The study of economics includes three schools of thought: first, the mainstream or 'neo-classical' school; second, the 'new' institutionalism of North, Schotter, Williamson and others; third, the 'old' institutionalism founded in the USA by Veblen, Commons and Mitchell.

Neo-classical economics is defined as an approach to the analysis of socioeconomic phenomena that embodies the assumption of maximizing behaviour by economic agents, has a predilection for equilibrium analysis and excludes chronic information problems. Although many of the 'new' institutional economists adopt neo-classical assumptions, 'new' institutionalism is regarded typically as embracing a broader range of economic theorists. This raises the issue of the appropriate definition of the 'new' institutional economics. The 'new' institutionalists are united by their common acceptance of the individual as given, taking his or her preferences as exogenous.

The 'old' institutional economics involves a radical break from both neo-classical and 'new' institutional economics, although there are some concerns and themes that are common to the latter. The fundamental assumptions of the 'old' institutional economics, are quite different. For instance, 'old' institutionalists do not start from the assumption that the given, atomistic individual and equilibrium theorizing is replaced by the evolutionary analogy. Accordingly, this 'institutional' economics is much more than the study of economic institutions: it is an alternative approach to the analysis of economic phenomena in general. Despite its being eclipsed in recent years by the rising 'new' institutionalism, the Veblen-Commons-Mitchell tradition has more to offer to business and management studies.

Geoffrey M. Hodgson