JOURNAL OF ECONOMIC ISSUES

Volume LVI No. 4 December 2022

DOI 10.1080/00213624.2022.2111145

The Institutionalist Method and Vision of John R. Commons

Charles J. Whalen
Abstract: Although John R. Commons is widely recognized as a founding contributor
to institutional economics, readers in his time and ours have often found it difficult to
understand what he had to say. This article complements new contributions to what
Commons was (as he put it) “driving at” by spelling out not only the research method used
to produce his transactional theory of value and other theories and analyses, but also the
“pre-analytic vision” underlying that method. Combined with his theories, analyses, and
conception of the economist’s role in economic reform, Commons’s vision and method
round out his institutionalist perspective. Thus, the article offers additional insight on the
longstanding question of what Commons was driving at and how his work contributes to
the institutionalist tradition. It also shows that a look at Commons’s perspective reinforces
some of the essential elements and key principles of contemporary institutional economics.

Keywords: method, pre-analytic vision, John R. Commons, institutions, pragmatism

JEL Classification Codes: B310, B410, B520

Although John R. Commons is widely recognized as a founding contributor to institutional
economics, readers in his time and ours have often found it difficult to understand what
he had to say.1 Yet Commons’s unmistakable commitment to public policy reform was so
strong—and his contributions to institutional change were so great—that institutionalists
have never fully given up on looking to his work for economic insight.2 For example, in a
recent book on institutionalist approaches, Charles J. Whalen and Thomas Kemp each offer
contemporary interpretations of what, as Commons (1934a, 1) put it, he “was driving at.”
In particular, Whalen (2022) sketches Commons’s transactional theory of value and reviews
decades of subsequent scholarship in which researchers have applied their understanding of
elements of that theory to real-world problems; and Kemp (2022) lays out Commons’s views
on the role of an economist as a contributor to economic reform.
This article complements those two new contributions by spelling out not only the
research method Commons used to produce his theory of value and other theories and
analyses, but also the “pre-analytic vision” underlying that method.3 Combined with his
theories, analyses, and conception of the economist’s role in economic reform, Commons’s

Charles J. Whalen is a research fellow at the Baldy Center for Law and Social Policy, University at Buffalo. He
thanks Linda Whalen and two referees for valuable comments and suggestions.
1
See, for example, Commons (1934a, 1); Harter (1962, 209–210); Ramstad (1987, 661–662); and Chasse
(2017, 257, 273).
2
For example, Commons contributed to civil service reform, legislation on worker safety and unemployment
insurance, and public utility regulation. In fact, Commons and his students made important policy contributions to
the Progressive Era, New Deal, and Great Society. For more on Commons’s various reform and practical problem-
solving efforts, see the excellent recent biography by John Dennis Chasse (2017).
3
In addition to a transactional theory of value (described in Commons 1924; 1934a; 1950), Commons
also offered other theories—such as a theory of the American labor movement (Commons 1909), business cycles
(Whalen 1993), and capitalist development (Commons 1934a, 763–805)—as well as countless analyses (see, for
example, Commons 1913).
1006
© 2022, Journal of Economic Issues /Association for Evolutionary Economics
 The Institutionalist Method and Vision of John R. Commons 1007
vision and method round out his institutionalist perspective. Thus, the article offers
additional insight on the longstanding question of what Commons was driving at and how
his work contributes to the institutionalist tradition. It also shows that Commons reinforces
some of the essential elements and key principles of contemporary institutional economics.

Commons’s Research Method

Commons discussed his approach to research in various writings, but perhaps most
thoroughly and directly in The Economics of Collective Action (Commons 1950, 117–144).4
What emerges is a method that begins with a purpose and a problem, and its other elements
include comparative analysis, institutional grounding, systems thinking, and a historical
focus.
A Purpose and a Problem
Commons stressed that human volition is behind all economic activity. In fact, he
often called his transactional theory a volitional theory of value. Thus, it’s no surprise that
Commons (1950, 118) places purpose at the start of his method. Even if a researcher’s purpose
rests entirely on idle curiosity, there is always some purpose at the start of an investigation
or analysis.5 There is also always a problem—or at least a question, area of concern, or specific
issue to be explored.
Sometimes the purpose of an institutionalist investigation is indeed motivated by
curiosity: the aim is to merely understand (or perhaps offer a historical account of) some
aspect of the economic process, and the “problem” is the researcher doesn’t yet know how
that feature of the process works. Most often, though, institutionalists seek economic
understanding as a starting point for the pursuit of a larger aim: proposing or introducing
changes with the goal of, as Wesley C. Mitchell put it, “making this world a better place in
which to live” (quoted in Ramstad 1989, 762). In that case, the problem is dissatisfaction
with some aspect of how the economy operates—generally traceable to either an unresolved
conflict of interests or a conflict resolved in what the investigator considers an unsatisfactory
manner—and the purpose is to make it operate better. This aim is at the core of much
institutionalist research, and is the reason institutionalists are widely known for having
interest in public policy and practical socioeconomic problem solving.
To be sure, analysts don’t need a deep understanding of a problem at the outset. They
need only a rough conception of the nature of the problem or question to be explored,
because that provides a guide to their selection of the right tools for the analysis. For
example, Glen Atkinson and Ted Oleson (1996, 705) ask: Why does a car have four or five

4
To be sure, Commons refers to the second chapter in Institutional Economics: Its Place in Political Economy
as “Method,” but that discussion strikes this author as more about methodology (preconceptions, fundamental
concepts, and their meaning) than about research methods, and, as the book’s subtitle suggests, Commons’s
purpose in that volume is to develop his ideas in the context of the evolution of the history of political economy.
The discussion of research methods in The Economics of Collective Action, called “Methods of Investigation,” is more
thorough than other essays that Commons wrote on research methods, and is much more direct in its discussion
of methods than Institutional Economics.
5
In the pages of The Economics of Collective Action that we are discussing here, Commons (1950, 118) writes
about the “purpose” of economic investigation. But if we look elsewhere, such as in his Institutional Economics, we
find that his view of the overall economic process (of real-world economic activity) contains a parallel notion of
“purpose” in that he sees the entire economic process as driven by the purposive actions of human beings (albeit,
of course, shaped by the influence, and even constraints, of working rules and other forms of collective action). In
fact, on this point, Commons (1934a, 656–677) drew a distinction between his view and that of Veblen, associating
Veblen with the notion that the economic process is “without [an] ascertainable goal,” and grounding his own view
of the economic process in the purposive notion of “human will in action.”
1008 Charles J. Whalen
seats? Examining “the physical properties of the car” won’t provide an answer; only studying
the car from a socio-technical perspective will address the question.
Of course, this also means that Commons’s methods are not suitable for every purpose
and problem. If you’re looking to explain how a world of autonomous, self-interested
individuals can achieve a stable equilibrium by means of exchanges in perfectly competitive
markets, his methods aren’t the right ones. If, instead, you’re looking to understand how
real-world social forces condition the human mind and will, the role that power plays
in influencing human relations and economic alternatives, and the multiple factors that
combine to shape economic outcomes, then his method and his institutionalist theories
(such as his theory of transactions) become relevant (Commons 1950, 118).
Comparative Analysis
Commons (1950, 124) argues that the deductive method “usually employed in orthodox
economic theorizing” is an inadequate tool for studying the complex and kaleidoscopic
world of countless transactions with multiple dimensions.6 His alternative is the comparative
method, which he describes as looking at different cases—various manifestations of the same
broad category of phenomena—and “searching for significant similarities and differences”
that shed light on the problem in question. In particular, Commons (1934a, 89–93, 378;
1950, 120–125) writes that a comparative analysis allows investigators to separate the key,
strategic (or “limiting”) transactions and factors from the less important ones that are merely
routine (or “complementary”) in nature.
But why look at transactions? As will be discussed in further detail later in this article,
Commons’s economics is all about interactions and interrelations between individuals and
the rest of society. Central to that economics is examination of the consequences of collective
action for individual action (consequences including “control, liberation, and expansion of
individual action”) and attention to social organizations of all shapes and sizes, which he
called “going concerns” (Commons 1931, 649; 1950, 21). According to Commons (1931,
652), the transaction is the smallest, most fundamental unit of institutional economics—
it’s what takes place within and across such concerns, between those organizations and
individuals, as well as between individuals. By defining transactions as transfers of rights
(and assignments of duties), Commons’s concept of the transaction extends far beyond
the concept of market exchange that is the focus of conventional economics. Indeed, many
important economic transactions occur before goods and services can be produced.7
Commons believed that examining transactions (or bundles of transactions in the
form of going concerns) in search of strategic similarities and/or crucial differences is the key
to developing an adequate theory of a problem or situation. In fact, discussing his research
method, Commons (1950, 123) hints that examining similarities and differences of business

6
To be sure, orthodox economics has evolved since Commons’s time. Today’s orthodox economics includes
behavioral and heuristic models that represent a step in the direction of institutionalism in that they incorporate
realistic behavioral assumptions and real-world facts; some in the economic mainstream even stress that institutional
details matter (for example, Duflo 2017). Nevertheless, much contemporary economics remains wedded to the
deductive method and detached nature of the orthodox theorizing seen in Commons’s time. In fact, that method
is present not only in the traditional models taught to undergraduates (see, for example, Colander 2020), but
also in advanced, formal models used widely in the profession. The latter include dynamic stochastic general-
equilibrium models, which remain influential in macroeconomics despite containing extraordinary assumptions
that contributed to economists being blindsided by the global financial crisis of 2007–2009 (Caballero 2010; Mason
2018).
7
For further discussion, see Commons (1934a, 55–59, especially 58). See also Commons (1931, 656) for
a discussion of the “three social relations implicit in every transaction, the relations of conflict, dependence, and
order.”
 The Institutionalist Method and Vision of John R. Commons 1009
cycles over time is what allowed him to identify the profit margin (rather than, for example,
the profit share) as a key strategic factor.8 In Commons’s view, the search for decisive
differences in real-world cases is also an essential part of resolving legal disputes (and, of
course, he was particularly interested in disputes with important economic consequences)
(see Commons 1942).
Commons thought that the comparative method could even be applied to account for
the work of research teams and the investigations of administrative commissions. Based on his
experience with such commissions, he writes: “The theories of the [individual] participants
served as guides to workable rules of action for the circumstances of time and place, but in
the negotiations [with other investigators] the progress was made by the comparative method
of searching for similar or common ground amid the multitude of [conceptual] differences.”
Thus, Commons (1950, 117–118, 125) envisioned joint study as an inherently comparative
analysis, with a built-in way “of checking upon the habitual assumptions of the investigator.”
Institutional Grounding
In addition to the search for similarities and differences, Commons’s method of analysis
is grounded in attention to institutional detail. In conventional economics, such details are
usually beside the point; they are either irrelevant complications or interferences that get in
the way of otherwise smoothly operating markets. In Commons’s institutional economics,
society’s institutions—also known as working rules, customs, habitual assumptions, or
collective action—are the main point. Yes, institutional economics recognizes the importance
of individuals and human will; in fact, Commons stressed that institutionalism “must make
an analysis of the behavior of individuals.” However, “the behavior in question is none other
than the behavior of individuals while participating in transactions,” and that behavior is
shaped by institutions (as are antecedent expectations) (Commons 1931, 654 and 1950, 105,
125–130).9
Having cast aside the notion of a self-regulating economy in favor of an ever-managed
control economy, Commons (1950, 130) argued that “it is through knowledge of working
rules” that economists learn about the real-world mechanisms by which collective action
exerts its control.10 He also stressed that such rules are products not just of governments, but
of all organizations, including corporations, labor unions, universities, churches, and civic
groups. Earlier economists took the rules for granted; but today’s economists must actually
investigate them “as adopted and enforced on individuals by different kinds of collective
action.”
Working rules apply to all economic situations and transactions. We are implicitly
making a reference to such rules not only when we speak of “monopolies” or “monopolistic
competition,” but even when we speak of “free competition” (since not even an industrial
structure approaching “free competition” could exist without an institutional framework
and supportive forms of collective action). And even when an economic transaction directly
involves just two people, “there are also the customs, the habits, the laws of the land, and the
Constitution, all of which are tacitly setting the rules within which the two individuals deal

8
The details of his development of a business cycle theory are offered in Institutional Economics (Commons
1934a, 508–589).
9
In discussing their take on the institutionalist method of real-world problem solving, which draws heavily
on Commons, Atkinson and Oleson (1996, 707) summarize all of this in two words: “institutions matter.”
10
According to Commons (1950, 22), among the “great goals” of such control are “liberty, security, justice,
and equality.”
1010 Charles J. Whalen
with each other” (Commons 1950, 128–129). Thus, institutional grounding is an essential
element of Commons’s method of economic analysis.
Systems Thinking
Another aspect of Commons’s method is what he called attention to “part-whole
relations.” I call it by the more modern name of systems thinking. In a system, individual
elements are not merely the sum of their parts; they contribute to a whole that is more than
the sum of its parts. This is precisely what Commons (1950, 130–135) saw wherever he
looked at the socioeconomic universe.11
Commons offered several examples of the importance of systems thinking. A
corporation accomplishes more—indeed, often allows individuals to accomplish more—than
individuals operating on their own; the overall results of many individuals organized into a
corporation are greater than the sum of its parts. The same is even true at the “shop floor”
level, where a wage earner and supervisor interact: “The wage earner and foreman are not
merely added together to make up two individuals of the population, each seeking his [sic]
own interest. Their joint activities are their part of the whole activity of a system coming out
of the past and moving into the future” (Commons 1950, 135). Another example is society
as a whole: if American society, for example, were nothing more than the sum of individuals,
there would be no “public interest,” just people guided by individual self-interest. But society
is more than people who operate as isolated atoms—it is an organized entity (Commons
1950, 130–132, 135).12
This systems thinking is important both as an overall way of approaching the analysis
of economic transactions and as an approach to thinking about public policy. In the case of
transactions, which are at the center of his conception of all economic activity, Commons
stressed the importance of looking at every transaction as a multiple of five interrelated
co-determinants—futurity (expectations), efficiency (productivity), scarcity, custom, and
sovereignty (the authority of the state).13 In the case of public policy, Commons offered
the example of a policy change that increases wages in some line of work. According to a
consideration of employer costs alone (that is, an increased wage bill), it might appear that
this change would cause employment in that occupation to decrease, perhaps even leading to
adverse effects on other workers as well (such as those dependent on the purchasing power
of the people unemployed by the initial employment decrease). But systems thinking allows
the analyst to bring other considerations in for examination and analysis, and Commons’s
own work experience (in a printing shop while studying at Oberlin College) and his extensive
study of real-world cases taught him that wage increases often spur other changes including
reduced turnover, greater worker commitment and productivity, introduction of machinery
that complements labor (in contrast to the typical mainstream argument that machinery
introduced under such circumstances will merely substitute for labor), and expansion of
business operations (Commons 1919, 17–27; 1934b, 19–20; 1950, 136–137).14

11
Commons (1950, 135) associated his part-whole focus with the concept of holism, which originated in
the work of Jan C. Smuts. Allan G. Gruchy (1947, 4) describes holism as looking at the economy as an evolving,
dynamic whole “which is not only greater than the sum of its parts, but which also so relates the parts that their
functioning is conditioned by the interrelations.” Charles Wilber and Robert Harrison (1978) build on Gruchy’s
work to argue that holism is an essential feature of the institutionalist outlook.
12
For a related and much more recent discussion of the “atomistic” approach of conventional economic
analysis and the part-whole or “molecular” approach of institutionalism, see Brazelton (2005).
13
For an illustration, see Whalen (1993, 1159–1160).
14
In our time, Commons’s systems thinking appears in pattern modeling (Wilber and Harrison 1978), system
dynamics (Radzicki 2003), and in a synthesis of the two that Michael Radzicki (1988) calls “institutional dynamics.”
 The Institutionalist Method and Vision of John R. Commons 1011
Commons’s main point on policy was this: “Public programs and policies cannot
be evaluated in terms of the logical consequences of isolated assumptions, [factors,] or
similarities.” Thus, in our policy analyses, we need to avoid “neglecting the whole,” which
happens all too often in economics either by ignoring the whole entirely, in favor of attention
to just one part, or by simply assuming that “all other factors ‘remain the same’ except this
one that we are arguing about.” And then we must use our understanding of how various
parts of the economy are related—that is, our systems thinking—to aim toward constructing
polices “that will benefit all parties concerned” (Commons 1950, 125, 132, 137–138).15
Historical Focus
Just as Commons stressed the volitional element of his transactional theory, he was
also explicit about aiming for an evolutionary theory of value. Thus, a historical focus was
bound to be an element of his method. According to Commons, transactions involve
choosing from alternative opportunities, and those opportunities change over time as
socioeconomic conditions change and institutions and power relations evolve. Thus, at the
core of economics is largely “a history of changes in the opportunities open to individuals.”
How these opportunities “were brought about and may be influenced” is a vital part of what
economics must investigate.16 In short, history must be the focus of institutional economics
(Commons 1950, 139–142).
Commons readily admitted that history does not always repeat itself, is rarely logical, and
constantly presents us with many causes and conditions to take into account. Nevertheless,
digging into “the history of economic conditions and the changing alternatives open to
individuals is necessary” for understanding the present and offering proposals for the future.
He added: “Instead of investigating a simple cause of self-interest, hundreds of causes and
historical conditions must be weighed and balanced against each other in the endeavor to
understand how to act on present day economic problems” (Commons 1950, 143).17

Commons’s Pre-Analytic Vision

Commons’s emphasis on the historical developments that created our modern conditions
combines with the other elements examined above to form his method of economic research.
That method is what led him to produce his transactional theory of value and to focus on the

(For further discussion of such methods, see Radzicki 2022; Radzicki and Tauheed 2009; and Tauheed 2011). Such
thinking also appears in some of the labor economics literature: see, for example, the explicitly institutionalist
work of Figart and Mutari (2004); and the more eclectic work of Freeman and Medoff (1984), which is considered
retrospectively in Bennett and Kaufman (2007).
15
Two notes are worth adding here. First, Commons’s systems approach suggests that policy solutions are
likely to be multidimensional, requiring not simply introduction of a new tax, for example, but also necessitating
attention to matters such as the distribution of economic power, the nature of property rights, and administrative
feasibility. (I’m grateful to one of this article’s referees for underscoring this point with an example that I’ve distilled
here.) Second, Commons (1950, 139) also stressed that examining part-whole relations ultimately brings our
attention back to institutions or working rules, for the working rules of each organization are what tie everything
together.
16
In a discussion of what attorneys ask in court hearings on contract disputes, Commons (1950, 139–
140) suggests that many attorney questions are similar to what an economic investigator might also ask. They
include: “What were the alternatives which the individual was ‘up against’ when [making] the contract? Were
they ‘reasonable’ alternatives at the time? Were they persuasive or coercive? Was the choice induced by hope or
compelled by fear? Was it a free choice or were the alternatives monopolized? Was advantage taken of the weakness
or ignorance of the individual by those who were strong, or intelligent, or powerfully organized?”
17
Writing in this journal several decades ago, Field (1979, 50, 67) compared Commons’s attention to “historical
understanding . . . [and] immersion in the current laws and customs organizing the process under investigation”
with the methods of neoclassical and new institutional economists (the latter focusing on transaction costs) and
concluded that Commons’s approach is essential to meaningful theory, analyses, and policy recommendations.
1012 Charles J. Whalen
notion of “reasonable” value.18 But the method also offers a glimpse into the “pre-analytic
vision” underlying Commons’s institutionalism.
All science starts with what Joseph Schumpeter (1954, 41) called a pre-analytic vision—a
set of preconceptions that must precede analytic effort in any field. Gunnar Myrdal (1969,
9) agreed: “Facts do not organize themselves into concepts and theories just by being looked
at. . . . There is an inescapable a priori element in all scientific work.” And in a lecture at the
University of Wisconsin, Myrdal (1978, 779) stressed: “There can be no view except from a
viewpoint.” Among the components of such a vision are a conception of society, an image of
the economy, a philosophy of science, and an approach to values.19
Conception of Society
Commons’s conception of society highlights interrelatedness and ongoing social
change. Contemporary institutionalists refer to the first of these features as (or at least
one aspect of) holism, meaning that social reality is viewed as a unified whole (Wilber and
Harrison 1978). To be sure, Commons wrote about the economy, but he also stressed that
social reality is not neatly divided into economic and non-economic spheres: “I have never
been able to think of the various social sciences as separate fields of history, political science,
law, economics, ethics, and administration. What we need is some way of working through
the whole complex of problems” that grow out of the “life-and-death struggle of making
a living and trying to get rich” (Commons 1950, 118). Myrdal (1969, 10) had the same
view: “In reality there are not economic, sociological, or psychological problems, but simply
problems,” all of which “are complex.”
The conception of society as being in a constant state of change is what today’s
institutionalists call a processual perspective (Dugger 1989, 4–6; Gruchy 1987, 4). This means
they view social systems as dynamic, ever-developing entities, and are keenly aware that
all social activity occurs in irreversible historical time and an environment of uncertainty
regarding the future.20 Commons’s emphasis on the need for an evolutionary theory of
value underscores his adherence to a processual perspective, and his emphasis on futurity,
fallibility, and uncertainty all align with that perspective.21
Image of the Economic Process
Commons (1950, 21) wrote that economics “deals with the problems of mankind
as they go about trying to make a living or get rich.” Thus, he suggested that economists
“are interested primarily in the problems which arise from the production of wealth and
distribution of income.” Based on his understanding of the history of economic thought,
Commons suggested that “virtually all economists would agree” with his definition. “The
disagreements come over how these problems should be approached,” he argued.

18
The method Commons outlined for his own research is the same as the method that he thought was
appropriate for groups to use when determining reasonable value (see Commons 1913, 382–424; 1924). For an
examination of Commons’s notion of reasonable value, see Ramstad (2001).
19
Commons’s viewpoint or vision, is the product of extensive participation in various forms of collective
action, ranging from membership in a typographical union while a college student to years devoted to resolving
labor disputes, analyzing workplaces, and drafting progressive legislation in Wisconsin. It is also the product of
decades spent studying and interpreting the history of economic thought. For Commons’s discussion of the sources
of his “point of view,” see the first chapter of Commons (1934a, 1–9).
20
On irreversibility of time, Commons (1950, 142) offered the following observation: “It is often said that
‘history repeats itself.’ But the alternatives for individuals are not repeated.”
21
Much of this links Commons to the pragmatism of Charles Sanders Peirce. See, for example, Commons
(1934a, 150–157).
 The Institutionalist Method and Vision of John R. Commons 1013
Today, of course, institutional economists would consider Commons’s definition of
the economic process to be too narrow. Contemporary institutionalists define economics
as a science of social provisioning—one that must allow room not only for explorations of
wealth and resource creation but also for investigations of production, social reproduction,
and want creation (Dugger 1996, 31–43). However, most economists confine themselves to
the study of the price mechanism and market transactions, or to the logical consequences
of self-interested action by independent individuals; in comparison with the perspective of
conventional economics, Commons’s institutionalist image of the economic process is much
broader.
The breadth of Commons’s image of the economic process is evident in his attention
to not just bargaining (market) transactions, but also managerial and rationing transactions
(the former involving superior/subordinate relations such as those between supervisors
and workers, and the latter involving rules set down by an organization’s policymakers).22
Moreover, Commons recognized that even bargaining transactions and the individual
decisions leading to them are shaped by a multitude of social and institutional forces,
resulting in a view of economic activity that’s much more “molecular” (that is, the parts are
interconnected) and holistic than “atomistic” and individualistic.23 Commons’s pre-analytic
perspective treats “the market” as just one type of social institution; recognizes that real-
world markets can take a variety of shapes; and insists that economists must study how
institutional changes alter the alternatives open to individuals.
Commons’s view of the economic process aligns even more closely with contemporary
institutionalism on the role of the state in economic life. Unlike conventional economics,
which sees the state as, at best, a corrective entity that can fix situations involving market
failure, Commons and today’s institutionalists share a view of the state as a creative
entity, always deeply and unavoidably involved in shaping the economy. In fact, this view
is underscored in the title of an article by A. Allan Schmid (1999), a Wisconsin-trained
institutionalist: “It’s Government, Property, Markets . . . In that Order . . . Not Government
Versus Markets.”
Philosophy of Science
Commons’s philosophy of science also aligns with that of contemporary institutionalists.
Their shared view rests on a belief that economics should contribute to an understanding of
actual processes of social provisioning, striving for theories grounded in realistic assumptions
and regularly reevaluated to keep up with an ever-changing economic reality. This contrasts
sharply with economic perspectives that treat creation of predictive models, regardless of the
realism of their assumptions, as the preeminent goal of economics.
Commons’s perspective on science is also rooted in the pragmatism of Charles
Sanders Peirce and John Dewey. From Peirce comes the notion that truth does not involve
absolute certainty; rather, we must always treat knowledge as true and right “as far as present
knowledge is concerned”—and must conduct our research in a community of scholars or
investigators, for the best way to arrive at provisional knowledge is through a social consensus
of those looking into the matter in question (Commons 1934a, 150–156, 730). Meanwhile,
from Dewey comes the emphasis on real-world problem solving. Dewey emphasized that

22
Although Commons did not apply his transactional approach to an analysis of households, the approach
could be used to study household social provisioning. Commons may have offered a somewhat narrow definition of
economics, but he also offered tools capable of examining the whole of social provisioning.
23
Again, on a molecular versus atomist orientation, see Brazelton (2005).
1014 Charles J. Whalen
the ultimate worth of a theory is found in connecting it to a social purpose and finding it
useful to achieve desired social consequences; Commons called this “constructive research”
(Commons 1913, 7–13; 1934a, 150–151, 655, 747).
Approach to Values
Commons’s approach to values has a few dimensions. One dimension is his recognition
of the multifaceted nature of the concept of value. It might be tempting to say that reasonable
value—determined socially and without coercion—is the only value concept that concerned
Commons.24 But, in fact, his transactional analysis also makes room for use value (which
appears mainly in the factor he calls efficiency) and exchange value (which appears in the
factors of scarcity and futurity). Indeed, Commons even recognized the possibility of a society
governed by the very opposite of reasonable value, namely an undemocratic, authoritarian
society. In particular, he wrote with concern about communism and fascism, both of which
were very real forms of social organization during at least a portion of his adulthood (see, for
example, Commons 1934a, 876–908).
Another dimension to Commons’s approach to values is his attention to the ever-
evolving nature of reasonable value, work that he considered a vital part of the study of
economics in a liberal, democratic market society. In studying how courts and other
bodies have arrived at, defined, and operationalized their conceptions of reasonable value,
Commons worked from the position of an inquiring observer. In such work, the value
judgments of judges, administrative bodies, and boards of directors are the subject of the
economist’s investigation.
However, yet another dimension to Commons’s approach to values found him an
active player in resolving economic conflict by advising government policymakers and
leaders of other organizations. In those situations, Commons had a personal view of the
sort of processes that can orient conflict resolution into the direction of the most reasonable
settlements and policies possible—processes involving representatives of all stakeholders
and aiming toward building consensus with the assistance of investigative research—and he
encouraged establishment of such processes whenever he could. In fact, Commons (1950,
256–257) even recommended institutional change for the Federal Reserve with that view in
mind.25
In short, Commons had a threefold approach to values: he recognized that various
types of value play a role in the real world; he focused his research on tracing the evolution
of reasonable value, which he considered the most essential form of value in American
economic life; and he promoted institutions and processes that appeared to him as the best
way forward in pursuit of reasonable value. That approach to values was combined with a
pragmatic philosophy of science and a holistic and processual conception of the economy and
society, resulting in the pre-analytic vision underlying Commons’s institutional economics.

Commons and the Principles of Contemporary Original Institutional Economics

By spelling out Commons’s vision and method, this article has helped to clarify Commons’s
institutionalism. The above discussion of vision has also argued that what Commons offered

24
Again, see Ramstad (2001).
25
On the Federal Reserve, Commons wrote that “a powerful advisory committee”—with representatives from
organizations representing manufacturers, farmers, workers, and other stakeholders—should replace the existing
Federal Open Market Committee, which represents only the banking community (Commons 1950, 256–257).
 The Institutionalist Method and Vision of John R. Commons 1015
aligns well with essential aspects of institutionalism today. The article concludes by further
reinforcing some of the key principles of contemporary institutional economics. In particular,
it offers a brief look at some common ground between Geoffrey Schneider’s (2019) recent
statement of contemporary original institutionalism and the perspective outlined above.
Institutions and Induction
According to Schneider (2019), a recent president of the institutionalist Association for
Evolutionary Economics, contemporary original institutional economics (OIE) is grounded
in fifteen key principles concerning methods, theoretical approaches, and policy orientation.
When those principles are compared with the perspective of Commons outlined above, two
commonalities jump out as perhaps most important of all: a) a belief in the need to focus
economic analysis “on institutions, power, and evolution;” and b) use of analyses grounded
in “inductive empiricism based on real world observation” (Schneider 2019).
Institutions, power, and evolution are all interconnected elements at the heart of
institutionalism for both Schneider and Commons. According to Schneider (2019),
institutions are the key subject matter of OIE; that orientation is reinforced by Commons’s
view that attention to institutions should be the main point of economics, not some
extraneous addition.26 Schneider also argues that “with the institutions that structure society”
comes power “in many forms.” Commons has a similar view: society’s institutions structure
power relations and socioeconomic conditions, thereby determining the alternatives available
to individuals. In addition, Schneider stresses that “true knowledge in economics stems
from an understanding of how economies evolve and change;” his emphasis on evolution is
reinforced by Commons’s historical focus.
Inductive empiricism, meanwhile, is the cornerstone of research for both Commons’s
and Schneider’s OIE. Schneider (2019) writes: “Institutionalists eschew the overly deductive
reasoning of neoclassical economics based on unrealistic assumptions. Economic theory
should be drawn from observations of real people operating in a particular economic system
and culture.” His emphasis on observation and induction is reinforced by Commons’s focus
on the comparative method as a way to examine real-world cases in search of the strategic
factors that shape economic transactions.27
Other Key Principles
Commons’s vision and method also reinforce most of the rest of Schneider’s (2019) key
principles of OIE. For example, those principles hold that “group behavior is the basic unit
of OIE analysis;” that such behavior is crucially influenced by “cultural processes;” and that

26
Commons’s conception of institutions (as working rules, customs, habitual assumptions, or collective
action) also reinforces Schneider’s (2019) definition (“the organizations, social structures, rules, and habits that
structure human interactions”). And, of course, the Commons-Schneider view of institutions is quite different from
that in the mainstream-oriented “new” institutional economics, which derives institutionalized patterns of behavior
from individual choices (Peterson 2022, 21n13).
27
This discussion above centers on theory construction. In discussing policy analysis, Commons introduced
a different contrast with deduction. Distinguishing his approach to analyzing the likely effects of a new public
policy from the approach of deductive reasoning that he associated with conventional economics, Commons (1942,
369, 389) sometimes called his approach “experimental reasoning,” which he described as examining the new
policy “historically and comparatively” in the context of similar (past or ongoing) policy experiments. According
to Commons (1942, 389), this experimental reasoning (he also called it “administrative reasoning”) looks at
actual, real-world cases, “comparing relatively the gains and losses for conflicting economic interests under actual
circumstances in view of their bearing upon the public welfare.” However, regardless of the label, the methods of
investigation are as have been described above.
1016 Charles J. Whalen
“output is generally a communal product of joint effort not a result of individual effort.”28
All of these elements have parallels in the discussion above: in Commons’s choice of the
transaction as the fundamental unit of institutionalist analysis; his emphasis on the fact that
individual behavior is shaped by sociocultural institutions; and his discussion of how joint
production, which he placed at the center of institutional economics, tends to be greater
than the sum of its parts.29
We find similar parallels in the case of other principles identified by Schneider (2019),
including, for instance, his propositions that institutionalism contains a pragmatic emphasis
on real-world problem solving and that institutionalists “lean away from laissez-faire
capitalism,” believe “there is nothing natural about the market system,” and consider equality
of opportunity, economic security (“adequate social provisioning for all”) and democracy as
vital “to achieving a good life for all and essential for a healthy economic system.” Grounded
in pragmatism and a belief in reasonable value, Commons’s vision and method underscore
the legal framework underlying all economic structures (which means that laissez-faire and
the free market do not exist) and point to an ever-managed economy aimed at opportunity
(robust alternatives for all), security, and a flourishing democracy.
At first blush, Schneider (2019) does identify two OIE principles that might not
appear to fully resonate with Commons’s perspective: identification of technological change
as “the most important driver of social change,” and the notion that “economic planning
via democratic means is crucial to achieving good economic outcomes for the common
people.” To be sure, an emphasis on technological change is more closely associated with
the institutionalism of Thorstein Veblen than that of Commons. However, technological
changes are essential forces in Commons’s theories of both the American labor movement
and capitalist development. Moreover, the institutionalist conception of technology involves
much more than machinery: it includes all technical knowledge (“defined in a very broad
sense as involving all tools and mental skills”) and “subsumes the capabilities that people
possess for improving their material welfare and/or for performing tasks” (Gordon 1980,
10). Thus, the expansive institutionalist conception of technology includes even the judicial
decisions that Commons often saw as driving social change through the redefinition of
property rights (see, for example, Commons 1924).
The notion of democratic planning also seems somewhat out of line with Commons’s
(1934a, 897–898, 902) rejection of a national economic planning council to help revive
the U.S. economy during the Great Depression. But three points are important to note
on this matter. First, Commons’s concern was that such planning would be controlled by
the leaders of industry and finance, exclude the voices of workers and other citizens, and
operate beyond the reach of the political process and governmental checks and balances. In
other words, what Commons objected to was planning that he perceived as exclusionary and
undemocratic. Second, Commons worried about a national drift toward authoritarianism,
which not only had taken control in Germany, Italy, and Russia, but also had begun to

28
On cultural processes, Schneider (2019) writes: “Culture shapes tastes and preferences, determines
attitudes toward fairness, and sanctions culturally appropriate behavior while discouraging other behaviors.”
29
Writing on Commons’s selection of the transaction as “the minimum unit of investigation among economic
and social relations,” Kenneth Parsons (1942, 252) explains: “It is a social relationship . . . ; it is where the minds
and wills of persons meet in the give and take of the social process, with the ingredient conflict, mutuality and
achieved order.” This unit of analysis (which takes the form of bargaining, managerial, and rationing transactions)
is particularly appropriate given Commons’s focus on corporations, unions, and other collective action—that is,
Commons focuses on the same world that Schneider (in his discussion of OIE principles) describes as one in which
“almost all production involves a sophisticated group effort.”
 The Institutionalist Method and Vision of John R. Commons 1017
appear in the United States in the form of suppression of labor unions and left-wing
political movements (Commons 1934a, 902). Third, as discussed previously, Commons
believed that a managed economy was unavoidable; thus, his primary policy goal was to
ensure that collective action aimed at economic development and stabilization did not also
drive out democracy, voluntary associations, opportunities for free expression, and room
for individual initiative (see, for example, Commons 1934a, 876–903). In short, despite
Commons’s apprehensiveness about “planning,” there is much in his policy perspective that
aligns with that of contemporary OIE as described by Schneider.

Beyond Vision and Method

Building on his vision and method, Commons developed several theories and countless
analyses, many of which contributed to economic reform. Nevertheless, readers of
Commons’s works have often been puzzled about what he had to say and what it all means
for institutionalism. To help clarify the matter, this article has offered an interpretation of
his vision and method, and demonstrated how they reinforce some of the essential elements
and key principles of contemporary institutional economics.
But, of course, economists must go beyond Commons’s vision and method; we must
construct theories, conduct analyses, apply his insights, and shed new light on policy
possibilities and their likely consequences. To be sure, some of that is already being done
(see, for example, Gemzik-Salwach 2020; and Mayhew and Dymski 2014), but our current
economic difficulties clearly indicate that much more work is needed. As Commons (1950,
294) wrote at the end of his final book, the challenge for economists “is not to create an
imaginary utopia,” but to fashion “by investigation and experiment a reasonably successful
world” of economic prosperity, security, and “fairly equal opportunities for everybody.”30

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