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Chicago, IL
January 6 - 8, 2017


Friday, January 6

Corporations, Networks, Technology, and Access (L2, B5)

Paper Session

Friday, Jan. 6, 2017 8:00 AM – 10:00 AM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: Ann E. Davis, Marist College

Evolution of the Corporation in the United States: Stabilization Policies and Vested Interests

Glen W. Atkinson, University of Nevada-Reno
Stephen P. Paschall, Lovett Bookman Harmon Marks LLP


The development of transportation and communication infrastructures, improvements in productive technology and the significant increase in the granting of corporate charters in the nineteenth century involved changes in the financial and legal institutions supporting production for large-scale markets. The evolution of the corporation under the circumstances of the widening of markets reflects the role of the legal system in disputes between public and private interests.

From the earliest characterization of the corporation as an entity created by a contract between the State and its incorporators and bound by its charter to the adoption of general incorporation statutes, the tension between public power and private power persisted. When the doctrine of ultra vires frustrated financial demands for mergers to stabilize prices, the formation of monopolies under general incorporation statutes was confronted by federal antitrust law and state regulation of business. Stabilization in a period of industrial abundance meant antitrust law would be restrained and state regulation would be limited.

This paper will examine the court decisions deeming the corporation to be a person with regulation of it limited by the due process requirements of the Fourteenth Amendment and creating the Rule of Reason in antitrust law. Such examination involves John R. Commons' stages of capitalism, particularly the age of abundance and the search for stability related to Banker Capitalism. The benefit of public stabilization policies for the vested financial and business interests will be explained.

Reproducing the Firm: Networks and Routines

Wilfred Dolfsma, Loughborough University-London
Amber Geurts, University of Groningen


Firms exist because jointly people can produce goods that they cannot produce individually, or they can produce them much more efficiently. People collaborating in firms can do so because of the social fabric that they create and maintain, somehow. The social fabric consists of the relations between individuals, in terms of a multitude of possibly overlaying social networks (Aalbers & Dolfsma 2015), as well as because of routines that grow from these social relations. The social relations can, but need not be informal. Routines, a concept similar to the concept of institutions, but best restricted in use, perhaps, to a more specific practice, must be supported by social relations, but can develop to become independent of them.

Routines set expectations with all individuals involved in a practice about what is appropriate behaviour to show in circumstances triggering an if→then sequence of behaviours. Organizational routines create a status quo expectation among participants in a firm, or practice generally. Organizational routines thus (help) reproduce the firm. As Kenneth Boulding has taught, however, each practice (or system) faces an external environment that affects it (Dolfsma & Kesting 2013), “irritates” the if→then routines that make the system work as Niklas Luhmann would put it. What is needed, then, is a conceptualization of what might stabilize the systemic nature of a practice again, after it is irritated.

In addition to supporting the development of routines, social network relations help determine when routines can be departed from without upsetting the status quo. Social network relations between individuals in a firm (organization, practice) offer the means by which novel kinds of routines are sought as information spreads across individuals in an organization through the contacts maintained.

Technology, Gender, and Entrepreneurship: Bridging the Resource Gap

Tonia Warnecke, Rollins College


Some of the most important resources for entrepreneurs and small businesses are intangible—knowledge and access to networks. In the developing world, technology can facilitate these resources and address basic human needs in a variety of ways, from provision of farmer training and cloud-controlled clean water systems to health information and mobile money services. Some of these services expand access to resources in ways that particularly benefit women. Where male-female interactions or decent work opportunities for women are limited, information and communications technologies can enable women to avoid some forms of gender bias, improving the ability to shift to the formal sector, access wider markets through e-commerce, partake in distance learning programs, and share experiences with and gain mentorship from other women. However, there are large gender gaps in access to technology, particularly in rural areas. Worldwide, women are 14% less likely than men to have access to a mobile phone, and 23% less likely to have access to the internet, though in some regions the gender gaps are much larger (Mitchell 2015). With particular focus on female entrepreneurship, this paper will discuss how technology is utilized to create social impact, reduce gender inequalities and increase female empowerment in the developing world context. Challenges hindering the impact of technology in these areas will also be discussed.

The Corporation, Credit, and the Public Interest

Eric R. Hake, Catawba College


Despite Veblen’s analysis of the rise of a credit economy a century ago, public policy has not yet addressed the profound role of the corporation in reorganizing industrial capacity or altering rights to work and income. Policy discussions are, unfortunately, still framed with reference to the benefits of competition, or a merger’s potential impact on market share and pricing control. While the nascent applications of equity finance and merger practice were laid out in rough form for Veblen to evaluate, recent decades have extended and multiplied the methods and practices of the modern credit economy with dizzying speed and complexity. Like that earlier time, this modern period has remade the substance of old taxonomies, blurring the lines between stocks and bonds, equity and liability, manufacturing and finance, capital and credit, investment and speculation. This paper will analyze the modern methods of corporate financial practice, in the hopes that a better understanding of its purpose and form will allow more effective framing of the initiatives necessary to promote the public interest.

Collectives and Commitments: The Co-Emergence of Corporations and Capital Markets

Ann E. Davis, Marist College


As recognized by J.R. Commons, the corporate command of labor in the market is a form of “public” power, although the business corporation is considered “private.” It is important to trace this apparent anomaly from the long term emergence of the private, for-profit business corporation from its roots in the early modern medieval Europe. The earliest forms of the corporation were the church, the commune, and the guild (Berman; Wickham; Barkan; Najemy), with eventual extension to the chartered monopoly corporation by the crown in the Dutch East India Company and the English East India Company (Dari-Matiacci, Gelderblom, Jonker and Perotti 2013). The issue of “shares” of the corporation and the emergence of capital markets for the trading of public and private debt has been dubbed the “financial revolution,” which then facilitated the emergence of the fiscal military state (Schumpeter; Brewer). The presence of public decision-making processes by parliaments, with public deliberation and “representation,” had an impact on the cost of credit (Stasavage; Pezzolo), and the race for empire via war and global exploration. This relative “rise of the West” has been interpreted as the superiority of “property rights” (Acemoglu and Robinson; Pomeranz), while the role of collective commitment and legal reinforcement has been recognized by economic sociologists, economic historians, and institutionalists (Carruthers; Greif; Trivellato; Stasavage; Hodgson; Pistor). This paper will explore the historical emergence of the private business corporation, in terms of the co-emergence of the financial circuit and enforceable credit commitments by collective entities, illustrating the methodology of “historical institutionalism” (Davis 2015).


Ellen Mutari, Stockton University


JEL Classifications

  • B5 - Current Heterodox Approaches
  • L2 - Firm Objectives, Organization, and Behavior



Development, Institutions and the Vested Interests (O1, O2)

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: Richard V. Adkisson, New Mexico State University

The Concept of Development Conventions: A Critical Appreciation and Some Suggestions for a Research Agenda (Street Scholar Address)

David Dequech, University of Campinas


This paper discusses development conventions, focusing on conceptual and theoretical issues. The term ‘development conventions’ was coined by the Brazilian economist Fábio Erber and has been used by a few other authors, especially in Brazil. As the paper shows, however, Erber does not adopt a coherent concept of convention. Moreover, it is not clear why Erber uses the term ‘development conventions’ instead of more general terms, like ‘conceptions’, ‘ideologies’ or ‘shared mental models’. The paper then offers some suggestions for the formulation and elaboration of a proper concept of development conventions and some basic theoretic propositions. Development conventions are broadly defined as socially shared systems of rules of thought or of behavior (institutions) regarding development, with the properties of conformity with conformity and arbitrariness: the fact that others have adopted a convention, or are expected to adopt it, plays a role in leading someone to also adopt it; and a non-inferior alternative exists or is conceivable. The paper identifies several social mechanisms through which the conformity of others leads one to conform. It also relates arbitrariness to uncertainty about future consequences and to the possibility of assessing development from various viewpoints, using various standards or metrics at the same time.

Vested Interests and the Common People in Developing Countries: Understanding Oppressive Societies and Their Effects

Lane Vanderslice, World Hunger Education Service


The standard economic model of how economies work is that people produce and exchange goods. Governments exist to provide “government goods”— things that people cannot provide for themselves, such as national defense. Thus the standard economic view is that activities are essentially productive. This is not a correct view of reality. The principal difficulty is that there is economic activity that is unproductive and harmful (from the point of view of those being harmed). This is a central feature of the economic organization of these societies, and creates poverty.

The first section set out a brief description of how societies are run on this basic set of principles: Take and maintain control of the government (and other aspects of society, and use powers of the government to obtain income. Key elements of this process are: Obtaining income, keeping people oppressed/preventing revolution, avoiding overthrow, and restricting entry. Institutional structures of society arise from, and support, this process.

The second section describes how this system, where the institutional structure is designed to benefit the few, and these elements specifically, create poverty. This section draws on theoretical work in economics and other social sciences, especially game-theory-based conflict theory, as well as empirical studies and evidence. Topics include corruption, expropriation of land and natural resources, harm as a factor in wage determination, discrimination, conflict, and the weight of the past.

Industrial Policy in Africa: An Exploration of Institutional Dimensions

Howard Stein, University of Michigan


Economists have long known that manufacturing expansion has a multitude of economic benefits for common people including potentially generating large scale employment opportunities. Sadly, sub-Saharan (SSA) has moved in the wrong direction with manufacturing as a percentage of GDP falling to around 9-10% from an already low 15% in the 1980s. SSA has largely returned to an extractive colonial style economy with its reliance on the export of unprocessed raw materials with terrible consequences to the quotidian struggles of the broader population. Raw material based expansion has very low employment and poverty reducing elasticities and vulnerable to the vicissitudes of international commodity prices. To reverse this pattern, governments will need to come up with new strategies to support industry. Some literature on industrial policy focuses on interventions to deal with perceived market failures. Others point to institutional failures where poorly operating markets is seen as one example and where purposive state actions can be used to deal with the institutional gaps that impede industrial growth and development. However, less has been written on how these actions can achieve the outcomes and why, in some cases, interventions in industrial policy have failed or led to less than desirable effects. Drawing on examples from a variety of African countries the paper will explore the institutional imperfections and static and dynamic institutional failures that have impeded industrial policy while pointing to key institutional constructs that can lead to the more effective operation of industrial policy organizations on the continent.

Growth Miracle or Development Catastrophe? Vested Interests, Institutions, Policy and Human Development in the Dominican Republic

Svenja Flechtner, University of Flensburg


The proposed paper addresses the issue of power, policy and institutions studying the case of the Dominican Republic (DR). The DR is usually considered among the most successful developing countries, based primarily on its high and relatively sustained growth rates over the last two decades. On the other hand, indicators of human and social development, health, and education have been particularly poor. This paper addresses this apparent puzzle from an institutional perspective, arguing that the polarization of economic and political power is at the origin of this development. I first analyze the structure of the Dominican economy in order to show that the country has relied on tourism, services, and special economic zones to obtain relatively high growth rates. These activities do not require high-skilled labor and will not allow the economy to generate high incomes for the population, but benefit a few families who control most conglomerates. I then analyze economic policy-making since the 1950s and trace back how business interests and in particular these few families have been able to shape policies according to their needs. This explains extremely low investments into education and social spending on the one hand and extremely low taxation rates on the other. Moreover, the elite has benefited from poor institutional quality. I close with a discussion of civil society initiatives aiming at countering the concentrated economic and political power of the narrow elite in the areas of education and housing.

Extending Veblen’s Notion of “Vested Interest” in International Relations: A Special Case of Nepal-India

Kalpana Khanal, Nichols College


Nepal is a land-locked country that shares open border with India. In addition to the economic relations across the border, people of Nepal and India share cultural and social ties. Recently Nepal promulgated its new constitution and it has led to a souring of ties with India. The main crux of the problem lies in the agitation of the Madesh/Terai origin people in Nepal demanding certain rights in the newly drafted constitution. India showed its displeasure publicly by cutting off essential supplies to Nepal. India’s trade embargo over the past month has stagnated Nepal’s economy and is causing genuine hardship to Nepali people. One interesting thing to note here is, this embargo is not the first one imposed by India on Nepal.

In the given context, the first section of this paper will shed some light on India-Nepal diplomatic relation in a historical context. The second section will shed some light the unequal footing in Nepal-India relationship using Veblen’s notion of “Vested Interest”. The third section will elaborate on the socio-economic impact of India’s repetitive trade embargos to Nepal. The fourth section will offer pragmatic solutions to bring institutional change consistent with instrumental values within Nepal so as to improve the diplomatic ties.


James T. Peach, New Mexico State University

JEL Classifications

  • O1 - Economic Development
  • O2 - Development Planning and Policy


Investment, Austerity and the Business Cycle (E3, E6)

Paper Session

Friday, Jan. 6, 2017 10:15 AM – 12:15 PM

Swissotel Chicago, Montreux 2 Hosted By: Association for Evolutionary Economics

  • Chair: Charles J. Whalen, Congressional Budget Office

Post-Keynesian Institutionalism and the ‘Common Man’: Philip Klein, Business Cycles, and the Public Sector

Charles J. Whalen, Congressional Budget Office


John R. Commons, whose career was motivated by “whatever helped the common man,” saw the business cycle as the most important of all labor problems. More recently, Philip Klein devoted his career to analyzing business cycles for much the same reason (Beyond Dissent, p. 301). Klein’s work focused on the development of cycle indicators, explicitly building on the pioneering efforts of Mitchell and the nascent NBER, and was supplemented by essays critical of mainstream macroeconomics and others on the role of the public sector.

Klein’s research led to an eclectic theory of cycles that remains useful as a way to synthesize a broad literature, even though the less comprehensive analyses of Sherman and Minsky have proven more useful in shedding light on recent cyclical developments. His essays on mainstream theory were timely when published, and contain enduring discussions of the malleability of the “natural” rate of unemployment and the value of a behavioral approach to expectations.

Klein’s attention to the public sector centered on introducing four concepts to explain how policy is made and plays a role in economic life—higher efficiency, collective ought, the value floor, and emergent values; he also addressed fiscal policy, emphasizing its role in moderating business cycles. In the end, his discussions of the public sector provide only part of a foundation for making and assessing economic policy from a post-Keynesian institutionalist perspective, but they also challenge us to think about the most fundamental issues in economics (and this paper proposes an initial step forward).

Business Cycles, Debt and Profits in the Neoliberal Era in the United States a la Kalecki

Erdogan Bakir, Bucknell University

Al Campbell, University of Utah


The U.S. economy has undergone significant transformation since Kalecki put forward his framework for the profits and their determinants. The pace of the transformation clearly sped up after the 1980s, and more specifically in the 1990s and 2000s once the neoliberal policies were fully implemented and financialization as an aspect of neoliberalism permeated every aspect of the economy. The neoliberal system introduced debt-financed consumption in order to fill the gap in consumption due to stagnant wages. It also changed the corporate governance in a way that corporations prioritized the interest of shareholders over the long-term health of the company, which resulted in depressed capital accumulation in the private sector. In addition, the U.S. trade deficit has worsened during the same neoliberal period.

This paper uses the Kaleckian framework to investigate the role each determinant of profits has in the generation and stabilization of the profits in the neoliberal period, and the other post-WWII periods before it. We look at the trajectories of the profits and their determinants over the business cycles and within different stages of each cycle. This will help us see how neoliberalism and its financialization aspect have changed the way the private sector generated their profits a la Kalecki. The paper also uses the Marxian framework for the profit rate. In our earlier works, using a Weisskopfian Marxist framework for the profit rate, we showed that in all post-WWII cycles a decline in the profit rate in the late expansion phase of the business cycle is an early indicator for the subsequent economic downturn. This paper compares the Kaleckian framework to this Weisskopfian framework in order to add more to our understanding of what causes this initial decline in the profit rate in the late expansion.

Reflections on the New Deal: The Vested Interests and Limitations to Reform

John F. Henry, Levy Economics Institute of Bard College


I subject the programs of Roosevelt’s “New Deal” to critical analysis, with particular attention to what is termed “liberal democracy.” I shall further argue that this analysis speaks to the current period, and demonstrate the limitations to reform given the power of “vested interests” as articulated by Thorstein Veblen.

While institutionalists in general are favorably disposed toward the New Deal, a critical perspective, drawn largely from the work of Veblen, casts doubt on the progressive nature of the various programs instituted during the Roosevelt administrations. The main constraint that limited the framing and operation of these programs was that of maintaining what is termed “liberal democracy.” Treading what appeared to be a fine line between the fascist solutions to the Great Depression, in particular that of Italian “corporatism,” and the planning program of the Soviet Union, the New Deal was shaped by the institutional forces then dominant in the U.S., including the segregationist system of the South. In the end, vested interests dictated what transpired, but what did transpire required a modification of the understanding of liberal democracy.

The argument developed surrounding the New Deal will then be applied to the current state of affairs imposed by the new capitalist order. While the main issue is no longer the contest between fascism and socialism, the institutions developed by and in the interests of the vested interests continue to constrain any movement toward a more progressive organization that promotes the provisioning process. In particular, the power of finance capital is now much stronger than in the 1930’s.

Governments’ Role in Aligning Functional Income Distribution with Full Employment

Antoon Spithoven, Utrecht University


Demand is an incentive for investment. Investment is required for creating employment. If demand lags behind supply, unemployment rises. Persistent unemployment indicates a dysfunctional price mechanism. Under the circumstances of persistent unemployment, lower social benefits and cutting government expenditure result in lower demand and discourage investment. Monetary policies might result in lower interest rates but be impotent to boost consumption and investment. Namely, savings may stay high because of speculative and precautionary motives and, due to a lack of demand, firms may abstain from investment. They may park profits in banks or use them to buy back stocks. Therefore, only governments are able to combat persistent unemployment. The federal government might take the role of countervailing power and stimulate demand, for example, by mandating higher minimum wages or by equalizing savings ex-ante by investing in the production of public goods and services. This solution of the allocation problem requires a revival of a meaningful democracy. A meaningful democracy depends on citizens and governments who are aware that they are not helpless victims of mysterious economic laws or of the vested interests’ influence over social climate and economic zeal. This is quite a challenge to educators.

“Give Me your Watch and I Will Tell You the Time”: Crisis and Austerity in the E.U. and Greece from a Bourdieusian Perspective

Asimina Christoforou, Athens University of Economics and Business


The article investigates austerity policies and the deterioration of socio-economic conditions, particularly in the context of the European Union (EU) and the Greek crisis, by appealing to the work of the French sociologist Pierre Bourdieu (1930-2002). Bourdieu offers an alternative understanding of economic behavior that highlights the interaction among individuals, institutions and social structures. Though he has immense influence in the social sciences, he has largely been ignored by economists.

The article begins with a brief description of Bourdieu’s framework, summarized in the triptych habitus-field-capital. Bourdieu argues that economic behavior depends on certain conceptions of social value imposed by the dominant classes over the dominated. He explains that power relations and social inequalities are reproduced because they go unrecognised and unquestioned by means of a process he terms ‘symbolic violence’ or ‘misrecognition’.

Then this framework is applied to re-assess austerity and socio-economic conditions in Greece and the EU. In the 1990s, Bourdieu often castigated the shift in EU policy priorities toward financial domination, flexible labor markets and restraints on public spending, leading to social segregation. Yet he argues that social groups and classes with various worldviews will struggle for symbolic power – the power to remake the ‘visions and divisions’ of the social world.

The article concludes with ways to combat these problems. It appeals to Bourdieu’s conception of the ‘collective intellectual’: the social scientist that collaborates with other scholars and social groups and creates European and global partnerships to question the social world, uncover the truth and reclaim social welfare.

JEL Classifications

  • E3 - Prices, Business Fluctuations, and Cycles
  • E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook



Vested Interests, Financialized Capitalism and Regulation (F5, B5)

Paper Session

Friday, Jan. 6, 2017 2:30 PM – 4:30 PM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: Eugenia Correa, National Autonomous University of Mexico

Saturday, January 7

Financialization and Vested Interests: The Irrelevance of Self-Regulation and Financial Stability as a Public Good

Faruk Ulgen, Grenoble Alpes University


From a critical perspective on market fundamentalism, this article maintains that Veblen institutionalism offers analytic and policy alternatives to money and finance in order to deal with recurrent systemic crises that threaten the viability of democratic societies. The article then suggests an institutionalist analysis of financialization through the lens of Veblen who puts the emphasis on the peculiar nature of money (and related financial relations) in capitalism. Veblen states that the network of ownership over holdings controls “the conditions of life for the common man”. In modern capitalism the financiers and their (economic/political/social) relatives are the barons who control the society’s destiny through their control over money and finance. This article argues that modern capitalism is a financialized society that is dominated by vested interests. Those latter rely on speculative expectations that often result in systemic crises. As in the case of the overcapitalization of farmlands studied by Veblen in The Vested Interests, financial liberalization leads to the speculative overcapitalization of every aspect of Common Man’s life and provokes systemic catastrophes. Therefore systemic stability cannot be ensured through liberal markets and privatized self-regulatory mechanisms which are not able to deal with society-level issues. Financial stability must be regarded as a public good and a specific public regulatory action must be designed to maintain society (and dominant vested-interests) within some viability limits.

An Institutional Perspective of the International Financial Governance: How Much Has Happened After the Crisis

Eugenia Correa, National Autonomous University of Mexico
Alicia Giron, National Autonomous University of Mexico


This article studies the main trends in international financial regulation after the 2007-2008 great crisis. It supports the idea that largest financial corporations are working to have several components for an international self-regulation. With the support of governments, private firms compose the architecture of this global and complicated mechanism. Meanwhile all this built-up mechanism is supported by several assumptions about the origins of the great financial crisis, and also about the capabilities of governments to reach the objectives they are expected to achieve. The article argues that such a private vested-interests-based regulatory framework is not able to deal with systemic financial instabilities. We then conclude that new financial crises will develop and the “too big to fail” financial corporations are preparing break-in-pieces strategies as possible exit solutions.

Which Vested Interests Do Central Banks Really Serve? Understanding Central Bank Policy Since the Financial Crisis

Mario Seccareccia, University of Ottawa


Central bank policies have gone from a neo-Wicksellian incomes policy of sustaining and stabilizing rentier incomes during most of the quarter century prior to the global financial crisis to something which appears much closer to Keynesian policy in favor of the euthanasia of the rentiers, with persistently negative real interest rates since the financial crisis. Except for a short interval during which bona fide fiscal stimulus was implemented, the biggest job of dealing with the financial crisis has been left to monetary policy. However the so-called “unconventional” monetary policy pursued since 2009 was more of a disguised fiscal policy for the banks. Under the monetarist pretense that sustained expansion of base money would support overall spending, this policy served a somewhat different purpose. Quantitative easing can be seen as an extension of the bank bailouts in sustaining asset prices, especially through the purchases of mortgage back securities held by banks as well as agency debt. At the same it led to a cut and maintenance of both nominal and real interest rates at their lower bound, while inadvertently and negatively affecting bank profitability. It is the latter effect that may well have led to QE’s ultimate demise by 2014. What we have seen since then is an attempt to revive rentier income once again in a desperate attempt to reflate the economy that remains stuck in a relatively stagnant state, because of lack of a desire to engage in sufficient fiscal stimulus or what some have referred to peoples’ QE.

The Vested Interests and the Common Man as Seen Through Monetary Policy: Flooding Wall Street or Main Street?

Gregorio Vidal, Metropolitan Autonomous University
Wesley C. Marshall, Metropolitan Autonomous University


There are many angles through which a critical observer can analyze the divergent class interests in most aspects of macroeconomic management. This paper examines the insistence of the financial authorities of all major economies in reviving economic activity through monetary and not fiscal policy, as a particularly clear example of favoring the vested interests over those of the common man. Close to a century after Veblen's writings on the subject, one can find many rhyming elements to the political landscape of the times. Today, the common man is often expressed by the 99%, and many accept that the dominant vested interest is that of global banks. Unlike Veblen's times, today's economists now have many historical experiments in economic management from which to consult. Employing logic, historical experience, and an understanding of our current global finance led capitalism, this article offers a preliminary institutionalist analysis of the mechanisms of current monetary policy that “flood” Wall Street while leaving employment, production and investment -Main Street- all but forgotten. The article then explains the dynamics of the monetary policy in today's financial structures, and argues that the vested interests have abandoned fiscal policy in an attempt to impose a deflationary macroeconomic environment.

Oligopolistic Cooperation and the Financialization of the Pharmaceutical Industry

Avraham Izhar Baranes, Rollins College


Veblen’s Vested Interests and the Common Man discusses how those in power use their position to reinforce and maintain their dominance. From this perspective, the concept of oligopolistic cooperation and centralized private sector planning can be seen as the method with which the vested interests reinforce their position. Under money manager capitalism, then, this is reflected in the encapsulation of industrial interests by financial interests and firms come to take a more intangible character. This essay examines the issue of oligopolistic cooperation in the pharmaceutical industry, emphasizing the importance of board of director intralocks and intangible assets. There are two key questions that will be addressed: First, to what degree can the pharmaceutical industry be considered oligopolistically cooperative? This has important ramifications for the public, particularly as it reflects the access to pharmaceuticals. Second, to what degree has the pharmaceutical core become financialized? In other words, in what ways has the pharmaceutical industry taken on a more intangible characteristic? It will be argued here that with the emergence of oligopolistic cooperation in the pharmaceutical industry, firms have become more akin to rent-collectors than productive enterprises, relying on their accumulation of intangible assets as a means to maintain themselves as vested interests.


Wesley C. Marshall, Metropolitan Autonomous University

JEL Classifications

  • B5 - Current Heterodox Approaches
  • F5 - International Relations, National Security, and International Political Economy


Babies, Business and Debt (M2, I2)

Paper Session

Saturday, Jan. 7, 2017 8:00 AM – 10:00 AM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics & Association for Social Economics

  • Chair: Steven Pressman, Colorado State University

Divergent Fortunes: Can Economic Pressures and Financial Strength Explain Differences in Entrepreneurship Between Younger and Older Households?

Christian E. Weller, University of Massachusetts-Boston
Jeffrey Wenger, RAND Corporation


Entrepreneurship among households 50 years and older has grown since the late 1980s, while it has fallen for younger households. The divergence in entrepreneurship may result from different responses to economic pressures, especially long-term unemployment and more volatile earnings in wage and salary employment. Older households may choose to pursue self-employment when facing economic pressures since they may not expect future gains in wage and salary employment, while younger households, considering a longer future time horizon, may delay their self-employment decisions in the hopes of seeing improvements in wage and salary employment. Alternatively, households of all ages may respond similarly to changes in financial strength – more wealth as collateral, greater credit access and increased opportunities to diversify income as buffer against risky business income. Older households have seen gains in financial strength, while younger households have not. We use data from the Federal Reserve’s Survey of Consumer Finances to test these competing hypotheses. Our descriptive statistics and multinomial logit regressions suggest that economic pressures are only playing a minor role in determining entrepreneurship among younger households and have no measurable effect on older entrepreneurship. Financial strength, though, matters for both older and younger entrepreneurship, but more so for older households and the gap has grown over time. The divergence in financial strength – partially a result of rising wealth inequality – and the growing gap in sensitivity to the financial strength by age are a key explanation for the different entrepreneurship experiences of younger and holder households.

Debt and Business Formation: The Impact of Student Debt Upon Entrepreneurship in Wisconsin

Thomas Kemp, University of Wisconsin-Eau Claire


Small business is the source of most new job creation. There is however a growing body of literature that shows that rising student debt is having an adverse effect upon new business startups. Using county census data applied to a model developed by Ambrose et. Al. (2015) this study attempts to quantify the reduced number of firms created due to statewide student debt load. From these results standard input/output analysis is used to estimate statewide job losses resulting from Student debt. We conclude that a cost/benefit case may be made for debt forgiveness.

Institutional Contexts and Entrepreneurship - History Revisited

Regina Frank, Loughborough University


This paper discusses historic determinants of today’s economic development and entrepreneurship by comparing and contrasting different religious institutions, their hierarchy and values and its influences on North and South American pioneers, respectively, in the 16th and 17th centuries. It will be hypothesized that in predominantly Protestant regions, entrepreneurial activity led to long-term regional economic growth and development with profits being reinvested locally. In contrast, in regions dominated by Catholic colonizing powers, raw materials were extracted, and less profits reinvested locally; instead, created wealth was be concentrated in the hands of a few and transferred back to colonizers, commodity exports benefitted the crown, mirroring the hierarchy of the Catholic Church in Europe. By drawing parallels between past formal and informal institutions informed by religion and culture, the ties of pioneers, settlers and colonizing powers in North and South America and today’s regional entrepreneurial activity, this paper applies institutional and social capital theories to entrepreneurship over time. It is postulated that the long term impact of the autocracy and values of different religious institutions on regional economic and entrepreneurial development can still be identified by comparing and contrasting today’s levels of entrepreneurial activity in North and South America, measured by the Global Entrepreneurship Monitor ('GEM').

Age of Financial Majority

Timothy A. Wunder, University of Texas-Arlington


The unrestrained power of the market economic narrative becomes frighteningly clear when financial security becomes the dictating force on human procreation. The common man’s desire for “right and honest living holds him to a submissive quietism” even with respect to the most fundamental call of human biology; the desire to have children. This disturbing control is so complete that it is common for people to discuss how irresponsible it is for a couple to have children they ‘can’t afford.’ This paper will use common data on debt, earnings, and costs of living to calculate at what age an average young American couple would be secure enough to have a child. This calculation will be made over time to offer a measure of financial majority. The age of majority generally connotes when a youth becomes a full adult and nothing so clearly suggests adulthood as being ready to have children. If the current system “controls the conditions of life” so thoroughly that young people delay or decline having children then there is a profound problem facing the United States.

The Burdens of Student Debt: Are Student Loans Keeping Young Adults From Moving on with Life?

Christina Curley, Colorado State University


The purpose of this paper is to examine whether and how student loan debt is preventing college graduates from achieving other milestones in life, such as purchasing a home, getting married, and having children. While news articles and surveys indicate that some student loan borrowers are finding themselves in situations where they must delay these milestones, there is little empirical evidence to indicate that this is a common or widespread issue. In addition, I investigate whether and how the impact of student loans differs by gender. A second point of inquiry is whether this is an important issue for economists and public policy makers to address. On one hand, we may assume that student borrowers are rational and have perfect foresight, and that the net lifetime benefits of a college degree are higher than the cost of attending college (and paying off the loans). On the other hand, students might not have perfect foresight, and the income that they expect to be earning from obtaining a higher level of education does not match the income they end up earning in reality. Using the Survey of Consumer Finances, I test the impact of student loan repayment burden on homeownership, age at first marriage, and number of children. Additionally, I examine the debt-to-income ratios of college graduates. Preliminary results indicate that there is very little correlation between student loan repayment burden and homeownership, marital status, or fertility. However, the mean monthly student loan payment-to-income ratio is higher for women.


Jeffrey Thompson, Federal Reserve Board
John Watkins, Westminster College
Sandy Baum, Urban Institute
Robert H. Scott III, Monmouth University

JEL Classifications

  • I2 - Education and Research Institutions
  • M2 - Business Economics


The Vested Interests Versus Rational Public Policy: Economists as Public Intellectuals (H0, H1)

Panel Discussion

Saturday, Jan. 7, 2017 10:15 AM – 12:15 PM

Swissotel Chicago, Vevey 3 & 4 Hosted By: Association for Evolutionary Economics

  • Chair: Geoffrey Schneider, Bucknell University


    The list of poor economic decisions by governments in recent decades is staggering: austerity, deregulating financial markets, supply-side tax cuts, inadequate efforts to address climate change, the fight against the Affordable Care Act in many states and in Congress, etc. At this roundtable, economists who are actively engaging in public policy debates will discuss their experiences, including why it seems to be so difficult to promote rational economic policy on behalf of working people in the modern world. How can we best work to institute rational economic policies given the fractured political and media landscape? What are the main barriers to progress? What should economists be doing to improve the policy landscape?


Joseph E. Stiglitz, Columbia University
Topic: The Quest for Rational and Effective Public Policy

James K. Galbraith, University of Texas-Austin
Topic: The Quest for Rational and Effective Public Policy

Stephanie A. Kelton, University of Missouri-Kansas City
Topic: The Quest for Rational and Effective Public Policy

Lawrence Mishel, Economic Policy Institute
Topic: The Quest for Rational and Effective Public Policy

Dean Baker, Center for Economic and Policy Research
Topic: The Quest for Rational and Effective Public Policy

JEL Classifications

  • H0 - General
  • H1 - Structure and Scope of Government



Complexity and Evolutionary Modeling (B4, B5)

Paper Session

Saturday, Jan. 7, 2017 12:30 PM – 2:15 PM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: Wolfram Elsner, University of Bremen

The Symbiotic Relationship Between Evolutionary-Institutional and Complexity Economics

Claudius Grabner, University of Bremen


This paper introduces the idea of a symbiotic relationship between evolutionary- institutional and complexity theory. It consists of two main parts:

The first part focuses on how the emerging research program of complexity economics can benefit from evolutionary-institutional theory. It begins by showing that complexity economics still lacks an adequate philosophical foundation. I explicate why such a foundation is needed and argue that such a foundation must consist of an adequate ontology, epistemology, and methodology. Then I refer to institutionalist and social theory to develop these three aspects: I derive a definition of complex economic systems by identifying their essential properties and make remarks from the perspective of critical realism. I propose an epistemology based on the concepts of mechanism-based explanation and generative sufficiency. I close with methodological considerations and argue that agent based computational economic modeling can play a distinctive role for the analysis of complex economies.

The second part sketches how evolutionary-institutionalism can profit from a theoretical and methodological transfer from complexity economics. In particular I argue that many classical institutionalists have considered the economy as a complex system as defined above. Their research agenda can be based on the concept of mechanism-based explanation. Thus, the method of agent based computational modeling can advance institutionalism both as a formalization device and by providing theoretical concepts that are useful heuristics for institutionalist theorizing itself.

The paper closes by discussing a potential convergence of evolutionary-institutional, complexity economics, and other heterodox approaches, and gives an outlook on avenues for further research.

The Narrow and the Broad Approach to Evolutionary Modeling in Economics

Torsten Heinrich, University of Bremen


One of the first scholars to call for an evolutionary approach in economics was likely Thorstein Veblen. He notes both the lack of adaptiveness of economics as a field of scholarship itself (which he contrasts with psychology and anthropology) and the ignorance in economics towards any realistic conception of human decision making beyond that of “a lightning calculator of pleasures and pains”' (Veblen, 1898). He insisted that human nature and psychology should be taken into account; that these were the dominant forces shaping the development of human society. More formal-mathematical aspects were introduced by later generations of institutional-evolutionary economists.

Some evolutionary models rely on direct analogies to genetic evolution: Assuming a population of firms with routines, technologies and strategies on which forces of diversity generation (akin to mutation) and selection act. One advantage of this narrow conception is that previous findings from evolutionary biology can be taken into account and built upon.

This narrow conception of evolutionary models can, however, easily be generalized to allow either many or just one entity (instead of requiring a population) that are adaptive and interact with their environment. This allows a much more general conception of the evolutionary entity which can then also be an institution or a society.Both approaches have been extensively used in the literature, albeit in somewhat different literature traditions.

The paper gives an overview over the conception and the development of both the narrow (population and selection) and the broad (adaptive entity) approach to evolutionary modeling.

Evolutionary Dynamics of the Obesity-Socioeconomic Status Paradox: A Veblenian Explanation

Kuochih Huang, University of Massachusetts-Amherst

Weikai Chen, University of Massachusetts-Amherst


In the traditional society, obesity is associated with high socioeconomic status (SES), while in the modern society, especially among women, it is associated with low SES, accompanying with the weight discrimination. We find these patterns consistent with the evolutionary dynamics based on a Veblenian hypothesis, in which body weight is used as the means of social class division. Given the changing incomes and costs of calories intake and expenditure, high-SES individuals choose a body weight to distinct themselves from the low-SES, and low-SES individuals try to imitate the high-SES while compete with each other. Our game-theoretical analysis and heterogeneous-agents-based simulations predict patterns supported by historical and contemporary evidences. This is the first paper analyzing the evolution of obesity-SES paradox and the endogenous formation of the inter-class social norm within an integrated framework.

Inequality and Income Distribution in Global Value Chains

Carlos Aguiar de Medeiros, Federal University of Rio de Janeiro
Nicholas Trebat, Federal University of Rio de Janeiro


Global Values Chains (GVC) led by transnational corporations (TNC) have reshaped the world division of labor over the past two decades. GVCs are pervasive in low technology manufacturing such as textiles and apparel as well as in medium and high-tech industry like automobiles, electronics, and machinery. Value along these supply chains is appropriated unequally as tangible activity (manufacturing and assembly) takes place in developing countries under regimes of fierce competition and low wages while intangible intellectual work (R&D, design, finance and marketing), mainly in services, is concentrated in developed countries and subject to relatively mild competition. The “core business” of every TNC is to create economic rents through the control of these intangible assets. As Thorstein Veblen noted in 1920, the control over “valuable good-will, monopoly rights, or outstanding corporation securities” form the most significant source of vested interests and unearned income. Trade and investment agreements promoted by the US government and signed with developing countries have strengthened corporate control over intangible assets—and the rents derived from them—through patent and property rights provisions, while at the same time weakening laws created to protect internal markets in developing countries. This process explains much of the social and economic polarization between developed and developing countries as well as that taking place within these countries.

JEL Classifications

  • B4 - Economic Methodology
  • B5 - Current Heterodox Approaches


Institutionalism and Economic Theory (B5, B4)

Paper Session

Saturday, Jan. 7, 2017 2:30 PM – 4:30 PM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: William Waller, Hobart and William Smith Colleges

Institutions: Why We Need to Distinguish Their Ontological Presuppositions (Ayres Scholar Address)

Lynne Chester, University of Sydney


This paper is the third part of a trilogy. In the first part, I posit that Institutional Economics could usefully deploy ‘institutional insights’ provided by French Regulation Theory and the Social Structure of Accumulation approach to advance understanding of social provisioning. In the second part, using contemporary electricity sectors as an empirical lens to illuminate the internal drivers of institutional change and the evolving nature of the co-constitutive relationships between institutions, I argue the need for a re-conceptualisation of institutions which account for global phenomena that are ‘flows’ transcending the boundaries of national economies. In this paper, as the third part of the trilogy, I deploy a series of questions to delineate different conceptions of institutions in order to understand their respective social ontological presuppositions and the analytical implications.

Rethinking the Foundation of the Original Institutional Economics Policy and Reform Program: Reactions to Leonard’s “Illiberal Reformers”

Eric Scorsone, Michigan State University
David Schweikhardt, Michigan State University


Thorstein Veblen, John R. Commons and other original institutional economists argued for the interests of the common people against the power of vested interests in politics and business. Against this backdrop, a new book argues that, in fact, these same economists were actually “illiberal” and only promoted the interests of certain groups such as Anglo-Saxon men and were in fact against the progression of minority populations, women and even the disabled. But Leonard’s argument is extended beyond the point that these economists were “illiberal”, and that in fact their entire reform program related to the role of government in the economy and the creation of the administrative state is essentially defunct. Leonard wrote at the end of the book’s prologue the most telling statement, “expertise in the service of the administrative state, what progressives call social control, has survived the discredited notions once used to uphold it”. This paper responds to this book via a direct critique of the arguments presented therein. We argue that the founders view on these issues are at least partially taken out of context and further that even where some of their views would be rejected by today’s institutional economists that that does not mean the entire reform project is be rejected. This issue has contemporary relevance as Leonard recently penned an editorial in the L.A. Times arguing that the minimum wage is a poor policy based partially on his historical arguments.

Neuro-Economic: Sociological and Psychological Concepts of Economic Analysis

W. Robert Brazelton, University of Missouri-Kansas City


The paper will analyze economic analysis and the assumptions of Rationality. The paper will point out the fact that such a study and assumption overlooks Sociological and Psychological studies in those fields that relate to economic behavior; and the reactions to economic events and to economic policy changes in relation to those economic events. The analysis will deal with studies by the Federal Reserve Bank and from psychological and sociological studies that deal with economic matters and how we as humans actually react to events and to shocks such as the Crisis of 2008 and the policy changes relating to such a crisis and its effects upon our reactions to it that may or may not fit into the Rationality analysis of Economists. The conclusion is that the reactions to such events is much more complicated than economic theory assumes.

Save Us From Something! An Analysis of the 2016 United States Presidential Primary Election

Richard V. Adkisson, New Mexico State University
James T. Peach, New Mexico State University


Institutional methodology posits that all current situations are the result of historical process and cumulative change. One current situation is that the 2016 presidential primary season has been interesting, to say the least, and has caused some angst in both voters and politicians. On one side a political novice and Washington outsider has been far more successful in the primary voting than many observers anticipated. On the other side, an avowed socialist has waged a significant challenge in his race against an experienced but more mainstream candidate. Suspecting that both of these phenomena are driven by widespread dissatisfaction with the socioeconomic status quo, this paper uses an empirical voting model to explore how the 2016 presidential primary outcomes vary with county level socioeconomic conditions, themselves the result of historical processes and cumulative change.

Economic Possibilities for our Grandchildren in the Light of the Vested Interests and the Common Man

Pascal Petit, University of Paris 13


Keynes short essay Economic Possibilities for our Grandchildren (1930) has been much debated for the strong views it took on a potentially future transition whereby our societies of work and investment (to meet their basic needs) would shift to societies of leisure where the economic problem have been solved. Interestingly it is much in Keynes view a matter of knowledge and beliefs for societies to reckon at some historical point that saving and investment by some class of people are not specifically needed anymore, the economies having reached some stationary state where all basic needs are met. The societies can then get rid of capitalist classes and turn to a new challenge : how to fill properly this life of leisure, how to recover some lost art of life. Such strong assessment has been much debated, interestingly by economists of diverse approaches. It remains very appealing to read Keynes ‘essay through the glasses that Thorstein Veblen (1920) offered a decade before. Veblen ‘s essay is all about changes in knowledge and belief and the conditions for such changes. Moreover it takes care to ground its arguments in historical phases. This focus does help to position Keynes essay in view of some contemporary debates regarding structural changes in our modern economies such as secular stagnation, circular economies, unequal societies, leisure economies, creative industries... The paper will try, using the lens of Veblen work, to revisit the much debated essay of Keynes.

JEL Classifications

  • B4 - Economic Methodology
  • B5 - Current Heterodox Approaches


AFEE Presidential Address


Saturday, Jan. 7, 2017 4:45 PM – 6:00 PM

Swissotel Chicago, Vevey 2 Hosted By: Association for Evolutionary Economics

Presidential Address


Deborah M. Figart, Stockton University

Topic: Three Short Stories of Progressive Institutional Change


Sunday, January 8

Institutionalist Approaches to the Environment and Inequality (Q5, D3)

Paper Session

Sunday, Jan. 8, 2017 8:00 AM – 10:00 AM

Swissotel Chicago, St Gallen 2

Hosted By: Association for Evolutionary Economics

  • Chair: Scott Fullwiler, University of Missouri-Kansas City

The Political Economy of Discounting Climate Change

Scott Fullwiler, University of Missouri-Kansas City


Institutionalists emphasize that there is no such thing as “the market” or a “market price” that is not a socially embedded construct; markets and prices necessarily reflect the balance of power among competing interests in making policy, laws, regulations, and so forth. The same goes for attempts at economic “valuation” within the context of the natural environment including climate change—prevailing market prices (as well as non-market prices obtained through “indirect methods”) are simply one source of possible normative “weights” for valuing outcomes in a policy context. Regarding intertemporal weights for evaluating policy or regulatory options related to climate change, economists again turn to market rates of interest (the so-called “positivist” view). Others holding the “ethicist” view believe market rates of interest rate are too high and justify lower discount rates via the Ramsey model. Both approaches, however, are based on neoclassical capital theory, and both have confused policy goals for policy “levers.” The goals of policies and regulations for climate change determine how much climate change is “acceptable,” they do not set an optimal intertemporal weight and then determine what is acceptable as a result of this weight. Importantly, both approaches are inconsistent with how real-world monetary systems set interest rates, which are policy variables, not market constructs. In contrast to the Cost-Benefit Analysis approach of monetization and discounting, the more instrumental approach to valuation of climate change reconciles normative goals with the necessarily distributive nature of intra- and intertemporal weights placed on socioeconomic and ecological outcomes.


Technological and Institutional Interaction in the Shale Oil [R]evolution

James T. Peach, New Mexico State University
Richard V. Adkisson, New Mexico State University


A decade ago, peak oil was a widely discussed topic. By early 2015, US oil production reached 9.7 million barrels per day, a figure not seen since the nation’s previous peak production in 1970. The dramatic increase in US production is commonly referred to as the shale oil revolution. It is often alleged that the shale oil revolution was the result of technological change, particularly horizontal drilling and fracking. Technological change was an important contributing factor to the increase in production but such change involved much more than horizontal drilling and fracking. Institutional changes also contributed in a major way to the shale oil revolution. Upstream, midstream and downstream markets changed dramatically. Global markets changed in surprising ways. New mechanisms of financing exploration and production were facilitated by low interest rates and quantitative easing. The political and regulatory environments changed dramatically as well. Institutionalists have long argued that markets consist of more than simple supply and demand curves. Rather, markets are a set of rules (institutions) that govern transactions. This paper will investigate the peculiar interaction of institutions and technology in the shale oil industry between 2010 and 2015.


The Meritocratic Elite Versus the Common Man: Income Inequality in the Affluent OECD Countries

Kosta Josifidis, University of Novi Sad
Novica Supic, University of Novi Sad


The goal of this inquiry is to highlight the relationship between "vested interests" of meritocratic elite and deteriorating situation of the common man on the example of rising income inequality in the affluent OECD countries over the past 30 years. The results showed that income inequality is growing despite the increase in labour productivity, which is proved by using a robust panel regression model. This finding could be explained by the effect of "extreme meritocracy” that describes a situation in which the wages of workers with an extreme level of human capital is growing faster than their labour productivity, which is actually another term for the wage stagnation for workers with a median level of human capital. The gap between wage and labour productivity growth indicates that much of the income gained by the meritocratic elite can be treated as "free income". As a result of meritocratization, income inequality becomes less static though not necessarily smaller. Consequently, the debate about income inequality has to be shifted from functional to personal income distribution — i.e., from class conflict to meritocratic deliberations. The privileged positions of those who have "vested interests" in such hyper-meritocratic society are not denying but it seems to be justified as natural moral or right. The final result is that the common man gradually adopts social conventions according to which rising income inequality is inevitable in modern globalized economy, causing the weakening of trade union power and slowing down the institutional changes towards greater redistribution of income and wealth.

Wealth Inequality Revisited: Lessons From the 400 Wealthiest Americans

Kevin W. Capehart, California State University-Fresno


This paper uses Forbes magazine’s annual list of the 400 wealthiest Americans to study how the wealthiest Americans have fared over recent decades as a group and as unique individuals. The list suggests they fared well as a group in both absolute and relative terms. Their wealth increased in absolute terms, even if it is measured by its purchasing power over conspicuously expensive goods and services. Their wealth also increased in relative terms as they took home a larger share of aggregate wealth despite shrinking as a share of the population. If the wealthiest Americans are seen as unique individuals rather than as a group, then their fortunes have been more varied with some becoming wealthier and others becoming poorer or simply dying, but intra- and inter-generational mobility seem stagnant. The paper reflects on the causes and consequences of that rising inequality and stagnate mobility. Of note, the title of this paper is based on the title of James Peach’s “Regional Income Inequality Revisited: Lessons from the 100 Lowest-Income Counties in the United States.” The methods adopted by the paper are also based on the institutionalist methods he adopts there and elsewhere. He joins a descriptive analysis of the degree of inequality with tentative conclusions about causes and consequences and also a call for greater equality.

Premature Deindustrialization and the Defeminization of Labor

Bret Anderson, University of Rhode Island
Josh Greenstein, Hobart and William Smith Colleges


Moving up the industrial ladder has a male bias. At the micro level, we know a little bit as to why this might occur. It may be due to reduced labor cost pressures in capital-intensive production, gender biases and norms, or lack of job training for women. At the macroeconomic level, very little is known about what conditions the link between industrial upgrading and women’s relative employment outcomes. In fact, dramatic regional differences between Asian and Latin American feminization and deindustrialization patterns suggest that the macroeconomic environment is a fruitful arena to explore the factors that condition the link between industrial upgrading and (de)feminization of labor.

We aim to fill this gap by analyzing how the (de)industrialization-(de)feminization link is condition by differing “deindustrial regimes”. We do this by bridging three separate strands of the literature: (i) deindustrialization [i.e. works like that of Singh (1977) and other Cambridge writers that build on the work of Kaldor (1966, 1967, 1968)], (ii) the fallacy of composition and Prebisch-Singer [i.e. Razmi and Blecker (2008)] and (iii) the feminist scholarship on feminization of labor [i.e. Elson and Pearson,(1991)Standing,(1989, 1999)]. From this we argue that the competitive position of manufacturing is the link between premature deindustrialization and defeminization trends. We use this lens to estimate the industrial upgrading – defeminization link across two deindustrial regime types. Given that very little is known about the consequences of premature deindustrialization, our results are novel and indicate that this process is likely to amplify the male bias of industrial upgrading.

JEL Classifications

  • D3 - Distribution
  • Q5 - Environmental Economics


The Vested Interests and Development in Russia, Brazil, and South Africa (O2, O5)

Paper Session

Sunday, Jan. 8, 2017 10:15 AM – 12:15 PM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: F. Gregory Hayden, University of Nebraska-Lincoln

Contextualizing Vested Interests in Soviet and Post-Soviet Economic History

Anna Klimina, University of Saskatchewan


This paper applies Veblen’s concept of vested interests to the analysis of Soviet and post-Soviet history to explain the crucial role vested interests played in thwarting the democratic promise of socialism in post-1930 USSR and preventing the construction of social-democratic market in post-Soviet transition.

In the 1920s, Soviet socialist market economists envisioned the coexistence of multiform and multilevel structures of productive property, intended to prevent any development of vested interests typical of Western capitalism.

Stalin’s 1929 turn to totalitarianism and tyrannical command planning brought back the phenomenon of worker alienation and created conditions favorable to the re-emergence of vested interests, now in the form of a second economy rife with theft of public resources by enterprise directors and corrupt state bureaucrats. These vested interests obstructed all later attempts to democratize the command economy in the USSR.

During neoliberal transition, vested interests substantially increased their economic and political power through corrupt privatization of former state assets. Most became business tycoons who captured almost all non-Baltic states of former USSR and took advantage of neoliberal globalization’s enormous potential for profiteering through tax evasion and money-laundering. Small wonder vested interests have blocked all attempts to construct social-democratic market in post-Soviet space. The failed promise of Russia’s state capitalism serves as case in point.

Vested interests of business can be divested of economic power through instituting participatory democracy in business enterprise, and then establishing adequate citizens’ control over business. Educating and organizing the public to demand effective economic democracy must become the top priority.

The Solidarity Economy: Forgotten Social Innovation or Contemporary Institution to Counter the Power of Vested Interests

Svetlana Kirdina, Russian Academy of Sciences


In 1997 in Lima, Peru, the term economia solidaria (solidarity economy) was introduced into the international scientific and political discourse as a way to define the type of economic relations that would be found in a non-capitalist mode of production built upon self-help organizations, co-operatives, and the like. The solidarity economy can be considered as a social innovation that “… prioritizes benefits for the many rather than few”. This inquiry considers the introduction and advancement of earlier ideas for self-help, mutual aid, and cooperation as found in selected works of two Russian scholars, namely, Peter Kropotkin (1842-1921) and Alexander Chayanov (1888-1937). Together they introduced understanding of the double value of cooperation and solidarity as anti-capitalistic and also anti-bureaucratic alternatives. In the modern world cooperation and the solidarity economy are considered as the contemporary institution to counter the power of vested interests as well. The attention to ideas of cooperation in economies is permanent but its level fluctuates from time to time. If the potential of predominant economic forms becomes exhausted (economic crises indicate this) and social inequality increases, the Renaissance of cooperation and solidarity ideas comes into being. It is clear that the global economy faces similar issues nowadays.

The Relevance of OIE Concepts for Understanding the Russian Political Economy Through the Integration of the Social Fabric Matrix and the Institutional Matrices for X-Theory and Y-Theory

F. Gregory Hayden, University of Nebraska-Lincoln


Russia is known for being a socioeconomic system with an extreme and growing gap between the common citizen and the integrated ruling officials in government and business. Francis Fukuyama, Anna Klimina, Svetlana Kirdina, and Joachim Zweynert have expressed disagreement about how the Russian political economy functions and about what paradigm to use to conduct analysis about guiding its future. The disagreement reaches into the core of original institutional economics (OIE) and in the Association for Evolutionary Economics and the Association for Institutional Thought where the disagreement has been expressed. The core of the disagreement is between the paradigms of OIE and the new institutional economics (NIE). Fukuyama, for example, has stated that the concept of social norms from OIE is a better approach for understanding the Russian bureaucracy and for designing policy to build economic capacity rather than the rationalist version of NIE.

The comparison of the relevance of OIE and NIE has demonstrated the need for refinement of OIE concepts. Thus, following the introduction, the next section of the paper identifies those concepts, critiques them with regard to their relevance for the analysis of the Russian political economy, and clarifies that they should be applied differently in different contexts.

The final section is devoted to the integration of the OIE social fabric matrix with Kirdina’s institutional matrices for the articulation of X-theory and Y-theory. The integration demonstrates the need for OIE concepts as well as explaining how to apply the Kirdina matrices in a complex socioeconomic system.

Public Policy, Vested Interest, and Common People in Brazil in the 21st Century

Felipe Almeida, Federal University of Parana
Ivan Gambus, Federal University of Parana


This paper offers an institutional approach to the issue of replacement of Brazilian entrepreneurs’ vested interests with common people policies in the Brazilian State agenda in recent years. It also highlights how the replacement relates to the recent political turmoil in Brazil. The main argument of this paper is that the establishment of industrial policy in Brazil during the 20thcentury generated a parental relationship between the State and the Brazilian entrepreneurs in the 21st century. This parental relationship strongly supported entrepreneurs’ vested interests in the Brazilian economy. The Great Depression caused Brazil to understand the fragilities of a coffee agro-export monoculture economy. After 1929, however, Brazilian industrialization was led by the State. During the 20th century, the Brazilian State, looking for a national industry, adopted the import substitution strategy, which promoted agrarian elites to industrial elites. By leading the industrialization process, the Brazilian government generated a paternal relationship with the Brazilian entrepreneurs. Consequently, during a crisis, when their privileges are threatened, entrepreneurs’ primary action involves complaining about the government or attempting to sabotage – practising obstruction, delay, or withdrawal to protect their vested interests. These complaints relate to the lack of, or the possibility of, ceasing governmental actions that sustain their pecuniary gains throughout the crisis. However, in the 2000s, Brazil began to consider policies focused on the common people. Today, two distinct forces host the Brazilian political turmoil: (1) a call for the State that protects vested interests; and (2) support for continuous enforcement of policies for the common people.

Rethinking the Links Between Human Relationships and Economic Efficiency Using the Local Micro Institutions

Camille Baulant, University of Angers


As in days gone by, today we still observe a concentration of wealth for a few people and unhappiness for most of the other people (Veblen, 1920, Helliwel, Layard, Sachs, 2016). Moreover, extreme poverty has increased in every country world-wide and never before has the gap between the macro level of the country and the micro level of people’s lives been so big. For this reason, this paper presents the new role of “micro institutions” in order to put human development in the center of the actors’ objectives. The paper develops the new paradigm of the happiness economy based on different kinds of approaches in economics, psychology and management. The theoretical part deals with the theories of Stieglitz in “efficient wages” (1984) and the micro institutions (Deaton, 1989) and are actualized by the development about the happiness economy in positive psychology approaches (Kahneman, 2011).

First, the paper defines the concepts of “monetary” (GDP per head in PPP) and “human wealth” (Gallup index) for individuals and countries.

Second, the paper reveres the functioning of the standard economic theory by putting in the human being in the center of the analysis. Following Deaton, Kahneman and Stieglitz, emotion can be powerful enough to build a sustainable and equitable growth and reach a higher economic and social efficiency.

Third, I compare the human wealth and the monetary wealth for two emerging countries with the same standard of life and show the different degrees in happiness feelings in Brazil and in South Africa.


David Dequech, University of Campinas

JEL Classifications

  • O2 - Development Planning and Policy
  • O5 - Economywide Country Studies


The Vested Interests and the Welfare of the Common People (I3, B5)

Paper Session

Sunday, Jan. 8, 2017 1:00 PM – 3:00 PM

Swissotel Chicago, St Gallen 2 Hosted By: Association for Evolutionary Economics

  • Chair: John Watkins, Westminster College

Care or Neoliberalism: Social Pathology?

William Waller, Hobart and William Smith Colleges
Mary Wrenn, University of Cambridge


This paper explores two conflicting social ethical systems. One is the dominant ethical standard of modern industrial society-neoliberalism. Neoliberalism’s ethical foundations grow out of classic liberalism which is essentially a natural law, natural right, conceptualization. This ethical system draws on the implicit characterization of human nature as immutably highly individualistic. As a consequence of this natural human condition, neoliberalism most deeply supports an overarching ethic of individual autonomy and individual responsibility. Thus neoliberalism redefines all other ethical principles in terms of individual autonomy so that freedom, equality and justice are all defined in individualistic terms. Behavior based on alternative conceptions is considered a manifestation of a social pathology.

Both institutional and feminist economics contrast this conception of human nature with a view of human beings as relational. In institutional economics this view of human nature is the result of instincts or adaptations and thus biologically determined. The ethical foundation of such a view requires a meta-ethic of interpersonal responsibility that supports an ethic of care. This view rejects the neoliberal view of ethics as in fundamental conflict with human nature. An ethic of care redefines responsibility in terms of democratic processes to assign responsibility and provide necessary care for human beings to experience freedom, equality, and justice in terms of their ability to participate in the democratic processes that determine the just allocation of responsibility for providing the necessary care. Behavior based on the neoliberal conception of human behavior is a manifestation of social pathology.

The Vested Interests and the Evolving Moral Economy of the Common People

Olivier Brette, University of Lyon


In a 1971 paper, the British historian E.P. Thompson develops the concept of ‘moral economy’ to analyze the food riot in eighteenth-century England. His aim is to highlight the set of moral assumptions which underlie and structure the way everyday economic relations are negotiated between the different classes of a community, in a particular historical context. While this notion has been used and debated in various disciplines (anthropology, sociology, political science, etc.), it has surprisingly not been considered within institutional economics.

The paper aims at elaborating on the concept of ‘moral economy of the common people’, by combining Thompson’s insights and some arguments developed by institutional economists following Veblen’s seminal ideas. First, I point out the commonalities as well as complementarities between Thompson’s and Veblen’s basic views. The paper shows that both authors share crucial common principles in their approach of human agency and of the relations between economy and other fields of social activities. Besides, I argue that Thompson puts forward an original and fruitful method to approach economic relations, whereas Veblen’s notions of habit and institutions provide a solid conceptual foundation to analyze the evolution of the moral economy of common people. Second, the paper emphasizes the heuristic value of a Thompsonian – Veblenian concept of moral economy to study the evolution of the relations between the vested interests and the common people, over the last three decades.

Mass Flourishing as the First Casualty of Vested Interests

Lauri Pietinalho, Aalto University


In this paper, I discuss the sources of human flourishing in a capitalist economy, and how those sources are affected by evolution of industries – and growing vested interests. My approach is analytic in nature. I build on the concept of mass flourishing by the Nobel Laureate Edmund Phelps, and synthesize research (especially) in positive organizational scholarship and industry lifecycles.

People flourish when they are tapped into their intrinsic motivation. Whether that can happen depends largely on how the surrounding institutions prime the people involved – through extrinsic or intrinsic motivations. While extrinsic rewards can bring momentary pleasure, actual flourishing then must wait for another context. There are prerequisites for the immediate social setting for experiencing flourishing: sense of autonomy, connectedness, and competence (as described by self-determination theory). I argue that additionally, systemic and sustained flourishing within an institution can be seen to relate to experiencing i) exploration of the new in creation of the institution, and ii) positive impact of the work on beneficiaries.

The first is naturally associated with the earlier phases of the lifecycle of an industry/organization. While the latter could be the source of flourishing for more established institutions, concentration of power typically blocks this from all participants. Those with power are distanced from experiencing the impact of the work on beneficiaries, structurally leading themselves to prime through extrinsic motivations. Consequently, this leads to the need to further control the actions of those who in the front-line could experience the impact, inhibiting flourishing from them as well.


The Fall of Common Man: From Loneliness to Precarious Classes

Ali Tarhan, Central Bank of the Republic of Turkey


Veblen’s arguments about the condition and future of the common man are dramatically right in an age of unfettered capitalism. The common man, squeezed between the dichotomy of labor and capital, has no way out but to retire from the public sphere and intolerable daily life. No doubt that, the Great Crisis of 1929 proves this desperation for both classes. However, an interregnum, roughly between the New Deal and the mid 1970s, shows the possibility of a welfare state and an affluent society. The latter two phenomena are institutionalized with a caring state, nuclear family, trade unions, rise of the middle classes, and the almost visible countervailing forces of society. During this era, estrangement and desperation are not widely recognized class issues other than individualistic problems. This epoch also witnesses the rise of centripetal forces in affluent societies. However, beginning with the 1960s, huge budget deficits, collapsing nuclear family, and eroding trust in governments, start destroying the fundamentals of welfare state. In the early 1970s, by the rise of Post-Fordist production, the proportional increase in the amounts of highly skilled workers and white collar employees gradually make trade unions weaker and mark the commencement of centrifugal forces in societies. In this “Liquid Modernity”, Veblenian escapism replaces its place with a vague sense of belonging since the Foucauldian capillary power of capitalist classes disguises the landmarks of supremacy and leaves no certain place to escape. Therefore, this study is an attempt to decode the rise and fall of the common man.


Karl Polanyi’s Criticism of Economics and the Origin of His Poor-Relief Ideas

Takato Kasai, Doshisha University


Karl Polanyi’s criticism of capitalism in The Great Transformation (1944) has influenced; however, in economics his thought was never the mainstream. This research shows the genealogy of a social organization for an inclusion of poverty by the investigation of Polanyi’s unfinished theory that incorporates Jeremy Bentham's perspective.

Polanyi criticized the connection of utilitarianism with economic liberalism by focusing on Bentham. This connection supports creation of a free market through 'commodity fiction', and accepts individual sacrifice, resulting in two outcomes: neglect of basic human rights and loss of individual liberty. According to Polanyi, the rationality of utilitarianism leads to a conflict regarding wage determination, resulting in both equilibrium and a walkout. Therefore, the utilitarian consequence would merely endanger society.

Polanyi highly appreciated Bentham as a social reformer with pragmatic thoughts, especially Industry-house and Panopticon, and simultaneously Polanyi had mixed feelings regarding the views of Bentham. Indeed, Bentham’s liberalism did not mean laissez-faire but explained the importance of indirect government intervention in the economy in order to increase human happiness. Polanyi followed Robert Owen’s thought about social organization for pauperism. Additionally, Bentham had a great influence on the emergence of this idea with further contributions from Robert Owen. Hence, the genealogy of social organization emerges as Bentham–Owen–Polanyi.

In conclusion, it becomes clear that Polanyi criticized only sum-ranking, but found the social factor in utilitarian. We can apply Polanyi’s unfinished social organization as a blueprint for social inclusion of poverty in current times.

JEL Classifications

  • B5 - Current Heterodox Approaches
  • I3 - Welfare, Well-Being, and Poverty