Most of David Hamilton’s book Evolutionary Economics: A Study of Change in Economic Thought, (1999) clarifies the main differences between institutionalism and classicism (Hamilton’s term for both classical and neoclassical economics). In the first place, classicism is reductionist, concentrating on only one aspect of society, namely the psychology of consumerism–and even that psychology is so abstract in its assumptions that it cannot be empirically tested. Institutionalism sees the whole society as a unified set of relationships and processes, so it is called holistic rather than reductionist. Secondly, classicism focuses on equilibrium with and the adjustment to equilibrium, as if there were eternal laws of equilibrium. Institutionalism focuses on the process of change of history in an evolutionary approach in the tradition of Darwin. Third , classicism explains everything based on the psychology of individuals, as if they could be seen in isolation from society, while social laws derive from individuals. Institutionalism argues that individuals are always part of society, so one must begin with the actual institutions, which embody relationships between groups.
