Dimensionalizing institutions

Geoff Hodgson has criticized the New Institutional Economics with the aim of rehabilitating the so-called original institutional economics associated most notably with Thorstein Veblen. The chapter argues that although there are differences between Hodgson and the institutionalism associated with Ronald Coase, Oliver Williamson and Douglass North, a comparison of Hodgson’s definitions of institutions, markets and firms with those developed recently in the Coase-North-Williamson tradition reveals that these have more to do with Hodgson’s strategy of differentiation than with fundamental disagreements on substance. Divergences are more substantial when it comes to other issues that new institutionalists consider important but that Hodgson either rejects or overlooks. In particular, Hodgson’s rejection of the concept of hybrid forms and his neglect of intermediate institutions that link the general rules of the game and the agents and organizations operating within these rules produce a somewhat amputated picture of how modern capitalist systems work.