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Institutional Economic Theory Economics 451 University of Missouri-Kansas City. Essay 2 Topics. Topic 1 - Discuss the Institutionalist theory of human nature a. Key points of theory b. Compare to standard theory.

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Institutional Economic Theory

Economics 451

University of Missouri-Kansas City


Essay 2 Topics

Topic 1 - Discuss the Institutionalist theory of human nature

a. Key points of theory

b. Compare to standard theory

Topic 2 - Discuss the concept of culture and its relation to the Veblenian dichotomy

a. Principal elements of culture

b. Key elements of Veblenian dichotomy


White divides the components of culture into four categories: ideological, sociological, sentimental or attitudinal, and technological.

  • The ideological sector: These are the beliefs of the tribe. They extend from the belief that the world is flat to the idea that process is central to the history of human kind, to the idea that symboling is a central aspect of human existence. Even the discussion of the symboling process is dependent upon symboling.
  • The sociological component: These are the customs, institutions, rules and patterns of interpersonal behavior.  Included are marriage patterns, behavior toward relatives, behavior toward those with whom you work and behavior with strangers. 
  • Sentiments: The loves and the hates, from relatives to inanimate objects.
  • Technology: White does not accept that human kind is the unique tool maker. He rightly points out that other animals not only use tools but invent tools. That which he insists separates the species homo sapiens from the rest is "The use of tools in the human species is, on the whole, a cumulative and progressive process; it is this that distinguishes Neolithic from paleolithic cultures, and the Age of Coal and Steel from the Middle ages. In the human tool process, one generation may begin where the preceding generation left off."


Of the four mentioned categories of culture‑‑ the technological is that which is most basic. White writes: "The technological basis of cultural systems is rather easily demonstrated. All living organisms can maintain themselves as individuals and perpetuate themselves as species only if a certain minimum adjustment to the external world is achieved and maintained. There must be food, protection from the elements, and defense from enemies. These life‑sustaining, life‑perpetuating processes are technological in a broad, but valid, sense; i.e., they are carried on by material, mechanical, biophysical, and biochemical means."

White continues, "It is fairly obvious that the social organization of a people is not only dependent upon their technology but is determined to a great extent, if now wholly, by it. both in form and content. As a matter of fact, a social system might well be defined as the way in which a society makes use of its particular technology in the various life‑sustaining processes: subsistence, protection from the elements, defense from enemies, combating disease, etc.... A hunting people will have one type of social organization as a consequence of this kind of activity, i.e., the use of certain technological implements; an agricultural, pastoral, or industrial people will have another cast to its social system."


The influence of the technology upon the social organization of a particular culture is expressed in two ways.

There is the direct effect of the technological instruments upon the behavior of human organisms.

Second on the social level the instruments relate to one another in a manner designed to make an integrated coherent, social system possible.


Implications of Concept of Culture for Social Analysis

  • The absence of the concept of culture thwarted the efforts of earlier scholars like Locke, Hume and Rousseau to account for the existence of common activity patterns among societies.
  • Concept of culture is revolutionary because it resolves, at long last, the mystery of humanness, thus completing the secular revolution begun in early times. The concept does three things:
  • it squares with Darwinism‑ group elaboration & transmission of culture to other members of the group and new generations
  • it explains diversity of human societies that are greater than the individual differences
  • it explains the amazing stability and persistence of this diversity ‑ imposition of sanctions

Real vs Ideal Culture

Standards of behavior vs real behavior

B. Malinowski

Trobriand Islanders ‑ incest taboo‑ they show horror at it and seek ways to thwart supernatural punishment.

Trobrinaders ‑ spirit conception of offspring ‑ matrilineal, mothers brother has important social position and it would be subversive for father to be biologically connected.

Forces in Culture: Creative—Permissive—Restrictive


Humanity's two aspects

 Culture as the combination of symbols and tools S x T = C

What is a symbol?

What is a sign?


William G. Sumner --Mores principle – cultures have gathered beliefs, traditions, myths, legends, rites, and so on that are unique to that culture and make no sense (are irrational) outside of that culture.

  • Is it just that the Zuni Indians of New Mexico have one set of symbols and the alluts of Alaska another and that is all there is to it?
  • This is the concept of cultural relativism, or so‑called moral agnosticism, nihilism
  • Thus, says Sumner : All values are determined by the culture and have no meaning outside the culture. This is of course the cultural relativist view regarding values, i.e., they are culturally relative.
  • To Institutionalists it is partly true (warranted).
  • However, Institutionalists would say that some values have meaning across and through time, and in any culture, e.g., long life v short life – tool using, germ theory of disease.
  • A digression on Sumner, Spencer and Veblen
  • Social Darwinism
  • Sumner and Noah Porter at Yale – curriculum reform
  • Evolution and the Social Sciences

The Veblenian Dichotomy

  • Culture and the Dichotomy
  • Draw from an analogy to chemistry – Solution – has elements in it.
  • If we view the solution as a culture – tools as part of the solution – as are myths, legends, norms, etc., these things are not floating rather they are dissolved in it.
  • Tools are used in the same way in all solutions, but the solutions are different.
  • If something is done to the solution, it will precipitate (change)

Dualism v Dichotomy

Dualism involves two separate roots—

Greek dualisms such as mind - body

Dichotomy involves one root with two separate branches–

Veblen’s distinctions


Veblen’s Distinctions

Workmanship ‑‑ Predation

Industrial ‑‑ Pecuniary

Making goods ‑- Making money

Clothing ‑‑ Dress

Serviceability ‑‑ Vendibility

Idle Curiosity ‑‑ Vested Interest

Industrial Arts ‑‑ Pecuniary Arts

Machine Process ‑‑ Conscientious Withdrawal of Efficiency

Functional Consumption ‑‑ Conspicuous Consumption

And several more





Tools & Skills

Instrumental Logic/Behavior

Ceremonial Logic/Behavior

The Veblenian Dichotomy


Myth, Legend, Tradition


Generalizations Regarding Ceremonial Behavior

Although there is enormous diversity of ceremonial patterns of different societies in different parts of the world, and also great differences in ceremonial patterns of the same society over time, as, e.g., the differences between ancient and modern Italian society, nevertheless, it is possible to identify some major features of ceremonies.

1. Power, authority, class inequality, rank, status, superior/ subordinate are based on the ceremonial aspect and all purport to rest on differences in competence and hence are quasi-technological; Veblen described this as "ceremonial adequacy."