The old and the new differ in many respects... The dispute centers on five main issues: - Malcolm Rutherford

This book examines and compares the two major traditions of thought that have attempted to incorporate institutions within economics. These are the "Old" (or American) Institutionalist tradition of Veblen, Mitchell, Commons and Ayres, and the "New" Institutionalism that has developed more recently from neoclassical and Austrian sources. The discussion is organized around a set of key problems involving the use of formal or nonformal analytical methods, individualist or holistic approaches, the respective roles of rational choice and rule following behavior, the relative importance of spontaneous evolution and deliberative design of institutions, and questions relating to the normative appraisal of institutions.

This book is a product of my long-standing interest in questions relating to institutions and their relation in economic life. Initially, this interest took me to the study of the American institutionalist tradition (now often called the "old" institutional economics, or OIE) and to a series of articles on Veblen, Mitchell, Commons and Ayres (Rutherford 1980, 1981, 1983, 1984, 1987), a line of work I have continued to pursue (1990a, 1990c, 1992a, 1992b). These pieces are written from the point of view of a sympathetic critic.

Many writers within the NIE have argued for the efficiency of market and spontaneous processes very broadly, utilizing only weak arguments by analogy. A closer analysis of invisible- hand, common law, and even competitive market processes reveals that there are no guarantees that the inefficient will be eliminated in favour of the efficient or socially beneficial. This may occur, but whether or not it does will depend on the specifics of the case.