（ 79 ）How Did Commons Understand Veblenʼs
Concepts of Intangible Property and Good-Will?a）

TSUKAMOTO, Takaob）
I

PrefaceThis paper clariﬁes John R. Commonsʼ（1862-1942）concepts of intangible property and goodwill. This consideration opens the way for Commonsʼ the reasonable value concept.1） As a ﬁrst
step, I reconsider how Commons understands Thorstein B. Veblen（1857-1929）, particularly theconcepts ofintangible property

andgoodwill.

In other words, to understand Commonsʼ

economics as a whole, we need to solve his concept ofreasonable value.

Thus, this paper

reexamines the meaning of Commonsʼ comments on Veblen to clarify his concept of reasonablevalue. 2） I seek to clarify the concept of Commonsʼ reasonable value through his comment on
Veblenʼs economics. Therefore, I reexamine passages about

Veblenin his Institutional

Economics.3）
Commons attempted to explain his concept ofreasonable value

using Veblenʼs theory ofintangible property. According to Commons, reasonable value can be found in the decisions of
the court; however, Veblen could not find them.4） Reasonable value gives us the standard ora） This paper has revised my report manuscript, John R. Commonsʼ View of T. Veblen: On his Intangible
Property and Good-will, in the Work-Shop of John R. Commonsʼ Contribution to the Theory of Regulation,
International Colloquium, Research & Regulation 2015, in Paris, June 12, 2015. I got valuable comment from
Professor Bruno Thère , the commentator of this workshop. I wish to thank him.
b） Author is Professor of College of Economics, Nihon University, Tokyo, Japan. E-mail tsukamoto.takao@nihon-u.
ac.jp
1） For recent research about of Commons, see Rutherford, Malcolm［1990］; Rutherford, Malcolm［2011］. In
particular, for a more recent research trend based on Commonsʼ economics, see Mayhew, A., et. al.［2014］, which
discusses a mini-symposium held on Commonsʼ economics. The symposiumʼs panelists argued over the validity ofCommons.
2） One belief is that we can more easily grasp Commonsʼ economic theory if we categorize his theory as an
institutional economics rooted in Veblen. However, recent studies on Commons do not seem to mention Veblen.
For example, see Whalen, Charles J.［2008］. However, most of researchers on Commons do not seem to mention
Veblen.
3） Commons, John R.［1934］, Veblen, in X Reasonable Value, pp.649-677.
4） Commons stated, I had read Veblenʼs brilliant criticisms, beginning in 1895, on the theories of the classical,
socialistic, and psychological economists, and his suggestion that an evolutionary theory of value must be
constructed out of the habits and customs of social life. But he had not studied the decisions of the courts which
are based on these customs and I went to work with my students digging directly out of the court decisions
stretching over several hundred years the behavioristic theory of value on which they were working. Commons, J.
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criterion for solving conﬂicts of interest.
According to Wesley C. Mitchell（1874-1948）, Commonsʼ reasonable value is a type of intangible
property.

To Commons, reasonable value is a theory of intangible property developed by Supreme

Court of the United States since 1890. 5） Moreover, Mitchell stated that,
institutional economics is an evolutionary science.

to him（Commons）

6）

Before beginning to reconsider Commons, I would like to glance how institutional economists viewthe framework of American Capitalism to make it convenient to understandinstitutional

economics. and Commonsʼ economics.
As is well known, Commons was one of the founders of America Institutional School. The othertwo founders were Veblen and Mitchell. Although the original concept of institutional economics
was provided by Veblen, he called his own economics evolutionary economics. 7） Veblen developed
an economic analysis model on modern American Capitalism called the business-industry model. 8）
According to Veblen, business obtains pecuniary gain for business men; on the other hand, industry
produces and provides useful goods and services for society. Business creates exchange value,
whereas industry creates use value.
Mitchell also considered the American Capitalism as a dual system. One purpose of the capitalism
is making goods, and the other is making money. According to Mitchell, money economy isconsisted of these two systems.9）
Commons divides American Capitalism around the beginning of 20th Century into two parts: agoing business and a going plant.
Their models are called the dichotomy of institutional economics, as indicated in Figure 1.
A review of Commonsʼ and Veblenʼs visions about American capitalism easily indicates similarelements. However each has his own vision. In this paper, we focus on the comparison between
Commons and Veblen.10） By considering how Commons took up Veblen, we recognize the diﬀerence
between them, thus resulting in an approach to Commonsʼ theory of reasonable value.

R.［1924］p. vii.
5） Mitchell, W. C.［1950-b］p.331.
6） Ibid., p.321. Also see, Tsukamoto, Takao［2015］.
7） Veblen, T. B.［1961-b］.
8） The material framework of modern civilizatioin is the industrial system, and the directing force whichanimates this framework is business enterprise.
This modern economic organization is Capitalistic Systemʼ orModern Industrial System,ʼ so called. Its characteristic features, and at the same time the force by virtue of which
it dominates modern culture, are the machine process and investment for proﬁt. （Veblen, T. B.［1973］p.1.; Veblen,
T. B.［1975 ］; Veblen, T. B.,［1964］.
9） Mitchell, W. C.［1950-a］.
10） Mitchell stated that, Commons is concerned to show how the institutional economics that he is developing
diﬀers from that of Veblen. Mitchell, W. C.［1969］p.722.
For how Mitchell discussed Veblen and Commons, see Toshihiro Tanaka［2012］.
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How Did Commons Understand Veblen’s Concepts of Intangible Property and Good-Will?
（TSUKAMOTO）〔Figure 1: Dichotomy of Institutional Economics〕



II
1

（ 81 ）［Source: by the author］

Veblen and Intangible Property

Veblen and Court for Intangible Property
Commons attempted to explain the theory of reasonable value through Veblenʼs concept ofintangible value. An outline of his comments on Veblen is as follows.（1）Commons appreciated that
Veblen developed the concept of intangible capital.（2）While the evolutionary theory of Veblen isnatural selection, the evolutionary theory of Commons is artificial selection, which is able toimprove more desirable institutions through court decisions. Therefore, Commons insisted on its
effectiveness.（3）Commons evaluated the notion of

good-willthat was developed by Veblen.

Veblen believed that the notion was excellent and eﬀective for analyzing modern business enterprisesystem.（4）Veblenʼs theory of the instinct of workmanship is a possible alternative for Commonsʼmanagerial transaction. （5）Commons explained the reason for Veblenʼs inability to reach the viewof reasonable value. Thus, Commons showed that useful analytical tools under American capitalism
are concepts of collective action,

going concern, and reasonable value based on court decisions.

Commons attempted to explain his concept of reasonable value. This concept is closely related
to the concept of intangible property, which Veblen first addressed in his book, The Theory ofBusiness Enterprise（1904）.11） Veblen considered that intangible property has laid the foundation for11） Veblen, T. B.［1973］.
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the big business enterprise system in America. Veblen found that intangible property generated adifferential profit,

which was a source of wealth from capitalism but was drowned by the

exploitation of society. At approximately same time, the U. S. Supreme Court made decisions
regarding monopolies. Commons examined these considerations.
According to Commons, Veblenʼs contribution to economic theory developed the theory ofintangible property. Until then, the only property for which a price was to be paid and that was
subject to ownership was tangible goods. Intangible property did not yet to be recognized.
The court began to certify recognition of intangible property with economic value through state
governments, which calculated taxable amounts and evaluated the purchase price to the private
sector for public.
According to Commons, since 1890, two different ways of thinking about modern intangible
property have developed. One way is Veblenʼs and the other way is from court decisions. In his book,
The Theory of Business Enterprise（1904）, Veblen developed his views through exploitation theory,and the courts developed their views as reasonable value （p.64912））.13） Both of theories represented
new concepts of capturing property as the present value of future transactions that result in a
beneﬁt or proﬁt.
Commons explored how the court came to recognized that intangible property deserved to be paidfor. He considered the case of Carnegie and U. S. Steel, and how state governments evaluated taxable
amounts of railway companies and the basis of that evaluation in the court decisions. By consideringsuch decisions, Commons determined that the process was an emerging one through which
intangible things that were not recognized as property were beginning to gain recognition as
intangible property with its own economic value. What was recognized as taxable consisted of thereconstruction costs, or the cost to rebuild a companyʼs tangible production facility, plus something .
That something was intangible property. The court recognized that intangible property was
the whole market value of stocks and bonds based on the expected capacity of the corporation as agoing concern （p.652）.
According to Commons,

Veblen rightly interpreted this intangible property as merely an

exploitation or hold-upʼ value. Veblen stated that the value of intangible capital based on expected
earning power was literally only a pecuniaryʼ valuation, and not the industrialʼ valuation （p. 650）.
This assertion by Veblen, if compared with the claims of traditional economics, becomes more
apparent. In traditional economics, the value of the capital was regarded as an expense to obtainproduction facilities and products and was merely grasped as tangible goods. Therefore, Commons
appreciated Veblen as the ﬁrst economist who developed the basic notion of intangible property in12） Subsequent to this point, if the number of pages has been written without special comments, then the page
number is from Commons, J. R.［1934］.
13） Commons described the differences between himself and Veblen over intangible assets as follows.
Consequently, his（Veblenʼs）notion of intangible property ended in the Marxian ideas of extortion andexploitation.ʼ Commonsʼ notion of intangible property ends in the common-law notion of reasonable value.
Ibid.,p.4.
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modern economic theory.
Commons highlighted that Veblen had his own limits, because he made no allowances for thedecisions of the Supreme Court. Whereas the courtʼs recognition of intangible assets was in line with
Veblenʼs claim, under the rule of public purpose ─ requiring equality of taxation ─ the court madethe decision that the economic value of intangible assets was evaluated as reasonable value on thebasis of a reasonable rate of return（p.652）.
Thus for the intangible property, the Veblen conclusion reaches a theory of exploitation, theCourt reaches a theory of the reasonable value.

…, the court reaches it experimentally by

investigation, by mistakes and corrections according to the changing personalities on the bench（pp.653-654）.
2

Pragmatism Theory and Exploitation Theory of Veblen
Commons asked why the conclusions of Veblen and the courts differed. Veblen captured
intangible property from the point of view of science and eliminated its purpose. In contrast, thenotion embraced by the courts was to capture intangible property from the standpoint of a public
purpose. The courts embraced the truth of the society ─ the courtʼs judgment is a truth forsociety. Then, court decisions must be in line with public purposes.
According to Commons, Veblenʼs conception of a science was a traditional science view in physics,
and he eliminated purpose form the scope of science. The reason for his elimination is in the manner
he interpreted Veblenʼs own pragmatism.14）
Veblen believed that the science was amatter-of- fact,

and he eliminated the purpose andanimism and incorporated only the notion that the scientific concept of change is continuous
process. A causal relationship toward a ﬁnal goal is teleological causality, which must be excluded.
Modern science is subject to verification of this validity.15） Commons argued that this statement
represented the scientiﬁc theory of Veblen.
Therefore, if Veblen is correct, science will be only physics, and the science of human nature is
not to be established.
Commons argued that Veblenʼs concept of human nature is rather ambiguous; if we use theconcept of transaction and working rules, we can address the concept in a compact. Collective
action controls the transactions in which individuals engage. We are able to develop the frameworkused in the analysis as working rules and going concern, which are the theory of reasonable value
and the due process of law under the legal system. The courts make decisions with conflicts ofinterest, and rules are developed from the point of view of public interest. Veblen constructed his
theory under capitalism without regulation by these legal systems, enabling Veblenʼs theory on14） Commons believed that Veblenʼs interpretation on pragmatism was defective: He（Veblen）does not seem tohave known the pragmatism of Peirce, which dealt only with physical science, nor the Pragmatism of the courts,…,
James applied it to individual psychology, and Dewy applied it to social psychology. In this ﬁeld they recognizedthat purpose was the dominant problem of a human science. Ibid., p.654.
15） Cf., Veblen, T. B.［1961-a］pp.17, 18.
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capitalism to become the theory of exploitation by the capitalist.
By studying Veblenʼs pragmatism theory, Commons revealed two meanings of pragmatism:
meaning as a scientiﬁc view to pursuing pragmatism and meaning from adapting the pragmatism of
the science of human behavior.
Commons argued as follows. If the sciences treat human behavior, then motivations with a purpose
and future-oriented minds exist. Collective action that controls the individual behavior incorporated
in Veblenʼs exploitation theory, working rules, and going concern may also be studied in line withpragmatism of as a way of science. The process that occurs derives its own decisions, is related tothe semantic content of the reasonable value, pursues a course of change, and can be studied as amatter of fact. The rules of collective action ─ including the customs ─ and going concern havebeen changing. Through the changing process, we see the process of economics evolving. Veblen
determined that orthodox scholars could not develop an evolutionary economic theory because they
have hada faulty concept of human nature. 16） This false concept was presented by Jeremy

Bentham.
Thus, Commons stated, we avoid the faulty concept by making the subject-matter of economics
the transactions of individuals and the going concerns of collective action （p.656）.
3 “Instinct of Workmanship”and Concept of Capital（1） Veblen’s Darwinism and the Instinct of Workmanship
According to Commons, intangible property and good-will are essential factors to develop andmaintain modern capitalism. However, for the purpose of public wealth, we need to control thesefactors. Indeed, common-law courts have done that on the basis of reasonable value. Veblen did notconsider these decisions.
Commons investigated the nature of Veblenʼs Darwinism to question the validity of his own
Darwinian. Previously, existing economics captured only physical goods as a substance concept.
However, according to Commons, Veblen evolved the concept into physical and non-physicalconcepts using instinct of workmanship.
The handling of the recent capital is appropriate to consider. In other words, the problem concerns
the substance and its ownership. The concepts that Veblen treated as the instinct of workmanshipwere Commonsʼ managerial transaction, which lead to customs and law. The habits and laws ofmanagerial transactions bring order to commodity production, making this practice and law also thebasis of the legal theory of quantum merit, or the claim of providing services equivalent to acertain amount of money. The claim is based on equity laws, 17） which claims that the property16） Veblen, T. B.,［1961-b］p.73.
17） Commons explains equity law and common law as follows; The common law was able to deal eﬀectively
only with physical things and to punish after the event, ─ equity deals with the most intangible values, for itcommands directly, before the event, the very performance, avoidance or forbearance on which value depends.
Equity looks on property as a behavior claimed of other persons; the common law looks on it as a thing owned bya person. Commons, J. R.［1924］p.234.
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owner has shown that he has the right to control the actions of the others.
Veblenʼs Darwinian evolution had no foreordained goal, but is a continuity of cause and eﬀect
without any trend, any ﬁnal term of consummation. It is a blind cumulative causationʼ（p.657）. .
These variabilities would be the concept of Darwinian evolution, not foreordained, and Veblen
endeavored to work them out as mere process without a goal （p.657）.18）
However, in Darwinʼs theory of evolution, two types of selection. exist: natural selection andartificial selection. Commonsʼ is the theory of artificial selection. Veblenʼs is a natural selection（p.657）.
According to Commons, Veblen raised the concept of process. No destinations exist such as they
can be ascertained. Veblen expanded the concept into an analysis of intangible assets on the basis of
the concept of process of Darwinism. The corporeal property itself is not related to the purchasing
power and the sales force. The purchasing, selling, and borrowing of intangible assets comprise theprocess that is expected to increase the monetary value of property rights through a loan. This is aﬁnancial nature. Thus, Veblen replaced the process of regularly creating wealth as a substance by amonetary process. Commons provided a name to this process managerial transactions. Veblen
called this process the instinct of workmanship （p.658）.
According to Commons, Veblen thought that previous economists handled physical goods that
simply had use value. They are produced and consumed, and then produced and consumed, whichindicates constantly repeated production and reproduction. Using Commonsʼ terminology, the concept
corresponds to the managerial transactions.

The true factors that newly produce physical goods

are knowledge, habits, and inventions, which include education, tradition, experience, and repetitionof the experiment, many generations through to examine a complicated matter systematically, indetail, and thoroughly. That is the human capacity. Veblen stated that this concept is science andtechnology, which is easy to understand, and is matter-of-fact knowledge. Because society has
inherited these types of knowledge, Veblen considered them non-material equipment of industry,intangible assets of society （p.660）.
Thus, Commons attempted to unravel the relationship between the instinct and custom in
Veblenʼs terminology.
According to Commons, Veblenʼs instinct includes the function of human volitions that engage indeterminations and selections. In fact, Veblen himself insisted that his concept of instinct

is,substantially all, a matter to tradition out of the past, a legacy of habits of thought accumulated
thought experience of past generations.

. Under the discipline of habituation this logic andapparatus of ways and means falls into conventional lines, acquires the consistency of customs andprescription, and so takes on an institutional character and force. 19） Thus, through customary waysof thinking and behaving, society has given them legitimacy and appropriateness, and the guiding
principle of the act. Therefore, the instincts that Veblen treated are made from education rather than18） Tsukamoto, Takao［1983］pp.165-183.
19） Veblen, T. B.［1964］p.7.
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No. ２・３from genetic, leading Commons to insist that the instinct of Veblen is actually a social custom.
Thus, Commons argued that the instinct of workmanship of Veblen should be referred to as thethe custom of workmanship.

In fact, Veblen stated that the instinct of workmanship has apurpose. Commons reached the conclusion that Veblen introduced purpose into the instinct ofworkmanship. Hence, Veblenʼs Darwinism is forced to change from natural selection to artiﬁcial
selection （p.661）.
（2） Veblen’s Going Concern and Capital Concepts
Veblenʼs concept of going concern expands the physical capital concept to that of an evolutionary
process, and the instinct of workmanship assists it. From the viewpoint of Commons, Veblenʼs going
concern means the going plant as a production technology.20）
According to Commons, Veblenʼs viewpoint of production indicates the managerial process, oreﬃciency. Eﬃciency is the concept of cause and eﬀect, a point on which Commons agrees with
Veblen. Eﬃciency depends on foremen and engineers who intentionally control production. Eﬀective
capital goods depend on this eﬃciency through the given physical production equipment.
If true, then eﬃciency indicates purpose. The physical capital that Veblen stated is not theamount of physical things. It is the prevalent habit of thought that leads to a process that alters theusefulness（p. 661）. Capital is not intended to be a product of past labor. Capital is a going plantconsisting of knowledge and experience for production.
From the viewpoint of Veblen, the property underlying the business in modern time is aninvestment, not a commodity. Thus, property is the monetary capitalization of earning power, andthis capitalization is modern Capital （p.663）.
Veblen regarded today as the era of the machine process. 21） This machine process is winding theentire nation, and the procedure is based on the systematic knowledge. Therefore, the machineprocess has its own meaning, that is,machine.

22）

the scope of the［machine］process is larger than the

The machine process is not established by itself; instead, the entire industry holds bycooperating. Therefore, an engineer, not a capitalist is responsible for the machine process.
However, disturbances occur when adjusting the machine process. Veblen argued that businessmen come into the process. In the terminology of Commons, adjustments by business men arebusiness transactions. Coordination between industries is reduced to monetary units. The interests ofbusiness men do not lie in the plant as industrial facility, or a production facility, but in pecuniary
assets. For business men, investment indicates a pecuniary transaction. 23） The aim of this20） The going concern of Commons is a complex of a going business and a going plant. A going business earns a
proﬁt, or the production of exchange value. A going plant produces goods and service, or the production of usevale.
21） Veblen, T. B., Chapter II: The Machine Process, in Veblen T. B.［1973］pp.5-19.
22） Ibid., p.5.
23） It is business transactions that the balance of working relations between the several industrial units ismaintained, or restored, adjusted and readjusted, .... The relations
are always reducible to pecuniary terms.
Ibid., p.18.
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How Did Commons Understand Veblen’s Concepts of Intangible Property and Good-Will?
（TSUKAMOTO）（ 87 ）

transaction is a pecuniary gain as seen from the viewpoint of value and ownership.24） Business man
makes his gains, not by workmanship which is serviceable to the community, but by business which
is not serviceable （p.663）.25）
According to Commons, this difference arises from the difference between tangible assets andintangible assets. Tangible assets are pecuniary serviceable capital goods and produce use
value.

Intangible assets

areimmaterial items of wealth, immaterial fact owned value, andcapitalized on an appraisement of the gain to derived from their possession （p.663）. The capitalist
becomes the de facto owner of intangible assets simply by the fact that he owns physical production
facilities of society. Capitalist ownership also includes all of the knowledge of the methods and themeans based on the technology and capabilities that technicians and workmen embody. Capitalists
own not only the right to use the technical capabilities of workmen but also the right of abuse andof neglect and inhibition. 26）
Those capitalized intangible assets are good-will, as called by Veblen. 27） Good-will creates adiﬀerential business advantage; however intangible assets have only monetary value to the owner.
IV
1

Intangible Property, Good-will and Privilege

Intangible Property and Good-will
According to Commons, the proﬁts of a monopoly or big business come from intangible property.

In that case, Commons divided this property into two parts: privilege and good-will. Proﬁts fromprivilege are of no use for public wealth; however, proﬁts from good-will are appropriate for modern
capitalism. The criterion for this judgment is the reasonable value on which common-law courts
depend.
Although Commonsʼ argument is comparable to that of Veblen, he investigated the essential
diﬀerence between tangible and intangible assets. We follow Commonsʼ argument.
According to Commons, a tangible asset represents the capitalization of the adept production
technology of the society, or capitalization of the production process. In contrast, an intangible asset
is the capitalization of the pecuniary gain obtained from the adjustment or mal-adjustments between24） The motive of business is pecuniary gain, the method is essentially purchase and sale. The aim and usualoutcome is an accumulation of wealth. Ibid., p20.
25） The motives of the business man are pecuniary motives, inducements in the way of pecuniary gain to him or
to the business enterprise with which he is identiﬁed. ... The ulterior end sought is an increase of ownership, notindustrial serviceability. Ibid., p.36-37.
26） Veblen, T. B.［1961-c］p.353. Examples of abuse of ownership, include the right to restraint of trade, the rightto deliberately stop the production, and the right to charge a fee to the full partner for the burden limit beyond alegitimate amount of money［charging what the traﬃc will bear］; such as rights interfere with the competition.
Ibid., pp.354-355.
27） Veblen stated that good-will in the original business usage of it［good-will］meant the customary resort ofclientèle to the concern so possessed of the good-will. It seems originally to have implied a kindly sentiment oftrust, and esteem on part of a customer, but as the term is now used it has lost this sentimental content. Ibid.,
p.362.
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the producer side and the market side from a slight change in supply. Intangible assets are notintended to produce wealth; they only aﬀect the distribution of wealth. Intangible assets are a means
to achieve an acquisition, a process of acquiring（p.664）. If companies are not able to satisfy thecurrent price, they withhold supply and generate proﬁt; thus, they have the means to control the
supply. Therefore, an intangible asset represents a pecuniary privilege and is, correctly, the opposite
of eﬃcient production（p.665）.
Veblen called a pecuniary gain vested interest. Vested interest is the right to obtain something
for free, with such right being subject to buying and selling in the market. Vested interest represents
non-material wealth, or intangible property. It can withhold supply, or interfere with a transaction,and garish advertising. Business enterprise gave it birth. Vested interest represents salesmanship,
not workmanship. Obvious unearned income that the law has recognized and income obtained forfree without paying anything are vested interests（p.666）.
Veblen viewed modern business men are keen to acquire money and legally secure documents,
such as bank checks, stocks and bonds. Such legal certificates represent proof of ownership（testimony）and provide the ability to govern the goods and the labor in exchange processes.
Therefore, legal deeds of this type represent forces that can control the supply of product. In thepast, master craftsmen and merchants brought their already produced products into the market.
However, modern intangible property is a legal right of calm for assets that have yet to be produced.
Using the power of intangible assets based on these rights, business enterprises are able to maintainhigh prices for their products by restraining supply and by dictating a lower wage to suppress thedemand for labor. Thus, they create a differential advantage and their expected net profits are
realized. On this account, Veblenʼs intangible properties are claimants to differential marketing
advantages （p.667）. Therefore, Veblenʼs intangible properties do not need to set the foundation on
the machine process that performs production, but solely rely on ownership only to control supply.
Commons indicated that a statement by Veblen previously described is the distinction that issimilar to judgment of the Supreme Court. As the court showed, Veblen expanded proprietary rights
and the deﬁnition of the capital from corporeal property to expected earnings capacity. Buying andselling this expected earnings capacity represents the contents of what Veblen called traffic in
vendible capital. Veblen took the traﬃc in vendible capital entity as the fund that measures value
with money and not with materials. The modern principle of capitalization is based on the earnings
capacity of a going concern. Therefore, the core part of capitalization isgood-will, 28） not theexpense to rebuild the plant.
The contents of good-will have been expanded to include various items that ﬁt modern business.
Good-will includes various items, with each of them having a common point ─

intangible assets

─ and good-will is not useful in society, but is useful for its owner（p.667）.
28） Veblen explains the good-will as follows: Good-will taken in its wider meaning comprises such things asestablishes customary business relations, reputation for upright dealing, franchises and privileges, trade-marks,
brands, patent rights, copyrights, exclusive use of special processes guarded by law or by secrecy, exclusive
control of particular sources of materials. Veblen, T. B.［1973］p.139.
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How Did Commons Understand Veblen’s Concepts of Intangible Property and Good-Will?
（TSUKAMOTO）（ 89 ）

According to Commons, Veblen thought about proprietary rights as follows. Proprietary rights
have a new aspect in the era of big business. They have the power to withhold the supply ofmaterial, money, and property. Workmanship increases supply, but ownership prohibits andwithholds supply. Therefore, the holder of proprietary rights can stop an industry at will if he uses
the power of these proprietary rights. Such a holder is able to engage in settlements at his own
convenience for both the producer side and the worker side. Permission to use the possession
becomes a target for being able to buy and sell it. From the view point of the credit system, thispermission is called a stock, a bond, a corporate bond, a deposit, and so on. These funds consist of thelegal right to claim the expected earnings capacity of this permission, and Veblen called this a loancredit. 29） Loan credit is an intangible asset recognized as

good-will

to produce a differential

advantage.
This diﬀerential advantage does not produce useful things but only shifts pecuniary wealth to one
from the other. Veblen developed the principle of diﬀerential advantage, which represents the powertoget something free of charge.

Commons insisted that we are able to see a portent of amanagerial transaction and a bargaining transaction.
2

Privilege and Good-will
Commons insisted that the development process of the instinct of workmanship of Veblen can be

reduced to the deployment process of a managerial transaction and a bargaining transaction, andover reasonable value.
Therefore, when the instinct of workmanship and the instinct of acquisition emerge over thewithholding power at a negotiation, the diﬀerence between them is just a matter of degrees. The
diﬀerence is nothing but a diﬀerence in negotiation power on the laborer side and the employer side.
In this case, the differences are questions of degree and can reduce to questions of degree of
reasonableness. Therefore, we handle these diﬀerences as those of a managerial transaction and abargaining transaction over the reasonable value. Thus, there is no good reason for separating theminto two entities, the idealized instinct of workmanship and the bedeviled instinct of acquisition （p.
673）.
According to Commons, the question of reasonableness is a matter of the courts. Commonsinsisted that Veblen was not able to properly obtain an evolutionary process of intangible property.
Such an investigation reveals the evolution of his［Veblen］ intangible propertyʼ which has
consisted in making the distinction, not allowed by Veblen, between good-will and privilege, good-willbeing the reasonable exercise of the power to withhold and privilege being the unreasonable exerciseof that power. It is only in the analysis of bargaining transaction that the economic foundation forthis evolution can be found.

. It is just because this fact of evolution in the decisions of courts is notobserved by Veblen that he does not arrive at a concept of reasonable value （p. 673）.
Commons appreciates the point at which Veblen paid attention to29） Veblen, T. B., Chapter V: The Use of Loan Credit, in ibid., pp.92-132.
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intangible capital. Furthermore, he evaluated that Veblen stimulated economics from equilibrium
theory to the theory of the process, and that Veblen hit the mark. However, Commons insisted thathitting the mark was insuﬃcient because Veblen lacked the concept of time. In other words, it is thedistinction between ﬂow of time and lapse of time.
According to Commons, incorporeal property is waiting until a debt is paid; intangible property is
the expectation that proﬁts will be obtained from future transactions. Indeed, both are vendible
capital as seen in the distinction between stocks and bonds, both proﬁt and interest are inextricableinterwoven in each （p.674）. In other words, intangible property represents the expectation thatthe expected profitable transactions will be repeated. The incorporeal property represents the
expected waiting for income to be derived from the enforcement of right and its equivalent duty
（pp.674-675）.
Veblen indicated a research theme of intangible property that could be reduced to transaction,
going concern, stabilization of prices, and reasonable value in term of Commons. To this point, theevaluation of the right of a property emerged as an issue. When we understand a theory ofreasonable value, Veblenʼs theory of exploitation is also reduced to this reasonable value. Commons
concludes that these are scientiﬁc, not in the sense of Veblenʼs physical science, but in the scienceof human will in action （p. 677）.
This point is Commonsʼ main point about Veblenʼs concepts of intangible property and good-will.
V

Conclusion :Evolutionary Economics of Commons

We have followed the points in Commonsʼ argument on Veblen and seen that Commons
appreciates Veblenʼs notion of intangible property, and intangible capital as related to big businessbeginning to appear in the Americans capitalism.
The concept of intangible property is an expected interest in future time. Therefore, the concept
of intangible property inevitably includes the concept of time. Commons tracked these aspects backto their origin and found them in the common-law method, which forms the process of an evolution.
Thus, the economics of Commons has become an evolutionary economics.30）
In addition, Commons examined the instinct of workmanship, which seems to be the main core of
Veblenʼs economics, and grasped it as the idealized instinct of workmanship and the bedeviled
instinct of workmanship （p.673）. Commons showed us that Veblenʼs economics do not have a dual
structure, such as the instinct of workmanship and the instinct acquisition, or the instinct of
predation, but could be considered a question of degree. In terms of Veblen, we state that the key is
to develop the process of the instinct of workmanship and its self-contamination. 31） Moreover,30） Cf., Hamilton, D.［1974］.
Actually, all institutional economists do not necessarily support the evolutionary approach. For example, K. W.
Kapp seemed to state an objection. According to the editors of his book,
Kapp rejected biological metaphorsand did not apply the evolutionaryʼ adjective. Kapp, K. William［2011］p.7.
31） Veblen, T. B.［1964］pp.38-102.
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How Did Commons Understand Veblen’s Concepts of Intangible Property and Good-Will?
（TSUKAMOTO）（ 91 ）

Commons seemed to handle this process as a developing process of the contradictions, which means
including the color of dialectics in Veblenʼs economics.32） To this point, the logic of Commons has adistinction on which we should focus.
However, we sometimes believe that agreeing with Commons is not easy, particularly when hebegins to discuss about the selection of Darwinism, which refers to teleology.
For example, Commons insists that Veblenʼs treatment of Darwinism is the logic of natural
selection, and Commonsʼ treatment is the logic of artiﬁcial selection. If we glance over his comments,
they seem to indicate the diﬀerence between them. However, Commons mentioned Veblenʼs logic of
the instinct of workmanship and ﬁnally commented that Veblenʼs logic of selection is almost identicalto artiﬁcial selection. Although Veblen insisted on the exclusion of teleology along with Darwinism,
Commons stated that Veblen has teleology-like view because his logic of selection is similar to theinstinct of workmanship. Such confusion regarding the logic of Commons seems related to a shortterm process versus a long-term process along the same line.
Commons suggested that

selectionaccording to the instinct of workmanship that Veblen

mentioned is a teleological one in the short term. However, when such a selection is subjected to a
cumulative process, causing it to differ from the initial selectionʼs unintended results becomes
possible. This logic, which Veblen might intend, is the elimination of the teleological based on the
Darwinian evolutionary process. At this point, stating that the interpretation of Commons belongs to
the intention of Veblen seems diﬃcult.
According to Commons, by relying on the precedent of the court, turning economics into thescience which Veblen insisted as

matter of fact

is possible. The decisions of the courts havestacked the teleological selections to serve a public purpose. This unfolding process led to Commonsʼ
theory of reasonable value. Veblen did not arrive at the theory of reasonable value because he
did not pay careful attentions to the decisions of the courts.
Why did Veblen not pay attention to the decisions of the courts, as did Commons? The answer isthe difference between the developing stages of the American capitalism which Veblen andCommons faced. For Veblen, the stage of American capitalism from the end of the 19th century to
the early 20th century was the beginning of big business, during which time the capitalist may beviewed as having the right to do anything without being bound by law. However, the stage that
Commons saw took a net of the law for monopolistic capital and regulation by the court began. The
criterion of the court was reasonable value that met a public purpose. Correctly, the constructionofthe theory of reasonable value

was an urgent problem, which is why Commons relates

economics to law.
Commons built his theory of reasonable value on the basis of the situation of such times. Thus, we32） Sasaki, Akira［1967］. Sasaki insisted that Veblen built his own economics using dialectic such as that used by
Marx.
John S. Gambs stated,
Veblenʼs methodology is his use of something like the Hegelian dialectic. Gambs, J. S.
［1973］p.60.
C. f., Tsukamoto, Takao［2015］pp.21-22, 24.
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must be aware that the theory of reasonable value is not unchangeable. Situations change over time,
and the contents of reasonable value also change. The contents of reasonable value in itself change
when adapting to an environmental change, and are intended to evolve.
Commons developed such thoughts using Veblenʼs intangible property theory and ideas ─ a truthof Commonsʼ comments on Veblen. A comparison with Veblen enables discussion of one standpointof Commons. Commonsʼ intention was not to criticize Veblen but to allow an economic progress tocomply with the development of the American capitalism after Veblen. This progress represents thedeveloping process of Commonsʼ a theory of the reasonable value.
Recognizing Commons as an institutional economist and his economics as evolutionary economics
enables us to comprehend that his concept of reasonable value is evolutionary. Therefore, thedevelopment of American institutional economics after Veblen may be classiﬁed as an evolutionary
process corresponding to changes in the quality of American capitalism. Therefore, Commonsʼcomments on Veblen need further investigations to grasp the evolutionary process of institutional
economics from Veblen to Commons.
References
Commons, John. R.［1924］Legal Foundations of Capitalism, New York, The Macmillan Company.
───.［1934］Institutional Economics: Its Place in Political Economy, New York, The Macmillan Company.
Gambs, J. S.［1973］Beyond Supply and Demand: A Reappraisal of Institutional Economics, Westport, Connecticut,
Greenwood Press, Publishers.
Hamilton, D.［1974］Evolutionary Economics: A Study of Change in Economic Thought, Albuquerque, University of
New Mexico Press.
Kapp, K. William［2011］The Foundations of Institutional Economics, edited by Sebastian Berger & Rolf Steppacher,
Routledge.
Mayhew, Anne et al.,［2014］ Mini-Symposium on Social Culture of Finance: John R. Commons in the Twenty-First
Century, Journal of Economic Issues, vol. XLVIII, No.4., pp.901-979.
Mitchell, W. C.［1950-a］ Making Goods and Making Money, in The Backward Art of Spending Money, New York,
Augustus M. Kelley, Inc.,pp.137-148.
───.［1950-b］ Commons on Institutional Economics, in The Backward Art of Spending Money and Other Essays,
New York, Augustus M. Kelley, Inc., pp.313-341.
───.［1969］Types of Economic Theory: From Mercantilism to Institutionalism, ed. by Joseph Dorfman, Vol. II , New
York, Augustus M. Kelley Publishers.
Rutherford, Malcolm［1990］ A New Introduction, in J. R. Commons, Institutional Economics: Its Place in Political
Economy, Transaction Pub., pp. xiii-xxxvii.
───.［2011］The Institutionalist Movement in American Economics, 1918-1947: Science and Social Control,
Cambridge University Press, pp.186-222.
Sasaki, Akira［1967］Methodology of Economics: Veblen and Marx［ Keizaigaku no Houhouron］, Tokyo, Japan,
Toyokeizai-shinpoushya, which is in Japanese.
Tanaka, Toshihiro［2012］ About Institutionalism Economics History by W. C. Mitchell, in Keizai Ronky, Kwansei
Gakuin University Faculty of Economics, vol. 66. no. 3, pp.1-32, which is in Japanese.
Tsukamoto, Takao［1983］ Veblenʼs Fundamental Critical Viewpoint of the Orthodox Economic Doctrines, Kiyou（ Bulletin）, Nihon University, College of Economics, Tokyo, Japan, no.7, pp.165-183, which is in Japanese.
────.［2015］ Mitchellʼs Some Comments on Commonsʼ Institutional Economics,” Keizai-shushi（ The Nihon
University Economic Review）, College of Economics, Nihon University, Tokyo, Japan, vol. 85, no.1, pp.11-27, which isin Japanese.
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How Did Commons Understand Veblen’s Concepts of Intangible Property and Good-Will?
（TSUKAMOTO）（ 93 ）

Veblen, T. B.［1975（1889）］Theory of the Leisure Class: An Economic Study of Institutions, New York, Augustus M.
Kelly, Bookseller.
───.［1973（1904）］The Theory of Business Enterprise, Clifton, Augustus M. Kelly・Publishers.
───.［1964（1914）］The Instinct of Workmanship: And the State of the Industrial Arts, New York, Augustus M.
Kelley Bookseller.
───.［1961-a（1919）］ The Place of Science in Modern Civilization, in The Place of Science in Modern Civilization
and Other Essays, New York, Russell & Russell, pp.1-31.
───.［1961-b（1919）］Why is Not Economics is an Evolutionary Economics, in The Place of Science in Modern
Civilisation and Other Essays, New York, Russell & Russell, pp.56-81.
───.［1961-c（1919）］ On the Nature of Capital: II. Investment, Intangible Assets, and the Pecuniary Magnate, in
The Place of Science in Modern Civilisation and Other Essays, New York, Russell & Russell, pp.352-386.
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