The Economy as Instituted Process

[243] Our main purpose in this chapter is to determine the meaning that can be attached with consistency to the term “economic” in all the social sciences.

The simple recognition from which all such attempts must start is the fact that in referring to human activities the term economic is compound of two meanings that have independent roots. We will call them the substantive and the formal meaning.

The substantive meaning of economic derives from man's dependence for his living upon nature and his fellows. It refers to the interchange with his natural and social environment, in so far as this results in supplying him with the means of material want satisfaction.

The formal meaning of economic derives from the logical character of the means-ends relationship, as apparent in such words as “economical” or “economizing”. It refers to a definite situation of choice; namely, that between the different uses of means induced by an insufficiency of those means. If we call, the rules governing choice of means of logic of rational action, then we may denote this variant of logic, with an improvised term, as formal economics.

The two meanings of “economic”, the substantive and the formal, have nothing in common. The later derives from logic, the former from fact. […]

[244] […] Laymen accepted this compound concept as a matter of course; a Marshall, Pareto or Durckheim equally adhered to it. Menger alone in his posthumous work criticized the term, but neither he nor Max Weber, nor Talcott Parsons after him, apprehended the significance of the distinction for sociological analysis. Indeed, there seemed to be no valid reason for distinguished between two root meanings of a term which, as we said, were bound to coincide in practice.

The Formal and the Substantive Meanings of “Economic”

[250] The human economy, then, is embedded and enmeshed in institutions, economic and noneconomics. The inclusion of the noneconomic is vital. For religion or government may be as important for the structure and functionings of the economy as monetary institutions or the availability of tools and machines themselves that lighten the toil of labor.

Text Informations

Reference:
Original Publication: “The Economy as Instituted Process”, chap. XIII of Trade and Market in the Early Empires (1957), p. 243-270
KPA: 34/16
Other Languages:

Lge	Name
DE
FR	« L’économie en tant que procès institutionnalisé »