The institutional school of thought became popular in the United States of America in the 1930s. It focuses on the roles of institutions such as firms and states in economic life and cultural development (Kapp, 2011). It views the market as a result of the interactions of these institutions. Veblen, Michell, and John R Commons developed institutional economics to show the inadequacy of neoclassical economics and try to put forward an alternative perspective (Elgar, 2012). John R Commons is mainly known for his role as a pioneer of labor economics.
John Rogers Commons was born on October 13, 1862 in Hollansburg Ohio, and died on May 1945 in Fort Lauderdale, Florida. He studied at Oberlin College and later at John Hopkins University. John chose John Hopkins University mainly because his mentor Richard T Ely was a teacher there and he wanted to study under his instructions. Richard had studied economics in Germany and was bringing the German Historical School’s approach to economics in America. After studying for two years, Commons got a job offer to teach at Wesleyan University in Connecticut but was not hired. Commons taught at the University of Indiana and Syracuse University in New York where he took a chair of sociology.
He wrote his first book; The distribution of wealth in 1983 which tackles the theory of value and principles of distribution. In 1901, Commons found a job in the U.S. Industrial Commission where he aspired to complete his study on immigration. His work in this commission led to the beginning of his specialization in labor economics as well as labor unions. In 1902, he became the assistant secretary of the National Civics Federation, where he researched taxation and labor-management reconciliation. Commons then went to Wisconsin in 1904 to accept a position in labor economics at the University of Wisconsin. While in the state of Wisconsin, he developed legislations on many social concerns. His association with Wisconsin University was the most fruitful in his life. He was responsible for drafting legislation that saw the creation of the Wisconsin Workers Compensation Program which was one of its kind in America (Gilbert, 1949). He also published his classic Documentary History of American Industrial Society (1910). Commons advocated for proportional presentation which he wrote in his 1896 book: Proportional Representation. He also served as the vice president of the Proportional Representation League in 1907. In 1910, he wrote his best-known work, The History of Labor in the United States, which tackled the role of trade unions in working towards equality of the workers and owners. Commons believed that carefully crafted legislation could bring about social change; that view led him to be known as a socialist radical. Commons is mostly known for his advancement of the study of collective action by institutions and the state because he was certain that they were essential in understanding economics. He promoted institutional economics, his views on transactions and incomplete contracts being his most notable contributions.