On the Integration of Institutional Themes and Neoclassical Formalism: Locational Economics as a Case Study in Pragmatic Empiricism

The conflict between institutionalism and neoclassicism in the 20th century has been investigated by scholars over the years. Many of them believe that in the postwar period, neoclassicism triumphed while institutionalism largely disappeared. The present chapter takes a very different view. The late 20th century represents a broad synthesis of neoclassical and institutional themes in a methodology we call pragmatic empiricism. That approach combines the mathematical model building and theoretical formalism of neoclassical economics with the institutional economist’s data-driven statistical analysis and concern for developing institutional forms. We use as a case study the history of American locational economics from the 1930s to the present. The mixing of institutional and neoclassical themes is quite evident in the work of three young scholars at Harvard who effectively initiated American locational economics. In the postwar period, we find a series of outstanding, well-published papers that capture the spirit of the “founders.” These papers do use more modeling, but they also focus on major institutional developments. A broader review of locational works is consistent with the pragmatic empiricism label. The history of locational economics supports the claim that institutionalism, far from disappearing, continues to provide fundamental questions and techniques for modern pragmatic empiricism.