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A Pragmatist's Quest for Holistic Knowledge: The Scientific Methodology of John R.
Commons
Author(s): Yngve Ramstad
Source: Journal of Economic Issues, Vol. 20, No. 4 (Dec., 1986), pp. 1067-1105
Published by: Association for Evolutionary Economics
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JeI JOURNAL OF ECONOMICISSUES
Vol. XX No. 4 December1986
A Pragmatist's Quest for Holistic Knowledge: The

Scientific Methodology of John R. Commons
Yngve Ramstad
It has always been difficult for noninstitutionaliststo describe and

interpretthe knowledgeproducedby institutionaleconomists.' How-
ever, if the literatureof institutionalismin generalis perceived by the
outsider to be obscure,the writingsof John R. Commons must be re-
gardedas practicallyunfathomable.Studentsof Commons'sworkhave
frequently commented upon the convoluted-if not outright
unintelligible-route by which he typically "explained"his concepts,
an approachthat has generallybeen attributedby the noninstitution-
alist to Commons's "confusion"regardingthe nature of scientific ex-
planation,or to his allegedfailureto develop a discernableexplanatory
structure.2Significantly,even institutionalistshave found it difficultto
summarizethe structureof Commons's thought or to explain why he
organizedhis work as he did.3 Indeed, there can be little question but
that, within the institutional movement itself, Commons is the least
understoodof its major theoreticians.
The question is, why so? It is my purpose in this article to offer a
partial answer: Commons's consistent adherence to the unfamiliar
methodologicalpreceptsof "holism."
Economists, as a rule, evince little interest in, or self-consciousness
about, the philosophicalissues underlyingscientificmethodology[Bo-
lan 1982, pp. xiii, 1-2]. As a result,explicit methodologicalinstruction
The author is Assistant Professor of Economics, University of Rhode Island, Kingston. An

earlier version of this article was presented to the History of Economics Society on 21 May
1985, at George Mason University, Fairfax, Virginia.
1067
1068 YngveRamstad
is seldom emphasizedin the economics curriculum,and most students

"learn"methodologyas part of the "personalknowledge"they acquire
throughstudyingexemplarsand by "doing"economics underthe tute-
lage of an establishedpractitioner.4To the extent that a methodology
is "taught,"it is likely, at least in "reputable"departments,to reflect
the formalistperspectiveassociatedwith mathematicalmodel-building
and econometrics. Seldom, if ever, is the aspiring practitionerpre-
sented with, or encouragedto explore, an explicit alternative.Hence,
thereare few within the economics professiontoday, asthere have been
few throughoutthe past half century,who would question the putative
applicabilityof formal methods to all "scientific"activity within eco-
nomics.5
Eight years ago in this journal, Charles K. Wilber, with Robert S.
Harrison,in an article entitled "The MethodologicalBasis of Institu-
tional Economics: Pattern Model, Storytelling,and Holism," argued
that anotherandfundamentallydifferentmethodologicalorientation-
holism-underlies the scientificendeavors of institutionaleconomists
[Wilberand Harrison 1978]. Despite its apparentwide-spreadaccep-
tance, there are, in my view, sound reasons for doubting the general
validity of Wilberand Harrison'sthesis that there is an ("the")institu-
tional methodology [Blaug 1980, p. 126; Ramstad 1981, pp. 376-79] 6
Yet, despite the exaggeratednatureof Wilberand Harrison'sclaim, it is
plausiblethat many or most institutionalistshave proceededalong the
lines they outlined.
Unfortunately,Wilber and Harrison provided no real examples of
how holist underpinningsmanifest themselves in the form and struc-
ture of the actual researchprogramsand writingsof presentor past in-
stitutional economists, and, regrettably,neither they nor anyone else
has subsequentlyprovided a case study that illustratesjust how an in-
stitutionalist'swritingsand his/her commitment to holism are related.
As a result, those interestedin the institutionalapproachare no more
informed about how to "do" holist work today than they were at the
time Wilberand Harrison'sarticle was published.
Having developed his version of "institutionaleconomics" prior to
the creationof the word "holism,"Commons, of course,never used the
term himself to describe his own methodological perspective. More-
over, whereasthe connectionsbetweenCommons'sapproach,the Ger-
man Historical School, and the philosophical precepts of American
Pragmatismare by now well-established,no one has yet linked the
structureof Commons's conceptual frameworkto holism.7Neverthe-
less, in what follows, I attempt to demonstrate,primarilythroughtex-
tual analysis of Commons's major theoretical works-Legal
of JohnR. Commons
ScientificMethodology 1069
Foundationsof Capitalism[Commons 1924],InstitutionalEconomics:

Its Place in Political Economy [Commons 1934a], and The Economics
of CollectiveAction [Commons 19501-that Commons did approach
economic analysis exactly as if he were a holist; in fact, Commons ap-
pears to be the prototypicalholist. In addition to showing that Com-
mons was a holist, I further attempt to show that his convoluted
explanatorystyle becomes a great deal more systematic if one keeps
that fact in mind.
It will be recognizedthat far more than a short article would be re-
quiredto fully demonstratehow Commons's methodologicalcommit-
ments are related to his writings. Commons's complex framework
emergedonly graduallyin the at least forty-fourarticlesand seventeen
books he wrote (occasionallywith his students)over a careerspanning
more than fifty years.8Furthermore,Commons's theories were them-
selves continuallytested and revised throughtheir applicabilityto the
innumerableconcreteproblemshe wrestledwith as a member of both
state and federal commissions and as the author of several pieces of
innovative legislation.9In this article, I attempt to establish conclu-
sively only that the term "holism"summarizesthe methodologicalpos-
ture from which Commons pursued his lifelong quest to round out
conventional economic theory.'0It is my hope that, once his method-
ological preceptsare clearlyunderstood,this knowledgecan be used to
renderthe structureof Commons's "institutionaleconomics"more in-
telligible,to the benefitof noninstitutionalistand institutionalistalike.
It should be emphasizedthat, to the extent the analysisis successful,it
will not only illuminate Commons's writings,but will also constitute
an explicit "exemplar"with which to support many of the generaliza-
tions forwardedby Wilberand Harrison.
Whatis Holism?
In orderto show that Commons proceeded"as if' he were an holist,
it is necessaryfirst to spell out the essential featuresof the holistic ap-
proach. It is to this task that I now turn. To facilitate understanding,
the holist's standpointis frequentlycontrastedwith the more conven-
tional views of the "formalist."
The term "holism"firstsurfacedin Jan C. Smuts'sHolism and Evo-
lution, published in 1926, and its application to economics can be
tracedbackat least to 1947, when Allan G. Gruchypublishedhis Mod-
ern Economic Thought [Gruchy 1947]. The methodological precepts
associatedwith the holistic approachas appliedto economic questions
were firstexamined by Henry W. Briefs in his Three Viewsof Method
1070 YngveRamstad
In Economics [Briefs 1960]. A more detailed and comprehensive ex-

aminationof the holistic approach,as well as a comparisonof its tenets
with the methodological beliefs underlying mainstream economics,
was undertakenby Paul Diesing in his Patternsof Discoveryin the So-
cial Sciences [Diesing 1971]. The article by Wilber and Harrisonwas,
in largepart, a summaryof Diesing's analysis."I
Given its integrationinto the literatureconcerninginstitutionaleco-
nomics, one can properlyask, what does the term "holism"connote?'2
As is so often the case, the exact meaning imputed to this widely used
term is not alwayseasy to discern.In practice,"holism"is used to con-
vey three quite different(thoughinterdependent)meanings.In one us-
age, holism refersto an ontological perspective(What is the natureof
reality?).Gruchyis representative;he explainedthat he coined the term
"holisticeconomics"to "callattentionto what is most characteristicof
the new economics [of Thorstein Veblen, Commons, Wesley Clair
Mitchell,John MauriceClark,RexfordTugwell,and GardinerMeans]:
its interest in studying the economic system as an evolving, unified
whole, or synthesis,in the light of which the system'spartstake on their
full meaning"[Gruchy 1947, p. viii]. The "individualismversus ho-
lism"debatealso revolves aroundthis meaningof the term. In a second
usage, holism connotes an epistemological posture (When do we
"know" something?). Most methodological debates within
economics-for example, verificationism versus falsificationism-
involve this meaningof the term.'3In its thirdusage,holism is assumed
to be a perspectiveon method (How do we "do" social science?),that
is, to indicate a commitment to a set of proceduresthat must be fol-
lowed if one is to produce"knowledge."
As noted, the term holism-as, for that matter,"methodology"and
its many variants-often, if not usually, is employed so as to simulta-
neously imply all threemeanings.'4It is important,however,that these
three dimensions be kept distinct, and every effortwill be made to do
so in the followingdiscussion.
TheHolisticStandpoint
Paul Diesing has summarizedthe basic position of the holist as fol-
lows:
The holist standpointincludes the belief that human systems tend to
develop a characteristicwholeness or integrity... a unity that manifests
itself in nearlyevery part.... The characteristicsof a part are largelyde-
terminedby the whole to which it belongs and by its particularlocation
in the whole system.... The holist ... believes not only that wholesexist,
but that his account of them should somehow captureand express this
holistic quality.... By "holisticquality"is meant, not only the manifold
ScientificMethodologyof John R. Commons 1071
interrelationsamong parts that appearin the original,but also some of

the uniquecharacteristics,the distinctivequalitiesand patternsthatdiffer-
entiates this system from others [Diesing 1971, pp. 137-39].5
In other words, holists employ a part-wholemode of apprehendingre-

ality. Reality is conceptualizedas an integratedwhole, a unity, not as
a set of logically separablestructuresand processes(for example, "the
price system")as perceived by formalists [Wilberand Harrison 1978,
p. 80]. Furthermore,there is no sharp distinction perceived between
the empiricaland logical natureof things.Meaning,therefore,is linked
to the context;entities or activities are assumedto be trulycomprehen-
sible only in their interrelations with other entities or activities.
Additionally,the whole is seen in the main to determinethe part. Ob-
viously, if one is committed to this interpretation,one should study
a whole living system ratherthanjust one part(for example, the "labor
market")taken out of context. Indeed, in principle,one should inves-
tigate nearlythe whole culturein order to understandand explain one
institution [Diesing 1971, p. 204].
The Productionof Holistic "Knowledge"

Capturingthe natureof a whole system is, to be sure, no easy task.
Nonetheless, the processby which holists pursuethis end has been iso-
lated and describedby Diesing. Diesing's characterizationof that pro-
cess can be summarizedas follows:
Supposethereexists a whole system, say the one shown in Figure 1a,
comprisedof many interrelatedparts.'6Initially,the researcherfocuses
A A
whole
system
(b)
(a)
Figure1
1072 YngveRamstad
on a small partof the entire system, say PartA. Throughclose observa-

tion of this limited domain, an analytical theme (generalization),
Theme 1, emerges in the mind of the researcher.The researcherthen
shifts his focus to other parts of the whole system, Parts B, C, and so
forth, in Figure lb, as he attempts to determlne whether this same
theme (generalization)can also be isolated in other contexts. Thus a
relianceon the comparativemethodis one of the cornerstonesof holism
[Diesing 1971, p. 149].As the researcherproceedsto comparecases, he
will become aware of differencesas well as similarities. Over time, a
typology will be developed that summarizesthe systematicdifferences
encountered. Note that, if the holistic method is faithfully pursued,
those types summarizereal cases; that is, they are real types.17
Once the researcherfeels a given theme has a real existence, he tries
to see what links it with other themes [Diesing 1971, p. 155],for exam-
ple Themes 2 and 3. What the researchernow strives to accomplish is
to capturethe linkages, the interconnectedness,as depicted in Figure
2, that constitute the system's unity or wholeness. These specificlink-
ages are what contributeto the system's uniqueness.
Figure2
At some point a theme becomes a tentative hypothesis. The re-

searcherthen tests the hypothesis by consulting as wide a variety of
data as possible-statistical data, survey data, participantobservation
data, case studies,anythinghe can get his hands on. No particulartype
of data is consideredsupreme;all are subjectedto "contextualvalida-

tion" [Diesing 1971, p. 147]. In other words, evidence is evaluated by
comparingit with other kinds of evidence bearingon the same theme.
In this way, a many-sided,complex pictureof the subjectmattergrad-
ually emerges.Quite obviously, the analysis possesses no "rigor,"only
varyingdegreesof plausibility.
Afterseveralthemes have been "validated"(thatis, found consistent
with manytypes of data),they arelinked into a networkand interpreted
to comprise a pattern [Diesing 1971, p. 158].18The resultant"pattern
model" is the holist's "theory."It is here that the partsare unifiedinto
a whole. Accordingly,partsof the system are explainedby showingvia
the pattern model how they are connected to the whole. The pattern
model is similarly tested by observing how well new evidence can be
incorporatedinto or explained within the pattern [Diesing 1971, p.
158]. It must be emphasized that a patternmodel will never be com-
plete,becausethe whole can never be comprehendedin its entiretyand,
furthermore,is itself constantly changing[Diesing 1971, pp. 164-66].
Hence, there are always "loose ends." Despite this difficulty,the re-
searchercontinuallylooks to fit more and more detail into the pattern
so as to obtaina finerand finerdegreeof coherencebetweenhis account
and the real world [Diesing 1971, p. 159].
As the holist laborsto improve the patternmodel, he simultaneously
strives to refinethe associated typologies he is employing to interpret
a specific system. In fact, the one task necessarilyinvolves the other,
as the characteristicsof a specific system (a pattern)are explained by
the holist when he shows how they reflecta unique blend of the char-
acteristicsassociatedwith each of the "types"found mixed togetherin
the whole understudy. Furtherstudy of how the characteristicsof spe-
cific types are reflectedin widely varyingwholes may lead to hypothe-
ses about which features of a pattern are of primary importance in
conditioning others. As the final step of the holistic method, the re-
searcher will identify universals emerging from the comparison of
widely varying types. Diesing refers to the identificationof such uni-
versals as holistic "generaltheory"[Diesing 1971, pp. 225ff.].'9
Sourcesof Confusion
It is obvious that those steeped in the rulingmethodologicalprinci-
ples of economic analysis are likely to find the work of holists to be
perplexing.20First of all, since holists find meaning to be contextualin
nature, they provide "definitions"of basic concepts that differ enor-
mously from the precise terminologyemployed by formalists.As Die-
sing put it:
1074 Yngve Ramstad
Holistic definitionsare likely to be long, complex and open-ended.The

definitionsof such concepts as institution, function, folk-society,or role
will takea chapteror a long articleand will reallybe essaysin theory.Such
concepts may have a vague core meaning,but the core shades off rapidly
into a seriesof variants,circumstances,aspects,standpoints,and relations
or contrastswith other concepts. And no such "definitions"will pretend
to be complete;there is always more to be said and discovered [Diesing
1971, p. 21 1].
WaltonHamilton'sdiscussion of an "institution"in the Encyclopaedia

of the Social Sciencesis a perfectexample of the approachused by ho-
lists to define fundamentalconcepts [Hamilton 1932].21
A second sourceof confusion is likely to inherein the holist's under-
standingof the term "explanation."For holists, an event or system is
explainedby identifyingits place in the whole or in a pattern[Diesing
1971, p. 158]. It must be rememberedthat each segmentof the holist's
theory(the discretetypologies)is developed, interpreted,and tested in-
dependentlyof the other segments of the pattern.Therefore,except in
those cases where a "generaltheory"has been developed, explanation
proceedsby showinghow the unique patternof a specificsystem mani-
fests, one by one, the featuresassociated with the types of which that
specificwhole is comprised.The structureof explanation,accordingly,
is concatenatedratherthan hierarchical.Nowhereare thereto be found
"coveringlaws"to renderthe underlyingconceptualstructureintelligi-
ble and therebyto explain how "data"are convertedinto outcomes. As
a result,"explanation"based on the patternmodel looks to the formal-
ist to be nothing more than "description."
This last point leads directlyto yet anothersourceof confusion-the
holist's casualattitudetowardprediction.For the holist, understanding
of a systemcomes with comprehensionof the unique interrelationsbe-
tween the whole and the parts.An incompletepatternmodel, therefore,
does not determine the nature of unobserved parts; in fact, study of
unobservedpartswill undoubtedlyalterthe researcher'sunderstanding
of those parts of the system previously investigated.Predictionof un-
observed parts(events), thus, is not regardedas an importantfactorin
assessingthe truth or falsity of a patternmodel [Diesing 1971, p. 164].
As long as the patternmodel can be modified to accomodate the new
discovery (part), there is no basis for its rejection. For the holist, in
short,theory(the patternmodel) is primarilyan aid in achievingunder-
standing,not an instrumentfor making predictions.This orientation,
though,provides the formalistwith anotherreasonfor concludingthat
"explanations"based on the pattern model are "unscientific,"that is,
merely "descriptions."
A final source of confusion is to be found in the attention accorded

by the holist to the individual case. This is because, for the holist, the
primarylocus of validity is not the general law or even the typology,
but one's understandingof the individual case: "[Theholist's] ultimate
interest always returnsto individual cases, and if he makes long ven-
tures into theory it is for the eventual purposeof understandingcases
better" [Diesing 1971, pp. 179, 195]. As a consequence, one needs a
theorycapableof sayinga greatdeal about a few cases, ratherthan very
little about all cases. This reflects the overridingaim of the holist to
develop "practitioner'sknowledge"-that is, knowledgedirectedto the
understandingand control of the specificcase. This is in sharpcontrast
to the formalist'spreoccupationwith the development of knowledge
applicableto aggregateseven if it is of limited applicabilityto individ-
ual cases.22
Commons's
Methodology
It would be impossible to comprehend the logic underlyingCom-
mons's approach to the pursuit of knowledge without first grasping
what it was that he wanted to know and why. As emphasizedabove, it
is beyond the scope of this articleto provide a systematicstatementof
Commons's theory of economic life, but a cursoryoverview of his in-
terpretationof the economic process may be helpful.
Commons saw the "transaction"-the actualexchangeof ownership
rights,that is, the rightsto controluse-as the fundamentalunit of eco-
nomic life. Each transaction,in turn, was interpretedas taking place
within the domain of a "goingconcern,"whetherit be the family, the
enterprise,or the nation. To ensure that transactionsdo not disrupt
order within the concern, "workingrules"are adopted. Workingrules
specify the rights,duties, et cetera,that individualshave in their trans-
actions with other "citizens"of the going concern, and their primacy
over behaviorwas seen by Commons as absolutelynecessaryfor main-
tainingorderwithin the concern.Thus Commons rejectedthe orthodox
view that economic orderemergesspontaneouslythroughtruly volun-
tary activity channeled by the price mechanism ("freewill");instead,
institutions-defined as "collective action in control of individual
action"-were declaredto be responsiblefor orderlyeconomic life. Be-
cause the transactionwas seen by Commons to be the fundamentalunit
of activity lying behind allocational and distributionaloutcomes (in-
cludingexchangevalues), he made it the focal point of his analysis.In
Commons's mind, the transactionhad to be explained if one was to
explain actual outcomes.
1076 YngveRamstad
Commons was of course as much reformeras scientist.23All his life

he was preoccupiedwith the task of attainingmore equitableoutcomes
("ReasonableValue")throughcollective action.24Since outcomes were
interpretedto be foreshadowed by transactions, and the content of
transactions,in turn, to be the consequence(in part)of the underlying
workingrules, more "reasonable"outcomes necessarilypresumedthe
existence of more "reasonable"workingrules. Thus if he were to pro-
mote more equitableeconomic outcomes (viewed broadly),Commons
had to know or to understandthe relationshipbetween workingrules
and outcomes. As a result, Commons's scientific activities were di-
rectedprimarilyto the task of obtainingknowledgeabout transactions
and theirdeterminantsfor the purposeof alteringspecificworkingrules
in such a mannerthat outcomes would become more "reasonable."As
will be shown, there can be no doubt that Commons's methodology
was perceivedto facilitatethe development of such knowledge.
Unfortunately,Commons never set down his methodologicalviews
in one place. What he did have to say about methodologicalissues is
scatteredhere and there throughouthis writings.The following analy-
sis, therefore, representsan attempt to synthesize Commons's pro-
nouncements in such fashion that a coherent methodological
stand-pointis revealed.It should be kept in mind that the end-in-view
here is to determine whether what Commons himself wrotecan be so
organizedand interpretedas to permit classificationof his methodo-
logicalapproachas holist;hence the many, and sometimes lengthy,pas-
sages incorporatedinto the analysis.
Commonsand Pragmatism
The subjectmatterof economics, in Commons'sview, is "collective
action in controlof individualaction accordingto the evolving working
rules of the various customs and concerns"[Commons 1934a, p. 655].
And those rules, Commons averred,can "be investigatedby the prag-
matic method of science" [Commons 1934a, p. 655]. But what did
Commons mean by "the pragmaticmethod of science"?
As noted earlier,Commonshad no realisticopportunityto label him-
self a holist since the term was coined only late in his life. Nevertheless,
Commons did learn of Smuts's new term and, in at least one passage,
seemed to imply that his own thory embodied the economic meaning
of the "modernterm, 'holism"' [Commons 1950, p. 135]. What Com-
mons did consider himself to be was a Pragmatist:"We endeavor to
follow [C. S. Peirce]and to accept the term Pragmatismas the name of
the method of investigationwhich we apply to economics"[Commons
1934a, p. 150].Commons emphasizedthat by Pragmatism,Peirce,and
ScientificMethodology
of JohnR. Commons 1077
thus he, "meant merely the method of scientific investigation"[Com-

mons 1934a, p. 150].25Hence the referenceto "the pragmaticmethod
of science."Accordingto Commons'sstudentand disciple, KennethH.
Parsons,Peirce'sessay on "How to Make Our Ideas Clear"was most
influentialin shaping Commons's point of view regardingthe nature
of scientificthought[Parsons1950, p. 343].26 Commons'sone extended
discussion of Pragmatism,a section in InstitutionalEconomics,draws
heavily on this essay [Commons 1934a, pp. 150-56]. Although Com-
mons does not tell us much here about the methodhe uses-instead he
focuses on epistemologicalissues-this is Commons'sonly substantive
discussion of his interpretationof Pragmatism,and it consequently
merits close examination.
Commons begins by addressing the question of what an idea or
thought"is."He finds its meaningto lie, as Peirceasserted,in the feel-
ing of "belief."Commons then quotes Peirce:
"The essence of belief is the establishmentof a habit.... The whole
function of thought is to produce habits of action.... To develop [the
meaningof a thought],we have, therefore,simply to determinewhat hab-
its it produces, for what a thing means is simply what habits it in-
volves.... Whatthe habit is dependson whenand how it causesus to act.
As for when,every stimulusto action is derivedfromperception;as for the
how,every purposeof action is to producesome sensible result.Thus we
come down to what is tangible and practical,"for which reason Peirce
gave it the name Pragmatism,"as the root of every real distinction of
thought.... Our idea of anythingis our idea of its sensibleeffects"[Com-
mons 1934a,p. 152].
Commons next cites Peirce's cardinal rule "for obtaining scientific

clearness"in our ideas: "Considerwhat effects, which might conceiv-
ably have practicalbearing,we conceive the object of our conception
to have. Then our conception of these effects is the whole of our con-
ception of the object" [Commons 1934a, p. 152]. Commons's dictum
that "Publicprograms[themselvesinitially 'ideas'] ... must be judged
by the practicalconsequencesof their operation"would appearto re-
flect this perspective[Commons 1950, p. 137].
It is evident from the foregoingdiscussionthat in Commons's mind,
ideas have no necessarycorrespondencewith "reality."They are simply
mentalaids for channelingaction. Thus, for example,Commons'smost
fundamentalconcept, the transaction,was explicitly, as "defined"by
him (moreon this shortly),"nota copy of natureor reality-it is merely
a mental configurationof the least unit of economic theory-a unit of
investigation by means of which reality may be understood,"that is,
by which the effects of action can be identified or anticipated [Com-
mons 1934a, p. 59].
1078 YngveRamstad
Having establishedthat ideas are beliefs regardingeffects of action,

Commons discusses how an idea/belief (which ultimatelyis combined
with otherideas into a "formula"or a theory)can be judged "scientific"
ratherthan simply the productof individual bias. In other words, how
do we know when a belief is "true?"Peirce is again the authority:"The
opinion which is fated to be ultimatelyagreedto by all who investigate
is what we mean by truth.The object representedin this opinion is the
real"[Commons 1934a,p. 152]. Commons thus groundsthe "truth"of
an idea (and thus, presumably,of a "theory"),not in the accuracywith
which it copies "reality"or isolates its logical structure,but in social
consensus-"the existing state of knowledgewhich changes with fur-
ther truth" [Commons 1934a, p. 152, n. 38]. In short, scientific
"truth"-that is, knowledge-is nothing more in Commons's mind
than an ever-evolving consensus of opinion as to the effects of action
[Commons 1934a, p. 153].
Commons next turns to the problem of locatingthe sourceof ideas,
which leads him to Peirce'sconcept of the mind as "anactive, continu-
ing organizerand reorganizerof impressions":"Themind does not wait
for impressions,it is continually looking for them, breakingthem up
into parts, and reconstructingthem into new feelings [concepts, or
ideas, or theories]"[Commons 1934a,p. 153]. Even if it pertainsto no
one else, this passage certainly captures the activity taking place in
Commons's mind-recall his aforementionedpassion for "classifica-
tion, subclassification, reclassification, and overclassification."For
Commons, such activity was no doubt perceivedto be the very essence
of scientificcreativity.In any case, significantly,Commons at this point
adds:"[I]mpressionsthemselves are seized upon [by the mind] in their
externalrelationsof partsrelatedto the whole activity, past and future,
instead of coming into the mind as separate impressions associated
only by resemblance,contiguity,and succession"[Commons 1934a,p.
153]. The mind, in other words, graspsthings in the same part-whole
relationshipthat characterizesthe externalworld, that is, reality.Com-
mons here has revealedhimself to share the ontologicalperspectiveof
holists.
Commons neglects throughoutthis entire discussion to inform us
what he means by the word "theory"(and it is best that explanationof
its meaning in Commons's mind be deferred).He nonetheless con-
cludes his discussion of Peirce's Pragmatismby expressing his own
pragmaticinterpretationof a theory's adequacy,that is, of its "valid-
ity":"[I]fa theory'works'when tested by experimentsand verifiedby
others, then the theoryis true and right, so far as presentknowledgeis
concernedand all the known facts are included"[Commons 1934a, p.
156]. This passage is crucial to Commons's approachthroughouthis

careerof conductingexperimentsbased on his theories-that is, apply-
ing them to actual cases and adjustingthem when they provided an
inadequateexplanation of observed effects, in short, when they were
"invalid."
Peirce'sdiscussionpertainedexclusively to our knowledgeof nature,
whereasCommons was interestedin social activity. Therefore,he ap-
pended to his discussion of Peirce a short section titled "FromNature
to Going Concerns,"in which we are told what it is Commons himself
is attemptingto "know":
Something similar is the test in economic science, as Peirce found in
physicalscience. But the essentialdifferenceis that physicalscience deals
with knowledgeof the activities within the body of the cosmos, including
humanbeingsas nature'sobjects;while economicsdeals with the individ-
ual as a citizen endowed with rights, duties, liberties, and exposures,in
varying degrees imposed by various concerns.... Peirce's pragmatism,
appliedto institutionaleconomics, is the scientificinvestigationof these
economic relationsof citizens to citizens. Its subject-matteris the whole
concernof which the individualsare members,and the activities investi-
gated are their transactionsgoverned by an entirely differentlaw, not a
law of naturebut a workingrule, for the time being, of collective action
[Commons 1934a,pp. 156-57].
Commons'sConceptionof Economic Theory

Commons perceived scientific activity to involve three distinct ele-
ments: facts (informationregardingthe currentstatus of objects or ac-
tivities), purpose (on the part of the investigator), and theory
[Commons 1950, p. 120]. Commons was quite explicit regardingthe
scientific role of theory:"The task of theory [is that] of arrivingat an
understandingof the part-wholerelationto be obtainedin economics";
it represents"a statement of what we now expect [effectsof action to
be] from our present knowledgeof the factors and our present under-
standing of their interrelations"[Commons 1934a, pp. 734-35]. It
should be noted that in the firstpassagewe get our firsthint that Com-
mons also sharedthe holist's belief that explanationmust capturethe
natureof part-wholerelationships.
The word "theory"has two distinct connotations. It can signify an
outcome producedby thinking, a specific complex of ideas about the
relationshipbetween facts or events. It can also convey the mental ac-
tivity itself, the way one thinks about concreteproblems.One concept
leads to a conception of theoryas specificcontent, the other as process.
Commons usually, though not exclusively, employed the word "the-
ory" to connote process [cf. Commons 1934a, p. 98].
1080 YngveRamstad
The nature of theory as an activity was summarizedby Commons

in the following manner:"[A Pragmatictheory] is a complex activity
of Analysis, Genesis and Insight"(and here his concept of the mind
surfaces)"activelyconstructedby the mind in orderto understand,pre-
dict, and controlthe future"[Commons 1934a,p. 102].The constituent
partsof the activity-Analysis, Genesis and Insight-are furtherdelin-
eated: Analysis is "the process of classificationby which we compare
similaritiesand distinguishdifferences"(cf. p. 1070 ); Genesis is "the
analysis of the changes that are continuallygoing on in all of the fac-
tors";and Insightinvolves the synthesis or "theunion of Analysis and
Genesis into a formula [this term will be explained shortly] of the
changingrelationsof the partsto the whole."Throughsynthesis,then,
the investigatoris able to "unite the changing parts into a changing
whole" [Commons 1934a, p. 99]. It hardlyneed be noted that this is a
radically different interpretationof the word "theory"than that ac-
cepted by modem-day economists. At the same time, it is fully consis-
tent with the holistic standpointadumbratedin the precedingsection.
Reflectinghis commitment to the Pragmaticperspective,Commons
averredthat ideas are what permit the scientist to "do"theory, that is,
to think his/her way through a concrete problem. Thus ideas can be
seen as the basic components of theory. Commons isolated five types
of ideas necessaryfor investigationand understanding.These "insepa-
rable and interdependentmental tools"-Percepts, Concepts, Princi-
ples, Formulae, and Social Philosophies (the parts)-together
constitute Theory (the whole), and serve as the source of any meaning
attributedto the subjectmatterbeing investigated-that is, the mean-
ing of facts [Commons 1934a, pp. 98, 735].
Comprehensionof this typologyis absolutelyfundamentalto an un-
derstanding of Commons's method of investigation and to his
circuitousstyle of explainingthe phenomenaand activities he investi-
gated.Commons defineda perceptas an idea that attributesinside feel-
ing (sensation)to somethinghappeningoutside the personexperiencing
the feeling; percepts are roughly equivalent to "non-reflectiveaware-
ness of objectsand relations"[Commons 1934a,pp. 94,735]. A concept
was definedas an idea that capturessimilarityof attributesamong some
of those objects and relations (for example, "Man" or "Use-Value")
[Commons 1934a, p. 94]. A principle,in like manner, is an idea cap-
turingsimilarity of actions (such as the principleof scarcity).Because
a principleinvolves the sequenceof time, it embodiescause, effect,and
purpose [Commons 1934a, p. 94]. The term "formula"was used by
Commons to representa mental picture or idea of a relation between
the partsand the whole. It "is a ... mentaltool constructedfor research
and action, and it is a formulationof the relation of the parts to each

other and to the whole" [Commons 1934a, p. 736]. Finally, a social
philosophy is an idea capturingsimilarityof purpose.Its role is subtle
yet fundamental:"If a man startsout to prove a thing, it is wonderful
how he can select the facts that prove it. It is our social philosophies
that unconsciouslyselect for us our facts [ultimatelypercepts]and our
definitions [percepts,concepts, and principles]"[Commons 1934a, p.
98].
Accordingto Commons, "Methodologyis the logical structureof the
concepts and principles in which each science formulates its own
knowledge"[Commons 1934a, p. 739]. In a discussion nominally di-
rected to the significanceof Max Weber's "ideal types," Commons
traces throughthe logical structureof the knowledgeproducedby po-
litical economy [Commons 1934a, pp. 736-38].
The interrelationsbetween the five components of economic theory
are shown by Commons to be quite subtle. Some percepts(objects or
relationsassignedmeaningby the mind) yield concepts (perceptswith
similarity of attributes).However, a percept is not a part of which a
concept is the whole; a perceptis only a special attributeof something
that is unknownas a whole [Commons 1934a, p. 735]. Other percepts
yield principles(similarityof action or motion). This also is not a part-
whole relationship;a perceptis not a partaction of which the principle
is the whole action [Commons 1934a,p. 735]. Thus the need for a for-
mula, the mental process uniting parts and wholes. But is it a formula
of concepts or a formula of principles?Ultimately, Commons argues,
this depends on the researcher'sspecific problem of researchand ac-
tion. Commons also shows how easy it is to transforma concept into
a parallelprinciple [Commons 1934a, p. 735]. Another complication
comes from the realitythat a concept or principlecan be either partor
whole, again dependingon the task at hand. The concept of a transac-
tion in one case is a part of the whole, "going concern" [Commons
1934a,p. 97]. In anothercase, that same transaction,now transformed
by Commons into the underlyingstate of mind, willingness,may itself
be conceived as the whole comprised of its own parts [Commons
1934a,p. 738]. The generalcase, then, is that "Thepartsare themselves
wholes, requiringeach its own formula, and so on down to the parts
which we consider ultimate"[Commons 1934a, p. 736].
Commons also outlined his interpretationof the formula'splace in
the "logicalstructure"of economics [Commons 1934a,p. 734]. Its role
is to furnishan "elasticoutline . .. of the interdependenceof all factors
[conceptsand principles],which must then be investigated both sep-
arately as part-wholerelations in their own rights and as interdepen-
1082 Yngve Ramstad
dents"[Commons 1934a, p. 738]. A formula,furthermore,is constantly

subject to revision:
An hypothesisis a statementof what we now expect from our present
knowledgeof the factors[Conceptsand Principles]and our presentunder-
standingof theirinterrelations.... But when,on investigationand experi-
ment, we "try out" the hypothesis-our formula-and find that it does
not exactlyfit,then ... we changethe formulato get a betterfit.... [Thus]
we have a changinghypothesis,takingin new factorsor retiringolderones.
[Commons 1934a,p. 734]
Commons's perspectiveregardingthe natureof theory-both as ac-

tivity and as structure-is summarizedin Figure3. It should be noted
that "'facts"plus "[economic]theory"(as a productof thought)are what
we know about the economic realm,that is, it is the content of political
economy.
Fige 3 ScientificActivity
Theory
Social
Philosophies
/~~~~
//
v | Concepts_|
AnalysIs Insightj Formul
Percepts aII
Prneincpe
__________Priciples Selection of
I approp.action
I i ~~~~~~Facts
.? . ?I _ Investigator's I
Purpose
Legend: Mental Structural

Activity Component L J
The significance(in the presentcontext) of the precedingdiscussion
can now be summarized.What Commons has done in his attempt to
delineate the structureof economic theory is to lay out a framework
remarkablylike that summarizedby Figures 1 and 2, above. The emer-
gence in the researcher'smind of a percept is equivalent to Theme 1
being discovered in Part A of the total system portrayedin Figure la.

The emergencein the researcher'smind of a concept or principle is
equivalentto that same theme being identifiedin Parts B and C of the
systemas portrayedin Figurelb. Themes 2 and 3 also become concepts
or principles,as an awarenessof their existence in other parts of the
system enters the investigator'smind. Finally, the creation in the re-
searcher'smind of a formulais equivalent to the researcherspecifying
the linkages and interconnectionsamong themes throughwhich they
become a "whole"( P. 1073above). As confidencein the formulagrows,
it becomes equivalent to the "patternexplanation."At the same time,
the formula-the pattern model-is always in the process of further
refinementas new informationis incorporatedinto the pattern(cf. page
above). It is quiteapparentthat Commonshas articulatedexactly what
Diesing describedto be holistic theory.
On the Meaning of TheoreticalTerms

Commons was disposed to use the word "understanding"(versus
"prediction"or "explanation")when describingthe objective of scien-
tific activity. For example:
The subject-matterwith which the economist deals is not a mechanism
or organismwhose motions the investigatorcannot understand[versus
"classify,measure,or mechanize"]-it is human beings whose activities
he can fairlywell understandby puttinghimself "in their place"and thus
constructthe "reasons"in the sense of motives or purposes,or values, of
their activity. ... [Whatwe reallywant is] ... to understandthe reasons
why people act as they do under the particularcircumstancesselected.
[Commons 1934a,pp. 723, 725]
But what did Commons believe to be the appropriateway for the econ-
omist to communicate his understandingof an activity (or the out-
comes producedby the activity)?An example will be instructive.
In a chapter of Institutional Economics devoted to outlining his
"method"(Chap. 2), Commons introduceshis "smallestunit of insti-
tutional economics,"the transaction[Commons 1934a, p. 58; also cf.
p. 55]. Commons states that transactions"arethe alienationand acqui-
sition, betweenindividuals,of the rightsof futureownershipof physical
things.... [They]are transfersof theserights"[Commons 1934a, p. 58].
This approximatesa "definition"as the term is conceived by formal-
ists. But in Commons'sview, apparently,this does not convey informa-
tion sufficientfor the economist, conditioned as he is to the traditional
way of interpretingeconomic life as a series of exchanges, to under-
stand the meaning of a transaction[cf. Commons 1934a, pp. 56-57;
1084 YngveRamstad
60-61]. First of all, one must recognizethat transactionsare embodi-

ments of the three "social relations"of conflict (conflictinginterestsin
ownership rights), dependence, and order (security of expectations)
[Commons 1934a,pp. 58, 92]. One must also appreciatethat the trans-
action is a unit of activity having simultaneous meaning in law, eco-
nomics, and ethics (which are thereby interpretedas an inseparable
whole); for example, the legal relation of "no duty" (versus right, no
right, and duty), the economic status of "liberty"(versus the corre-
spondingsecurity,exposure,and conformity),and the workingrules of
"'may"(versuscan, cannot, and must/must not) are "correlated"in the
transaction[Commons 1934a, p. 59; cf. the chart on p. 78].
Then there is the part-wholeproblem. From one angle, transactions
are the parts of which the going concern is the whole; thus we must
grasp the nature of a going concern to understandthe meaning of a
transaction[Commons 1934a, p. 59; cf. pp. 58, 69]. From anotheran-
gle, a transactionis the whole (as an outcome) of which the parts (its
"causes")are the five principlesof scarcity(similar, but not identical,
to the conventionalidea of supplyand demand),efficiency(productiv-
ity), workingrules and custom (this is what links Commons to other
institutionalists), sovereignty ("the changing process of authorizing,
prohibitingand regulatingthe use of physical force in human affairs"
[Commons 1934a, p. 684]), and futurity (anticipation of the future);
thereforewe need to have a graspof the interrelatedoperationof these
principles to understandthe meaning of a transaction[cf. Commons
1934a,pp. 69-74 and 77-83 (WorkingRulesand Custom),74-77 (Scar-
city), and 83-84 (Futurity)].
But this is not the end! There are actuallythree quite differenttypes
of transactions:Bargaining,Managerial,and Rationing [p. 58]. In fact,
it should be kept in mind that Communism, Fascism, Nazism, and
Capitalism are, as alternative economic systems, nothing more than
"wholes"comprised of different mixtures of bargaining,managerial,
and rationingtransactions[cf. Commons 1934a, p. 93]. However, one
cannot "add up" the differenttypes of transactions;the five principles
interact differentlyas "parts"within the three types of transactions,
each exhibitingits own "legal,economic, and ethical correlation,"that
is. each requiringits own formula [Commons 1934a, pp. 59, 64]. We
thereforeneed to know somethingabout those formulasin orderto un-
derstandwhat a specific transactionmeans [cf. Commons 1934a, pp.
59-69]. Furthermore, behind value lies a transactional-or
negotiational-psychology (versus the earlier"individualisticpsychol-
ogy"), that must also be understood;"[A] scientific understandingof
of JohnR. Commons
negotiationalpsychology"thereforenecessitatesan understandingof its

principles so that they may be sifted and weighed [Commons 1934a,
pp. 90-92]. The investigator,if he is to understanda transaction,must
pinpoint the personalitiesof the participantsin a transaction,as well
as their relative power, the circumstancesin which each personalityis
placed-and so on. What is requiredto understanda transaction,in
other words, is an understandingof "willingness"[Commons 1934a,p.
94]. In addition, the principlesof performance,avoidance and forbear-
ance are crucialto the meaningof a bargainingtransaction[Commons
1934a, pp. 87-89].
On a somewhatdifferenttack, Commons indicatesthat the meaning
of a transactionalso cannot be fully understoodunless it is graspedthat
the principleof an Institution-"collective action controlling,liberat-
ing, and expandingindividualaction"-is reflectedin every transaction
[Commons 1934a,pp. 70, 92]. Concomitantly,transactions,and hence
institutions,foreshadow("cause")Value [Commons 1934a,pp. 86-87].
Therefore,if things are viewed from the social action perspective(re-
flectinga desire on the part of the investigatorto see values-and thus
transactions-altered), the strategictransactionmust be distinguished
from the routine;but of course, which of the observed transactionsis
the strategicone depends in part on the objective(s)of the investigator
[cf. Commons 1934a, pp. 89-90]. And thereis much more.
As Commons moves throughthis discussion, each time a new con-
siderationis raised,the transactionis rediscussedwith the new shading
added to its meaning. By the time he has discussed everything that
must be kept in mind if one is to understandwhat a concretetransac-
tion is, that is, to discernits meaning,Commons has provideda synop-
sis of his entireconceptualframework.In otherwords,he has described
one part of his analyticalstructureby attemptingto explain how it is
interconnectedwith other concepts into a whole (his conceptualframe-
work).It must be emphasizedthat this approachhas not been acciden-
tal: "Evenfor strictlylogical purposesa term cannot be definedexcept
with referenceto the context of other terms with which it is associated.
Its meaningdependsupon the meaningof the othertermsdefinedalong
with it. It shades off into differentmeaningsin orderto fit itself to their
meanings.... Then it operateswith differentdegreesof power accord-
ing to its part in the total of complementaryqualities and faculties."
[Commons 1924,p. 347] Accordingto Webster'sCollegiateDictionary,
a definitionis "an explanationof the meaningor meaningsof a word."
One can perhaps legitimately question whether the content of the
thirty-eightpages Commons has taken to outline his understandingof
1086 YngveRamstad
the word "transaction"[Commons 1934a,pp. 55-93] constitutesa true

definition. There is no doubt, however, that if it does, it is a "holistic
definition"(cf. pp. 1073-74 above).
The Evolutionof Commons'sTheory

It should be apparentby now that Commons can appropriatelybe
classifieda holist. It is beyond the scope of this articleto show in detail
the evolution of his patternmodel as articulatedin the threetheoretical
works in which he "summarized"his point of view. A brief overview
would appear appropriate, however, since it will provide further
confirmationof his holistic orientation.It will also be helpfulto briefly
discuss the holistic perspective underlyingthe organizationof Com-
mons's three theoreticalworks.
Commons first hit upon "collective action" as his central concern
when he and his brother,as collegestudents,workedin competingprint
shops. Commons'sshop was unionized;that of his brotherwas not. By
comparingtheir situations, both in earnings and working conditions
(note that he is alreadyrelyingon the comparativemethod), Commons
learnedfirst-handthe meaning of "collectiveaction in control of indi-
vidual action" (he did not yet call this an "institution"),and how the
rightsand liberties of typesetterswere createdby collective action [cf.
Commons 1934b,pp. 17-20; Commons 1950, pp. 25-28]. This was the
original theme (p.1071above) produced by Commons's active mind,
one that he laterextended"asa partof economic science,to all corpora-
tions, trade associations, banks, and every occupation" [Commons
1934b, p. 19]127
Commons's first significant publication was The Distribution of
Wealth,an attemptto graspthe "practicaloutcomes"of the theoriesof
distributiondeveloped by leading economists-that is, marginalpro-
ductivity analysis [Commons 1893]. Commons was always suspicious
of what he termed the "single-trackmind" [1934b, p. 28] and conse-
quently habitually"looked for the omitted factors, or the ones taken
for grantedand thereforeomitted" [Commons 1934b, p. 28]. Thus, af-
ter firstoutliningthe (singletrack)marginalproductivitytheory, Com-
mons awkwardly spelled out what he considered to be "omitted
factors,"with special emphasis placed on the "rights"createdby con-
tract or custom [cf. Commons 1893, Chap. 2]. "Yearslater, in Institu-
tional Economics,"the omitted "naturalorder"(created"rights")had
become the Principleof Custom [Commons 1934b, p. 49]. In his effort
in this earlyworkto specifythe omitted factors-already by employing
analysis (classificationof similarities and differences)-and to show
how they were linked to the included factors (marginalproductivity
of JohnR. Commons
theory),Commons developed an extensive typology of the factorsthat

must be kept in mind in constructinga formulacapableof yielding an
explanation of distributional outcomes (see Commons [1893], chart
precedingp. 1). In the concluding third of the book, Commons used
that frameworkto develop a crude formula(patternmodel) capableof
approximatelyexplainingactual distributionaloutcomes.
The patternmodel provided in The Distributionof Wealthis not, to
be sure, the one Commons ultimately incorporatedinto his "institu-
tional economics."Indeed,the constituentsof his theoryemergedonly
graduallyover the course of his career.Firstcame the principleof sov-
ereignty,as developed in a seven-partessay publishedduring 1899 and
1900, "A SociologicalView of Sovereignty."28 Significantly,Commons
later concludedthat "'A SociologicalView of Sovereignty'. . . became
for me eventuallyInstitutionalEconomics"[Commons1934b,p. 44].29
In 1901came the WorkingRule:"[Iread] ... Webb's[sic] new book on
Industrial Democracy with its remarkableanalysis of the 'common
rule', which afterwardsI generalizedas the 'workingrule' of all collec-
tive action, includingthe state" [Commons 1934b, p. 71].
By 1907, Commons had concluded that the concept of an exchange
of objectsand activities should be replacedby a "unitof analysis"cap-
turingthe more fundamentalexchangeof the rightsof ownershipto the
object or activity [Commons 1934b, p. 27]. This was not an easy task
for Commons:"it took me more than twenty-fiveyears ... to workout
persistently,by numerous mistakes, the transitionto the concept of a
'transaction"'[Commons 1934b, p. 27]. Whenfinally"workedout,"the
transactionhad become the fundamentalunit of activity underlyinga
full-blownTheory of ReasonableValue.
The path to this theory was not a direct one. As he was developing
his explanatoryprinciples (pattern model) during the 1890-1909 pe-
riod, Commons also articulated,in a series of remarkableessays, his
"social philosophy"-one he at that time summed up with the term
"utilitarianidealism" [Commons 1913, Chap. 1].30 At this early stage
of his career,Commons also settled upon three principlesthat would
guide his researchactivities: one regardingthe type of knowledge he
sought;the two others, the method by which he would seek it. With
respect to the first principle,Commons discerned three distinct types
of research,each motivated by a differentpurpose.The firsttype, "aca-
demic research,"was assertedby Commons to be directed to the end
of "truthfor its own sake"[Commons 1913, p. 7]. The second type was
"constructiveresearch,"that is, the pursuitof "truthfor the sake of util-
ity" [Commons 1913, p. 7]. The third type, "journalisticresearch,"had
as its objective "to awaken the public"by "exposing[a] disease" and
thereby showing "that something must be done" [Commons 1913, p.
1088 YngveRamstad
8]. Commons's overridingmotivation throughouthis academiccareer

was to "save Capitalism by making it good", by which he meant to
bring about outcomes more favorable to the laboring masses [Com-
mons 1934b,p. 143;cf. Commons 1894, Chaps.1 & 2; Commons 1913,
Chap. 6]. Regulationof economic life was seen by Commons to be the
mechanism for bringinginto effect that "good"type of capitalism [cf.
Commons 1934b,p. 118].Constructiveresearch,accordingly,is inves-
tigation,first,that facilitatesthe draftingof legislationthat promises to
actually advance the public purpose it was enacted to promote, and,
second, that facilitatesthe administrationof that legislation[Commons
1913,pp. 7, 10;also cf Commons 1950, pp. 124-25]. Commons clearly
intended that his researchbe of the "constructive"type.
The second and third considerations underlying Commons's re-
searchactivity relatedto the method by which one can develop "con-
structive"knowledge.It was Commons'sview that a theory capableof
providingguidancefor administrationmust be structuredso as to fa-
cilitate the comparativemethod of reasoning(cf. p. 1071 ), that is, one
that allows for the isolation of strategicsimilaritiesand differencesbe-
tween the specificproblem or case awaitingresolutionand others with
which an agencyhas had to grapple[Commons 1950, p. 124]. Further-
more, an adequatetheorymust inducethe administratorto considerall
the factors of the part-wholerelationshipsthat determine the content
of a specific transaction [Commons 1950, pp. 136-38; also cf. Com-
mons 1919, p. 63].31In other words, constructive researchhas as its
ultimate locus of validity its utility in determiningwhat to do in a spe-
cific case or context32( P.1075above). Commons believed it is only
throughthe development of a theory based on the comparisonof indi-
vidual cases that this type of "practitioner'sknowledge"can be ac-
quired. In studying individual cases, however, Commons believed it
mandatory that the investigator "look and see" for himself, an ap-
proach first advocated by his teacher and mentor, Richard T. Ely [cf.
Ely 1938, pp. 154, 161].33
Attemptingto proceedin compliancewith these precepts,Commons
studied individual cases with a voracious appetite, first in the area of
public utilities and then in labor. For him, this was definitely not a
short-cutto knowledge.Commons reportedin his autobiographythat
whereas "The genius can see throughto the bottom of things without
digging,... I must dig and re-dig"[Commons 1934b,p. 3]. His volumi-
nous publicationsprior to 1924 attest to the magnitudeof his effortto
"dig and re-dig."To supplement his fieldwork,Commons structured
his classes in such a fashion that they were little more than an attempt
to sift throughthe implicationsof his latest findingsand to incorporate
them into an ever-changingset of theories(principlesand formulae)so

as to give them greaterand greaterempirical content [cf. Commons
1934b,pp. 47-48].34Moreover,Commons'sstudentswere made active
partnersin this process,being instructedto "testtheir own and all eco-
nomic theoriesby experience"beforethey graduated-and upon doing
so, said Commons, "Theycame back and correctedmy errors"[Com-
mons 1934b,p. 4].35 In addition to being tested in the classroom,Com-
mons's ideas were also subjected to the Pragmatist'scriterion-did
they work when incorporatedinto legislation or regulatorydecisions?
Whenever his ideas were shown, throughpracticalapplication, to be
lacking-that is, to be inapplicableto actualproblemsor to bringabout
unanticipatedconsequences,as invariablyhappened,he at once set to
work to modify them.36
On the Structureof Commons'sTheoreticalTrilogy
Given that his overridingpurpose was to "make capitalism good"
throughthe exerciseof explicit social controlover the wagebargain(la-
bor contract)and the pricing of essential commodities and services,
what Commons sought throughouthis thirtyyears of "constructivere-
search"was knowledgethat would permit him to understandhow the
complex of workingrules that define "propertyrights"could be altered
so as to bringinto effect"reasonable"-that is, fairandjust-economic
outcomes.3"Specifically,he sought a theory that would provide him
with the insight needed in actual situations to identify legislative lan-
guageand administrativestructurescapableof actuallybringingabout
such outcomes.38
Legal Foundationsof Capitalismis Commons's first attempt to ar-
ticulate the theory he had developed in the pursuitof that end. In this
remarkablebook, Commons first attempts to define the concepts-
foremostamongthem are property,transactions,and going concerns
and principlesthat constitute his theory [Commons 1924, chaps. 1-5].
Developing and then using typology after typology to facilitatea com-
parisonof similaritiesand differencesas they are found in concreteap-
plications to real cases (analysis),while simultaneouslyproceedingin
genetic fashion so as to convey as full an understandingas possible of
theirevolving meaning(genesis)[cf. Commons 1924, p. vii], Commons
attemptsto transmita part-wholeunderstandingof all the constituents
of his theory, each conceived as both its own whole and as an inter-
related part of the larger theory.39Specific examples illustrate each
point, thus ensuringthat the meaning of all ideas is related to actual
cases. Commons next shows how the various elements of his theory
(patternmodel) arereflectedin the whole that is each transaction[Com-
1090 YngveRamstad
mons 1924, chaps. 6-8]. Here he also demonstrates that the ever-
changing parts incorporatedinto his theory (pattern model) can be
convertedinto verbalformulaecapableof explaining-that is, yielding
an understandingof-the ever-changingcontent of actual transactions
as reflectedin the typical rent bargain,price bargain,and wage bargain
(each conceived to be a related, yet unique, type of whole). As in the
earlierchapters,specific cases, the true locus of validity, illustrateall
points. Having thus shown that his theory is valid, Commons con-
cludes the book by arguingthat his "Theoryof ReasonableValue,"as
he labeledit, providesthe insightrequiredto ensureprogress,by means
of strategiclegislative alterationof the workingrules controllingprop-
erty, towardsa world characterizedby "reasonable"values [Commons
1924, p. viii].40 Legal Foundations was consequently a personal tri-
umph for Commons. Without yet having a name for it, reasonable
value was the normative end that he had embracedso many years ear-
lier duringhis stint as a union typesetter.Legal Foundationsannounced
to the world that he had developed at last, through years of "con-
structive research,"the scientific foundation-or in his terminology,
the "evolutionary and behavioristic, or rather volitional, theory of
value"-required to ensure its realization[Commons 1924, p. vii].
Surprisingly,Legal Foundations is devoid of examples illustrating
how Commons appliedthe Theoryof ReasonableValue to actualprob-
lems.41Also missingis any substantiveattemptto explainhow that the-
ory was related to or affected the more familiar economic theories.
Commons explained that the omitted materialwas to be incorporated
into "another volume in contemplation" [Commons 1924, p. vii].
Nonetheless, these omissions only exacerbated the difficulties that
economists experiencedin attemptingto graspthe essential logic, not
to mention the significance,of Commons's highly originalconceptual-
ization of economic life.42
Commons soon came to recognizethat he had failed to successfully
communicatethe "whole"that was his theory, a realitythat he subse-
quently acknowledged:"Readers and students of... Legal Founda-
tions ... could not understandmy theories nor what I was driving at"
[Commons 1934a, p. 1]. So, Institutional Economics, published ten
years later, contains a full restatementof Commons's theory (pattern
model), although by this time the model had been "corrected"to in-
clude two additionalprinciples("efficiency"and "futurity").However,
remainingtrue to the agendahe had establisheda decade earlier,Com-
mons's main objectivein this volume was to renderthe theoryintelligi-
ble to economists by showing how it was related to economic theory
as it existed at that time. Thus he begins the prefaceby proclaiming:
of JohnR. Commons
This book is modeledupontextbooksin the NaturalSciences.Eachidea

hereincorporatedis tracedbackto its origin,and then the successivemod-
ificationsof that idea are developedand the earlierdouble or triplemean-
ingsof the idea [eitherrelativeto differentconsiderationsor as interpreted
from differentvantagepoints] are separated,until each, as a single mean-
ing, is combined with the other in what I conceive to be the Science of
Political Economy, as it is developing since [World War I] [Commons
1934a, p. v].
Practicallyindecipherableto the unpreparedreader,this passage can

now be seen as Commons'sdirectway of statinghe is going to use gen-
esis and analysis to synthesize the "magnificentinsights" of earlier
economists- all "parts"- with his own insight of "collective action
in control of individual action"-another "part"-into the "whole"
that is Political Economy [cf. Commons 1934a, pp. 7-8]. The task, in
other words, "as I shall endeavor to show throughout,[is to give] col-
lective action its due place in economic theorizing.... What I have
tried to do is to workout a system of thoughtthat shall give due weight
to all economic theories, modified by my own experience"[Commons
1934a, p. 8]. Only in this way could Commons, as a holist, achieve the
aim of this work, as expressedin its full title, InstitutionalEconomics:
Its Place in Political Economy.
The structureof the maze that is InstitutionalEconomics becomes
comprehensibleif one keeps in mind Commons'smethodologicalpre-
suppositions and his objectives. Of particularsignificanceis the ex-
tremely ambitious nature of his aims. One task is to impart his
(part-whole)understandingof the theoreticalconstructs(conceptsand
principles)that he employs, each conceived of as its own whole (cf. p.
1081). A second task is to impart his (part-whole)understandingof
the interconnectionsof those constructsas they unite into the whole of
the theory that has by now been relabeled"InstitutionalEconomics."
But this is not all. As a third task, Commons also seeks to impart his
(part-whole)understandingof how that theory-now itself a part-
interconnectswith the other theories to form the even greaterwhole
that is political economy. In other words, each of Commons's con-
structshas a (part-whole)meaningdependentupon which whole is the
frame of reference. Complicating the task of communicating these
(part-whole)meaningsis Commons'sevident belief that no one of them
can be fully comprehended without grasping their interconnections
with the others.Given that he soughtto impartas full an understanding
of his theory as possible, he consequentlyfound it necessaryto pursue
all three of his aims simultaneously.
InstitutionalEconomics is organizedto impart this type of holistic
1092 YngveRamstad
understanding.Commons begins by providingan overview of his the-

ory in consecutive chapterstitled "The Point of View" and "Method."
Although these chaptersrun to a total exceeding one hundred pages,
there is no real attempt made here to communicatea complete under-
standingof either parts or whole. Rather,the concepts and principles
centralto Commons's theory are simply introducedand (holistically)
defined-yet even here, in holistic fashion, the discussion is replete
with referencesto the ideas of other economists. Following this intro-
duction, Commons provides more than six hundred pages of discus-
sion devoted to the ideas of earlier "Pioneersof New Insight, each of
[whom] has contributed something [to the concepts and principles
Commonsemploys]which, in the wind-up[theformula],must be given
due weight along with the conflictingor contradictoryopinions of all
the others"[Commons 1934a,p. 121].As he proceeds,Commons dem-
onstrates that many of his ideas were implicitly contained in earlier
theories and that others were "omitted factors."Throughout,Com-
mons uses his own concepts as the referencepoint, and by the classifi-
cation and comparison of similarities and differences (analysis),
attemptsto develop a deeperunderstanding,both of his own constructs
(each as its own whole) and of the extent to which precedingtheories
are and are not reflectedin his theory (the intermediatewhole) and in
his conceptionof political economy (the largestwhole). As he proceeds
to review the theoriesof one economist (broadlydefined)afteranother,
Commons shows how precedinginsights had to be modified and ulti-
mately transformedinto his own constructs,due in part to their own
incompletenessand in part to the evolving landscapewith which eco-
nomic theory must deal.43Thereby,throughgenesis, Commons gradu-
ally develops a deepeningunderstandingof his own constructs,both as
evolving separatewholes and as parts of the successivelylargerevolv-
ing wholes. Significantly,nowheredoes Commons attempt to describe
the whole. Presumablyit is only through an ever-deepeninggrasp of
the parts and their interconnectionsthat comprehensionof the whole
as a wholeis to be slowly obtained by the reader.
In a section titled "Accidentsand Unemployment-Insurance and
Prevention,"Commons provides examples that demonstratehow his
theory served to guide him in draftingactual legislation.Again, it is in
the applicationto concretecases that the validity of the theory is dem-
onstratedand its pragmaticmeaning revealed. In the final chapter,ti-
tled "Communism, Fascism, Capitalism," Commons attempts to
survey then-contemporarydevelopments from the vantage point pro-
vided by his part-wholeunderstandingof political economy. In this
chapter,he exposes to the reader'sview, once more, the social philos-

ophy underlyinghis own scientificactivity.
Even sympatheticreviewerslike A. B. Wolfe conceded that Institu-
tional Economics did not effectively lay bare the structure of
Commons's"systemof pragmaticphilosophy"[Wolfe 1936, p. 206]. A
third and finalattemptwas, therefore,made by Commons to articulate
the essentiallogic of his conceptualsystem as it bearson public policy,
this time, accordingto KennethH. Parsons,in "simpleterms"[Parsons
1950, p. v]. The Economics of CollectiveAction, published posthu-
mously, is the productof that effort.In the main, no attempt is made
in this workto convey the whole that is political economy. Nor is there
as complete an accountof his own system, in part-wholeterms, as that
forwardedin InstitutionalEconomics.Instead,Commons merelysum-
marizeshis framework(Parts 1 and 2), as well as his method of inves-
tigationand the principleshe believes controleffectiveimplementation
of his concept of Reasonable Value (Part 3). Then, throughextended
actual examples, he shows how his ideas are linked to the structureof
workingrules actuallyimposed on going concernsas a resultof federal
legislation and regulatoryaction-again, the specific case (a law or
agency)constitutesthe ultimatetest of the theory'svalidity.44TheEco-
nomics of CollectiveAction, in effect, is the practitioner'sversion of
Commons's theory, whereasLegal Foundationsand InstitutionalEco-
nomics were contributionsto economic theory and hence directed to
scholars and theorists. For the economist, the latter work represents
the best expressionof Commons's frameworkas a whole.
Summary
Over the many precedingpages it has been shown:that Commons's
conception of realitywas holist; that his beliefs regardingscientificex-
planationwere holist; that the procedureshe used to develop and test
his theories were holist; that the concepts he developed to communi-
cate his understandingof scientific method can be easily translatedso
as to correspondwith the languageused by Paul Diesing to describe
the holist's precepts;and that if one keeps in mind those holist presup-
positions, it is apparentthat Commons's three attempts to outline his
theory were not "organizedby means of the random walk"but rather
were organizedin accordancewith those same holist presuppositions.
In other words, it has been shown beyond any reasonabledoubt that if
Diesing has accurately described the general contours of the holist
standpoint,Commons must be classifiedas a holist.
1094 YngveRamstad
Concluding
Observations
John R. Commons was that rare scholar who somehow managesto
reinterpretfamiliarevents in such fashion that they take on an entirely
new meaning.Commons's own contributionwas to reveal how collec-
tivecontrolof individualtransactionsis the "generaland dominant fea-
ture of [economic] life," an insight that led him to advocate explicit
social control over the process of institutionaladjustment[Commons
1950, p. 21]. The Theory of ReasonableValue was the instrumenthe
craftedto guide the search for progressiveadjustmentsto existing in-
stitutionalarrangements.
Commons's ideas are of fundamentalimport to the economist con-
cernedwith the problemof institutingprogressiveinstitutionalchange,
and they deserve to be taken seriously.But, in the main, they have not
been.45It is the premise underlyingthis article that Commons's ideas
have been neglected in part because they have not been well under-
stood. Indeed, in the first paragraphof this article it was assertedthat
economists generallyhave found Commons's writings to be "practi-
cally unfathomable."While no attempt was made to establishthis as a
fact, there surely can be little question that most professionalecono-
mists have found it virtually impossible to isolate and articulatethe
structureof Commons's framework.The foregoing analysis suggests
that this state of affairscan be tracedin some measureto Commons's
consistent adherenceto holist precepts.
For example, Commons's writings are replete with two tendencies
for which he has been roundly criticized-repetition and overclassifi-
cation. Yet both are necessarycharacteristicsof holistic explanation.
Regardingthe former, Commons offeredthe followingjustificationin
the prefaceto InstitutionalEconomics:
I confessthat this book is burdenedby much repetition.But this I could
not help, partlyon account of unfamiliarityof studentsand readerswith
the novelty of the subjectand partly because, in a theory that gives due
weightto the many sourcesof multiplecausation,a singleconceptor prin-
ciple recursat every point whereone or the othermany changeablecauses
infringes.If a precedingcause ... is omitted or forgottenat this different
angle of vision of the same thing ... I am compelled to repeatit. [Com-
mons 1934a,pp. 8-9]
In short, Commons found holistic definitions renderedin part-whole

terms to be indispensablefor true understanding.Yet Commons rou-
tinely created new terms or appropriatedunfamiliarones from other
disciplines, and, without precise definitions of these terms, the unpre-
paredreaderno doubt feels both restive and confused.
of JohnR. Commons
Commons's undeniablepenchant for classificationand (sometimes

multiple) reclassificationwas also part of his "scientificmethod." As
noted earlier,it is only throughthe processof systematicallyclassifying
similaritiesand differencesthat the holist is able to constructthe typol-
ogies so fundamentalto his partitioningof the world. Thus, the more
complex the whole, the more "types"that one must incorporateinto a
patternexplanationof any one of its parts.Moreover,the key to effec-
tive action is to "discover the similarities [and] recognize real differ-
ences" [Commons 1950, p. 121]. This is the comparativecase method
of reasoningthat is so fundamentalto recognizingthe extent to which
previous actions (cases) serve as models for the presentproblem. And
as noted, this is the method Commons deemed fundamentalto the pro-
duction of knowledgethat is applicableto the individualcase [cf. Com-
mons 1950, p. 121-24]. Since Commons dealt with extremelycomplex
problems, involving at the same time legal, ethical, and economic di-
mensions, it is not surprisingthat he developed an extensive set of ty-
pologies to guide him in his application of the comparative case
method. It is evident, therefore,that Commons'sextensive relianceon
classificationschemes, while admittedly overdone, is but the system-
atic application of holistic procedures. But the unpreparedreader,
searchingin vain for explicit structuralrelationships,is left perplexed
by the stream of unfamiliartypologies that Commons forwards,each
with its terms only partiallydefined-again in accordancewith holistic
procedure-when first presented.
Serious as the roadblocks presented by these deficiencies may be,
there is yet a greatercomplication facing the student of Commons's
thought.As indicated earlier,Commons was cognizantof the fact that
readershad difficultyunderstandinghis theories, leading him at one
point to wonder whether"my theories were so personalto myself that
perhapsnobody could understandthem" [Commons 1934a,p. 1]. This
was not idle musing. To truly understandthe meaning in part-whole
terms of any component of Commons's thought, one mustfirst grasp
his entireframework.How else can one grasp his part-wholerelation-
ships? This reality, however, complicates enormously the task of un-
derstanding Commons, for his "whole" was exceptionally
comprehensive.Througha lifetime of study, Commons had managed,
by the time he completedInstitutionalEconomicsat seventy-twoyears
of age, to acquire a truly staggeringknowledgeof intellectualhistory,
legalhistory,and economic history(includingan exceptionallykeenap-
preciationof U.S. economic history), all of which he synthesizedinto
his conception of "politicaleconomy"-and, moreover, which he felt
compelledto communicatein part-wholeterms.46Given the ambitious
1096 YngveRamstad
task Commons set for himself, the comprehensivenessof the "whole"

he sought to delineate and the unfamiliarlanguagehe used to clarify
its "parts,"the readerof InstitutionalEconomics is faced with a truly
formidablechallenge.
In fact, that challengeis in many ways similar to the undertakingof
an anthropologistwho is set down in the midst of a primitive social
groupand instructedto discover the meaning of activities and objects
as understoodby the members of this alien culture themselves. Only
slowly, as the participant-observergraduallybecomes familiarwith the
activities of the new cultureand the contextualnuancesof the language
in which its members express their thoughts, do accurate meanings,
and therebygenuineunderstanding,emerge.In like fashion,one simply
cannotgraspwhat Commons is drivingat on an initial reading.Indeed,
even approximatelyto grasp fully his frameworkin part-wholeterms,
as Commons attempted to articulateit in InstitutionalEconomics, it
may be necessary first to read and reread all of Commons's major
works.In short, Commons is not a "quickread";one must persistlong
enough to acquirea sense of the whole beforethe partsthemselves can
be understood.
These complications-all traceableto the holistic method itself-do
much to explain why InstitutionalEconomics, in particular,and the
other theoreticalworks, to a lesser degree, are so difficultto compre-
hend upon a first reading.All too often, though understandably,the
reactionis to throw up one's hands in frustration,declareCommons's
thoughtsto be something approximating"muddled,"and move on to
another,and perhapsmore lucid, writer.47
In spite of these obstacles to rapid comprehension,one nonetheless
can anticipatethat occasionalscholarswill continue to take up the task
of rearrangingthe various elements of Commons's thought into "the
clearly integratedsystem of pragmaticsocial philosophy which, in all
but form, it actually js."48 It is a well-establishedtruism that a writer
must be interpretedon his own groundif his meaning is to be under-
stood. The foregoinganalysis shows clearlythat, over the course of his
long career, Commons developed and communicated his theories in
strictadherenceto the requirementsof the holistic method.49It is to be
hoped, therefore,that explicit consideration of his holist standpoint
will permit future scholars to follow more easily the twists and turns
of Commons's multi-level, part-whole mode of explanation, and
therebyto renderat last this neglectedintellectualgiant'scomplex sys-
tem intelligible-as an interconnectedwhole-to all.
Beyond any light it may shed on Commons's writings,the analysis
additionallygives rise to some importantquestions for all who seek to
of JohnR. Commons
develop a more humanisticand comprehensivetype of economic the-

ory to structurethe ongoingprocessof implementing,on a case-by-case
basis, progressiveinstitutionaladjustment-a searchthat appearsto be
the motivation for furtherdevelopmentof the domain describedby the
term "neoinstitutionaleconomics."50A major thrust of this efforthas
been to move towardagreementregardingthe natureof the evaluative
principlethat is to be used to distinguish"better"from "worse"states
of the world. As Commons emphasized, however, an economic
theory-and thus neoinstitutionaltheory-will be meaningful(instru-
mental) only if it permits one to act correctly,that is, to show how in-
stitutions can be altered in a specific context so as to actually effect the
intended consequences.
To effectsuch changes,however, one mustfirst possess a mental im-
age of the structurethat comprises a given context. Recent contribu-
tions by PaulD. Bushand F. GregoryHaydencan be cited as two highly
creative and promising efforts to conceptualize that structure[Bush
1983;Hayden 1982, 1983].It should, therefore,not be overlookedthat
Bush's characterizationof reality is formalist in nature,whereasHay-
den's is holist. In other words, the ontological question regardingthe
formal versus the holistic structureof reality must be addressedif the
effort to craft a neoinstitutionaltheory or perspectiveis to move for-
ward. Should the holist conception be deemed more appropriate,sev-
eral questions must next be addressed.5'For example: How can the
conceptual components of Hayden's "social fabric matrix"be trans-
formed into the most appropriateset of concrete components?How
are the componentsto be defined?How is a "correct"understandingof
the interconnectionsbetweenthose componentsto be developed?How
can such an understandingbe most effectivelycommunicated?How is
the evolvingnatureof their relationshipsto be accomodatedand com-
municated?And so on. As the effort moves forwardto transformthe
promisingidea of a social fabricmatrixinto an effectivesharedinstru-
ment for the guidanceand implementationof institutionaladjustment,
the vexing natureof these problems will quickly become apparent.
Thus it is extremelyimportantto recognizethat these were the very
methodologicalproblems with which Commons grappled.As his ca-
reer progressed,Commons slowly constructedin his mind the equiva-
lent of Hayden's social fabric matrix. At the very least, Commons's
theoreticalwritingsprovide us with an exemplarof the difficultiesthat
must be surmountedif the effortto constructa holistic neoinstitutional
theory, and then to successfullycommunicate it to others, is to bear
fruit. For this reason alone, John R. Commons's lengthy, and ulti-
matelyunsuccessful,struggleto articulatehis holistic theoryof Reason-
1098 Yngve Ramstad
able Value would appearto be of particularrelevancefor all who seek

to contributeto that effort.
Notes
1. For example, David Secklerhas observed that "The chapterson 'institu-

tionalism' are uniformlythe weakest chapterin any standardtext in the
history of economic thought"[Seckler1975, p. 4].
2. Secklerhas been quite explicit about this aspect of Commons's work, as-
sertinghis "resentmentover havingbeen forcedto read [in the preparation
of his own manuscript]... severalthousandpagesof Commons'swritings
(which seems to be organizedby means of the random walk) in order to
obtain what would constitutea good small book"[Seckler1975, p. 154, n.
22]. Similarly,accordingto Kenneth Boulding,"[Commons's]theoretical
writing is obscure and cumbersome"[Boulding 1957, p. 7]. Or, as Neil
Chamberlainhas put it, "Therehave been few economistswho have been
so given to classification,subclassification,reclassification,and overclassi-
fication as Commons" [Chamberlain1964, p. 80]. Benjamin Ward was
surelythinkingof Commons when he opined:"The institutionalistsseem
to have sufferedfrom a methodologicalconfusion regardingthe natureof
theory. They thought a description was a theory; or alternatively,they
thoughtthata good theoryshouldexplaineverything"[Ward1966,p. 187].
To provide another example: "Theory was never Commons's metier.
When he calls his 'theories' are almost exclusively poorly wroughtand
somewhatlackadaisicalclassificationsand sub-classificationsof phenom-
ena as they appearto him from the dimly held and mainly intuitive con-
ception impossible to define"[Seckler1975, p. 124].
3. Harterprovides the most comprehensivetreatmentof Commons and is
an indispensablesource for anyone seekingto comprehendthe enormity
of Commons'sendeavors[Harter1962].Gruchyis more limited in scope
but also providesa sweepingoverviewof Commons'sideas [Gruchy1947].
Neither of these authors, however, shows how Commons's conceptions
combine into an analyticalsystem, nor do they explain clearlywhy Com-
mons presentedhis theories in the seeminglyclumsy mannerthat he did.
(For a partial exception to this generalization, see Harter [1962, pp.
210-12]). For shorter,yet insightfuldiscussionsof Commons'sframework,
or a specificaspectthereof,see, amongothers,Chamberlain[1964],Chasse
[1985], Dugger[1979], Gonce [1976], Parsons[1950], Reed [1986], Ruth-
erford [1983] and Wolfe [1936]. These contributionsto the literatureon
Commons similarlyfail to shed much light on the question of whyCom-
mons was unable to communicatethe essential logic of his theories in a
more effectivemanner.
4. See Polanyi [1958] for the argumentthat such is necessarilythe procedure
in all sciences.
5. It is not being assertedthat all but institutionalistssharea single method-
ological perspective. Certainlythe modern Austrian economists should
also be classifiedas "outsidethe fold." Perhapsalso the Neo-marxists.It
is nonetheless true that the overwhelmingmajorityof economists today
acceptthe formaliststandpoint.On this point, see Ward[1972, p. 43].
6. See, for example, Caldwell[1982, pp. 200-205].

7. Commons'sfamiliaritywith, and high regardfor, the approachof the Ger-
man HistoricalSchool is discussedby Harter[1962, pp. 32, 177].The rela-
tionship between Commons's approachand Pragmatismis outlined by
Gruchy[1947, pp. 155ff.].
8. Commons's publishedwritingsare listed in their entirety in an appendix
to his Economicsof CollectiveAction [1950].
9. See Commons'sautobiography,Myself,for an overview of Commons'sin-
volvement in the world of public affairs[Commons 1934b]. Harteralso
details the particularsof Commons's participationin the formulationof
public policy [Harter1962, Part 2].
10. Commons'savowed aim was to "roundout"existingeconomic theory,not
to create a differentparadigmdivorced from orthodoxy. See Commons
[1934a, p. 5; 1950, p. 117]. See Ramstad for the argumentthat, whatever
Commons'sintent may have been, he in fact createda frameworkthat is
incompatiblewith the vision underlyingorthodox (neoclassical)econom-
ics [Ramstad 1986].
11. Wilburand Harrisonsubtitled their article "PatternModel, Storytelling,
and Holism."Diesing, however,arguesthat the "patternmodel,"a concept
originatedby AbrahamKaplan, ratherthan an addition to holism (thus
"6and") is instead a characteristicfeature of holism [Diesing 1971, p. 158;
Kaplan 1964].
12. It should be noted that not all institutionalistshave embracedholism as a
definingcharacteristicof institutionaleconomics.Two recentmajorworks
by prominentinstitutionalists,MarcR. Tool and WendellGordon, fail to
mention the term [Tool 1979; Gordon 1980]. See Bush [1983] for a pre-
sentationof institutionaltheory along formalistlines.
13. On this point, see Dray [1967] and Agassi [1975].
14. Cf. Wilberand Harrison[1978].
15. The presentanalysisis taken in its entiretyfrom Diesing'sPatternsof Dis-
coveryin the Social Sciences[Diesing 1971].
16. Holists apparentlyhave varyingconcepts of how "whole"the system has
to be [Diesing 1971, p. 141].
17. A real type is a generalizationthat has emerged from an observation of
actual behavior. The concept of economic man, in contrast,is not based
on generalizationsfrom observedbehavior.For an extendeddiscussionof
the differencebetweenreal types and "idealtypes"such as economic man,
see Diesing [1971, pp. 197-99].
18. Blaug[1980]labelsthis approach"verificationism."It shouldbe noted that
Blaug chargesthat not only institutionalists,but also the overwhelming
majority of neoclassical economists, actually practice verificationism
ratherthanthe espouseddoctrineof"falsificationism"[Blaug1980,p. 256].
19. Veblen [1899; 1904, 1918],Ayres [1962], Brady[1943], Kerret. al. [1960],
Myrdal[1968],and perhapsGalbraith[1973]should be included,perhaps,
amongthe institutionalistswho have triedtheirhandat "generaltheory."
20. This is quite aside from any judgment renderedas to the scientific ade-
quacy of the holistic approachonce it is understood.
21. It should be noted that Veblen'swork is repletewith such "definitions."
22. Thus AlbertRees has written:"Thepurposeof science is to achieve under-
standingeitherfor its own sake ... or as a basis for predictionand control.
Althoughboth elementsare presentin economics, the latteris particularly
1100 Yngve Ramstad
evident. The predictionssought generallyreferto the aggregatebehavior

of sizeablegroupsof peopleand not to the behaviorof individuals... .The
focus on aggregatesmakes it possible to summarizethe accumulationof
economic knowledgein statementsof observedregularities,or 'laws,'that
do not apply to individuals [or, presumably,cases] considered singly"
[Rees 1968, p. 473].
23. Dugger[1979] provides an excellent summaryof Commons's reformori-
entation.
24. See Ramstad [1986] for a detailed examinationof Commons's Theory of
ReasonableValue.
25. Commons emphasizedthat he was a followerof Peirce only with respect
to scientificmethod. Regardingsocial philosophy,Commonsmade it clear
he regardedhis perspectiveto be derived from John Dewey's brand of
pragmatism[Commons 1934a,p. 150].
26. To the readerwho has been left befuddledby Commons'snarratives:No,
this is not a badjoke.
27. For Commons'sargumentthat collective action is the "dominantprinci-
ple" of modem economic life, see [Commons 1950, Chap. 1].
28. Commons'sholism came throughclearlyin these essays. In his autobiog-
raphy, Commons observed that a critic had renamed the series "An
EconomicView of Sovereignty"due to the emphasisCommons placedon
the changingnature of propertyas an explanatoryfactor underlyingthe
changingnature of the state [Commons 1934b, p. 44, emphasis added].
Commons respondedto this "criticism"in direct (and "holistic")fashion:
"I alwaysthoughtthat both political science and sociology were branches
of political economy" [Commons 1934b, p. 44]. Commons expandedon
this theme in his final work:"As I have studied practicalproblemsit has
always seemed to me that the life-and-deathstruggleof making a living
and trying to get rich was at the bottom of all other problems... .Con-
sequentlyI have never been able to think of the various social sciences as
separatefields of history,political science, law, economics, ethics, and ad-
ministration.What we need is some way of working throughthe whole
complex of problems that grow out of this fundamentalstruggle"[Com-
mons 1950, p. 118].
29. Somewhatpuzzlingis the factthatCommonsdid not elevate "sovereignty"
to the statusof a full-fledged"principle"-thus, in part,explainingthe con-
tent of a transaction-until after the publicationof Legal Foundationsof
Capitalism.
30. These essays were collected and republishedas Social Reform and the
Churchand Laborand Administration[Commons 1894; 1913].
31. See Commons [1919, p. 110] for a simple but fascinatingexample.
32. The fundamentaldifferencebetween "academic"and "constructive"re-
searchmay be the sourceof John Dunlop'scomplaintthat he was unaware
of even one piece of economic researchperformedby an academic that
provided him with policy-relevantconclusions applicable to a specific
problemhe encounteredas Secretaryof Labor(see Dunlop [1977]).
33. Duggeremphasizes that even Commons's conception of specific ends-
"good"capitalism-emerged from this "look and see" approach[Dugger
1979, pp. 370-71].
34. Commons did not see specificcases and theoryas separateentities. He re-
portedin his autobiography,with evident pride, how an associatehad re-
markedon his ability to "stickto details and make generalizationsat the
same time" [Commons 1934b,p. 130].
35. In interviewswith Commons'sstudents,Harterlearnedthat many of them
apparentlyhad great difficultyobtaining an understandingof their men-
tor'stheories.Indeed,some confessedto havingno understandingof them
at all!See Harter[1962,pp. 79, 206]. This suggeststhat Commonsprobably
overstatedto a considerableextent the active contributionof his students
to the developmentof his theoreticalframework.
36. "Thefull consequences[of public programsand policies]can never be an-
ticipatedbefore programsare put into effect"[Commons 1950, p. 137].
37. "Property-rights ... we define as the workingrules enforcedby the com-
munity upon individuals in their transactionsrespectingthat which is or
is expectedto be scarce"[Commons 1934a,p. 75]. See Ramstad[1986]for
the argumentthat by the term "ReasonableValue,"Commons meant out-
comes that representthe maximumdegreeof "fairness"(as he interpreted
the meaningof "fair")attainableat any given historicalmoment without
underminingsocial order.
38. It was Commons'semphasison the practicalapplicationof his ideas ("the-
ory")to individualcases that led EdwinWitteto characterizethe approach
of Commons and his studentsas a "practicalproblemsapproach"[Witte
1954, p. 133;also cf. n. 28 above].
39. It will be recalled that, for the holist, it is actual cases that serve as the
sourceof theoreticalconstructs;similarly,new cases provide the concep-
tual problems that precipitate modification of those constructs, and
therebyof the theory (pattem model). Commons, therefore,cited cases to
illustratewherehis (or the courts')conceptionsoriginated,not to illustrate
a principlederivedthroughdeductivereasoning.Commons'sevolutionary
approachis anotherfactorthat links him to the institutionalmovement in
general.On this point, see D. Hamilton [1970].
40. "I wantedto work on the strategicfactors"[Commons 1934b,p. 129].
41. Numerousillustrationshad earlierbeen provided,however,in Laborand
Administration[Commons 1913, esp. Chap. 21], Industrial Goodwill
[Commons 1919] and Principlesof Labor Legislation [Commons 1920,
writtenwith John B. Andrews].
42. The reaction of Jacob Viner is representative:"The book is at times in-
comprehensibleto me, and I thereforefeel incapableof appraisingits mer-
its. Almost every page leaves me lost in a maze of novel terminologyor of
new, and thereforeconfusing, applications of established terms" [Viner
1925,p. 711]. See Mitchell[1924]for a reviewby an establishedeconomist
who did believe himself to discernwhat Commons was drivingat.
B3.Thus Commonsentitles sections in InstitutionalEconomicswith headings
such as "FromNature to Going Concerns,""FromIndividualsto Institu-
tions" and "FromNaturalRights to ReasonableValue."
4. Commons did not attempt to conceal his awarenessthat his principal
mechanism for bringing "Reasonable Values" into effect-regulatory
agencies-were not workingas of the early 1940s,to actuallypromotethat
end [Commons 1950, pp. 270-77]. He attributedthis, not to a deficiency
1102 Yngve Ramstad
in his "theory,"but to the practiceof allowingthe appointingauthorityto

select individals"who are favorableto its own economic or politicalpoint
of view" ratherthan ensuringthroughthe legislationitself that designated
organizationsbe permitted to select their own representatives,as Com-
mons had specifiedin InstitionalEconomics(Commons 1950, p. 275].
45. To illustratethis point, the following history of economic thought texts
contain nothing of substance regardingCommons's ideas: Blaug [1978],
Gill [1963], Ekelundand Hebert [1975], Finkelsteinand Thimm [1973],
Hunt [1979], Pribham [1983], Rima [1972], and Roll [1974]. Except for
Oser and Blanchfield[1975], no modern-dayhistoryof economic thought
text has an extendeddiscussion of Commons'sframework.
46. Commons evidently had a prodigiousappetite for work. He reportedin
his autobiographythat he awakenedeach day at fouror five in the morning
because "In this way I could study and write three or four hours before
breakfastwhile [the others in my family]were asleep."[Commons 1934b,
p. 24]
47. Countlessindividuals have reportedto me, "I once startedto read Com-
mons, but, unableto figureout whathe was drivingat, I moved on to some-
thing else." On Commons'sbehalf, it should be pointed out that his early
works-see, in particular,[1894, 1899-1900, 1907, 1913 and 1919]-are
modelsof clarity.The problemwas not one of beingunableto writeclearly.
48. This was the evaluationof A. B. Wolfe,who providedwhatremainsto this
day the best summaryof Commons's"message"in InstitutionalEconom-
ics [Wolfe 1936, p. 206].
49. It must be emphasizedthat it is not being arguedthat the analysisthereby
establishes that Commons's ideas were "correct,"or "science,"or even
"economics."
50. See, for example,Foster[1981], Gordon [1980],Munkirs[1985],and Tool
(1979].Stanfield[1979] uses the term "socialeconomics,"but his perspec-
tive is, in its generalcontours,quite similarto that of the "neoinstitution-
alists."'
51. It is my suspicionthat Bush'singeniouseffortto formalizesuch qualitative
and evolving concepts as "socialvalues,"and then to combine them into
concepts such as "ceremonialencapsulation"or into quantitativeindexes
such as the "indexof ceremonialdominance,"will ultimatelyprove sterile.
But that would be anotherarticle.
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A Pragmatist's Quest for Holistic Knowledge: The Scientific Methodology of John R.

A Pragmatist's Quest for Holistic Knowledge: The

It has always been difficult for noninstitutionaliststo describe and

The author is Assistant Professor of Economics, University of Rhode Island, Kingston. An

is seldom emphasizedin the economics curriculum,and most students

Foundationsof Capitalism[Commons 1924],InstitutionalEconomics:

In Economics [Briefs 1960]. A more detailed and comprehensive ex-

interrelationsamong parts that appearin the original,but also some of

In other words, holists employ a part-wholemode of apprehendingre-

The Productionof Holistic "Knowledge"

on a small partof the entire system, say PartA. Throughclose observa-

At some point a theme becomes a tentative hypothesis. The re-

of data is consideredsupreme;all are subjectedto "contextualvalida-

Holistic definitionsare likely to be long, complex and open-ended.The

WaltonHamilton'sdiscussion of an "institution"in the Encyclopaedia

A final source of confusion is to be found in the attention accorded

Commons was of course as much reformeras scientist.23All his life

thus he, "meant merely the method of scientific investigation"[Com-

Commons next cites Peirce's cardinal rule "for obtaining scientific

Having establishedthat ideas are beliefs regardingeffects of action,

156]. This passage is crucial to Commons's approachthroughouthis

Commons'sConceptionof Economic Theory

The nature of theory as an activity was summarizedby Commons

and action, and it is a formulationof the relation of the parts to each

dents"[Commons 1934a, p. 738]. A formula,furthermore,is constantly

Commons's perspectiveregardingthe natureof theory-both as ac-

Legend: Mental Structural

being discovered in Part A of the total system portrayedin Figure la.

On the Meaning of TheoreticalTerms

60-61]. First of all, one must recognizethat transactionsare embodi-

negotiationalpsychology"thereforenecessitatesan understandingof its

the word "transaction"[Commons 1934a,pp. 55-93] constitutesa true

The Evolutionof Commons'sTheory

theory),Commons developed an extensive typology of the factorsthat

8]. Commons's overridingmotivation throughouthis academiccareer

them into an ever-changingset of theories(principlesand formulae)so

This book is modeledupontextbooksin the NaturalSciences.Eachidea

Practicallyindecipherableto the unpreparedreader,this passage can

understanding.Commons begins by providingan overview of his the-

chapter,he exposes to the reader'sview, once more, the social philos-

In short, Commons found holistic definitions renderedin part-whole

Commons's undeniablepenchant for classificationand (sometimes

task Commons set for himself, the comprehensivenessof the "whole"

develop a more humanisticand comprehensivetype of economic the-

able Value would appearto be of particularrelevancefor all who seek

1. For example, David Secklerhas observed that "The chapterson 'institu-

6. See, for example, Caldwell[1982, pp. 200-205].

evident. The predictionssought generallyreferto the aggregatebehavior

in his "theory,"but to the practiceof allowingthe appointingauthorityto

Bolan, LawrenceA. 1982. The Foundation of Economic Method. London:

Ekelund,Robert B., Jr., and Robert F. Egbert. 1975. A History of Economic

Ramstad, Yngve. 1981. "The Analyticaland MethodologicalOrientationsof

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