institutional economics

School of economics that flourished in the U.S. in the 1920s and '30s, which viewed the evolution of economic institutions as part of the broader process of cultural development. Thorstein Veblen laid the foundation for institutionalism with his criticism of traditional economic theory. He tried to replace the concept of people as the makers of economic decisions with a more realistic image of people as influenced by changing customs and institutions. John R. Commons emphasized the collective action of various groups in the economy, viewed within a system of continually evolving institutions and laws. Other U.S. institutional economists include Rexford Tugwell and Wesley C. Mitchell. See also classical economics, German historical school of economics.

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