCHY
JOHN ADAMS
Editor
University of Maryland
GMartinus GJVijhoff Publishihg
Boston/The Hague/London
Distributors for North America:
Martinus Nijhoff Publishing
Kluwer Boston, Inc.
160 Old Derby Street
Hingham, Massachusetts 02043
Distributors outside North America:
Kluwer Academic Publishers Group
Distribution Centre
P.O. Box 322
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Library of Congress Cataloging in Publication Data
Main entry under title:
Institutional economics.
I. Institutional economics-Addresses, essays,
lectures. 2. Economic policy-Addresses, essays,
lectures. 3. Underdeveloped areas-Addresses, essays,
lectures. 4. Gruchy, Allan Garfield, 1906-
I. Gruchy, Allan Garfield, 1906- II. Adams,
John, 1938-
HB99.5.I57 330.15 79-13203
ISBN-13: 978-94-009-8738-8 e-ISBN-13: 978-94-009-8736-4
001: 10.1007/978-94-009-8736-4
Copyright © 1980 by Martinus Nijhoff Publishing
So/leover reprint of the hardcover I st edition 1980
No part of this book may be reproduced in any form by print,
photoprint, microfilm or any other means, without written
permission from the publisher.
CONTENTS
Preface v
I. ALLAN G. GRUCHY: MAN AND IDEAS 1
1 The Writings of Allan G. Gruchy 3
John Adams, The University of Maryland
2 Allan Gruchy, Neoinstitutionalist 19
H. H. Liebhafsky, The University of Texas at Austin
3 Allan Gruchy and The Association for Evolutionary
Economics 26
John Gambs, Clinton, New York
II. INSTITUTIONALISM TODAY AND TOMORROW:
THE EVOLUTION OF IDEAS 31
4 Neoinstitutionalism and the Economics of Dissent 33
Wendell Gordon, The University of Texas at Austin
5 A Reconsideration of Holistic Economics 45
Philip A. Klein, The Pennsylvania State University
6 Just Economic Institutions: Two Philosophical Views 59
Royall Brandis, The University of Illinois
iii
iv CONTENTS
7 Atomistic and Cultural Analyses in Economic
Anthropology: An Old Argument Repeated 72
Anne Mayhew, The University of Tennessee
8 The Evolution of the Institutionalist Theory of
Consumption Milton D. Lower, House Sub-Committee
on Consumer Protection and Finance 82
9 Institutionalism from a Natural Science Point of View:
An Intellectual Profile of Morris A. Copeland 105
James R. Millar, The University of Illinois
III. PLANNING: PROBLEMS OF MANAGING
THE INDUSTRIAL STATE 125
10 Human Capital and Economic Progress in Eastern
Europe: A Veblen-Ayres Perspective 127
Anthony Scaperlanda, Northern Illinois University
11 Income Distribution in the Welfare State:
Consequences of a Loss of Consensus in Britain 139
Walter C. Neale, The University of Tennessee
12 Sources and Symptoms of Monetary Instability 153
Thomas Havrilesky, Duke University
13 Institutionalism and Microanalytic Simulation of
Economic Systems 172
Robert L. Bennett, The University of Maryland
IV. PLANNING AND DEVELOPMENT
IN THE THIRD WORLD 181
14 Technology, Development, and Resources:
Theory and Problem Solving in a Worldwide Context 183
Thomas De Gregori, The University of Houston
15 Tax Policies toward Multinational Corporations
in Developing Asian Countries 196
Edward Van Roy, ESCAP, United Nations, Bangkok
16 Economic Policy Making and the Structures of
Corporatism in Latin America 217
William Glade, The University of Texas at Austin
17 A Holistic Approach to Underdevelopment 239
James H. Street, Rutgers University
PREFACE
Allan Garfield Gruchy, now Professor Emeritus at The University of
Maryland, retired in 1977 from full-time duty. That he continued to teach
his graduate seminar in institutional economics and simply accelerated work
on a major study of planning in world economies is only more evidence of
the energy and concern he has brought to his teaching and writing through
out his career. His undergraduate classes in comparative economic systems
and modern economic thought, and his two graduate courses on institu
tionalism, were always among the most popular in the department. They
were firmly grounded in a perspective that opened the minds of hundreds of
students to new avenues of thought and to different modes of economic
organization. Returning students who report they quickly forgot the arid
intricacies of intermediate theory courses nonetheless recall Allan's verbal
thrusts at orthodox positions and at the shortcomings of American eco
nomic institutions. Allan worked for many years with Dudley Dillard to
construct Maryland's present department and served ably as acting
chairman in 1976-77 after Dudley relinquished the chairmanship. His
impatient wit enlivened faculty meetings and rendered them expeditious in
the extreme, and it was welcomed by all except those with a penchant for
pontification.
Allan is best known among economists for his elucidation of institutional
and neoinstitutional thought and for his comparative analysis of planning
v
vi PREFACE
and growth. His Modern Economic Thought (1947/1967) and Contempo
rary Economic Thought (1972) have long been touchstones for those seek··
ing expositions of heterodox thought. Likewise, his Comparative Economic
Systems (Second Edition, 1977) has been a standard text for over a decade.
Allan's professional impact has not been limited, however, to the written
word. He was the early moving force behind The Association for Evolution
ary Economics and was that group's president in 1968.
This book honors Allan Gruchy and his career. To many of its contri
butors he has been a stimulus, friend, and ally. It would be remiss not to
report, as editor, the enthusiasm that the sixteen authors expressed for this
project. Respect and affection motivated them to write essays of the first
quality and made the task of editing remarkably easy.
The contributions are grouped into four sections. The first is devoted to
Allan's writings and professional activities. The other three contain clusters
of papers touching on each of the themes that run with enormous con
sistency right through the whole of his lifetime work as an economist: the
evolution of institutionalist ideas, planning in modern industrial economies,
and planning and growth in the developing world. They are all written from
what Allan calls the holistic viewpoint; that is, they treat economic ideas
and problems as part of a process in which social, political, and economic
factors intermingle in an interdependent fashion.
The collection as a whole also embodies one of Allan's major precepts:
that we must always be concerned with where we are going-in our thought
and in our actions. It is often said by those who should know better that
institutionalism is dead or dying or that its ideas have been absorbed into
the mainstream. None of the authors in this volume thinks of himself as
dead or as having been absorbed. Rather, they regard themselves as very
much alive and still ready to fight. They all understand where they are going
and the tasks that lie just ahead. There is a living institutional tradition, and
that tradition is healthy, vigorous, and perhaps even expanding. There are
institutionalists who are writing of the same problems about which the
orthodox are writing, but from their own vantage point. The papers
assembled in the book attest to these things, and they indicate that insti
tutionalism-holistic economics-has a future and that. institutionalists
have contributions to make to the solutions of today's economic problems.
Dudley Dillard and Wendell Gordon were extremely helpful in the initial
phases of this undertaking. The contributors were all cooperative in meeting
their deadlines and otherwise making the editorial job a pleasure. My
thanks to all. Mrs. Edith Van Ness assisted most helpfully with corre
spondence and with preparation of copy. My thanks to her.
John Adams
I
ALLAN G. GRUCHY
Man and Ideas
1
THE WRITINGS OF
ALLAN G. GRUCHY
John Adams
It is rare that one sits down to read the entire range of another's work. I
have done this twice, or two-and-a-half times, with Jane Austen, once plus
odds and ends with Hemingway, Henry James (with some cheating), and a
few other serious writers, and with a legion of authors of mysteries,
thrillers, romances, and what Graham Green called entertainments. The
only economist whose writings I have read all of in a deliberate, concen
trated way is Allan Gruchy. I recommend the exercise, at least in this case,
because I have come away with enormous respect for the continuity and
unity of his writing and for the consistency with which he has held to and
argued for a set of profoundly important ideas in the fields of economic
thought, economic systems, and national planning. It is obvious that
Gruchy seized in the late 1930s upon two giant ideas, one stemming from
the horrors of the Great Depression and the other from the strong contem
poraneous intellectual current favoring active government. The first was
that modern capitalist economies had ceased to function - if they ever
had - in the automatic self-adjusting fashion described by the orthodox
tradition of economics. The second was a perception of an underlying unity
in the writings of the major American institutionalists. Both real
izations - one about the nature of the economy, the other about the char-
3
4 THE WRITINGS OF ALLAN G. GRUCHY
acter of economic thought - made it possible to build chains of argument
leading ineluctably to one conclusion: the need for national economic
planning. The evolution of the economic system and the evolution of ideas
pointed in an identical direction.
To date, the systematic development and presentation of these two ideas
and the conclusion to which they lead has generated two books on institu
tional thought and one in the field of comparative economic systems.
Modern Economic Thought appeared in 1947 and was reprinted in 1967,
Contemporary Economic Thought was published in 1974 and editions of
Comparative Economic Systems came out in 1966 an 1977.1
Further, the early study of banking in Virginia (1937) stands as a mono
graphic effort to examine relations between the state government and a part
of the economy everywhere congenitally unable to manage itself. With the
2
stream of related journal articles and book reviews, the total number of
pages Gruchy has in print amounts to over 2,500, not counting separate
editions. A study of national planning - another book - will soon appear
and a new book on institutional economics is also planned. Gruchy has thus
comprehensively surveyed institutional thought, examined national eco
nomic performances in a comparative perspective, and, so to speak, will
close the cycle of his argument with a volume on national planning. Over
four decades have been devoted to this task: to elaborate the vision that was
there in more or less full form by the end of the decade of the 1930s. Vogues
have come and gone - even Keynesian thought is being redefined and
merged into older convention-but Gruchy has continued to argue with pa
tient consistency that contemporary national economies cannot be left to
manage themselves, or measures of their performance - growth rates,
inflation, unemployment, and others - will prove popularly unacceptable.
Also, he has made explicit the links of a second generation of institutional
ists - the neoinstitutionalists - to the earlier group. Thus, remarkable
continuity and coherency mark Gruchy's career as an economist and dis
tinguish it from those of economists who bounce opportunistically from fad
to fad, from topical issue to topical issue, and from one palliative to the
next.
I have no intention of undertaking a full review and assessment of
Gruchy's writings. Most of those who will read these remarks are at least as
familiar with them as am I, and have been for a longer time. For the uniniti
ated his works speak for themselves: they are not arcane and they are not
plagued with the abstruseness of much modern technical economics. The
references I list can be pursued as one's interests dictate. The scope of this
essay is deliberately limited: it is not supposed to serve as a comprehensive
survey and assessment of Gruchy's whole corpus of work; rather, what I
will do is review the handling of certain key themes and introduce the con-
THE WRITINGS OF ALLAN G. GRUCHY 5
tributions that constitute this collection. I am thus not essaying to do a
"Gruchy" on Gruchy, to add an eleventh review of an institutionalist's
thought to his ten. (Or perhaps one could say a twelfth, if Millar's con
tributed essay on Copeland is numbered eleven.) It is significant that
Gruchy does not need a Gruchy to be understood. Commons without a
crutch (or a Liebhafsky lighting a fire under one) is not easily grasped by the
neophyte; Veblen can go out of his way to say what he does not mean (the
best example perhaps is "instinct," and there are paragraphs and pages,
too); reading Ayres without coming into contact with someone in the oral
tradition does not seem to do much for people. But Gruchy's strategy of
argumentation - and it is clearly conscious - is to be plain and direct and
to work out the lines of reasoning as unambiguously as possible. He needs
no pulling guard, no explicator.
Gruchy introduced the term "holistic" to describe one of the unique and
contrasting features of institutionalism: its striving to look at all aspects of
reality - not just at the narrowly economic - and to see them as an inter
related whole. It is worth saying, before going on to deal with the various
facets of Gruchy's writings, that his body of work is itself holistic. To look
at the work on institutional thought apart from the comparative systems
book is to miss a portion of the argument. His writings are also unified over
time. Modern Economic Thought, which covers the older generation of
institutionalists (Veblen, Commons, Mitchell, Clark, Tugwell, Means), and
Contemporary Economic Thought, which reviews largely postwar develop
ments in neoinstitutionalist thought (Ayres, Galbraith, Myrdal, Colm),
constitute, in effect, a two-volume set, separated by twenty-seven years. An
early important paper, which appeared in the Southern Economic Journal
of 1939, lays out the consensus in much institutional thought in favor of
planning.' This precursive article forms a tandem with "Institutionalism,
Planning, and the Current Crisis," which came out in the Journal of
Economic Issues in 1977, thirty-eight years afterwards. 4
Those who bounce from problem to problem in economics - who
dabble here and there - might wonder at the discipline and concentration
required by Gruchy's holistic consistency. I believe it is important that this
be perceived as a chosen path, reflecting an obviously early and deep-seated
judgment about the ultimate valuation of one's career as an economist. As
might be expected, Gruchy is sparing of his criticisms of institutionalist
writers. Of our great god Veblen, however, he says:
No careful reader of Veblen's essays and treatises can lay them down without
feeling that there are certain very grave deficiencies in his work. The elements of
his system of economic thought for the interpretation of twentieth-century eco
nomic enterprise are scattered over many essays and volumes .... If he had