Thorstein Veblen: The Father of Evolutionary and Institutional Economics

Being ‘institutional’ and ‘evolutionary’ is currently fashionable for economists. Since the early 1990s, almost every economist has learned to stress the importance of institutions and several Nobel Prizes have been awarded to institutionalists, including Ronald Coase, Douglass North, Elinor Ostrom and Oliver Williamson. Evolutionary themes pervade game theory and other approaches in mainstream economics. We are all institutional and evolutionary economists now. Of course, these widely shared terms obscure a variety of different basic assumptions and approaches. There is also no unanimity on what ‘institutions’ are and what ‘evolution’ means. Given the broad coverage of these terms, it is also possible to point to a wide variety of progenitors. Adam Smith, Karl Marx, Carl Menger, Alfred Marshall, Joseph Schumpeter, Friedrich Hayek and others were all, in a meaningful sense, evolutionary economists; they all developed an understanding of the dynamic processes of structural change. They all, furthermore, paid much attention to the effects of social institutions on economic performance. Accordingly, evolutionary and institutional economics as found today have a rich variety of ancestors, in part accounting for the diversity of contemporary approaches.