ABSTRACT
This chapter reviews the institutional and neoclassical schools in labor economics. Labor institutionalism spans four generations of contributors, beginning with John R. Commons, his associates of the Wisconsin school, and many other well-known labor economists of the period. The labor institutionalist's methodological approach to research is distinguished by four key features: the emphasis on fact-gathering, the importance of realism of assumptions, the virtues of a "go and see" participant/observer method of investigation, and the necessity of an interdisciplinary approach to theory-construction. Price theory is the conventional, core version of neoclassical economics. Price theory is about how an economy operates—it is a theory of how competitive prices coordinate economy activity. Choice theory switches the focus of economics to a verb—the study of economizing—and entails a theory of rational allocation of scarce goods to their most efficient use.
