Institutional Law and Economics: The Legal-Economic Nexus

  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...