This work analyses the substantive basis of the institutional approach to the study of the economy. The term “substantive” – as opposed to “formal” – derives from the distinction made by Carl Menger in the last edition of his Grunsaetze. We argue that in Menger’s account the two tendencies were complementary, hence providing a way out of the Methodenstreit. However, Karl Polanyi took up the distinction and made it clear that the two term are the roots of two completely different approaches to economics. We dwell further on this idea, presenting it as a key to interpret modern approaches (such as Georgescu-Rogen’s and Sen’s,to name but two).