jei JOURNAL OF ECONOMIC ISSUES

Vol. XXVm No. 2 June 1994

The Pragmatic Instrumentalist Perspective on

the Theory of Institutional Change

Paul D. Bu8h

The purpose of this paper is to explore certain implications of

John Deweys pragmatic instrumentalist philosophy for an under-
standing of the meaning and significance of institutional change.
It will be argued that the theory of institutional change that has
emerged in the works of Clarence E. Ayres, J. Fagg Foster, and
Marc R. Tool (as interpreted and extended by the present writer)
manifests both methodological and substantive features uniquely
grounded in Dewe^s philosophy. While this thesis is generally ac-
cepted in the institutionalist literature, there remains a certain
vagueness, if not disagreement, with respect to the powerful nor-
mative implications such a theory entails both in its methodology
and in its substantive analysis. Recent criticisms by prominent in-
stitutionalists of Tool's social value principle are indicative of the
confusion that continues to plague a straightforward application
of pragmatic instrumentalist philosophy to the theory of institu-
tional change.^ Although the debate over Tool's social value prin-
ciple is only one manifestation of this confusion, the following
discussion will attempt to demonstrate how his social value prin-
ciple emerges from a pragmatic instrumentalist approach to in-
stitutional change.

The author is Professor of Economics, California State University, Fresno. This

paper was presented at the annual meeting of the Association for Evolutionary
Economics, Boston, Massachusetts, January 3-5, 1994.

647
648 Paul D. Bush

Dewey's Rejection of the Normative-Positive Dualism

A diagnostic characteristic of pragmatic instrumentalism is its
rejection of the Cartesian knowing-doing dualism. This dualism
poses an invidious distinction between the lofty affairs of the mind
and the lowly affairs of human action. It is the foundation upon
which traditional philosophy, and even contemporary versions of
positivism, draws the crucial distinction between theory and prac-
tice. Dewey rejected this dualism and all of its corollaries. With
respect to inquiry in the social sciences, Dewey once observed that
if man in knowing is a participator in the natural scene, a
factor in generating things known, the fact that man par-
ticipates as a factor in social affairs is no barrier to
knowledge of them. On the contrary, a certain method of
directed participation is a precondition of his having any
genuine understanding. Human intervention for the sake of
effecting ends is no interference, and it is a means of
knowledge [1960, 212].
Thus, rather than being confined to the realm of the intellect, in-
quiry must be located squarely within the problem-solving proces-
ses of living communities.
One of the most important manifestations of the knowing-doing
dualism is the foundationalist tenet that there is, to use Lord
Robbins's memorable term, a "gulf-fixed" between normative and
positive realms of discourse. Dewey viewed this normative-positive
dualism as a major obstacle to the pursuit of inquiry. His rejection
of it sets Dewey's philosophy apart from the philosophies of science
articulated by both logical positivism and Popperian fas-
lificationism. It also distinguishes his philosophy from those ver-
sions of hermeneutical philosophy that adhere to Wilhelm
Dilthey's view that the method of verstehen, which is presumably
the value-laden mode of knowing in the social sciences and
humanities, is fundamentally different from the wertfrei mode of
knowing in science. For Dewey, normative considerations are en-
demic to scientific inquiry, and he draws no epistemological dis-
tinction between the social and natural sciences with respect to
their normative content.
J. Fagg Foster and his students have attempted to clarify the
discussion of the "value problem" in economics by adopting ter-
minology that adds precision to the discussion of normative
 The Pragmatic Instrumentalist Perspective 649

propositions. Following the Fosterian usage, when the term "nor-

mative proposition" is used in this discussion, it will refer to one of
two kinds of interrelated activities: value judgments or valuations.
The term "value judgment" refers to the selection of a standard of
judgment, which is called a "value." The term "valuation" refers to
the use of a previously chosen value as a criterion of judgment in
the act of making a choice. While Dewey did not use this precise
terminology, it conforms to his theory of valuation, and it will be
used below to explore the implications of his rejection of the nor-
mative-positive dualism.
Dewey's theory of valuation leads to a conception of science in
which a distinction is made between those values that are ap-
propriate to scientific inquiry and those that are not. According to
Dewey, those values that are justified on the grounds of eternal
verities, first causes, or ultimate ends have no place in science be-
cause they are themselves not subject to revision through inquiry.
In other words, the process by which such values are formed is
presumably beyond the reach of inquiry. Being thus exempt from
scrutiny, Dewey argued that they block inquiry. Such values and
the valuations for which they function as standards of judgment
will hereinafter be referred to as "ceremonially warranted."
Dewey agreed with the positivists that the exclusion of
ceremonially warranted values from scientific discourse is jus-
tified. But the exclusion of such moral precepts, he argued, does
not justify the exclusion of all normative propositions from the
realm of science. In contrast to ceremonially warranted values, in-
strumentally warranted values are standards of judgment "deter-
mined in and by the process of inquiry" [1938, 503]. They are the
standards of judgment by which scientists correlate their behavior
in the conduct of inquiry.
As standards of judgment in the correlation of behavior, values
give direction to inquiry. Accordingly, Dewey says:
This element of direction by an idea of value applies to
science as well as anywhere else. For in every scientific un-
dertaking, there is passed a constant succession of es-
timates; such as "it is worth treating these facts as data or
evidence; it is advisable to try this experiment; to make that
observation; to entertain such and such a hypothesis; to per-
form this calculation," etc. [1960, 261-62].
Being subject to critique and revision, the instrumental warrant
of scientific values lies in the evaluation of their consequences for
650 Paul D. Bush

the continuity of inquiry. The scientific method entails, among

other things, the continuous scrutiny of valuations in inquiry. The
standard of judgment by which a given valuation is made must be
clearly understood, and the value judgment by which the standard
was selected must also be open to investigation, correction, and
reformulation. Thus, instrumental valuation is an ongoing process
integral to scientific inquiry.
From this pragmatic instrumentalist perspective, "objectivity"
is not achieved by excluding all forms of normative propositions
from scientific discourse, as adherence to the Cartesian dualism
requires. On the contrary, the necessary condition for "objectivity"
is that a distinction be drawn between ceremonially warranted and
instrumentally warranted values; and the sufficient condition is
that inquiry be directed by instrumentally warranted values.
Thus, science is "contaminated" only by ceremonially warranted
values, not instrumentally warranted values. The former block in-
quiry, whereas the latter are the necessary standards of judgment
by which scientific inquiry is directed in both theoretical and em-
pirical endeavors. Dewey is joined in this view of the role of values
in science by Jacob Bronowski, who observes that the values of
science "... have grown out of the practice of science, because they
are the inescapable conditions for its practice."^

The Ceremonial-Instrujnental Dichotomy with

Respect to the Value Structure of Institutions
There is a logical line of continuity running from the rejection of
the normative-positive dualism in methodology to the analytical
distinction that is drawn in institutional economics between in-
strumentally warranted and ceremonially warranted patterns of
behavior. Following the Fosterian formulation of the institutional
dichotomy, the pragmatic instrumentalist abandons the "technol-
ogy versus institutions" version of the dichotomy in favor of the
view that institutions are composed of both instrumentally war-
ranted and ceremonially warranted patterns of behavior.^ In other
words, all institutions embody two value systems that interact in
complex ways but that are, nevertheless, warranted through dif-
ferent sets of considerations.
This analytical distinction between ceremonially warranted and
instrumentally warranted patterns of behavior lays the foundation
 The Pragmatic Instrumentalist Perspective 651

for the empirical analysis of institutional structures and changes

in them. Consistent with the foregoing remarks on the pragmatic
instrumentalist methodology, it must be noted that the meaning
of this analytical distinction is couched in a normative frame of
reference, which holds that it is methodologically legitimate to for-
mulate such a distinction. Thus, the normative burden carried in
empirical research is the formation of a judgmentr-which Dewey
would have called a "judgment of practice"-to the effect that a
particular cluster of activities is ceremonially warranted, whereas
a different cluster of activities is instrumentally warranted. The
normative burden of analysis becomes even weightier when it is
believed that certain instrumentally warranted activities are
"ceremonially encapsulated" by the dominance of ceremonially
warranted values within the institutional structure; Veblen's ex-
tensive discussion of the dominance of the "pecuniary" employ-
ments over the "industrial" employments illustrates the
phenomenon of ceremonial encapsulation [Veblen 1975a, 229-33;
1975b, 39-45, 314-73, 375]. Dewey was also concerned with this
pattern of ceremonial dominance, as he indicates in the following
passage:
. . . the simple fact is that technological industry has not
operated with any great degree of freedom. It has been con-
fined and deflected at every point; it has never taken its
own course. The engineer has worked in subordination to
the business manager whose primary concern is not with
wealth but with the interests of property as worked out in
the feudal and semi-feudal period.
To reiterate, the normative distinction between ceremonially
warranted and instrumentally warranted patterns of behavior
sets the analytical frame of reference for the investigation of the
institutional structure.

The Theory of Institutional Change

The theory of institutional change, as it has evolved using
Foster's conception of the institutional dichotomy, identifies the
locus of institutional change within the value structure of society.^
The process of institutional adjustment is broken down into two
phases: Phase I involves ceremonial encapsulation, and Phase II
may involve either regressive or progressive institutional change.
652 Paul D. Bush

In the first phase, progress in knowledge, generated formally

through the arts and sciences or informally through the day-to-day
problem-solving processes of the community, is encapsulated
within the existing value structure. Technological innovations are
incorporated into the practices ofthe community only to the extent
that they do not disrupt the patterns of power, status, and other
forms of differential advantage previously existing within the com-
munity. In other words. Phase I of institutional adjustment invol-
ves no change in the value structure of the community. However,
over time the new technological processes demonstrate new in-
strumentally warranted possibilities for correlating behavior in
ways not sanctioned by the community's traditional pattern of
values. There are two possible outcomes in this situation: one is
regressive institutional change, and the other is progressive in-
stitutional change, either of which involves a change in the value
structure of the community. A regressive change occurs when new
instrumentally warranted patterns of behavior are suppressed and
additional patterns of ceremonially warranted behavior are in-
stituted to secure the suppression; in other words, the value struc-
ture changes as ceremonially warranted values displace
instrumentally warranted values in the correlation of patterns of
behavior, thereby increasing the degree of ceremonial dominance
in the institutional structure. A progressive institutional change
occurs when the new instrumentally warranted patterns of be-
havior displace ceremonially warranted patterns of behavior. In
this case, instrumentally warranted values displace ceremonially
warranted values in the correlation of behavior, thereby lowering
the degree of ceremonial dominance in the institutional structure.
Progressive institutional changes are sustainable if they meet the
requirement of what Foster called "minimal dislocation"; that is,
the requirement that the incorporation of the new instrumental
behavior has a minimally disruptive effect on other instrumental
patterns of behavior the community relies upon to sustain the life
processes.
This brief recitation ofthe theory should make it perfectly clear
that the empirical investigation of this process requires that the
investigator be willing to make analytical judgments about norma-
tive processes.
 The Pragmatic Instrumentalist Perspective 653

The Concept ofProgressive Institutional Change

Implies Tool's Social Value Principle
The concept of progressive institutional change explains how a
change in the value structure of an institution permits the exist-
ing knowledge fund to be more fully exploited in the problem-solv-
ing processes of the community. But it does more than this. It also
reveals the strategy that can be employed to enhance the life
processes of the community. Dewey captured the essence of this
strategy in the following words:
What is needed is intelligent examination ofthe consequen-
ces that are actually effected by inherited institutions and
customs, in order that there may be intelligent considera-
tion of the ways in which they are to be intentionally
modified in behalf of generation of different consequences
[1960,273].
This is essentially the strategy contained in Marc Tool's social
(or instrumental) value principle, which, in turn, is implied in the
concept of progressive institutional change. To put the matter in
Dewey's language. Tool's social value principle is a normative
proposition "determined in and by the process of inquiry" into the
phenomenon of institutional change.

Tool's Social Value Principle Sets the Normative

Frame ofReference for Policy Formation
Tool's social value principle specifies the normative context for
policy formation that is implied in the concept of progressive in-
stitutional change. It specifies in general terms the process of
human deliberation by which progressive institutional change can
be brought about. According to the social value principle, that
direction is forward (i.e., that process of institutional adjustment
which entails progressive institutional change under conditions of
minimal dislocation) that "provides for the continuity of human
life and the noninvidious re-creation of community through the in-
strumental use of knowledge" [Tool 1979,293].
The role Tool's social value principle plays in institutional
economics fulfills what Dewey called the function of "intelligence."
Intelligence, Dewey says.
654 Paul D. Bush

is associated with judgment; that is, with selection and ar-

rangement of means to effect consequences and with choice
of what we take as our ends. A man is intelligent not in vir-
tue of having reason which grasps first and indemonstrable
truths about fixed principles, in order to reason deductively
from them to the particulars which they govern, but in vir-
tue of his capacity to estimate the possibilities of a situation
and to act in accordance with his estimate [1960, 213].
Dewey clearly believed that science as a system of values
provides intelligence in the guidance of human action. Accordingly,
institutional economics would fail in its scientific mission if it did
not provide guidance in the area of policy formation. Returning to
Dewey's words:
When theories of values do not afford intellectual assistance
in framing ideas and beliefs about values that are adequate
to direct action, the gap must befilledby other means. If in-
telligent method is lacking, prejudice, the pressure of imme-
diate circumstance, self-interest and class-interest, tradi-
tional customs, institutions of accidental historic origin, are
not lacking, and they tend to take the place of intelligence
[1960,265].
Thus, social inquiry has a special obligation not to evade its
normative responsibility. Dewey emphasizes this point in the fol-
lowing passage:
Social inquiry, in order to satisfy the conditions of scientific
method, must judge certain objective consequences to be the
end which is worth attaining under the. given conditions.
But, to repeat, this statement does not mean what it is often
said to mean: Namely, that ends and values can be assumed
outside of scientific inquiry so that the latter is then con-
fined to determination ofthe means best calculated to arrive
at the realization of such values. On the contrary, it means
that ends in their capacity of values can be validly deter-
mined only on the basis of the tensions, obstructions and
positive potentialities that are found, by controlled observa-
tion, to exist in the actual situation [1938, 503].
It follows from these observations that if institutional
economics has produced a competent theory of institutional
change, it has, in consequence of this achievement, obligated itself
 The Pragmatic Instrumentalist Perspective 655

to fulfill the normative responsibility of intelligence. Without

prescribing any particular institutional structure as the right and
best way to go about doing things, and without mandating any
particular valuation with respect to a particular problematic
situation, it must, perforce the logic of its analysis of institutional
change, set forth the normative frame of reference which appears
to be most appropriate for policy formation. This is what Tool has
accomplished in his formulation of the social value principle.

Note8
1. This paper offers an extension of a line of argument
originally developed in Bush [1993, 59-107]. The term
"pragmatic instrumentalist" is adopted for the pur-
pose of clearly distinguishing Dewey's conception of
"instrumentalism" from those set forth by Karl Pop-
per and Jurgen Habermas. The necessity of doing so
is occasioned by the fact that in the literatures of the
philosophy of science and economic methodology, "in-
strumentalism" is almost always given the Popperian
meaning. In the literature of hermeneutical
philosophy, it is Habermas's usage, not Dewey's, that
predominates. See Popper [1959, footnote, p. 59] and
Habermas [1971,308-11].
2. See, in particular, Gordon [1984, 369-81; 1990, 879-
86], Mayhew [1987a; 1987b, 587-603], and Hamilton
[1989, 900-06, esp. 905]. For Tool's reply to Gordon
and Mayhew, see Tool [1993,119-59, esp. 140-53]. A
longer version of Tool's reply to Gordon and Mayhew
appears in [1990a, 1109-22; 1990b, 1122-32].
3. See Bronowski [1965, 60]. I have cited this remark of
Bronowski's many times before. It seems to me that it
bears repeating.
4. Two discussions of Foster's formulation of the institu-
tional dichotomy may be found in Bush [1986, 25-45]
and Waller [1982, 757-72].
5. Dewey [1927, 108]. The existence of this passage was
brought to my attention while reading Hayden [1993,
291].
6. The exceedingly brief statement of the theory of in-
stitutional change that follows runs a high risk of
656 Paul D. Bush

error and ambiguity. Such are the hazzards of space

limitations. Detailed statements of the theory can be
found in Bush [1983, 35-66; 1987, 1075-1116; 1989,
455-64].

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