1 – Introduction

1Cumulative causation is an important perspective of institutional economics, as remarked by Kapp [1976]. Cumulative causation refers to a change of factors progressing cyclically and cumulatively through reciprocal reinforcement of the factors. There are two genealogies for theories of cumulative causation.

2In the first genealogy, analytical themes provide the dynamics of the macro economy. Widely used, this genealogy began with A. Yang in 1928 and proceeded to G. Myrdal in 1957 and N. Kaldor in 1966, among others. However, Uni [2013] proved that J.R. Commons’s masterpiece Institutional Economics [Commons, 1934a] provides a framework of cumulative causation with regard to this theme, that is, the cumulative causation between “efficiency increase” and “supply and demand growth”.

3However, macroeconomic composition, the microeconomic arrangement of opportunities and certain interests of actors have been formed and reformed by institutions. These institutions have evolved in accordance with a different causation. The second genealogy considers this causation.

4In this second genealogy, analytical themes consider the cumulative causation between institutions (a society) and individuals. This focus on causation enables us to treat “cognition”, “volition” or “choice” of individuals as they are socialized and simultaneously maintain their own singularity, without lapsing into “reductionism” or “totalism” [Bazzoli, 1999, p. 128]. T. Veblen is the primogenitor of this genealogy and also the pioneering figure [Veblen, 1899]. He formalized cumulative causation between “prevalent habits of thought” (institution) and “instincts” of humans, which explains why industrial technology is directed towards maintaining the “leisure class”.

5According to Ramstad [1990], Commons — who is known as one of the founders of Old Institutionalism — belongs to this genealogy [see also Bazzoli, 1999; Zingler, 1974]. Loosely speaking, they understood that Commons’s Legal Foundations of Capitalism [1924] and his Institutional Economics [1934a] contain a circular ring between the “institutionalized mind” (the individual) and the institution (society).

6Ramstad favourably explained the circular ring and thought it self-evident that Commons was aware of the ring [cf., Albert and Ramstad, 1997; Bazzoli, 1999]. In contrast, Hodgson [2003] stressed that the ring is not perfected by the descriptions of Commons [1934a]. Hodgson’s [2003] main criticisms are the following three points. First, Commons [1934a] did not correctly apprehend Dewey’s concept of habit. Second, Commons [1934a] did not apprehend “instinct” as fundamental motivation when individuals adjust themselves to societies. Third, Commons [1934a] did not explain causation from habit to custom.

7This article enters the debate over Commons’s cumulative causation by considering whether Commons [1934a] contained a framework of cumulative causation between institutionalized mind and institution. This is a valid consideration for the following two reasons.

8First, Commons’s explanations are difficult to follow, but when we read Commons [1934a] from the perspective of cumulative causation, we can get a holistic modelled picture of the relationship between some of Commons’s key concepts and principles, that is, conflict, custom, habitual assumptions, investigation, sovereignty, futurity, and reasonable values. [2]

9Second, when we read Commons [1934a] from the perspective of cumulative causation, we clarify the challenges rooted in the circumstances of his time. An urgent issue for Commons from the mid-1920s to the 1930s was to devise a social progress theory without lapsing into either extreme individualism or extreme holism [Commons, 1934a, Ch. XI; 1934b, p. 170; 1950, p. 163]. He focused on neither individual nor social totality, but rather on the cycle of causation linking individuals and society. Individuals are appropriate subjects for social progress only because they are on the cycle of circular causation. This is because individuals internalize social norms and simultaneously maintain their creativity, which brings new order from “conflicts” [Commons, 1934a, p. 766].

10The first purpose of this article is to prove that Commons [1934a] adequately formalized a framework of cumulative causation. This can be done only from the “instrumental pragmatism” perspective of reading Commons [1934b, p. 160]. “Instrumental” means that Commons saw “intellects” (the creative minds of individuals) [3] and institutions as devices of “progress”. When we read Commons [1934a], our method is to rebut the criticisms of Hodgson [2003]. By relativizing Hodgson’s one-dimensional understanding of pragmatism, we can directly understand Commons’s characteristics of cumulative causation.

11As Commons himself described, and as many researchers have pointed out, Commons’s view of intellects and institutions is characterized as “instrumentalism” [Commons, 1934b, p. 160; Rutherford, 1983, pp. 731–2; Vögelin, 1995, pp. 11–3, 281–2; Taka, 2004, p. 242]. By reading Commons [1934a] from the perspective of instrumentalism, which is the second purpose of this article, the characteristics of cumulative causation showed by Commons [1934a] are elucidated. The characteristics are the following four points. First, conflicts provide some of the momentum for collective reasoning. [4] Second, Commons dared not place instincts as a cornerstone of cumulative causation. Third, “insights” and “joint expectations” are the “footholds” of actors who feel their way in uncertain situations. Fourth, an action is evaluated not by whether it brings a certain consequence, but whether it keeps to certain requirements of due process (working rules). When one of the requirements, “due process”, is discussed, it is possible to understand the way in which, within cumulative causation, minds and their joint evaluation develop to a state of “reasonableness”. This development occurs through the compression of political, economic and ethical norms into institutions. The function of cumulative causation in coordinating the different norms is missed not only by Hodgson [2003], but also by the advocate of Commons, Ramstad [1990].

12This article is organized as follows. Section 2 clarifies the issues we should consider by comparing Hodgson’s three criticisms with Ramstad’s explanations. From Sections 3 to 5, Hodgson’s [2003] criticisms are rebutted with detailed arguments. As a result, Commons’s [1934a] formulation of a “circular causation” between institutions and individuals is understood to be correct. Then, in the last part of Section 5, the notion of causation as “cumulative” is proven. Through these discussions, the characteristics of Commons’s [1934a] cumulative causation are elucidated. In Section 6, we connect cumulative causation with “reasonable value”, which is Commons’s key concept. As a result, we show a fourth characteristic of cumulative causation. Section 7 provides concluding comments.

2 – Opposing views on Commons’s cumulative causation

2.1 – Institutional causation and individual causation

13This article first checks the essential points of Ramstad [1990] and Hodgson [2003] that mention Commons’s cumulative causation before turning to the main purpose: whether Commons [1934a] contains a framework of causation. Ramstad [1990] is the only study that concretely distils the circular and cumulative causation between individuals and society. [5] In contrast, Hodgson [2003] expressed a biting opinion of Ramstad’s work. The purpose of this section is to compare their opposing views in order to clarify the three issues that we should consider about Commons [1934a].

14Ramstad [1990, p. 77] asserts that Commons [1934a] contains a framework of circular causation between “institutional causation” and “individual causation” (see Figure 1).

Figure 1

Circular Causation Discussed in Ramstad [1990]

Circular Causation Discussed in Ramstad [1990]

15Institutional causation means reciprocal relations that follow two directions: first, institutions (customs and working rules of going concerns) cause transactions and economic outcomes; second, the outcome is a cause on which the perpetuation of each institution depends. [6] Individual causation refers to reciprocal relations between experiences and will. [7] The experiences that come from the outside world are the causes of “meaning”, “valuing” and “choice” in the inner world. The internal activities result in actions. [8] The actions are conductive of the next experiences [Commons, 1934a, p. 95; cf., Dewey, 1929, pp. 167–8]. In individual causation, the inner and outside worlds are not divided but interlinked at an interconnection point, namely, action [Albert and Ramstad, 1997; Costa and Castro Caldas, 2011, p. 675; Dewey, 1922; Harter, 1963, p. 227].

16Institutional causation and individual causations are connected by two links: “customary practices shape the will” and “the will chooses outcomes/ working rules” [Ramstad, 1990, p. 79]. The former link indicates that expectations, purpose, the way of recognition, and the way of action converge, to some extent, to a certain type. When we designate this link as our starting point, institutional causation becomes the “cause” of individual causation because institutional causation is expressed in the expectations and purpose of individuals [cf., Biddle, 1990a, p. 3]. Commons borrowed the term “institutionalized mind” from E. Jordan to express the will internalizing institutional causation [Commons, 1934a, p. 697, n. 72; Jordan, 1927].

17The latter link, namely, “the will chooses outcomes/working rules”, is the “volitional dimension of action directed to the achievement of future end” [Ramstad, 1990, p. 80]. Ramstad focused on volition of “authoritative agency” (especially, courts of law), that is, purpose. [9] The authoritative agency chooses new working rules to fit with the purpose that is the cause of action. The “purposeful thought” and the choice resting on the thought are “artificial selection” and a cause of institutional causation [cf., Ramstad, 1994, pp. 109–11].

18Thus, individual causation and institutional causation form a circular ring by these two links. “If one is to understand why an individual has acted in the way he/she has been observed to act, one must evaluate the significance in the particular case of both ‘volition’ (‘individual causation’ as captured by the term ‘methodological individualism’) and ‘working rule and custom’ (‘institutional causation’ as captured by the term ‘determinism’)” [Ramstad, 1990, p. 97, n. 54]. [10]

19Ramstad [1990] asserts that the essence of Commons’s institutional economics is to understand economic values in circular causation. On the one hand, in mainstream economics, “the wills of individuals, as limited by their own endowments of resources and the state of technology, are jointly the basic ‘force’ underlying, or fundamental ‘cause’ of, observed economic values” [Ibid., p. 83]. On the other hand, in Commons’s theory, if we dare to set a starting point or cause, it is the purpose that the authoritative agency has. According to this purpose, the agency “chooses outcomes/working rules”. “Orderly transactions” based on the “adopted working rules” realize economic values [Ibid., p. 85, Figure 2]. Thus, the realized economic values are seen as a consequence of economic coordination.

Figure 2

Uncompleted Circular Causation

Uncompleted Circular Causation

20Supporting this “reinterpretation of the etiology of economic values” means following two points [Ibid., p. 87]. First, the amendment of working rules becomes a way to enforce economic values that come closer to public purposes than economic values realized under the old rules. Working rules are evaluated and reformed based on gaps between public purposes and economic values that are raised by transactions based on the rules [cf., Biddle, 1990b, p. 31]. Second, an issue that economists should address is redefined, from defining the goals that principals or authoritative agents other than economists ought to pursue, to “showing how the existing structure of working rules must be altered if the evolving purposes of the principals’ collective will are to be attained” [Ramstad, 1990, p. 87]. Therefore, economists should first investigate the meaning of public purpose created historically in cumulative causation before thinking about the instrument to attain the purpose. [11] Adding to Ramstad [1990], this method of investigation differs completely from that which considers prescription fitting a given cause, that is, an a priori purpose.

21This article backs Ramstad’s assertion by showing, in the following sections, that cumulative causation between “institution” (working rules and customs) and “institutionalized mind” is described in Commons [1934a]. However, the article raises four outstanding issues in Ramstad [1990].

22First, what is the momentum of an intellect that doubts existing institutions and habitual assumptions? Ramstad focused mainly on doubts arising as momentum when unintended consequences emerge, in other words, motivation that attempts to increase the availability of “instruments” for purposes. This article adds “conflicts” to the momentums of doubt. As inspired by Vögelin [1995, p. 262], Commons is unique in focusing on both doubt and conflict as the momentum of investigation [Commons, 1934a, p. 848]. [12]

23Second, what are the two variables when we view Commons’s cumulative causation as reciprocal reinforcement of multiple variables? In Section 5, we define the variables based on descriptions given by Commons [1934a].

24Third, with regard to causation, how are the political, economic and ethical norms compressed into the institutions, and how are they compressed into reasonable value? Although this issue is the basis of Commons’s [1934a] institutional economics, it was not considered by Ramstad [1990]. The criticism that the issue is overlooked applies equally to Hodgson [2003].

25Fourth, we should consider the decision of “authoritative agency” in two ways. One way involves the decision of sovereignty, for example, a court’s decision. Another way is the voluntary agreement between organized interests, which is expressed as “consensual idealism” [Commons, 1934a, p. 743]. The reason we divide the decision of the authoritative agency in two ways is that Commons evaluates the second way as more appropriate for “social progress” [Commons, 1934b, pp. 155–6].

3 – Habit and habitual assumption

37As we confirmed in Section 2, while Ramstad [1990] discussed “institutional causation” and “individual causation” contained in Commons’s works, Hodgson [2003] criticized Commons [1934a] for not completing the circular causation between “custom” and “habit”. In this section, we verify the cumulative causation between “institution” (working rule and custom) and “institutional mind” (intellect and habitual assumption), which is narrower than Ramstad [1990], who brought price mechanisms into the picture, but a little broader than Hodgson [2003], who provided limited discussion of the linkages connecting “habit” with “custom”. The reason for including intellect in our discussion is to grasp “volition”, “activity” and “creativity” of minds running through Commons’s works.

38This section analyzes the first criticism of Hodgson [2003, p. 556], that is, that Commons [1934a] did not correctly portray the concept of habit of Dewey [1922]. While Commons [1924] formulated the concept of habit correctly based on a quotation of Dewey [1922], Commons [1934a] defined the concept as “a repetition of acts” in a behaviouristic manner and, according to Hodgson [2003, p. 556], “he mangled Dewey’s concept of habit”. In what follows, we confirm this finding of Hodgson.

39In Commons [1924], the section closest to the ontology of pragmatism is “Ch. VI (IV) Due Process of Thinking”. Commons [1924, p. 352] asserted that the only way to remove two slanted views is to stand on the due process of law, which is a truly pragmatic process. The slanted views are, on the one hand, solipsism and egoism, and on the other, empiricism, as represented by J. Locke.

40In this due process of law, habits, ideals, definitions, classification, investigation and valuation play a great role, after which choice and action follow [Commons, 1924, pp. 349–51]. With regard to “habit”, Commons borrowed Dewey’s concept of habit.

41

Habits are the subconscious setting of body, nerves and brain on the basis of past experience and ready to set off in accustomed directions when touched by stimulus from outside. “Habit is energy organized in certain channels”.

42Dewey asserts that habits should be seen as “energy” or propensity.

43

. Tendency to repeat acts is an incident of many habits but not of all. A man with the habit of giving way to anger may show his habit by a murderous attack upon someone who has offended. His act is nonetheless due to habit because it occurs only once in his life.

44However, in Commons’s works after 1924, habit is explained as “repetition” [e.g., Commons, 1925, p. 267; 1934a, pp. 45, 155, 740]; thereby a habit that is defined as propensity has not appeared [Hodgson, 2003]. As Hodgson [2003, p. 557] indicated correctly, habit has little utility in Commons [1934a] because the role of habit is as a mere stepping stone to bring about the proper concept of “custom” [Commons, 1934a, pp. 140– 57].

45Aside from this “habit”, the concept of “habitual assumption” has appeared on the scene since Commons [1932, pp. 463, 466]. Its easiest explanation is seen in Commons [1934a, p. 697] [cf., Biddle, 1990a, pp. 14–5].

46

All economic investigations are investigations of people in their economic activities. In order to understand why they act so and so, it is necessary to discover the assumptions which they take for granted as so familiar that they are not formulated in words. […] [Assumptions, meaning words such as beliefs, divine rights, natural rights, the natural order] are fixed beforehand not in nature but in the customs and habits of participants in transactions.
[…] All minds are institutionalized by whatever habitual assumptions they have acquired and they take for granted, so that they pay no attention to them except when some limiting factor emerges and goes contrary to what they were habitually expecting.

47Then, “intellect” activates in order to control the limiting factor. Commons defines the “mind” as consisting of habitual assumptions and the intellect as “institutionalized mind”, borrowed from Jordan [1927] [cf., Commons, 1928b]. [16] Thus, habitual assumptions are certain “predispositions” of action, belief, meaning, opinion and so on, which are not associated with intellects [Commons, 1934a, pp. 697–8]. The following description clearly shows that habitual assumption is predisposition in the inner world.

48

These activities [of transactions] come to us first as mere sensations, and, as such, we cannot be sure whether they are caused only by and social philosophies inside ourselves, or by activities outside ourselves.

49The meaning of habitual assumptions as “predispositions” resembles Dewey’s meaning of habit. In the reference sections, Commons [1934a, p. 748] applies a “two language hypothesis” to the concept.

50

Habitual assumptions have the double aspect of unthinking impressions, and of the customary repetition of transactions.

51Hodgson’s targeting of habit in Commons [1934a] is the aspect of “customary repetitions of transactions”. Why did Commons define it not as “predisposition” but as “repetitions”? One reason is that Commons regarded economics as a science that infers from measurable facts [Commons, 1934a, p. 698]. [17] While Dewey discussed the psychological mechanism intensively, he also emphasized “behaviours observable” because his purpose of investigation was to arrive at consensus in a group [Ratner and Altman, 1964, pp. 67–8].

52

Yet opinion and action cannot be separated in scientific investigations, for action is opinion-in-action, and science measures the action while inferring the opinion.. Here the process of investigation is similar to psychologist, […] [not individualistic but] social science investigates habitual and cu[s]tomary assumptions as an explanation of transactions.

53This “investigation” means not to infer certain causation between a measurable act and a stimulation as a behaviourist would do, but to infer from a measurable act to the volition put into the act, that is, performance, forbearance, avoidance and timeliness, and then to refer back to the actor’s intellects and habitual assumptions [Commons, 1928a, r. 12 s. 817; 1934a, p. 24]. [18] Moreover, this “process of investigation” is not only the due process of thinking of judges and Commons himself as an economist and a party [Biddle, 1990a], but also the circular process “of all reasoning and valuing by people not judges” [Commons, 1934a, p. 717]. [19]

54This analytical method was adopted in order to address the following two challenges. The first involves the creation of a theory of “institutional liberalism” without lapsing into either extreme totalism or individualism [Takahashi, 2009]. Institutional liberalism regards a citizen as a bundle of interactions alongside other citizens, technologies and the natural environment. It tries to expand an individual’s liberties by editing the interactions. The second involves focusing on the way to control conflicts and uncertainties. The condition in which conflicts and uncertainties are controlled to some extent, that is order, is created from collective reasoning. Therefore, “behaviours observable” should be used as stepping stones to create collectively “joint expectations” [Commons, 1934a, pp. 58, 242], In other words, actions are the objective starting point of the instrumental pragmatist. As observed above, by discussing Hodgson’s [2003] criticism that Commons [1934a] does not define habits as propensity, it can be proved that Commons understood habit as having two aspects, internal propensity and habitual action; thus, the criticism misses the point. The reason that habitual action was necessary for Commons [1934a] is that he brought institutional economics into a scientific realm. Such a realm infers, from a certain actor’s observable action, how the actor gave meaning to his or her experiences that derive from the institutional environment. The actor’s meaning establishes his or her interaction with other actors and institutions. After inferring the actor’s way of interacting, the instrumental pragmatist reforms the institutions in order to change the interactions so as to expand the liberty of the actor.

4 – Commons’s critique of instinct

55Hodgson [2003] indicated that Commons [1934a] does not contain “instinct” or “impulse”, which Hodgson believed to be the heart of the link from custom to habit. While Commons was vividly aware of instinct, that is, the element of psychology [e.g., Commons, 1934a, pp. 660, 699, 748], in addition, he pointed out that it cannot be separated from the arising of custom [Commons, 1934a, p. 45], and he dared not make it the core concept of his psychology. This section considers the following two questions. First, why did Commons not place instinct in his analytical concept? Second, what is individual motivation (not instinct) for learning customs, or what is the driving force behind internalizing customs in the mind?

56Let’s begin by considering the first question. The reason Commons did not place instinct in his analytical concept was to avoid “antagonism” contained in the theories of K. Marx and Veblen. One of the causes of this antagonism is an assumption that connects certain instincts with certain personalities. Commons mentioned that the “instinct” provided by these theories is correspondent to “habitual assumption” [Commons, 1934a, p. 660]. Commons mentioned that habitual assumption has many aspects, mainly technological, proprietary (bargaining) and ethical assumptions [Commons, 1934a, pp. 698–9]. Technological and proprietary assumptions appear to correspond with “instinct of workmanship” and “pecuniary instinct”, respectively [Commons, 1934a, p. 673]. However, these instincts are different aspects of assumption of the same person. Commons pointed out that the pecuniary instinct may be inherent in the minds of both an employee and an employer based on the case of wage bargaining by skilled workers [Commons, 1934a, p. 672]. Regarding Marx, Commons criticized Marx’s terminology as propaganda that divided citizens into two classes and pointed out that assumptions could be classified as profit, interest, rent, wage consciousness and so on, when Commons observed American society at the time [Commons, 1934a, p. 699; Vögelin, 1995, p. 260].

57The reason Commons [1934a, p. 699] avoided “antagonism” is that he tried to create a psychological basement of an ethical subject who is not entrenched in the a priori dichotomy of classes and instincts [Rutherford, 1986, p. 731]. Therefore, the ethical subject should be the “institutionalized mind”, which has social norms and peculiar volition together, that is, which explores creative opportunities in the cycle of causation. From this discussion about ethics, and because this framework of cumulative causation was presented after Commons [1924] but before Commons [1934a], we may guess at one of his intentions. [20] At the time, Commons may have been trying to provide a clear illustration of a tolerant society that satisfied both cohesion of totality and variety of individuals. From the 1920s to the 1930s, socialism and fascism grew in strength worldwide. Wisconsin, where Commons resided at the time, was a “miniature” of the world situation [Commons, 1934b, p. 97].

58

[…] what I was always trying to do, in my academic way, was to save Wisconsin and the nation from politics, socialism or anarchism, in dealing with the momentous conflict of “capital and labour”.

59Commons thought that it is the “binding force” of customs, working rules and sovereignty that anchors citizens in this “momentous conflict” [Commons, 1934a, pp. 738–9].

60In addition, Commons’s analytical purpose was not to explain, using instinct and prevalent habits of thought, why the leisure class is maintained, but to describe how individuals, who are now twisted by the river of circular causation, are defined by the environment and reach for causation in order to achieve purposes. The analytical concept of instinct, which is useful in ontology or to explain the anthropological cumulative cycle, is not a necessary concept in Commons’s analytical purpose.

61In chronological order, the instinct that grasps certain habits comes before habits, but Dewey [1922, p. 66] indicated that it is not until obtained habits exist in the mind that innate activities are given meaning. Commons likewise refused to isolate instinct as a priori assumptions from habits and customs. Hodgson’s apparently ongoing question about whether Commons [1934a] contains “instinctive triggers” may conceal the indecision or hesitation of Commons and Dewey, and concerns whether the a priori assumption may bring excessive antagonism into the whole theory [cf., Costa and Castro Caldas, 2011, p. 668; Rutherford, 1986, p. 731].

62Then, what is the “trigger” to internalize customs in Commons [1934a]? In Commons [1934a], the “trigger” completing the link between customs and habitual assumption is “motivation” and “the three most fundamental wishes of mankind: security, liberty and equality” [Commons, 1934a, pp. 705–6], as Albert and Ramstad [1997, p. 898] pointed out. Yet two important points should be added to their views. First, the security of expectation is a motivation that is more fundamental than economic liberty and equality, and has an anthropological and trans-historical perspective. Commons’s [1934a] institutional economics regards the mind as a blend of multi-layered motivations. However, as suggested in Dewey’s [1929] ironic title, The Quest for Certainty, even if the security of expectation is fulfilled, this condition must be temporary. Thus, the quest for certainty will continue because certainty cannot last forever. Second, the contents of wishes have been changing and will continue to change gradually, according to the customs and decisions of sovereignty at the moment. One set of examples comprises the precedents that have changed the meaning of the Constitution of the United States, with sections on liberty and equality changing alongside shifting prevalent customs [Commons, 1934a, p. 714].

63According to Commons [1934a], individuals driven by motivation or fulfilling wishes “are learning to fit themselves to custom. […] If they do fit, then the customs to which they adapt themselves give to them security of expectations” [Ibid., pp. 701–2]. However, if they fail to fit their habits to customs, they are condemned or eliminated from transactions [Ibid., p. 702]. Spontaneous motives and wishes alongside the exterior results of their realizations or eliminations represent the junction points of customs and will. These are core to the “customary practices [that] shape the will link” of Ramstad [1990, p. 81]. [21]

5 – From habit to custom

64In this section, by first discussing Hodgson’s [2003] third criticism, the circulative nature of causation is proven. Then, the cumulative nature of causation is proven. Further, through the following discussions, the framework of cumulative causation is presented.

65Hodgson [2003, p. 555] indicated that Commons [1934a] did not show “how habits help ‘customs persist’”. However, “transaction” itself is the creation of joint expectation that starts from each individual. [22] Individuals “as prepared more or less by habit, induced by the pressure of custom, to engage in those highly artificial transactions created by the collective human will. […] They are always participants in transactions” [Commons, 1934a, p. 74]. In the transactions, “each participant in the transaction is endeavouring to influence the other towards performance, forbearance or avoidance. Each modifies the behaviour of the other in greater or less degree” [Ibid., p. 91]. Thus, certain types of joint expectations, that is, customs and going concerns, are created and start from individuals’ habits [cf. Dewey, 1922, pp. 16–7].

66Joint expectations modify from “practice” to “usage” and then “precedent”, with precedent displaying clearer “precision” and “publicity” [Commons, 1934a, pp. 706–7, 709, cf. p. 44–5]. [23] Powers that bring practices up to usage are imitation, competition and elimination. Powers that bring usage up to precedent are approvals and sanctions by arbitrators. This method is the “common law method”.

67Thus, we prove that Commons [1934a] properly formulated the linkages of causation. The next point to address is whether causation is “cumulative”. Obviously, habitual assumptions of judges depend strongly on cumulative precedence. Commons viewed the habitual assumptions of not only judges but also other people as depending on precedent. “Even the child appeals to precedent” [Commons, 1934a, p. 706, see also p. 717]. According to Zingler [1974, p. 333]: “the cumulative effect of collective action over time was the establishment of working rules which were codified in the legal framework of statutes and decisions of courts and administrative bodies, or in the less formal sense of prescribed behaviour of going concerns”. [24] The following description indicates that Commons was aware of accumulation. [25]

68

[…] We name it custom, as he intended, instead of instinct. Such instinct, he says, is “a matter of tradition out of the past,”.

69

[…] we reach the present contesting concepts of reasonable value in a world that but is compelled by economic maladjustment to evolve a future new out of the obsolescent old. […] [Motives, theories and social philosophies of actors] have with expected consequences which they wish or fear.

70Thus, both institutions at the level of collectivity and experiences at the level of individuality (institutionalized mind) accumulate. Institutionalized mind is, on the one hand, the product of the historical cumulative process and, on the other hand, a volitional entity that evaluates these institutions and experiences at the present time [Commons, 1934a, pp. 712–3] and constitutes a joint experience with others in order to step boldly into action, even in uncertainty and conflicts. The description “pragmatism is futurity”, which is difficult to understand, means, from our perspective, the process of constitution and diffusion of joint expectation in the cumulative causation derived by doubts and conflicts [Commons, 1934a, p. 152]. [26]

71Cumulative causation progresses experimentally to “reasonable values”, which are “reasonable transactions, reasonable practices and social utility” and “reasonable capitalism” [Commons, 1934a, pp. 681, 891]. However, cumulative causation may be tautologous. The reason is that, for Commons, collective reasoning itself is “the process of habits, right ideals, true definitions, sincere investigation, reasonable classification, reasonable value, justice”, “equivalent to public purpose” [Commons, 1924, p. 352; Commons, 1934a, pp. 681–3].

72

The private purpose of those who make the rules becomes a public purpose when approved by the court. […] The Supreme Court decides what is and what is not a public purpose by choosing between existing practices and customs. […] The economic interests of all parties, immediate or remote, must be valued as a part of the whole public purpose.

73Therefore, the private purposes of individuals and going concerns and the public purpose of sovereign concerns are not a priori exterior factors of causation. These have been created collectively and historically, according to changes of customs and consequences of collective reasoning.

74The cumulative causation between habitual assumptions and customs is, in terms of reinforcement of multiple variables, causation between expansion of “security, liberty and equality” in the institutionalized mind [Commons, 1934a, p. 706] and institutions which may be “made reasonable instead of oppressive, confiscatory or exploitative” [Commons, 1934a, p. 672]. Figure 3 shows cumulative causation in Commons [1934a]. Moreover, investigation, conflict and futurity are not shown in the figure; however, they relate to this framework as follows. Conflicts and unintended consequences comprise the momentum of investigation, that is, they are the triggers by which intellect is activated. Futurity is the psychology of the institutionalized mind bargaining at the present time based on institutions (joint expectations). Sovereignty, on the one hand, is the entity that selects institutions and assumes a role as part of working rules, that is, laws. Sovereignty directs the actions of citizens and going concerns toward socially desirable consequences. Further, it has a role that induces citizens to play a part in social governance by protecting, authorizing and enabling them [Kitagawa, 2016].

Figure 3

Framework of Cumulative Causation in Institutional Economics

Framework of Cumulative Causation in Institutional Economics

Note: This figure is based on the discussion of the psychological foundation in IE [Ch. X]. With regard to the mental process of scientific activity in Ch. II (III) “Ideas”, see Ramstad [1986, p. 1082, Figure 3]. With regard to cumulative causation in the dynamics of the macro economy, see Uni [2013, p. 21, Figure 1].

75Figure 3 is simply a model. To be precise, we should not see cumulative causation shown in Commons [1934a] as a “single” circular ring. Causation is constituted by the sovereign concern, various economic and cultural concerns, and the “citizens” of each concern. The peak of the pyramid of the valuing system is the sovereign concern. Cumulative causation is, in fact, “pluralism” and “hierarchy” between various concerns, between concerns and citizens, and between citizens [Commons, 1950, p. 75; 1998, pp. 100–1]. Understanding it from a dynamic perspective, it is a chain or accumulation of “inter-relational” effects [Dubouchet, 2003, p. 85]. [27]

6 – Cumulative causation and reasonable values

76This section addresses the following problem in order to connect cumulative causation and Commons’s key concept of “reasonable values”. When an individual feels his way in uncertainty and conflicts, what are his footholds and how do we evaluate his steps as “progressive”? With regard to the former question, he has two “footholds”. One is “insight”, that is, creative reasoning for problem solving. The second comprises institutions as instruments, that is, constituent “joint expectation”.

77With regard to the latter question of how to evaluate an individual’s steps as progressive, “progress” may be given to an action that is based on the framework and procedure; “equal opportunity”, “fair competition”, “equality of bargaining power” and “due process of law”. The due process of law is, simply stated, to inquire collectively based on procedures defined in working rules [Commons, 1924, p. 352; 1934a, pp. 681–3]. The actions that fulfil these requirements express “progress”, that is, “reasonable practice”, and the consequences of the actions are “reasonable values”, whether the consequences are intended or unintended. Therefore, reasonableness is judged based not on certain consequences but on the actions fulfilling the abovementioned requirements.

78With regard to these requirements, the due process of law should be discussed in depth because it compresses political, economic and ethical norms into reasonable value in accordance with cumulative causation. Further, this issue is overlooked not only by Hodgson [2003] but also by Ramstad [1990].

79The due process of law has two meanings, namely “procedural” due process and “substantive” due process [cf., Commons, 1924, pp. 331–42]. Compliance with procedural due process means that when a going concern, which is based on a procedure given in a working rule, leads to a decision that affects the property of a member, the member has an opportunity to plead. Substantive due process means that the working rule itself is the focus of collective reasoning based on the present situation. Thus, substantive due process has the characteristics of democratic ethics. The issues about collective reasoning are whether the purpose of the working rule is right or wrong and whether the means for attaining the purpose are appropriate or not. Of course, the issue of ethical norms (social justice and injustice) in the present is related to such reasoning. Moreover, with regard to reasoning, the “rule of reason” is adopted. This is the way of thinking that should consider the economic advantages and disadvantages that the member who is related to the concern may receive from the collective decision.

80The actors who are part of this due process are, according to Figure 3, not only sovereignty but also the institutionalized minds who are related to an economic dispute. Commons [1934a] placed value on joint weighing and the evaluation of the facts and advantages among representatives of conflicting, organized interests. Thus, collective reasoning necessarily has the characteristics of negotiation. In this process of negotiation, political, economic and ethical norms, along with the disparity of forces that relate to each norm, are compressed into, and expressed by, working rules (institutions). The institutions have different norms and form macroeconomic arrangements and arrangements of opportunities at the micro level. [28] The institutions that influence, for example, freedom of association or practices of competitive restriction have been changed substantively by reinterpretation of their roles. These institutions arrange and rearrange the bargaining powers and opportunities of buyers and sellers. The economic consequence of a transaction conducted in accordance with these arrangements is reasonable value.

81In this regard, the meaning of “reasonableness” should be discussed further. According to Commons [1934a, p. 860], there are two meanings for reasonableness: “ordinary” and “upper practicable limit of idealism”. The method of establishing working rules produces the difference. The former meaning refers to customs that courts choose. The latter meaning is attained via “voluntary agreement of voluntarily organized, though conflicting, interests” [Commons, 1934a, p. 861; cf., Bazzoli and Dutraive, 2014]. The concrete form that Commons imagined is “commission”, for example, the “joint bargaining system” of capital and labour with the government acting as a conciliator [Commons, 1934a, p. 858]. Commons [1934a, pp. 840– 75] highly valued the case in which employers and labour unions agreed to diffuse best practice, which is discovered by collective investigation, through a process elaborating the draft of the Accident Compensation and Safety Law and Unemployment Compensation Law in the Wisconsin Industrial Commission. In the negotiation process, with regard to employer and labour interests and motivation, mutual understanding grew. Such a process — from investigation and negotiation to agreement and reconciliation — is expressed by Commons as “consensual idealism” [Commons, 1934a, p. 743]. Commons’s deep belief in collective investigation is expressed clearly in the following.

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The definition of reasonableness [reasonably permit] I worked out afterwards, with my classes, during more than twenty years, as my meaning of “pragmatism”. […] Reasonableness is idealism limited by practicability. Practicability could be investigated and ascertained as actually in operation in the factories of the more progressive employers, and then the rules of the commission, sanctioned by law, could bring other employers up to the level. […] A collectivistic theory of value derived from existing best practices, from custom, the common law, and the decision of courts, could make reasonableness “objective” and therefore capable of investigation and testimony, leading to the formation of working rules for collective action in control of individual action.

7 – Conclusion

83This article verified that Commons [1934a] explained cumulative causation between “institution” and “institutionalized mind”. We started by analyzing Hodgson’s [2003] three criticisms of Commons. The reason why our conclusion differs from that of Hodgson [2003] is that our perspectives for reading Commons [1934a] differ. Hodgson [2003] reads Commons [1934a] from the perspective of “pragmatism” as psychology focused mainly on instinct and habits of thought. Conversely, this article reads Commons from the instrumentalist view of intellect and institution, that is, “instrumental pragmatism”. In the framework of cumulative causation, this article revealed a holistic modelled picture of the relationships between Commons’s key concepts: conflict, custom, habitual assumption, investigation, sovereignty, futurity and reasonable value. In Commons’s institutional economics, it is the ethical subject who internalizes institutions and simultaneously has specific volition [Commons, 1950, pp. 166–8].

84This article illuminated the four characteristics of cumulative causation shown in Commons [1934a]. First, conflict is an important momentum of investigation. This focal point is not confirmed in Dewey’s discussion, which focused mainly on doubt and uncertainty as a momentum of inquiry. Second, as distinct from Veblen, Commons [1934a] dared not put instinct as a cornerstone of his cumulative causation because he tried to avoid bringing the capital-labour dichotomy deriving from instincts into his institutional economics. In addition, we can say that instinct is not a necessary analytical concept when one discusses the shorter time cycle of conflict and joint expectations compared to Veblen’s anthropological time axis. Yet like Veblen [1898], in Commons’s cumulative causation, there is no a priori meaning of purpose that provides an evaluation criterion. The reason is that no meaning of purpose exists outside of causation, but is created and reinterpreted inside causation. In addition, no instrument can be deducted outside of causation. Therefore, the third interim “footholds”, or “instrument” of experimentalist actors are “insight” and “institution” (working rule and custom). Fourth, the action that is evaluated as “progress” or “reasonableness” is not an action bringing certain consequences, but an action based on the requirements of due process (working rules). With regard to “substantive” due process, the changing political, economic and ethical norms compress and re-compress in the context of institutions. If sovereignty directs the process properly, the institutions come close to being reasonable. Further, according to this situation of institutional change, the minds and their joint evaluation within the changing institutional environment are directed towards reasonableness. During the time in which Commons [1934a] was writing, the most appropriate meaning of the purpose of sovereignty, namely public purpose, was reasonableness, which represented “consensual idealism”. It was not “idealism” that is outside of cumulative causation, but rather the “social philosophy” of experimentalists troubled by tense relations, which arise one after another through cumulative causation, between ideals and practical effects [Commons, 1913, pp. 1–13; 1934a, pp. 97–8, 107].