In The Economy as Instituted Process, Karl Polanyi addresses that it is necessary to distinguish between the formal and the substantive meanings of ‘economics’ . Reflecting on the epistemological issues that arise in economics as a scientific knowledge, he argues that development of economics mainly depends on formal principles. As a result, a set of assumptions – that becomes premises – are used as the basis for a sequence of logical deductions. Beyond the economic laws, Polanyi’s The Great Transformation highlights the presence of the ideology that supports economic liberalism. Indeed, the economic changes that resulted from the Industrial Revolution cannot be apprehended if ignoring the political, social and ethical issues underlined by Polanyi.
Karl Polanyi invites us to re-examine the meaning of ‘economics’. Indeed, in the introduction to Trade and Market, Polanyi proposes a new theoretical construction in order to explain the place and role of human beings in the social and economic system. And he argues that man values material goods only in so far as they serve the end to promote social standing. In Polanyi’s view, the method of economic anthropology, as it depends upon principles of economic behaviour that are induced from empirical observation, could be known as substantive. In this approach, the economic question becomes an anthropological question.
The substantive meaning of economics certainly offers to us a new way of looking at the human beings that live in real world societies. Indeed, in Polanyi’s view, the representation of the so called rational economic man does not apprehend the multiple set of issues related to human nature and human needs in the context of social interaction.
In fact, the fundamental problem in economics, for Polanyi, is the attendance of human needs. This approach to economics is supported by ethical principles that touch on social justice.
Today, what is urgent to highlight to students is the importance of the substantive meaning of ‘economics’. The substantive meaning derived from the social nature of man and his interchange between his natural and social environment. While taking into account different ways of organizing men’s livelihoods, Polanyi provides a guide that stimulates empirical observations of economic life in the real world. He emphasizes the importance of history and of a multidisciplinary approach to social and economic change since economic development is overwhelmed by the role of culture. Following this guide, students will certainly understand the deep challenges of formal economic analysis to face our contemporary problems.