The Battle for Change and Variety

Niko Waesche 25.11.1997

Why the "digital revolution" will not change evrything and why change will not be the same everywhere.

Vorspann
The Battle for Change and Variety
Addendum: Short Bioghraphy and Selected Publications

Interview with Geoffrey Hodgson, Institutional Economist

In the early 1980s, one lecturer in economics at the University of Northumbria, UK, embarked upon a scholarly journey, switching from an intellectually quite fashionable field towards a niche that seemed at the time rather antiquated. Retrospectively, this move demonstrated foresight and timing.

Geoffrey M. Hodgson moved from being a "sympathetic critic of Marxism" towards institutional economics. Seen from the perspective of mainstream, neo-classical economics, this move was one from an established counter-doctrine to a minute, yet heretical strand of economics. In addition to being peripheral, however, institutional economics had collected some dust, its academic popularity in the United States dated back to the period before the Second World War. Its roots lay in the German Nationaloekonomie of the previous century.

The Cold War made it possible for Marxist as well as neo-classical economists to almost completely ignore the existence of two things: institutional variety and technological change. Yet, both were important aspects of the international political economy, especially in the 1980s. And both were the stuff of institutional economics.

On the one hand, institutional variety was insuring that within both Cold War blocs distinct 'cultures' existed which made the Czech economy as distinct from the Chinese as the Japanese was to the American. Underneath the surface of the two blocs, therefore, variety was deeply rooted in history. On the other hand, technological change was increasing in speed and complexity in the 1980s, most important perhaps being the rise of 'intelligent networks' created by the convergence of computer, telecommunications and media technologies.

These two forces broke out into centre stage in 1989. Suddenly, it seemed as if the world was a patchwork of different, overlapping regions, nations and supranational entities. Contemporary observers spoke of a return to medieval conditions. And intelligent networks had entered all aspects of our lives, transforming business processes as much as social interaction.

How exactly change manifested itself, however, depended on the specific, historically rooted institutional environment it was impacting upon. And change did not happen over night. Institutional approaches in the political sciences and economics were, therefore, in a unique position to explain how change was occurring in a world of variety.

Well before 1989, Hodgson made it his goal to 'modernise' institutional economics. His three most important books to date represent a step-by-step approach towards making a peripheral strand of economics into a robust discipline.

In his first major book with an institutionalist theme, "Economics and Institutions" (1988), Hodgson sought to critique mainstream economics and introduce the main themes of the institutionalist stance. In his second book, "Economics and Evolution" (1993) he explored the use of evolutionary ideas of change in economics, change being one of the most important concerns of institutional economics. In his current book, "The Political Economy of Utopia," just completed in draft form, he rigorously places changes occurring today into an institutional framework. Changes catalysed by increasing complexity and an increasing need for advanced knowledge are discussed in the detailed and inherently sceptical manner characteristic to Hodgson.

And he is emphatically European, if this is the right label for a stance that does not categorically rule out government intervention in the economy. This makes him distinct from most American institutional economists, the most famous being the economic historian Douglass North, who won the Nobel prize in economics in 1992. It puts Hodgson more in the camp of political scientists such as Peter Hall or John Zysman, who had similarly embraced institutional approaches in the 1980s.

Telepolis features Geoffrey Hodgson in an one-hour interview held in his office in the Judge Institute of Management Studies, Cambridge University.

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