Institutionalism

Nineteenth-Century European Institutionalism

A full overview of the institutionalist tradition would go back to Aristotle's discussion of regime types (politeia). More recent interest in institutions emerged during the nineteenth century among the German historical economists (GHE) or what Paul Pierson called the institutional economists. Providing a critical response to the universal theories of the classical economists, these scholars disparaged deductive work, which they considered to be self-referential mathematical modeling. They argued that economic life is better understood through empirical work rather than through logical philosophy.

Their key insight was the need for historically and sociologically informed empirical analysis of reality. The earliest figure from this group was Wilhelm Roscher. His work insisted on the importance of context—historical, social, and institutional—for understanding the laws of political economy, economic behavior, and the empirical diversity of social life. Early research focused on the relationship between the social and economic organization of society, stages of development, and evolutionary processes. Bitter conflicts with their Marxist contemporaries (followers of the theories of Karl Marx) notwithstanding, some scholars now see a close analytical affinity between the two traditions.

It is customary to divide the GHE into three generations: Early, Younger, and Last. The latter is noteworthy because it encapsulates some of the work of Max Weber, who was influenced by early GHE. Weber is perhaps the most influential modern institutionalist. Contemporary institutional works that posit institutions as an independent and non-epiphenomenal [Page 450]variable are indebted to Weber's theorizing a political realm that is autonomous from economics and ideas. In his discussion of the state and bureaucracy, he proposes a macrosociological theory of institutions.

Institutionalist insights are also present in Weber's theory of authority. For Weber, charismatic authority, though magical in essence, is inherently transient. As charisma exhausts itself and becomes routinized, traditional or rational-legal forms of authority take its place. With routinization, social relations and interactions become increasingly regular, predictable, and impersonal. Under modern capitalism, these take on a rational-legal form and become more extensive and elaborate. Some usages of the term institutionalization are thus a subset of Weber's process of routinization. Later institutionalist insistence on the importance of the legitimacy of social action is informed by Weber's insight that social action is framed with reference to a “sacred” metaphysical principle.

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