Institutionalist economics asks economists to focus on the importance of norms and rules
and the patterns of behavior caused by the resulting institutionalized behavior. Thorstein
Veblen argues that firms are organizations which contain rival patterns of behavior
(workmanship vs. invidious distinctions for example), while Coase and Williamson suggest
that the rules and behavior patterns that exist within firms are a result of the drive to
maximize profits. Explain these differing perspectives by referring to the assigned
readings. Does the old institutionalism of Veblen or the new institutionalism of Coase and
Williamson make the most sense to you? Explain why.
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