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Institutionalism
is an economic point of view that emphasizes the role of
social organization and structure in modern economic life. Thorstein
Veblen (1857-1929), an American son of Norwegian immigrants
was instrumental in creating this school of thought in the early
twentieth century, and he vigorously attacked what he regarded
as the privileged "leisure class" in American.
To
Institutionalists, the important "institutions" of economic
life include customs, habits, morals, and laws.
These are believed to be more important in shaping economic
life than are marketplace principles. Institutionalists emphasize
a historical interpretation of social life, asserting that economic
generalizations should be relevant to time and place. They believe
that economics has few absolute principles, and therefore that
economics cannot be a rigorous science.
Institutionalist
ideas greatly influenced economic policies that were created
in response to the Great Depression. Among the most important
followers of this tradition in the late twentieth century has
been John Kenneth Galbraith.
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