ABSTRACT
In this chapter, we will develop the institutional concept of the multi-sector or compound character of the modern economy. This concept contradicts the traditional view of the economy as a system which can be adequately analyzed by a single equilibrium model of competition between essentially homogeneous economic units. In contrast to this view, institutional economics has always regarded the economy as a system complex in its structure, and composed of heterogeneous units different in both size and bargaining power. These units are connected to each other by a network of relationships that are asymmetrical, or not fully reciprocal, in character. Institutionalism has endeavored to develop alternative theoretical and analytical schemes designed to account more adequately for the elements of inequality, power, and dominance in the relationships between different economic units and sectors. These schemes are associated primarily with such names as John R. Commons, Gardiner Means, John K. Galbraith, Gunnar Myrdal, and François Perroux. Such schemes do not, of course, constitute a uniform framework, at least not yet; nevertheless, they represent a radical departure in the analysis of economic relationships, as compared with the conventional theory of competition, and a theoretical alternative for the interpretation of the modern, compound economy.
