Institutionalist political economy

Institutionalist political economy, also known as institutional political economy or IPE, refers to a body of political economy, thought to stem from the works of institutionalists such as Thorstein Veblen, John Commons, Wesley Mitchell and John Dewey. It emphasizes the impact of historical and socio-political factors on the evolution of economic practices, often opposing more rational approaches.
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 contemporary or neoliberal 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. This includes processes deciding 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 neoclassical economists who assert that the market is an autonomous, apolitical domain. 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.
Actors
J. R. Commons had discussed how institutions were the result of past choices made on the individual level. These choices then decide the structure in which the institutions operate, and how they enable and constrain market actors. The element of evolution returns by institutions changing in terms of workability, marking his pragmatist influence on the subject. Commons therefore separates himself from other institutionalists by implementing this notion of workability, absent in Veblen. Institutionalist approaches often consider situations in which actors act against their predicted most profitable way of action. This is where institutionalists argue that concepts like habit evolution via institutions come in. Institutionalist accounts have been used to criticize neo-liberal accounts, as it is the institutions that influence how certain actions are understood. The way states actively participate in the creation of institutions is therefore object of study, and how they might accomplish the structural changes within the institutions that are necessary to bring about economic development, downplaying the role of the free market. In a study of Latin American countries economic underperformance has been linked to institutional durability, due to established elites clinging onto arrangements detrimental to national resources.<ref nameCypher /> In addition, dominance of these elites has been linked to their relative organizational strength, compared to the weak national elites of various Latin American countries.<ref nameCypher />

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