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. In the political sense, this implies the influences actors like the state have on socio-economic practices and the shaping of institutions via political decision-making. Relevant variables for the study of political institutions include the structures that indicate voting rules, the political system, preferences and ideological leanings of leaders. 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.