The Meaning and Concept of Institutions in Institutionalism

“Institutions matter”. This is what we now see repeatedly in economic texts. But, some economists mentioned this truth more than a century ago. By asserting that mainstream economics has ignored institutions, these economists established a new paradigm, named institutional economics, which was, according to their manifesto, “the only way to the right sort of theory.” The crucial point, however, was that this new paradigm was introducing a critical element as the main unit of analysis that could well destroy all aspects of conventional economics. Now, more than one hundred years after the beginning of institutional economics, the science of economics has witnessed many valuable endeavors to imbed institutions in economic analysis. Although valuable, but these efforts has made the concept of institutions more complicated. Indeed, as mentioned by J. R. Commons, from the early stages of the evolution of institutionalism, this concept was tangled. However, after the emergence of New Institutional Economics, we can see more difficulties. Therefore, it is important to pay attention to the meaning and concept of institutions and its relation with individuals. Another issue that this paper is going to shed some light on it, is the role of institutions in economic occasions. Finally, the paper will concentrate on one important and neglected question, which was the main source of Veblen’s attack on orthodoxy, that is, why did mainstream economics ignore institutions?