John R. Commons and the Foundations of Institutional Economics

The purpose of this essay is to evaluate the attempts of John Rogers Commons (1862–1945) to provide the “old ” tradition of American institutional economics with a systematic theoretical foundation.1 Although there are several other evaluations of Com-mons ’ work, the present essay reaches some novel conclusions. And although some of the other evaluations have also been largely methodological in content, the present essay chooses some themes that have not been developed to the same extent elsewhere.2 The main issues involved in the present appraisal are (a) Commons ’ neglect of the instinct-habit psychology of William James and others; (b) his failure to appreciate the philosophical and other insights of Darwinism; and (c) his failure to give sufficient emphasis to extra-legal institutions, extra-legal self-organization, or spontaneous orders that do not involve legal rules. In at least some of these respects, the work of Commons contrasts significantly with that of Thorstein Veblen and others. Despite any such limitations in his work, it is clear that Commons was one of the most influential economists of the twentieth century. John Maynard Keynes (1931, 303–4) was attracted by some of his ideas (Skidelsky 1992, 229; Hodgson 2001, 216). In addition, two Nobel laureates in economics, Gunnar Myrdal (1978, 771) and Herbert Simon (1979, 499), have claimed to be significantly influenced by Commons (Fores