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from economic behaviour (as has often been claimed under the rubric of ‘revealed preference’), but that the interpretative and intentional problems of the actors must also enter into the picture, undermining any unique reference for the concept of self-interest. In essays such as ‘The economic theory of woman’s dress’, he shows the hermeneutic practice of approaching familiar behaviour as if one were producing an ethnographical report of the behaviour of an alien tribe. His conception of capital as an evolving linchpin of our economic system has interesting parallels with Peirce’s idea that natural laws themselves evolve, and thus our interpretations are forced to evolve as well.

These possibilities did not receive the attention they may have deserved; and instead, Veblen became associated in the public mind with the politics of the ‘technocratic movement’ and a ‘soviet of engineers’, as the extrapolation of his faith in a self-assured materialist science (Layton 1962).

JOHN R.COMMONS

The Peircian legacy in the work of Commons was more self-conscious and more direct (Ramstaad 1986). In his magnum opus, Institutional Economics

(Commons 1934), he surveyed the philosophical traditions which he saw as nurturing the primary schools of economic thought, and argued that it was time for recent advances in philosophy to prompt a new economic theory.

In the stage of Pragmatism, a return is made to the world of uncertain change, without fore-ordination or metaphysics, whether benevolent or non-benevolent, where we ourselves and the world around us are continually in a changing conflict of interests…. Not till we reach John Dewey do we find Peirce expanded to ethics, and not until we reach institutionalist economics do we find it expanded to transactions, going concerns, and Reasonable Value.

(Commons 1934, pp. 107, 155)

Commons followed Peirce in many respects. He, too, was hostile to the Cartesian duality of mind and body (Commons 1934, pp. 16 and 105), and suspected that the said doctrine had served to obscure the problem of conflicts of interest in earlier economic thought. For Commons, both truth and value were defined as the consensus of the relevant investigative community. Contrary to neoclassical biases, mind was not assumed to be a passive receptacle of sense impressions, but rather was seen as an active inventor of meanings, which displayed ‘an inseparable aspect of valuing, choosing and acting’ (Commons 1934, p. 18). Commons brought these philosophical convictions to bear in his economics, by isolating value as the central epistemological term in economics, and postulating that the definition of value is tentative and evolutionary, constructed by courts in the course of their adjudication of conflicts of interest.

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Commons perceptively grasped the importance of the dichotomy between sufficient reason and efficient cause in Veblen’s research programme, and yet he rejected Veblen’s reification of the dichotomy as an unbridgeable gap:

Veblen’s concept of a science was the traditional concept of the physical sciences which rejected all purpose in the investigation of the facts. The court’s concept of a science was an institutional concept wherein the investigation must start with a public purpose as a primary principle of the science itself. Veblen’s elimination of purpose from the scope of science was based on his interpretation of Pragmatism as set forth by James and Dewey. He does not seem to have known the Pragmatism of Peirce, which dealt only with the physical sciences, nor the Pragmatism of the courts, which more nearly followed Dewey.

(Commons 1934, p. 654).

This hermeneutical character of science is an important presupposition of Commons’ economics. He insisted that, ‘False analogies have arisen in the history of economic thought by transferring to economics the meanings derived from the physical sciences’ (Commons 1934, p. 96). If economists had not been so spellbound with the slavish imitation of the outward trappings of physics, they might have admitted that the structures and meanings they had constructed frequently conflicted with the interpretations of the actors so described, and that there had to be some rational means for reconciliation of such divergent constructions. All economic life is interpretative, and there is no more certain recourse than the interpretative practices of the community. This explains why Commons dubbed his theory ‘Institutional economics’. As he put it: ‘we may define an institution as Collective Action in Control of Individual Action’ (Commons 1934, p. 69).

Commons’ theory of transactions follows directly from his embrace of what we have called Peircian hermeneutics, as it attempts to supply a theory of semiotics to explain the actors’ interpretations of the meanings of legitimate transactions (Ramstaad 1986, pp. 1083–6). To portray a transaction as simple physical transport between two spheres of relative need assumes away all problems of rational cognition (Mirowski, 1989, 1990).

It is significant that the formula of a transaction may be stated in terms of psychology…. All that is needed to shift it to institutional economics is to introduce rights of property; legal units of measurement; the creation, negotiability and release of debt; the enforcement of the two duties of delivery and payment by the collective action of the state.

(Commons 1934, pp. 438–9)

In effect, Commons was invoking Peirce’s dictum that every semiotic act must be analysed in terms of the sign itself, the signifier and the interpreter. In his taxonomy of transactions, the signifiers were the actual traders, the interpreters

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were to be the virtual buyers and sellers and the state apparatus, and the signs were to be the contracts, the debt instruments and all the rest.

Once one sees the transaction for the complex social phenomenon which it is, it should become apparent that conflicts of interest and interpretation would be endemic. Hence, problems of co-ordination within a market system will be rife, and there will be an imperative for some notion of ‘reasonable value’ to be negotiated. This concept of value can only be historical, and contingent upon the evolution of the interpretative community.

Commons’ legacy as an economist was surprisingly consonant with his stated philosophical premises. As is well known, both he and his students were very active in legal and governmental circles, attempting to get courts and legislatures to recognize their role as experimenters as well as mediators. Commons’ stance was that he was openly advocating the gradual improvement of capitalism through governmental intervention. Many of the economic functions of American government which we today take for granted were the handiwork of Commons and his students in the first half of the twentieth century.

However, his greatest triumphs in the arena of practice were viewed as liabilities in the arena of economic theory in the next generation. His refrain that there were no ‘natural’ grounds for economic institutions was read as implying that Commons left no systematic economic theory. The conjuncture of the decline of pragmatism in the US in the 1930s with the rise of a particularly narrow form of positivism sealed the fate of the Commons wing of the Pragmatist institutionalist programme.

POST-1930s INSTITUTIONALISM

The pragmatist view of science had fewer and fewer partisans in the US from the 1920s to the 1960s. The causes of this decline are too baroque to discuss here, but it is obvious that a Cartesian-style positivism rose to predominance and became the premier cultural image of natural knowledge.9 The Institutionalist school of economics found itself very vulnerable in this harsh new climate. The rival tradition of neoclassical economics was patently more attuned to the trends in philosophy and science, and even went on the offensive, branding its rivals as ‘unscientific’. In reaction to this threat, the ‘second generation’ of institutionalists tended to distance themselves from their heritage of Peircian pragmatism. Two prominent representatives of this reaction were Wesley Clair Mitchell and Clarence Ayres.

Mitchell was a student of Veblen, and received from him an extreme scepticism about the analytic claims of neoclassicism, a scepticism he maintained throughout his career. His early work on monetary history and business cycles were extrapolations of some major Veblenian themes, such as the divergence of financial from material expansion as a cause of macroeconomic instability. However, as Mitchell rose in professional standing, he became the advocate of a very unsophisticated notion of scientific endeavour, in the sense that he became

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an advocate of the economic scientist as a neutral and impartial gatherer of facts. One of his crowning achievements was to be the prime mover behind the founding of the National Bureau of Economic Research, an organization originally dedicated to the non-partisan support of the collection and analysis of quantitative economic data such as the fledgling national-income accounts.10

From some of his comments—such as those in Mitchell (1937, p. 35)—it seems he thought that statistical analyses were somehow separate from and immune to the mechanical analogies imported by neoclassical theory. None the less, it is also clear that his formidable success in capturing funding and support for his Bureau hinged crucially upon his willingness to make use of prevalent impressions of the trappings of scientific rigour. As a result, it was largely due to Mitchell that by mid-century the Institutionalist school was perceived as promoting a form of naïve empiricism without any theory. Protests to the contrary were met with the challenge ‘where is your scientific theory?’—which really meant, ‘why aren’t you using the conventional techniques of physics (such as constrained maximization) as we do?’. Mitchell and his school had no coherent response, since he had already acquiesced to so much of the positivist programme.

Clarence Ayres was another well-known institutionalist who stressed the later, more Manichaean side of Veblen’s legacy. Ayres explicitly traced his influence from Dewey: ‘It was from John Dewey that I first learned what that way of knowing is. It is what Dewey called the “instrumental” process. This, as Dewey realized, is identical with what Veblen was calling the “technological” process’ (Ayres 1961, p. 29; see also McFarland 1986, p. 622). The reification of technology as the sole category of legitimate knowledge, begun by Veblen, was carried to its extreme conclusions by Ayres. In the process, the Peircian pragmatic maxim was stripped of everything but a crude instrumentalism which sought ‘to identify the intellectual procedures of science with the use of instruments and at the same time to identify the instruments of scientists with the tools which are still in wider use by artisans and craftsmen’ (Ayres 1961, p. 277). While Dewey could hardly be accused of possessing an architectonic, this was certainly a misrepresentation of his position (Rutherford 1981). Where Dewey wanted to portray scientific inquiry as a continuous questioning procedure, Ayres tried to portray it as the accumulation of certain and final knowledge by means of the accumulation of tools and artefacts. While this position had little to do with pragmatism, it did resonate with certain doctrines in the philosophy of science in the 1930s through the 1960s—such as Bridgeman’s ‘operationalism’ and various attempts to define a neutral object languageand therefore it did attract adherents.

The central theme in Ayres’ work is the tension and dichotomy between ‘ceremonial’ and ‘technological’ or ‘instrumental’ processes (Waller 1982; Bush 1983). The distinction seems to reduce all social life into an exhaustive partition of non-scientific and scientific endeavour, for Ayres insists that: ‘tribal beliefs, and the institutional and ceremonial practices in which they are objectified, are

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simulacra of scientific knowledge and technical skills’ (Ayres 1961, pp. 30–1). Technology is by far the larger category, since it is defined:

in the broadest possible sense to refer to that whole aspect of human experience and activity which some logicians call operational, and the entire complement of artefacts with which mankind operates. So defined, technology includes mathematical journals and symphonic scores.

(Ayres 1961, p. 278)

This work was more reminiscent of Comte’s division of all human knowledge into three stages—the Theological or fictitious, the Metaphysical or abstract, and the Scientific or positive—than it was of any of the writings of Peirce or Dewey. Somewhat incongruously for an Institutionalist, ‘ceremonial’ practices and habits are equated with institutions, which are then invidiously contrasted with science. Religion, myth, folkways and the status quo are at various times tarred with the brush of ‘ceremonial’ status; but the most concise definition of the concept is provided by Mayhew (1981 pp. 515–6): ‘Ceremonialism is a failure to evaluate by testing consequences.’ At the end of this road, the pale shadow of pragmatism has become—irony of ironies—a Popperian version of science.

Hence the subtle hermeneutics of Peirce, by way of Dewey, was reduced in Ayres’ hands and those of his followers to a very prosaic materialism. ‘The “we” who know are not the entire community, or even a majority of all the people…such knowledge exists, is a community possession, so to speak accessible to anyone who seeks access to it’ (Ayres 1961, p. 34). Knowledge was effectively a physical stock, and the role of community was diminished to the vanishing point. Science was treated as if it were the embodiment of a single method true for all time, although he was negligent when it came to describing precisely what the method consisted of (Ayres 1961, p. 51). Ayres was prone to such obiter dicta as ‘nothing but science is true or meaningful’, or ‘Any proposition which is incapable of statement in scientific terms, any phenomenon which is incapable of investigation by scientific methods, is meaningless and worthless as meaning and value are conceived in that universe of discourse’ (in Lepley 1949, p. 59). Ayres did temper the harshness of this pronouncement by his reference to the relevant universe of discourse, but he had obviously come a long distance from Peirce’s hermeneutics. This increasing stridency in the evocation of science became painfully incongruous to a positivist audience, and pushed institutional economics further and further out on a limb: how could they praise scientific discourse as the only relevant truth criteria, and simultaneous eschew scientific practice as it was understood in mid-twentieth-century America? Where was the mathematical formalism and axiomatization, the systematic hypothesis-testing according to the canons of classical statistical inference, the mathematical models, and the style of studied anonymity of the physics report?