| Abstract |
This thesis delves into the history of economic thought in order to dredge up the theoretical
tools that help better explain the foundation of modern Political Economy. The collected works
of Thorstein Veblen, the so-called “patriarch” of the Old Institutionalist school of thought, are
in the spotlight here. We will mainly emphasize, and at times revisit word-by-word, Veblen’s
The Theory of the Business Enterprise (1904), which is the forefather of many not so obvious
modern theoretical undertakings, with Diferential Accumulation, Jonathan Nitzan’s and
Shimshon Bichler’s outlook on Political Economy, being the most prominent and
underrepresented in the modern (critical) outlooks of our fnancial world.
In the course of the thesis we will analyze the main propositions presented in The Theory of
Business Enterprise and other works by Thorstein Veblen, which, contrary to what some of his
later critics put forward, are enough to establish a good part of the unifed economic theory he
attempted to propose, and also create a theoretical framework for the interpretation of
modern capitalism as the study subject of Political Economy with a deep focus on its fnancial
aspect.
Our starting point couldn’t deviate from an introduction to the peculiar methodology of
Veblen’s unique take on the Institutional School’s practices, as well as his not so conventional
way of writing. Two vital elements permeate Veblen’s thought: the dichotomy and institutions.
Institutions, explicit or implicit they may be, are defned as habits, norms, and patterns of
thought and behaviour. Veblen deals with the interactions and innate contradictions of all
biologically defned, socially-molded, and transferable institutions, within an evolutionary
context, that eventually constitutes the socioeconomic environment in its entirety.
The much-cited Veblenian Dichotomy helps shape the aforementioned contradictions, and
catalogues or categorizes the institutions according to the subject of the analysis.
Nevertheless, the essence of the dichotomy is essentially a unifed entity; the mismatch
between the technological and social realities, that is, between human progress and human
perceptions.
In the context of The Business Enterprise, the dichotomy emphasizes the contrast between
business and industry, with these two functions being in a recurring confict, ultimately grinding
the gears of the modern economy. This thesis deals with the analytical deconstruction of
Veblen's eponymous book, the pages of which are the incubators of several ideas formally
postulated at a later date by other, certainly more recognizable than Veblen, economists. The
concepts we will examine include, inter alia, the division between technical/industrial and
business/pecuniary employments, business credit and the emergence of the corporate era, as
well as absentee ownership along with the redefnition of capital in the 20th century.
The latter two points, on ownership and capital itself, allow us to move onto the contemporary
theory of Nitzan and Bichler on the diferential nature of accumulation. The work of the two
professors has a retroactive efect and a revisionist perspective for the entire 20th century, as
well as for the 2007-08 crisis.
By combining the work of past and present, we can defne capital as quantifed and auctionable
ownership rights over groups of tangible and intangible assets, that are expected to generate
income streams in the future. According to Nitzan and Bichler, the only point that modern
Political Economy should focus on is capitalization and the analysis should only be conducted in
real stock market terms rather than using abstract frameworks to help shape our
understanding of the economic system. This thesis proves that Veblen's thinking is along the
exact same lines, and focuses on business reality, as it is formed every day with corporate stock
buyouts, mergers, and acquisitions.
Of course, the peculiarities of the Nitzan and Bichler theory, with its emphasis on power in
diferential rather than absolute terms, will be emphasized. Their work on the dynamics of the
fnancial system will give the thesis the impetus for more practical pursuits, and we will deal
with the implications of mergers and fnancial innovation of the recent past.
For completeness’ sake, we will also refer to the depth of Veblen's theoretical foundation for
describing the aforementioned fnancial reality, with references to the ideas of J. M. Keynes
and Irving Fisher.
The scope and purpose of this thesis is not a sterile re-examination of a long gone and
forgotten economics theorist, but the full association of synthesized theory with present
issues. Nevertheless, we must constantly be aware of the heterodox nature of most of the
theories that are presented therein, and not bestow upon them unwarranted value simply
because of obscurity. This thesis is merely an attempt to map and better understand modern
fnancial reality through the combined the study of Political Economy.
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