This article records tradition as it has been passed down and reported. Its sources are not yet part of the atlas's verified catalogue.
Thorstein Veblen did not think much of the rational actor at the center of most economic theory, and he said so with a memorable label. In The Theory of the Leisure Class, published in 1899, Veblen described a great deal of the spending done by the wealthy as conspicuous consumption: purchases made not for the straightforward use of the thing bought, but to display status to onlookers. A watch that tells time no better than a cheap one, worn because it is expensive rather than because it is accurate, is not the behavior of someone maximizing utility in the way economic textbooks described. It is the behavior of someone playing a social game the textbooks had no room for. Veblen pushed the point further than a single memorable phrase. He argued that economic behavior in general is shaped by habits, customs and institutions that evolve over historical time, the way a biological species evolves, rather than by fixed preferences an individual carries into every decision unchanged. An economics that wanted to explain the actual economy, Veblen thought, needed to study how those institutions actually form, persist and change, not build ever more elegant models of a equilibrium that assumed the institutional question away. This was less a policy program than a demand that economics ask a different kind of question, and it set the agenda for the institutional economics that followed him. John R. Commons took the argument in a more legal direction, examining how courts, statutes and organized collective action define the property rights and contract enforcement that make market exchange possible at all, treating the legal architecture of a market economy as something to be explained rather than assumed. Institutional economics remained a minority tradition for most of the twentieth century, overshadowed first by the rise of neoclassical price theory and later by the great debates between Keynesian and monetarist economists over demand management and the money supply. But its central insight, that institutions are not a backdrop to economic activity but part of what economic activity actually consists of, returned to prominence from the 1970s onward in what economists generally call New Institutional Economics, a related but distinct later tradition. Douglass North examined how property rights and enforcement institutions shape long run economic growth across centuries, and Elinor Ostrom, the first woman to win the Nobel Memorial Prize in Economic Sciences, studied how real communities govern shared resources such as fisheries and irrigation systems through locally evolved rules, often succeeding where a simple choice between private ownership and government control, the two options economic theory had long treated as exhaustive, would have failed. This later tradition is now modeled on this atlas as its own school of thought, New Institutional Economics, distinct from Veblen and Commons's own Institutional Economics: related by its debt to Veblen's founding insight, but different enough in method and question, spanning Coase's transaction costs, North's institutions and growth, Williamson's governance of the firm and Ostrom's commons governance, to stand as a school in its own right. What is not in question is the debt: an economics willing to ask how institutions form and change, rather than assuming them away, starts with the book about the leisure class.