Original Institutional Economics: A Review of Common's Thoughts and his Transactional Approach

About hundred years ago, Walton Hamilton, in a historical event tried to introduce an alternative approach to economics, known as institutional economics. He intended to show that the institutional economics is an extensive and comprehensive scientific paradigm that could unite the whole economics. In fact, this school of thought well succeeded to rule over the prestigious universities of the world for some decades with the help of its founders and explainers. Commons, one of the founders of the institutional economics, trained great economists and for many years his institutional ideas ruled over Wisconsin University, one of the most prestigious universities of the time. This paper tries to answer such questions as follows: What was Commons’ analytical approach to economic issues and problems? What were the differences caused by his institutional perspective in conducting economic analyses? Like Veblen and Mitchell, Essentially what shortcomings did Commons assume in the mainstream economics that led him to found the institutional economics? What differences did Commons create in economic analyses and what subjects did he emphasize on? Specifically speaking, what transformations did his emphasis on the concept of transaction bring about in the principles of economics? Having a specific and different viewpoint, this paper uses a textual analysis to discuss these subjects in a try to show that Commons with his unique vision toward the concept of ‘institution’ could change the unit of economic analysis and was successful to introduce a new approach to this field of study, which might be referred to as ‘transactional approach’.