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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]

Figure 1

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

Figure 2

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].

2.2 – A new perspective on Hodgson’s criticism

26Hodgson [2003] asserted that the links set out by Ramstad [1990, pp. 79–81], that is, “customary practices shape the will” and “the will chooses the outcomes/working rules”, are incomplete. While Ramstad [1990] elucidated the implication of Commons [1934a] favourably, Hodgson [2003, p. 571] performed a “grounded exegesis of what Commons actually wrote and thought”. Hodgson flatly refuted the discussion of Ramstad, who complimented Commons [1934a] by referring to Dewey [1922] as “wishful imputation” [Albert and Ramstad, 1997; Hodgson, 2003, p. 571].

27Hodgson’s criticism is based on the following (see Figure 2). First, Commons [1934a] did not account for “instinct”, while Hodgson viewed such “impulse” as the point of junction of the link between customs and habit. Second, Commons [1934a] lacked an explanation of the link between habit and customs. Third, Commons [1934a] did not formulate the concept of habit correctly compared to Dewey [1922]. While Commons [1924] formulated the concept correctly based on a quotation of Dewey [1922], in Commons [1934a], Commons defined the concept in a behaviouristic manner and, according to Hodgson [2003, p. 556], “he mangled Dewey’s concept of habit”. Thus, Commons did not inherit “instinct–habit psychology” correctly. Of great significance in Hodgson’s discussion is the attempt to verify whether the psychological foundations underpinning causation are written in the text of Commons [1934a] and to identify points that need further explanation. The elements of Hodgson’s criticisms are the following three points.

28First, Commons [1934] did not use “instinct” as the cornerstone of causation. Hodgson saw that instinct or “impulse” connects institutional causation with individual causation. An individual, driven by instinct, reaches for custom to acquire habit. “The acquisition of habit is often triggered by human instincts as well as by institutional and customary constraints” [Hodgson, 2003, p. 558]. Commons [1934a] lacked an explanation of the connection point.

29Second, Commons [1934a] lacked an explanation of how a habit becomes a custom [see also Rutherford, 1986, p. 735].

30Third, in comparison with Dewey [1922], Commons [1934a, p. 45] defined “habit” as a behaviouristic concept, that is, “mere repetition of acts”. Therefore, Commons did not inherit “instinct–habit psychology” from pragmatism correctly.

31Thus, Hodgson [2003] narrowly viewed the elements of social psychology of pragmatism as instinct and habit. He appears to require the phylogenesis of institutional economics based on instinct.

32Consequently, what is Hodgson’s [2003] “instinct–habit psychology”? Schematically, if Figure 2 is completed, the details show this. Certainly, the figure is useful for explaining the circular causation of society and individuals from their genesis. In this regard, instinct is the trigger for learning about the natural and social environment and for adapting to the environment. As a result of the action of such adaptive behaviour, a habit is formed. A certain habit that has a dominant position within various other habits may then become a custom. Thus, a custom is learned by individuals because of an instinctive trigger and is then reflected in their adaptive behaviour. Hodgson’s [2003] interest is to explain the evolution of capitalism, namely the circular causation of humans and society, based on instinct, which is “substance” or a fundamental trait. Hodgson unconsciously seeks in Commons’s [1934a] institutional economics a genetic theory based on instinct [Hodgson, 2003, pp. 550, 554]. [13] However, Commons [1934a] did not use a genetic approach in order to explain causation; instead, he adopted a different psychology. Commons [1934a] considered how a society controls uncertainty and conflicts by using institutions and intellect as tools. Thus, his interest lies in how a society solves confrontational problems in the “present”. Hence this article reviews the three criticisms of Hodgson [2003] from a different perspective. This perspective, in accordance with Commons [1934b, p. 160], is “instrumental pragmatism”.

33Instrumental pragmatism is a social philosophy that considers the process of solving a conflict that occurs in the political economy. It is applied from the perspective of “pragmatism”. This examines the development of hypotheses in the scientific community by focusing on the “effect” of a tested object. With regard to instrumental pragmatism, a certain action’s “desirable consequence” for a certain community is substituted for physical “effect”. [14] The fundamental aspect of instrumental pragmatism is not a clear explanation of genetic history; instead, it focuses on the ways in which actors who face a certain problem in the present mobilize the social construct, represented by the institutions that have cumulated, in order to create a situation in the future in which the problem is solved [Biddle, 1991]. Thus, the focal point of analysis is not instinct but intellect activated for the purpose of solving a problem.

34The mind that appears in Commons’ institutional economics is customized or institutionalized. Nevertheless, why does the mind reflect on customs that construct the mind? The answer is that unintended consequences force the mind to consider those customs on which the mind has unconsciously depended. Here, the intellect, awakened by the unintended consequences that disrupt expectation, starts to inquire about reconstructing such expectation. The intellect in institutional economics is J.R. Commons himself because he was a social reformer and a citizen who was involved in economic conflict. The citizens in Commons’s institutional economics view institutions instrumentally as an interim and changing order in which transactions stably bring about their private purpose in complex and uncertain economic system [Commons, 1913; 1934a, p. 717; Biddle, 1990a, p. 17].

35Here, the specificity of conflicts considered by institutional pragmatism is touched upon. In both the genesis of the problem and the formulation of a solution, the elements that are associated with the processes are the private and public purposes; the economic interests; and the political, economic and ethical forces. Thus, to begin with, the way in which a problem is brought to the fore or suppressed is established by such elements. Second, workable solutions are limited within various possible solutions. A noble institution that may become a tool for problem-solving will be effective only when “administration” is well conducted. Therefore, in a negotiation through which the institution works, an agreement for administrative cooperation must be reached.

36In the following three sections, Hodgson’s [2003] three criticisms are discussed from the perspective of instrumental pragmatism.

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.


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”.
[Commons, 1924, p. 349; Dewey, 1922, p. 76]

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


. 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.
[Dewey, 1922, p. 42]

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].


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.
[Commons, 1934a, p. 697] [15]

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.


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.
[Commons, 1934a, p. 121]

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.


Habitual assumptions have the double aspect of unthinking impressions, and of the customary repetition of transactions.
[Commons, 1934a, p. 748]

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].


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.
[Commons, 1934a, p. 698]

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].


[…] 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”.
[Commons, 1934b, p. 170]

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]


[…] We name it custom, as he intended, instead of instinct. Such instinct, he says, is “a matter of tradition out of the past,”.
[Commons, 1934a, p. 660; Veblen, 1914, p. 7]


[…] 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.
[Commons, 1934a, pp. 682–3, see also pp. 7, 90]

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].


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.
[Commons, 1934a, pp. 712–3]

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

Figure 3

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].
(Source: Compiled by the author)

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.


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.
[Commons, 1934b, pp. 155–6]

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].


This work was supported by JSPS KAKENHI (Grant-in-Aid for Scientific Research (B), Grant Number 26285048 and Grant-in-Aid for Research Activity Start-up, Grant Number 15H06303). I received invaluable comments about a previous version of this manuscript from Mr Bernard Chavance (Professor Emeritus at the University of Paris Diderot).


  • [1]
    Research Fellow of C-PiER (Center for the Promotion of Interdisciplinary Education and Research), Kyoto University
    address: International Affair Office, Graduate School of Kyoto University, Yoshida-Honmachi, Sakyoku, Kyoto, 606-8501, phone: +81–75–753–3400, fax: +81–75–753–3492, e-mail address:
  • [2]
    In this article, “value” means “proprietary scarcity value”, namely “price” [Commons, 1934a, pp. 207, 213]. Further, value in a broader meaning is expressed as “norm”. However, Commons [1934a] did not use the word “norm”.
  • [3]
    In Commons [1934a, p. 698], the term “intellect” is presented as one element of the mind compared with another element of the mind, “habitual assumption”. “Intellect” can be expressed differently as “active mind” [Commons, 1934a, p. 149]. The intellect begins working when doubt occurs or conflict with other minds arises.
  • [4]
    Other momentum comes from unintended consequences, as Biddle [1990b] stressed.
  • [5]
    However, in Ramstad [1990], as can be expected from the section title “XVII. A Digression on Institutional Causation”, cumulative causation is discussed within a space constraint [Ramstad, 1990, pp. 77–86].
  • [6]
    Following law or causation is involved in institutional causation. According to Ramstad, it is the law of supply and demand, that is, “economic law”. According to Uni [2013], it is the cumulative causation of the macro economy. Based on Ramstad [1990], for Commons, “economic law” or “market force” arises from myriad transactions, which are controlled by institutions; therefore, the law does not exist prior to institutions and does not evolve independently from the institutions. However, this article focuses only on the causation between “institution” and “institutionalized mind” within “multiple causations” [Commons, 1934a, p. 7].
  • [7]
    “Will” refers to the total inner world of an individual. “Volition” indicates active choice, that is, “performance”, “forbearance”, “avoidance” and “timeliness” [Commons, 1934a, pp. 305–6; 1950, p. 149].
    Figure 3

    This strategic choice, including deliberate “withholding”, is intended to control “proprietary scarcity” [Commons, 1934a, pp. 198–201]. Timeliness is the choice of appropriate time and place and degree of performance.
  • [8]
    A brilliant explanation of the relation between meaning, valuing and volition is given in Commons [1934a, pp. 17–20] [cf., Mirowski, 1988, p. 127].
  • [9]
    The purpose of authoritative agency derives from the collective will of principals.
  • [10]
    Here and throughout this paper, italic font indicates a direct quotation, whereas bold font indicates emphasis added by the author of this article. [] is a supplement of the author.
  • [11]
    When Commons discussed whether the draft laws would be effective for certain problems, he considered not only the drafting of the law but also the existing or attainable belief systems of participants in transactions that would become norms at a meta-level, supporting the operation of the draft. His view, that it is the norms at the meta-level that underpin the workableness of institutional reform, is expressed clearly in his key word “administration”. His method, in which he processes reasoning based on existing or attainable customs, differs completely from the method of economists who deduce from certain assumptions that are not based on experiences [Commons, 1934a, p. 847].
  • [12]
    The question of how new order is brought out of conflict may be a unique focal point of Commons in comparing modern institutionalism. Modern institutionalism, for example, the new institutionalism of D.C. North, regulation theory and convention theory have commonality with Commons’s focus on “conflict”, “mind”, “convention” and so on [cf., Rutherford, 1986, pp. 736–8; Baslé, 2002, p. 25]. However, Commons is unique in focusing on the creative method exercised in constituent processes of joint experience. The creative method is, as discussed in Section 6, “insight” and the negotiation process between representatives of organized economic interests [Commons, 1934b, p. 73]. Perhaps the method was a specific way of being for the intellect and a specific way of forming an agreement in the United States or the state of Wisconsin at the time [Vögelin, 1995]. If this is true, then the cumulative causation shown by this article cannot become a general theory [Terakawa, 2014].
  • [13]
    Hodgson [2003] saw the evolutionary theory of Veblen [1899] as “the social analogs of biological genes” [Jennings and Waller, 1998, pp. 1020–1, n. 4] and applied this perspective to Commons’s [1934a] institutional economics. However, Hodgson’s [2003] emphasis on Veblen’s evolutionary theory is deemed to be problematic. The biological evolution approach is not only a genetic approach but also an approach based on ethnology and sociobiology. Veblen emphasizes the latter approaches [Taka, 2004, p. 126, n. 11]. Taka [2003, p. 20] characterizes Veblen’s evolutionary theory as follows:
    […] Veblen tried to adapt the theory of biological evolution to anthropological generalizations through the assistance of the ethological approach.
    Commons also sees instinct not as the social analog of genes but the established method of the various ways in which actors form relationships with others and with materials.
    […] the instincts are not so much hereditary as educated. They are subject to variation, selection and survival, through competition and struggle, primarily as adaptations to meet the material requirements of life and the cultural changes of civilization
    [Commons, 1934a, p. 660]
    As noted above, Hodgson [2003] makes the criticism that Commons [1934a] did not place inherent traits in his institutional economics. Further, Hodgson [2003] rejects Commons’s [1934a] focus on habitual action because it seems like the “behaviourism” of J.B. Watson. This way of thinking appears to derive from an understanding of evolutionary theory, not from the ethnological and sociobiological approaches, which focus on the gradual transformation of the meanings of actions and ideas through a changing relation with others and with materials, but from the genetic approach.
  • [14]
    In Commons [1934a], desired consequence is discussed as desirableness for public purposes; for example, for further freedom, fairness, the commonwealth, the stabilization of the value of money, and the stabilization of employment.
  • [15]
    Commons [1934a, pp. 90–1] mentioned that such a mechanism of mind corresponds to Dewey’s social psychology. What Commons indicated by the term “social” in comparison to the term “individualistic” may be the following: testing the consequences of an action does not mean valuing the “utility” of someone’s inner world subjectively but rather jointly evaluating the consequences of “trans-action” based on collective reasoning [cf., Geyer, 1914, pp. 38–41; Commons, 1931, p. 450].
  • [16]
    Intellect consists of “rationalization” and “insight”. Rationalization is a way of rigorous reasoning, such as deduction or induction. It is divided into “analysis” and “genesis”. The former is a process of classification. The latter is an analysis of change of the classified parts. Insight is, like the way of reasoning of Peirce’s “hypothesis”, “the union of analysis and genesis into a formula of the changing relations of the parts to the whole” [Commons, 1934a, p. 99]. Insight, rationalization and habitual assumptions comprise the institutional mind. These are, in fact, inseparable; however, they are separated for analytical convenience [Ibid., p. 747]. With regard to insight, see Bazzoli [1999, p. 68] and Peirce [1903, p. 186; 1923, p. 131].
  • [17]
    In addition, Commons required a measurable concept of “scarcity value” and “use value” [e.g., Commons, 1934a, p. 383].
  • [18]
    This stance closely resembles the “social behaviourism” of G.H. Mead [Albert and Ramstad, 1998, p. 32].
  • [19]
    In Commons [1934a], it is difficult to divide ontology from epistemology. Commons himself was an “observer” of the economic scene [Ratner and Altman, 1964, pp. 67–8] as well as, in one case, an “investigator” in Institutional Economics [Commons, 1934a, pp. 840–1]. Therefore, in Commons [1934a], the term “investigation” is a key concept in methodology, epistemology and ontology [cf., Bazzoli, 1999, pp. 56–7; Commons, 1939, p. 523; Rutherford et al., 2008, pp. 231–2; Samuels, 1998, p. 2].
  • [20]
    The main description explaining the framework of the cumulative causation, e.g., Commons [1934a, Ch. X. I. Veblen, V. Habitual Assumptions] may have been written during the time from 1929 to 1933 [Commons, 1927; 1928a; 1931; 1932; 1934b, p. 201]. In the society that had been much more unstable since “November 1929, when the financial system collapsed” [Commons, 1950, p. 69], Commons may show more clearly than in his former works what entity individuals are and how they should behave. This is a topic for future research.
  • [21]
    Is it worth focusing on security of expectation, liberty and equality as fundamental driving forces? In Commons [1934a], these wishes, together with other motivations — for example, self-interest, profit seeking and rent seeking — drive individuals. Because the fundamental wishes conform with the human rights of the US Constitution and were aspired to by people who endured the social situation of the interwar period, these motivations appeared to be period-specific wishes.
    However, we can confirm a case in which people were driven by these wishes. For example, the biggest trade union in modern capitalism, the German Industrial Union of Metalworkers (IG Metall), runs a nationwide campaign for an improvement in labour security and uncertainty [Kitagawa et al., 2014]. Therefore, focusing on these fundamental wishes might be effective in explaining institutional change in modern capitalism.
  • [22]
    Commons [1934a, Ch. IV (III) Pragmatism] refers to the process and the way in which a certain habit becomes a prevalent custom.
    But custom is that portion of experience, feelings and expectations derived from other persons who act collectively alike, which is education in its broadest meaning. […] Education is the acquiring of habit by conformity to custom. And so it is with Peirce’s consensus of opinion. It is the consensus of belief by scientists which has the force of custom in creating new habits for the individual.
    [Commons, 1934a, p. 115]
    The discussion of (III) Pragmatism ends as follows.
    He [Peirce] meant, if a theory “works” when tested by experiments and verified by others, then the theory is true and right, so far as present knowledge is concerned and all the known facts are included.
    [Ibid., p. 155]
    We may translate “a theory” to a habit or a local custom. “From Habit to Custom” means that “individual bias” has become “a social consensus” through collective inquiry [Ibid., p. 152].
  • [23]
    This “practice” is not the practice of an individual but (customary) practice on the level of transaction, namely, joint expectation. “Repetition” and “duplication” contain “variability”. While practice is raised to “usage” through repetition, this variability changes the practice and the usage gradually [Ibid., pp. 44–5; cf., Commons, 1950, p. 180].
  • [24]
    “Going concern” refers to any organized group that imposes certain working rules on its members, for example, family, corporation, labour union or government.
  • [25]
    Commons knew of the term “cumulative causation” [1934a, p. 657], but why did he not use it willingly? The reason may be that he focused on “multiple causations” [Commons, 1934a, p. 7]. As shown by the following quotation, Commons’s aim was to control limiting factors that are successive, not cumulative.
    […] generally, in a going concern, the limiting factors are not cumulative at a point of time — they are successive during a sequence of time.
    [Ibid., p. 90]
    That is why Commons rarely used the term “cumulative causation”. That is, his main emphasis was not accumulation but succession of the limiting factors. Little more is mentioned about successions. Business, political or cultural concerns should maintain interactions with members, other concerns, and the natural and social environment. In order to continue, a concern tries to gain control over a situation by operating a limiting factor, namely the “strategic factor”. However, of the various factors, the strategic one “in the present” changes from moment to moment. Thus, the concern merely operates a factor that “is inferred to be” strategic. Whether the factor is really strategic or not is tested when the concern operates the factor. Moreover, the factor that is really strategic is the one that changes. Thus, the quest for the strategic factor lasts a long time.
  • [26]
    Futurity is the psychology of valuing facts in the present based on expected consequences [Commons, 1950, p. 105; cf., Fajnzylber et al., 1998, pp. 23–7]. It indicates that “here is an [expected] effect that precedes its cause” that is valuing and action at present [Commons, 1950, p. 105]. While from the subjective perspective of the psychology of an actor, the flow of cause and effect seems to reverse, when we see this psychology as part of circular causation, it is obvious that joint expectation (institution) precedes valuing and action.
  • [27]
    Therefore, cumulative causation shown in this article resembles Dewey’s meaning of “trans-action”. On the contrary, the “transaction=trans-action” of Commons [1934a, p. 73] may be close to Dewey’s “inter-action” [Commons, 1925, p. 266; Dewey and Bentley, 1949, especially p. 101, n. 8].
  • [28]
    With regard to the macroeconomic arrangement that forms part of the institutions, see Uni [2013]. With regard to the arrangements at the micro level decided by the institutions, see Kitagawa [2016].

Commons’s [1934a] theory of institutional economics explained cumulative causation between an “institution” and an “institutionalized mind” from the instrumentalist view of intellect and institution; namely, “instrumental pragmatism”. This article verifies Commons’s [1934a] theory with a holistic model and elucidates four characteristics of cumulative causation that are shown in Commons’s [1934a] work. First, the findings illustrate that conflict is an important cause of momentum for investigation. Second, Commons [1934a] dared not use instinct as a cornerstone of his cumulative causation because he wished to avoid introducing a capital-labour dichotomy to his concept of institutional economics. Third, the interim “footholds” or “instruments” of experimentalist actors are “insight” and “institution” (i.e., working rules and custom). In this regard, the actors need footholds because, in Commons’s [1934a] cumulative causation, there is no a priori meaning of purpose that provides an evaluation criterion. Fourth, an action evaluated as “progress” or “reasonableness” is not an action that brings a certain consequence; instead, it is an action based on the requirements of due process.
JEL classification: B25, P16


  • J.R. Commons
  • institutional economics
  • cumulative causation
  • pragmatism
  • reasonable value


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Kota Kitagawa [1]
  • [1]
    Research Fellow of C-PiER (Center for the Promotion of Interdisciplinary Education and Research), Kyoto University
    address: International Affair Office, Graduate School of Kyoto University, Yoshida-Honmachi, Sakyoku, Kyoto, 606-8501, phone: +81–75–753–3400, fax: +81–75–753–3492, e-mail address:
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