INSTITUTIONAL FACTORS IN ECONOMIC THINKING.

This article considers the institutional factors in economic thinking. To Thorstein Veblen, what economists believed and had to say about the operation of economic forces in a price system was essentially a logical formulation of the preconceptions and observations of those whose daily lives were subjected to the impact of the system. The problems economists think about and the way they think about them are determined by the institutional matrix in which they find themselves. Around this idea, economist Wesley Clair Mitchell built his course in the development of economic thought from Adam Smith to John R. Commons. Smith formulated principles governing the determination of prices, the economic allocation of resources, the distribution of income, the geographic division of labor, and economic progress, and in doing so he laid the basis for late-nineteenth-century neoclassicism. Smith, in defending economic individualism as a means of promoting the national welfare, conceived of the national income as the aggregate of individual incomes .But economic individualism, the philosophical product of individualistic capitalism, had no sooner conquered men's minds than the great transformation was ushering in the next sequence in the inexorable flow of institutions and ideas.