ABSTRACT
Reference in previous chapters to Kaldor demonstrates that only a few economists are able to avoid the tendency to rationalize political and social factors that are beyond the confines of economic theory.2 Clegg’s observation illustrates the importance of including institutional analysis within the framework of economic analysis. The design and motivation of institutions are functional because they further and sustain specific interests in the pursuit of general economic efficiency. However, design and motivation, while functional on a collective basis, may also be defensive. Moreover, economists appear able to rationalize all aspects of employer behaviour as rational and functional in the quest for improved economic efficiency. In contrast, neoclassical and Austrian economics readily rationalize similar institutional behaviour by trade unions as destructive and obstructive.
