Institutionalist political economy, also known as institutional political economy or IPE, refers to a body of political economy thought stemming from the works of Thorstein Veblen, John Commons, Wesley Mitchell, John Dewey which emphasizes the impact of historical and socio-political factors on the evolution of economic practices.
Overview
The institutionalist political economics perspective builds upon core theories from institutional economics and further apply them to the field of contemporary political economy. Wesley Mitchell originally differentiated the institutionalist approach to economics from previous schools of economic thought by emphasizing its focus on the cumulative process of evolutionary change in economics. Contemporary theorists further expand this definition by emphasizing the effects of the historical shift from the classical system of laissez-faire capitalism to modern capitalism in the current international economic society, in which various institutions are major actors. The institutional basis of the rights-obligations structure classically assumed of the market is also examined, such as the processes behind how legitimate actors and legitimate objects of exchange are determined. At their core, proponents of this school of thought maintain that economics cannot be divorced from the social and political context since the market itself is an institution, which is to say is politically constructed. In this sense institutionalist political economists place themselves in opposition to neo-liberalists who call for the depoliticization of markets. They also differ from proponents of the new institutional economics perspective in that institutions are viewed as being able to fundamentally shape the individual rather than as merely placing constraints on the theoretically pre-defined and unchanging individual.