Summary

Thorstein Veblen was an American economist who lived from 1857 to 1929. He was born into a family of farmers in the state of Wisconsin. Veblen’s formal education was long and meandering, as he entered into Carleton College in 1877. He then moved to Johns Hopkins to begin a PhD in philosophy, which he then finished at Yale in 1884. After a 7-year hiatus, Veblen re-entered academia in 1890 as he enrolled in the doctoral program at Cornell. In 1891, Veblen moved to the University of Chicago, where he secured his first teaching position in 1892, but resigned in 1906. After departing Chicago, Veblen’s academic career remained sporadic. He taught at Stanford, the University of Missouri, and The New School for Social Research, each for a short period.

Veblen believed that classical economics was fundamentally flawed. He made many significant contributions to the field through his creation of institutional and evolutionary economics. Both perspectives involve the integration of Charles Darwin’s theory of evolution into economic analysis. Unlike many of his contemporaries, Veblen viewed Darwinian evolution as a philosophical basis of inquiry that could be applied to all complex systems. This formed the conceptual basis for his rejection of classical economic principles, which he viewed as teleological, or seeking the definition of natural laws. Just as Darwinian evolution had transformed the natural sciences, Veblen aimed to rehabilitate the field of economics.

Veblen published ten books and wrote over one hundred essays and articles during his academic career. Much of his eminence rests firmly on one of his earliest works, The Theory of the Leisure Class, which is largely a critique of capitalism and wealth inequality in American society. Veblen’s approach to economics was multidisciplinary. As such, his work contains a variety of influences, from philosophical pragmatism and Darwinian evolution to both American and European socialism, as well as psychology and anthropology. Veblen’s contributions to economics have generally been classified as heterodox, primarily because of their theoretical nature and Veblen’s lack of a systemic comprehensive theory as well as his harsh critique of American capitalism.

Both institutional and evolutionary economics have retained varying degrees of relevance in the decades since Veblen’s death. The original form of Veblen’s institutional economics exhibited a degree of favor in the academic discourse preceding the New Deal in the mid-1930s. However, institutional economics was further developed in the mid-1930s to the early 1960s, through second-generation institutionalists, such as Clarence Ayres, John Commons, and Wesley Mitchell. In the mid-1970s, new institutional economics was established to shift the field toward a new paradigm. Despite its historical roots in Veblen’s heterodox writings, the importance of institutions in analyzing economic development, and in formulating public policy, has been adopted by the modern mainstream economic discourse. The Association for Evolutionary Economics (AFEE) and the European Association for Evolutionary Political Economy (EAEPE) continue to bring together economists who perform research from evolutionary and institutional perspectives. The AFEE honors Veblen’s legacy and his contributions to the field through its annual Veblen-Commons Award for outstanding research.