Institutional Law and Economics: The Legal-Economic Nexus

 In this set of pages, Veblen continues his exploration of the transformation of various cultural and religious practices as the handicraft era of industry continues to evolve.  Veblen notes that the religious move is towards autonomy and more focus on the individual self and more in line with a protestant view as opposed to a catholic view of christianity. Another major movement that occurred during the handicraft era according to Veblen in political history and thought was the creation of nation states. Veblen sees the handicraft era as supplying the necessary means for large states to exist and for warmaking to be feasible on a large scale. Veblen is at pains to note that handicraft workers did not wish to subject themselves to the coercion of the nation state but rather this was a side effect of the price system and its principle of self-help.  Why? In essence according to Veblen, princes of states could buy from a larger catchment era the needs for war and could even...

Veblens Instinct of Workmanship pg. 253-265  We continue this journey still in the chapter on the “Era of Handicraft’.  The next section of the book may be why some religious leaders did not appreciate the line of thinking that Veblen was taking.  He referred to several times about the “cult” of religion.  He also notes that religious and theological thinking dominated the nature of overall preconceptions of most people.  Further, academic inquiry was oriented around the question of “what hath God ordained” . In the handicraft era, that began to shift.  He begins with the good of “man” begins to become the preconception as opposed to the nature and needs of God. Hew rites in characteristic veblenian fashion that “the sentimental ground of conviction comes to the recognized serviceability of the ascertained facts for human use, rather than their conformity with the putative exigencies of a self centered divine will” One can see the shift that Veblen is claim...

 On page 242, we see Veblen express something like a hypothesis regarding human mastery of technology. He writes that, "The larger the available body of information of this character, and the more comprehensive and unremitting the share taken by the discipline of the machine process in the routine of daily life, therefore, the greater, other things equal, will be the rate of advance in the technological mastery of mechanical facts." Veblen is pointing to the importance of a "rate" in assessing the relative changes in a society's move from the handicraft era to the machine or mechanical era. Of "this character" to what is he referring to? Here we need to look at what he discussed above. He is referring to the fact that the machine world needs information that is not of a personal or anthropomorphic character. The faster this type of knowledge and information is stripped from the ideas or information of a community, the faster its rate of advance in the ...

  This section continues Veblen's thinking regarding the evolution of the handicraft era.  The first point he wants to make is that the machine era requires a matter of fact and mechanical approach to work and workmanship as opposed to the era of human dexterity and high touch of the handicraft era. He also notes again how the crafts persons embody the nature of the economy in that era and convince many others that human craftsmanship is the best gauge upon which to assess society. He writs that,  “to serve the needs of this machine technology, therefore, the information which accumulates must in some measure be divested of its naive personal colouring by use and wont; and the degree in which this effect is had is a measure of the degree of availability of the resulting facts for the uses of the machine technology.” (Veblen, pg. 240, 1914). From this point, we observe the shift towards the machine age and perhaps of equal importance the price age.  As Veblen notes on...

 This section starts with Veblen stating that in the handicraft era, the individual craftsman is again the dominant force in the economy.  This in turn implies three key facts that are important to Veblen.  The first key fact is that the instinct of workmanship is an important element in how humans think and act again. we can perhaps think here that the instinct of workmanship is less contaminated by other instincts in the handicraft era. Another key piece is that the "common stock of technological knowledge" is open to all and easily mastered by the individual crafts person. If we recall, Veblen wrote that this technological knowledge is always held in commons by all people but in certain eras it is dominated by a small group of individuals whereas in the handicraft era it is shared by many crafts people. The final key fact is that craft persons can easily understand technical and natural forces as they need to and machines are devised to be in accordance with the needs ...

 Chapter 11, the Era of Handicraft pg. 231-234 Veblen starts this chapter by noting that in his mind Eruope had not been characterized by large scale emperors but generally smaller fiefdoms and kingdoms unlike Asia for example. He felt that the Roman Empire was more of a southern European tradition.  Western and northern Europe developed with small scale industry and the handicraft system in the middle ages in particular.  This eventually changed over time as we have already explored as the technology changed and it became impractical for every small handicraft merchant to own capital. In the handicraft era, the habit was that price should be based on a labor theory of value but this changed to become based on freedom between buyer and seller as the capital intensive nature of industry changed. Over time, the owners became a smaller class of people and the workers, who were originally handicraft based, came under the dominion of the owners of capital.   This marked t...

  This last section ends the chapter and a discussion of the competitive system.  Veblen defines a competitive system as: Pecuniary rivalry and contention Price system Dominated by mechanic industries Standardized consumption Large scale industries Material equipment held in private hands Technological knowledge is held in a few specialized hands although it belongs to the entire community Owners of the necessary equipment control the labor force. Veblen then goes on to talk of the “captains of industry”. He asserts that these people who have in the past been technologically aware are not anymore. No longer are they aware of technology or perhaps even care to be aware of technology. The capitan does realize the need for industrial control and therefore begins to train and implement a new set of efficiency engineers. Yet, there remains an ongoing battle between workmanship and salesmanship even with these efficiency engineers. Vebeln also emphasizes here that a genetic account ...

 This post will cover pages 205-218 that make up the first half of section II - the competitive system of chapter 5. Veblen's story starts here by noting that the accumulation of goods is the prime objective of industry and how any business concern will be rated amongst its fellow firms. He also notes that business traffic and business concerns are now thought to correspond directly to the well being of the community overall. Here we turn to a key method used by Veblen.  The near past of say 100 years ago from when he was writing so late 18th and early 19th century, are the habits of thought that still guide thinking in the early 20th century.  As we will, this is a major problem for Veblen and his perception of what is in the best interest of the community's welfare. He also notes how these old patterns of thought continue to capture business interests and economists. As is typical, Veblen wants us to focus on the state of industrial arts. The handicraft phase isi what s...

We asked in the last post about the nature of change in Veblen/s system, we get a partial answer in the pages following the last section.  Veblen specifically uses the term “mutations” to talk about what has brought on this”modern technological episode”. He points to two competing habits of thought: 1) warrant of seizure by prowess and 2) prescriptive tenure. He points to the second one, prescriptive ownership as being the one that facilitates the growth of technology, trade and industry. One key point where number two dominates occurs when the interests of the “commonweal” are greater than the “fiscal interests of the crown or state”. This change will mark a substantial improvement in the mechanical arts as well. It is in this environment that the “genius” of the lower or industrial classes can excel versus those of the ruling class. He states this period can be characterized by a shift to a nearly shift to “spirit of savagery” versus the predatory barbarian culture where exploita...

  Vebeln starts this section with a discussion of those peoples of northern Europe who have apparently made the greatest advances in technological proficiency in the industrial age.  His claim is that they have not been under a filly patriarchal system and its attendant authoritative rule of government. They have been fragments in forms of local self government and have shown a  degree of skepticism towards religion for example. The important point has lees to do with the specifics of Veblen's analysis than with how he is performing a cultural analysis to understand how habits of thought or institutions are formed and altered over time that explain the economy. He writes that northern Europeans were unable for whatever reason to excel in building great artifacts or civilizations but did excel in fighting and small-scale crafts. As he writes, “their best efficiency has rather run to those bull-headed deeds of force and those mechanic arts that touch closely on the domain o...

  We  move to chapter 5 and “Ownership and the Competitive system”. Here Veblen tells us he is going to investigate the impact of the switch to the pecuniary system and its impact of workmanship and serviceability to the community. He starts by contrasting the two main classes in the pecuniary culture of the laborers and the owners. Moving from the period of free labor to ownership of capital, the laborer no longer cares about his own efficiency according to Veblen. The worker must work to earn a wage due to ownership of capital. The owners of capital are focused on pecuniary gain and the manipulation of property. As we switch from a period of free labor to owned capital, they derive gains from the business like management of this property without care or concern for other factors. They are also very focused on the field of bargaining, as Veblen writes, “it is by bargaining that their discretionary control of property takes effect and in one way or another their attention cent...

 Veblen here is continuing to help us understand how he views the shaping of human use of technology and workmanship.  A statement perhaps that best summarizes his views is, "therefore on the facts made use of in the industrial arts....and the immediate question is as to the bias or drift of the pecuniary culture as it affects the apprehension of facts serviceable for technological ends". Veblen's view is that facts are not just lying around to be picked up but are shaped by the culture and habit of thought that exist in the community at any given time. I am curious to see if Veblen ever addresses mutations or when people decide to go against the habits of thought in their community? This seems to be such an important to how change occurs and is important to so many human stories we tell. Veblen takes another stab at religion writing that, God throws a deeper shadow of ignobility over the material side of life, and makes any workmanlike preoccupation with industrial effic...

  Veblen starts by noting that in his mind the pastoral regimes have no real interest for today's civilization based on matter-of-fact knowledge.  The current society has been greatly impacted by the predatory regimes of the past such as the Roman empire.  He also writes that defenders of the predatory regime are not based on its own internal merits but rather because it is necessary to protect us from external forces. There are two parts or phases to the predatory regime.  The first is that of “lower barbarism” where war and conflict are common.  The second phase is the peaceable phase where regimes are armed but not fighting.  This is a highly “self-regarding” phase focused on ownership and property rights.  And key for Veblen, workmanship is based on factors of “personal, invidious, differential and emulative nature”. In essence, workmanship is warped to external and damaging factors and not based on “other regarding” factors as they wer ein “savage...

  This section begins with a simultaneous causality of predation creating ownership and ownership creating predation in Veblen's mind. He says regardless of which comes first there grows with ownership a sense of differentiation between people based ons status, occupations, habits and many other characteristics.  In fact, people begin to grow in self-interest and the common interest that is exemplified by the parental bent is greatly diminished.  To the extent that any interest beyond the self exists, it is based on a false patriotism towards the flag only and not in the common good for all who reside in a community. Again, Veblen notes that as private ownership, wealth and predation grow so too does the power of the priesthood grow as well.  Generally, in fact the warlike Goods become predominant as this helps build the myth around those who are the warrior and predatory class.  The monarch is then supported by the priesthood (and can also be brought down by th...

In this section, Veblen starts by casting doubt on the presumed origins of private property. The standard story according to Veblen is that farmers and ranchers began to develop better techniques and a surplus of product they had to need to store such surpluses.  Veblen doubts that the institutional innovation of private property would have developed in this manner.  Instead, he starts his story with the idea that a portion of the now growing agricultural surplus is being captured by a priestly or magical class. He uses the term “inchoate priestly class” which could mean in preparation for a criminal act. In this case, I believe he means that some of the surplus will be removed by less than legitimate means at least in Veblen's view. He also points tot he fact that the very fact that technological growth and efficiency is occurring gives rise to a warrior class who can act in a predatory manner and take what others have produced.  This gives to the institution of a predat...

  Veblen begins the next section by stating three prepositions: 1) it is difficult to say when and how institutions will change in these earlier phases of industrial organization and 2) this early phase of workmanship can be contrasted with a later phase primarily dominated by private property and 3) the two phases may overlap to a large extent. The next couple of paragraphs lay the groundwork for what Veblen views as the material limitations imposed on these earlier cultures in the development of technology via their instinct of workmanship. Each culture has the inherent ability to further develop their technology and mastery of material conditions but become constrained by the natural environment that they face and in some cases by the older institutions they inherit from elders. Veblen believes we can make several general statements about transitions between what he calls “the savage state of affairs” to a “barbarian culture” which entails pecuniary control of industry and work ...

  Chapter 4 is entitled “The Technology of the Predatory Culture”.  It starts with a strong statement that the way of life is very much based on the group's holding of a stock of knowledge and no individual can truly do their work or create without access to a pool of knowledge.  This is a reversal from some of our traditional notions that individuals create knowledge and that knowledge is then shared with the group through usage and implementation.  This idea is present through much of Veblen's writing. Veblen does recognize that some individuals are more creative or hard working or more inherently skilled but that they are still a product of the group. The next few paragraphs Veblen focuses on the differences they exist across individuals due to chance of heredity and other random factors. He also makes the point that people will often deny the role of the group in their achievements and success. He writes that, “to evade or deny something of the breadth of their i...

  Veblen ends this chapter 3 with a discussion of the borrowing of technology across cultures. He also notes that a degree of religious or magical thinking is often associated with many prehistoric cultures. Here again he notes the problem that this causes with the mechanical arts although less so with the agricultural and animal arts. He then speculated that certain cultures borrowing from others may not carry over the religious or spiritual or magical elements.  Thus unencumbered borrowing in Veblen's mind would lead to more improvements in mechanical arts as they are tied into the problems of spiritual elements and more focused on matter of fact application.  It is hard not to see in this book so far that Veblen was very much arguing that 1) technological improvement was a key to human development and growth, 2) technological development was inhibited by imbecile institutions such as religious or spiritual practices versus matter of fact viewpoints, 3) spiritual or mag...

 In this post, we are looking at about 20 pages to catch up from the week missed. Veblen starts with the claim the the rate and nature of the technology of any community is a function of the material environment and the nature of the people in that community. He at first seems to claim that different communities will have different capacities for technological change but then wavers and seems to say that the character of people to seek and make technological change is a function of the material environment as well.  He then makes a further claim that communities which are made up of “hybrid” racial groups will be better able to achieve technological change and growth.  These are clearly empirical claims that could in theory be tested. Starting on page 117, Veblen starts with a claim that all of the European communities started at a low level of savagery in terms of their institutional and technological environment and character. These communities in this state of “savager...

  In chapter 3 entitled "The Savage State of the Industrial Arts", Veblen starts with his well known notion of the community stock of technological knowledge or as he often refers to it immaterial equipment. Well before Paul Romer and his Nobel prize, Veblen understood that economic growth and change was driven by changes in tools and know-how of humanity. Veblen's approach acknowledges that individuals come up with changes in tools use and ideas but that these individuals are immersed in a social and community setting.  This is the key connection that Veblen makes.  Individuals do have agency and do act but at the same time are immersed in a deep social network or setting that drives to some extent what we think about and our decision making processes.   There are a few underlying points or details that Veblen is at pains to make in this overall discussion.He points to the fact that at times certain specialists will be brought to bear.  And yet, he still argues...