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John R. Commons and Gunnar Myrdal on Institutional Economics: Their Methods of Social Reform

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Contemporary Meanings of John R. Commons’s Institutional Economics

Part of the book series: Evolutionary Economics and Social Complexity Science ((EESCS,volume 5))

Abstract

This chapter aims to present a comparative analysis of institutional economics by John R. Commons and Gunnar Myrdal. Although they met in 1930 and have been widely known for their positive practical works toward social reform from an institutional standpoint, a comparative analysis has rarely been conducted. The year 1930 was of immense significance not only in the economic history but also in their academic careers. For Commons, it signified the midpoint of his work toward the completion of Institutional Economics. The change from the 1927 manuscript to Institutional Economics shows that Commons enlarged his discussion of “reasonable value.” For Myrdal, it was a turning point at which he went from being a “theoretical economist” to becoming a “political economist.” The two men regarded the individual as an “institutional mind” by following a Veblenian view of evolutionary economics and believed that harmony of interests was not an underlying premise of economics, but needed to be created by collective actions. However, regarding the method of social reform, Commons paid attention to “law” and “reasonable value,” while Myrdal emphasized “policy” and “enlightenment” on the basis of “value premises.” Three key points are addressed to provide a more detailed explanation of this difference: utopia, harmony creation, and the meaning of institutional economics.

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Notes

  1. 1.

    Therefore, the following explanation is not easily accepted. “Myrdal’s early concern for the effect of the social environment on human behavior, his stretching of the scope of the economic viewpoint to cover all relevant factors, his concern with dynamics, and his postulate of circular causation within a social system are all so compatible with the positions of American institutionalist economics that it is hardly any wonder that Myrdal, after overcoming an early animosity, embraces and is embraced by this school” (Dykema 1986, p.157).

  2. 2.

    For more details read the following sentences, see Jackson (1990, pp.59–64).

  3. 3.

    As a Swedish economist, J. H. Åkerman met American institutionalists at Harvard University in 1919–1920. Åkerman was influenced by Mitchell’s business cycle analysis and imported his analytical skills to Sweden. For more details, see Carlson (1999). Although Hodgson (2004, p.153) believes that Åkerman further influenced Myrdal, there is no evidence of this according to the author.

  4. 4.

    Alva Myrdal was acquainted with psychologists in various places. In Minneapolis, she met the Russian sociologist P. T. Sorokin and spent time with relatives. The Myrdals bought a car after Myrdal was awarded an unexpected science prize in Sweden, and they drove it back to Washington.

  5. 5.

    As for the 1930s, there is only one item of correspondence between Commons and Myrdal, a letter from Myrdal to Commons dated 16 January, 1934. (This letter was located in “Alva och Gunnar Myrdals arkiv [Alva and Gunnar Myrdal’s Archive],” Arbetarrörelsens arkiv och bibliotek [Labour Movement Archives and Library], Stockholm, Sweden, when the author was undertaking research in 2008.) Myrdal wrote to Commons to make his acquaintance prior to going to America as a Rockefeller scholar. In the opening sentences, Myrdal asked Commons if he remembered him.

  6. 6.

    Jackson (1990, p.64) strongly believed that Myrdal was determined to introduce the Wisconsin way of thought to Sweden. Moreover, Cherry (1995) pointed out that Commons and Myrdal discussed the problem of discrimination against Negro people, in which Myrdal was involved in later years.

  7. 7.

    There is also a reel of microfilm containing Commons’s drafts from about 1928–1929 (H. L. Miller (ed.) 1986. Wisconsin Progressives, The John R. Commons Papers, Microfilm Edition, Madison, The State Historical Society of Wisconsin). However, these are not arranged into a booklet.

  8. 8.

    Commons considered ideals such as heaven, communism, anarchism, universal brotherly love, universal virtue, and universal happiness to be unattainable (Commons 1990 [1934], p.742).

  9. 9.

    Kapp (1976) explained and evaluated Myrdal’s theory of cumulative causation. He regarded it as “the core of institutional economics” (Kapp 1976, p.83). On Myrdal’s theory of cumulative causation in the history of economic thought, see Fujita (2007).

  10. 10.

    Myrdal only partly admitted the influence of Weber’s methodology as “the remote and rather indirect influence” (Myrdal 1958, p.251). In his last years, he regretted that he had not criticized Weber’s discussion on wertfrei (Andersson 1998).

  11. 11.

    On the other hand, Ramstad (1989) emphasizes a paradigmatic conflict between Dewey’s “instrumental value” and Commons’s “reasonable value.”

  12. 12.

    Myrdal (1966, p.65) demonstrated the change in reality brought about by the spread of scientific knowledge using the Wicksell-Keynes theory as historical proof. He refused to entertain a fatalistic view of history such as that of Marx.

  13. 13.

    By this “social responsibility,” Commons meant “a willingness and ability to pay taxes and to insist on a competent civil service system adequate to maintain and administer the ‘social services,’” examples of which are “free education, health protection, child labor prevention, freedom of collective action of organization, a new kind of unemployment relief without the sting of charity, and a new idea of unemployment prevention” (Commons 1990 [1934], p.844).

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Acknowledgments

This work was supported by the Japan Society for the Promotion of Science (JSPS), the KAKENHI Grant-in-Aid for Scientific Research (B) (grant number 26285048).

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  1. Nagoya City University, Nagoya, Japan

    Nanako Fujita

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  1. Graduate School of Economics, Kyoto University , Kyoto, Japan

    Hiroyuki Uni

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Fujita, N. (2017). John R. Commons and Gunnar Myrdal on Institutional Economics: Their Methods of Social Reform. In: Uni, H. (eds) Contemporary Meanings of John R. Commons’s Institutional Economics. Evolutionary Economics and Social Complexity Science, vol 5. Springer, Singapore. https://doi.org/10.1007/978-981-10-3202-8_5

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