John R. Commons Quotes

The aim of this volume is to work out an evolutionary and behavioristic, or rather volitional, theory of value. It was commenced thirty-five years ago at Johns Hopkins University under my stimulating teacher, Richard T. Ely.

In the entire circuit of the globe those races which have developed under a tropical sun are found to be indolent and fickle. From the standpoint of survival of the fittest, such vices are virtues, for severe and continuous exertion under tropical conditions bring prostration and predisposition to disease. Therefore, if such races are to adopt that industrious life which is a second nature to races of the temperate zones, it is only through some form of compulsion. The negro could not possibly have found a place in American industry had he come as a free man.

But institutional economics is the field of the public interest in private ownership, which shows itself behavioristically in buying and selling, borrowing and lending, hiring and firing, leasing and renting. The private interests become the field of intangible yet quantitative and measurable rights, duties, liberties and exposures to the liberties of others. These are various aspects of rights of ownership. What we buy and sell is not material things and services but ownership of materials and services. The correlation of engineering economics, home economics, and institutional economics makes up the whole of the science of political economics.

Economic theory deals with two concepts, Value and Economy. Abstract reasoning regarding these concepts rests ultimately on mathematical concepts of quantity, time and energy. The three are inseparable, for quantity and time are dimensions of energy. The quantity relationships of energy, usually termed "statics," turn on the problem of the relation of the parts to the whole, while the time relationships, usually termed "dynamics," are the relations of a process that connects past, present and future.

Legally, the term liberty means absence of duty, or rather the limit of duty.

It is an easy and patriotic matter for the lawyer, minister, professor, employer, or investor, placed above the arena of competition, to proclaim the equal right of all races to American opportunities; to avow his own willingness to give way should even a better Chinaman, Hindu, or Turk come in to take his place; and to rebuke the racial hatred of those who resist this displacement. His patriotism and world-wide brotherhood cost him and his family nothing, and indeed they add to his profits and leisure.

The ‘liberty’ of one is his permission to act as he pleases, supported against interference by the power of the concern or government

Since institutional economics is behavioristic, and the behavior in question is none other than the behavior of individuals while participating in transactions, institutional economics must make an analysis of the economic behavior of individuals.

Liberty is as much a matter of compulsion as duty, but where duty says to a person that he must or must not, liberty says to other persons that they must not interfere with that person, or that they even must help to prevent still other persons from interfering, if necessary.

Economic theory, since the time of the Physiocrats, has endeavored to get rid of the human will and to explain economic phenomena in terms of physical and hedonic forces. The human will had been the main reliance of the Mercantilists and of the economic theory of the Church fathers. But the will was arbitrary, capricious and contrary to natural laws. There were two stages of these physical theories which attempted to get away from the will:-the natural rights arld physical equilibrium stage of foreordained evolution of Quesnay, Adam Smith and Karl Marx, and the natural selection stage of blind evolution that followed Darwin, whose distinguished exponent in economics is Veblen. The theorists of each stage attempted to get rid of the human will and to explain economic phenomena as the working out of natural forces, either foreordained or blind. It was a concept of society as the natural growth of a mechanistic equilibrium.

The boot and shoe makers, either as shoemakers or “cordwainers,” have been the earliest and the most strenuous of American industrialists in their economic struggles. A highly skilled and intelligent class of tradesmen, widely scattered, easily menaced by commercial and industrial changes, they have resorted with determination at each new menace to the refuge of protective organizations.

The difficulty in defining a field for the so-called institutional economics is the uncertainty of meaning of an institution. Sometimes an institution seems to mean a framework of laws or natural rights within which individuals act like inmates. Sometimes it seems to mean the behavior of the inmates themselves. Sometimes anything additional to or critical of the classical or hedonic economics is deemed to be institutional. Sometimes anything that is "economic behavior" is institutional. Sometimes anything that is "dynamic" instead of "static," or a "process" instead of commodities, or activity instead of feelings, or mass action instead of individual action, or management instead of equilibrium, or control instead of laissez faire, seems to be institutional economics.

An institution is defined as collective action in control, liberation and expansion of individual action. Its forms are unorganized custom and organized going concerns. The individual action is participation in bargaining, managing and rationing

These individual actions are really trans-actions instead of either individual behavior or the "exchange" of commodities. It is this shift from commodities and individuals to transactions and working rules of collective action that marks the transition from the classical and hedonic schools to the institutional schools of economic thinking. The shift is a change in the ultimate unit of economic investigation. The classic and hedonic economists, with their communistic and anarchistic offshoots, founded their theories on the relation of man to nature, but institutionalism is a relation of man to man. The smallest unit of the classic economists was a commodity produced by labor. The smallest unit of the hedonic economists was the same or similar commodity enjoyed by ultimate consumers. One was the objective side, the other the subjective side, of the same relation between the individual and the forces of nature. The outcome, in either case, was the materialistic metaphor of an automatic equilibrium, analogous to the waves of the ocean, but personified as "seeking their level." But the smallest unit of the institutional economists is a unit of activity -- a transaction, with its participants. Transactions intervene between the labor of the classic economists and the pleasures of the hedonic economists,simply because it is society that controls access to the forces of nature, and transactions are, not the "exchange of commodities," but the alienation and acquisition, between individuals, of the rights of property and liberty created by society, which must therefore be negotiated between the parties concerned before labor can produce, or consumers can consume, or commodities be physically exchanged.

Other races of immigrants, by contact with our institutions, have been civilized—the negro has only been domesticated.