Comments on the Institutionalist View of Reaganomics
Greater attention to the institutionalist tradition in economics, especially as developed by John R. Commons and W. C. Mitchell, might have avoided many of the problems of Reaganomics-which I define as monetarism; plus supply-side economics. This institutionalist tradition is based on careful attention to empirical evidence, the inductive method, and an analysis of organizations and institutions, and not merely on narrow market-oriented analysis based on highly restrictive deductive assumptions. Contrary to the opinions of some of their critics, institutionalists are not anti-theoretical or anti-quantitative; rather, they place heavy emphasis on theories derived from studying the real world and other empirical evidence to reveal the organic relationships between systems rather than the deductive mechanical relationships explored in much of neo-classical economics. Reaganomics is unfair, unworkable, and unrealistic. Monetarism is based on the assumption that inflation is caused only by an increase in the money supply. In a perfectly competitive world, where all decisions were made at one time and where there was something called "money" that people could agree on, then perhaps the monetarists would be correct. But in the real world these conditions clearly do not hold. In an informa-