What is Institutional Economics?

From William Dugger’s Underground Economics: A Decade of Institutionalist Dissent:

“Institutionalism serves as the methodological conscience to the unrealistic neoclassicism that now dominates economics departments in U.S universities. Realism is the touchstone of institutionalism. Institutionalists may differ over many particulars, but on this we agree: economics should be realistic; it should deal with the real world, the world as we find it, not the world we must assume in order to build determinate models. This does not mean that institutionalists wish to be atheorectical. Institutionalism is not opposed to theory. Instead, the quest for realism means that institutionalism starts with history, with human economic experience. It is from experience, not a priori first principles, that institutionalists try to theorize, and we criticize those who take shortcuts that avoid the messy details of the human experience (p. xvii).
Little room for real disagreement was allowed within the neoclassical hegemony. So most economics departments in U.S universities became dread-fully dull places… When academic security is found in dullness, and when consensus is mistaken for scientific truth, disagreement and dissent are pushed below the surface of correct inquiry. And I suppose this is why institutionalism is usually kept in the underground. We [institutionalists] make too much of a fuss about realism, and a real world is a messy and, at times, unpleasant place. Digging into such things is considered decidedly unprofessional, particularity if the digger borrows tools from her sister social sciences, for them the digger has broken one of the strongest taboos in neoclassicism. He or she has become a sociologist!” (p. xviii)

— Dugger, William M. 1991. Underground Economics: A Decade of Institutionalist Dissent. London: M.E. Sharpe.

institutionalism institutional theory