Pluralism and ILE's Approach to Economics
A. Allan Schmid was one of the co-founders of Institutional Law and Economics (ILE) from Michigan State University. He took a balanced and pluralistic view of the value and importance of the various approaches and methodologies. One of the key questions is the relationship between institutional economics and neoclassical (or so called orthodox) economics. Schmid, as we will see, took a very balanced and nuanced view of this relationship. This view helps set the stage for a more general exploration of institutional economics in future blog posts.
His writing illustrates his nuanced view of these issues. Schmid writes that "orthodox economics misses many issues of power" and "neoclassical economics has focused narrowly on that part of psychology that can be captured in the concepts of utility and preferences" (Schmid, pg. 3 and 4). At the same time, Schmid is complimentary of some of the important advances in neoclassical and welfare economics, he writes that, "welfare economics provides a number of useful concepts applicable to broad political economy and policy analysis" (Schmid, pg. 4, Property, Power and Public Choice, 1978).
Schmid's concept was to use the approaches that have been built by neoclassical and welfare economics. His words express these ideas in the best way, "welfare economists have identified a number of product characteristics that create problems in identifying efficient welfare improving allocative changes". "Those will be utilized and added to, but not for the purpose of defining barriers to optimization". Thus, we see that Schmid had a great respect for the work that had gone in orthodox economics but at the same time also felt that there was need to refine and reshape how that thinking had proceeded.
In particular, Schmid wanted analysts to focus on how the law and the choice of institutional structure resulted in performance and economic outcomes and that these outcomes were chosen and not simply the result of "natural forces". He would not simply be for or against the "market" as a potential choice of institutional structure. Rather, he would ask how the market is structured and what are the resulting outcomes of that market structure. He was against privileging one form of institutional structure, for example the so-called marker, as against other choices of structure. In this sense, the ILE school doesn't fall neatly into a left wing or right wing camp but rather forces us to focus on the difficult decisions that must be made and "whose interests count" in each choice.
His writing illustrates his nuanced view of these issues. Schmid writes that "orthodox economics misses many issues of power" and "neoclassical economics has focused narrowly on that part of psychology that can be captured in the concepts of utility and preferences" (Schmid, pg. 3 and 4). At the same time, Schmid is complimentary of some of the important advances in neoclassical and welfare economics, he writes that, "welfare economics provides a number of useful concepts applicable to broad political economy and policy analysis" (Schmid, pg. 4, Property, Power and Public Choice, 1978).
Schmid's concept was to use the approaches that have been built by neoclassical and welfare economics. His words express these ideas in the best way, "welfare economists have identified a number of product characteristics that create problems in identifying efficient welfare improving allocative changes". "Those will be utilized and added to, but not for the purpose of defining barriers to optimization". Thus, we see that Schmid had a great respect for the work that had gone in orthodox economics but at the same time also felt that there was need to refine and reshape how that thinking had proceeded.
In particular, Schmid wanted analysts to focus on how the law and the choice of institutional structure resulted in performance and economic outcomes and that these outcomes were chosen and not simply the result of "natural forces". He would not simply be for or against the "market" as a potential choice of institutional structure. Rather, he would ask how the market is structured and what are the resulting outcomes of that market structure. He was against privileging one form of institutional structure, for example the so-called marker, as against other choices of structure. In this sense, the ILE school doesn't fall neatly into a left wing or right wing camp but rather forces us to focus on the difficult decisions that must be made and "whose interests count" in each choice.
Comments
Post a Comment