Institutional perspectives on work
A man who is not interested in his work, and does not recognise in it either beauty or utility, is degraded by that work, whether he knows it or not.
(J.A. Hobson 1914)
The study of work and labour occupied a central position in American institutional economics. Beginning with writers such as Richard T. Ely in the 1880s and continuing with John R. Commons and others in the early decades of the twentieth century, the institutional approach to labour research assumed a prominent and inﬂuential position in economic debates. Early institutional writers were not marginal ﬁgures within economics. Ely, for example, was a founder of the American Economic Association. These writers published in leading economic journals and also held posts in the economics departments of high proﬁle American universities (see McNulty 1980). Further, they exerted an inﬂuence over policy making: Commons and his followers helped to shape the New Deal in America during the 1930s. Institutionalism was very much an American venture. However, it drew on
a wide set of sources, including the German Historical School and the work of the Webbs in Britain. Although there were diﬀerences between the contributions of individual institutional economists, a common theme in their work was the critique of neoclassical economics. Thorstein Veblen and John R. Commons, as founders of American institutional economics, argued that neoclassical theory was an obstacle to a proper understanding of the economy and the relations therein. Particular dissent was shown towards the conception of work and labour contained in neoclassicism. Veblen (1898) criticised the neoclassical assumption of the marginal disutility of labour. He argued that this assumption was not explained by neoclassical economists. Commons, on the other hand, highlighted the deﬁciencies in the ‘commodity theory of labour’ (Commons 1919: 17). He accused neoclassical economists
of treating labour as a homogenous input into production and of neglecting the direct impact of work on the well-being of workers. Institutional economics eﬀectively created ‘labour economics’ (McNulty
1980; Boyer and Smith 2001). This term entered the lexicon of economics in the mid-1920s (Solomon Blum’s 1925 book was the ﬁrst to bear it as its title). The emergence of labour economics partly reﬂected on the state of neoclassical economics at the time, where the study of work and labour was seen as increasingly inconsequential to economic theory as such. Early institutional labour economists positioned themselves on terrain that had been vacated by neoclassical economists. Their contribution, importantly, reached out to researchers beyond economics. For example, institutional labour economics was a strong inﬂuence on the development of ideas in the subject of industrial relations. This chapter considers the contribution of American institutional eco-
nomics to the analysis of work and labour. It begins by examining the interventions of early institutional labour economists, including Ely and Commons. It then moves on to consider the work of Veblen. Veblen is shown to have provided a novel challenge to the ‘work as bad’ thesis, as articulated in conventional economics. On the one hand, Veblen argued that people possessed an ‘instinct of workmanship’: he refuted the idea that people were born lazy. Yet, on the other hand, he suggested that people had been led to acquire an aversion to work by the prevailing ‘pecuniary culture’ in society. Veblen’s contribution is assessed critically in the second section, drawing out weaknesses in his conception of the instinct of workmanship and in his account of the evolution of industrial capitalism. Finally the chapter considers the post-war evolution of labour economics, focusing on the demise of institutional labour economics and the rise of neoclassical labour economics.