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Part I
Instincts and Institutions
Ultimately, economics is about human behavior. That is why every system of economic analysis must include a description of how people behave. Not surprisingly, different schools of thought present very different views. Before we look at Veblen’s ideas on the subject, it will be instructive to examine the views of the two major schools of thought that existed at the time Veblen was writing. As we shall see, the contrast with Veblen is stark.
Neoclassical economists had an extraordinarily simple view of human nature, which they believed to be the same at all times and places. People, because they are people, were all assumed to be utility maximizers. That means that all behavior can be explained as rational attempts either to obtain pleasure or to avoid pain. Economists of the time wrote about people as hedonistic utility maximizers in stark terms. Edgeworth, for example, spoke of humans as “pleasure machines” [Edgeworth, 1881, 15]. People calculated the likely pleasures