The Old and the New Institutionalism: Can Bridges Be Built?
The old and the new institutionalism are both programs of research that arose out of a concern with the almost complete lack of consideration given to institutions in conventional neoclassical economics. That institutions matter in shaping economic behavior and economic performance is a central tenet of both the old and the new institutionalism, as is the recognition that institutions themselves change over time and often respond to economic factors. This shared concern with incorporating institutions within economics is not, however, reflected in a common approach to the problem. For old institutionalists, the neoclassical approach with its emphasis on the rational economic actor is to be abandoned in favor of one that places economic behavior in its cultural context. For new institutionalists, or at least a good number of them,1 the standard neoclassical approach based on the rational choice model is to be extended, perhaps modified, but not abandoned. In previous discussions of old and new institutionalism, much has been made of this basic difference. Mayhew [1989] contrasts the "mankind as a product of culture" focus of old institutionalists with the "mankind as rational chooser" focus of the new. Hodgson [1993] claims the new institutionalism takes the self-interested, maximizing individual as a given though this is exactly what was rejected by Veblen and other old institutionalists. Eggertsson [1990] makes a similar point in his survey of what he calls "neo-institutional" economics. Many other points of contrast