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ABSTRACT

This paper focuses on the contribution of the so-called “new” economic sociol-
ogy to the study of market phenomena in general and market regulation in par-
ticular. Several approaches within market sociology teach not only that, but also
how economic actions in the market place are embedded in political spheres of
influence, institutional arrangements, networks of social relations and cultural
patterns. The specific way particular economic actions are embedded in these
political, social and cultural structures dictates to a certain degree the nature,
forms and results of economic actions that take place in the market place and the
possibilities for and results of market regulation. Increasingly, however, market
regulation takes place not within a particular state or society but on a transnational
basis. Nevertheless, national styles of market regulation persist. To illustrate the
interaction between transnational and national styles of market regulation a par-
ticular case in discussed, that of the European common market.

T

ijdschrift voor Economie en Management

Vol. XLIX, 2, 2004

The New Economic Sociology of

Market Regulation

A Budding Research Program

by W.A. A

RTS

Wil A. Arts
Tilburg University,
Department of Sociology, Tilburg,
The Netherlands

I. INTRODUCTION

For more than two centuries a debate has been going on about
the proper role of state regulation in a market-oriented economy.
This debate has become particularly intense in the most recent period
of deregulation and privatization and is certainly not over yet.
The position taken in the debate by standard neo-classical economics
is that if the maximization of the subjective satisfaction of wants is the
ultimate goal, then an optimal allocation of resources is recquired and
that can best be achieved by the closest possible approximation of
perfect competition. Government intervention in order to promote effi-
ciency is in that opinion only warranted in case of market failure.
The theoretical arguments for this standpoint are derived from the neo-
walrasian Arrow – Debreu model of competitive equilibrium, which
is a generalization of the pure theory of exchange (Megginson and
Netter (2001)). If one or more of the very restrictive assumptions of
the A – D-model do not hold, a situation arises that justifies Pareto-
improving government interventions in the market place. There is,
however, a caveat appended to this conclusion. Government inter-
vention in a market-oriented economy may well cause more problems
than it solves.

Many economists still consider the A – D model the keystone of

contemporary economics. Since the 1970s, however, a new research
program has developed that does no longer focus on perfect markets
from the orthodox point of view of pure theory (Kay (2003)). It rather
focuses on situations in which markets fail from heterodox perspec-
tives such as game theory, and experimental or evolutionary econom-
ics (Eatwell, Milgate and Newman (1989)). Arrow himself gave the
impetus to this program by bringing attention to the limitations of the
A – D model in light of the asymmetric distribution of information and
its discontents such as adverse selection, moral hazard, and agency;
strategic behavior; increasing returns; and, above all, incomplete
markets.

One of the significant contributions of this post-A – D research pro-

gram has been that it has led to a better theoretical understanding and
modeling of the operation of incomplete markets and at least some
empirical analysis of actual markets, whereas the A – D model only
provided mathematical analysis of generalized and/or stylized markets.
This has brought economic analysis closer to economic sociology
(Beckert (1996)). The typical approaches of economics (mathematical

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modeling) and sociology (empirical research) seem to converge in
some degree in this program.

Many economists feel that the “elegant” and “clean models” of eco-

nomics are superior to the “dirty hands” of the empirical approach of
economic sociology. This economic hubris could lead to one-sided
research, inaccurate theory and bad policy recommendations (Hirsch,
Michaels and Friedman (1987) and Davern and Eitzen (1995)).
The above mentioned convergence could put an end to this “hubris”.
There is, however, a problem. Economics has a long and impressive
tradition in studying market phenomena. In the course of time much
progress has been made both within the neo-walrasian research pro-
gram and within the post-A – D program. The pretensions of eco-
nomic sociology, on the other hand, have always been greater, than its
feats. There have recently been, however, developments within eco-
nomic sociology that hold out every hope that sociological insights can
offer a meaningful contribution to the study of market phenomena.

The aim of this paper is, firstly, to explore these recent develop-

ments and to apply the newly gained sociological insights to the
problem of market regulation. Next we will ask what the contribution
of these theories is in understanding one of today’s grand endeavors
in market regulation, the formation of the single European market.
Then we raise the question of whether these theories help in under-
standing what matters in improving European economic performance.
Is the disenchantment with government intervention in markets as rel-
evant to Europe as it is to the Anglo-Saxon countries? Are European
governments and public opinion as amendable to the doctrine of less
government intervention as is the case in Anglo-Saxon countries after
the Reagan-Thatcher revolution? If the answer to this latter question
is in the negative the implication could be that Anglo-Saxon concep-
tions of market regulation cannot be transferred with impunity to
Europe. If the answer is in the affirmative market sociology loses most
of its relevance for market regulation in Europe. Finally, we conclude
and discuss whether the developments within the new economic
sociology of market regulation promises well for the future.

II. THE “NEW” ECONOMIC SOCIOLOGY OF MARKETS

Classical “economic” sociologists, such as Durkheim and Weber,
have explicitly studied both the unintended consequences of market

241

processes and the prospects of market regulation. They developed a
theoretical critique of the neo-classical economics premise that the
market is a sufficient institution for the coordination of individual
action and the reproduction of a stable equilibrium. The state is in
their opinion an indispensable element for achieving a stable social
and economic order (Beckert (1996)).

Modern economic sociologists have for a long time neglected the

study of markets. One of the few laudable exceptions has been the
pioneering work by Hans Albert in the 1960s and 70s (see Albert
(1966) and (1998)). During the 1970s, however, sociologists started to
become interested in studying markets again. Since the early 1980s
sociologists interest for markets intensified and a host of works
appeared. Furthermore, in the last few decades a research program
has emerged within economic sociology that explicitly purposes to
study market phenomena. This approach has been labeled the “new”
economic sociology (Swedberg (1990) (1993) and (1997); Granovetter
and Swedberg (1992); Guillen et al. (2002); and, Buskens et al.
(2003)). Within the theoretical framework of this research program
progress has been made in acquiring knowledge about how markets
come into existence, how they function, how they are regulated and
structured, how they are embedded in their institutional environment
et cetera.

Swedberg (1994) and Lie (1997) argue that the structural approach

pioneered by Granovetter, White, Burt, and others is the sociological
theory of markets that in particular stands out (see, however, Krippner
(2001) for a critique). Reason enough to start this review of the “new”
economic sociology of markets with the structural approach.

A. The structural approach in market sociology

The revival of market sociology owes much to the work of Mark
Granovetter ((1973) and (1974)) who pioneered a network approach to
labor markets by dropping the assumption that market exchange only
entails arm’s-length ties. In standard neo-classical economics traders
in competitive markets are price-takers and thus interchangeable.
The details of their social relations are irrelevant. Granovetter looked
instead at the role that strong and weak ties play in job searches.
By looking at the role of social relations in labor markets Granovetter
not only elaborated on but also criticized several new developments
within the post-A – D research program such as search theory and

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transaction-cost economics. He acknowledged that the post-A – D pro-
gram has been right in arguing that at least theoretically there is more
than one stable competitive equilibrium possible. He also acknowled-
ged that the market situation does determine what the possible com-
petitive equilibria are. He denied, however, that the market situation
does necessarily determine the future outcome, i.e., which equilibrium
is eventually reached. How economic actions, given a particular mar-
ket situation, are embedded in networks of social relations contributes
significantly to which of the multiple equilibria eventually ensues.
Looking back at this pioneering phase, Granovetter (1988) concluded
that better models of the labor market will result from a merger of the
economists’ sophistication about instrumental behavior and concern
with efficiency, and the sociologists’ expertise on social structure and
the complex mixture of motives present in actual situations.

Granovetter ((1985) and (1992)) argued that not only economic

action of individuals but also larger economic patterns, like the deter-
mination of prices and economic institutions are very importantly
affected by networks of social relationships. Furthermore, he argued
that economic goals are usually combined with striving for sociabil-
ity, approval, status, and power as well. He accused standard neo-
classical economics of an undersocialized or atomized actor explana-
tion of economic actions.

1. Why we make transactions with well known actors

He took, hoewever, not only exception to the model of man of standard
neo-classical economics but also to that of institutional economics and
the “old” economic sociology. He accused institutionalists and sociol-
ogists of an oversocialized model of man and their introduction of cul-
ture as a deus ex machina. Their conception is oversocialized because
it assumes that people follow customs, habits or norms automatically
and unconditionally (see, however, Biggart and Beamish (2003)). The
oversocialized approach has in common with the undersocialized a con-
ception of action uninfluenced by people’s existing social relations.
Economic actors do not behave or decide as atoms outside a social
context, nor do they adhere slavishly to a script written for them by the
particular intersection of social categories that they happen to occupy.
Their attempts at utility maximizing are instead embedded in concrete,
ongoing systems of social relations. Concrete personal relations and
social structures (or networks) of such relations play pivotal roles in

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generating trust and discouraging malfeasance. The widespread pref-
erence for transactions with individuals of known reputation implies
that few are actually content to rely on either generalized morality or
institutional arrangements to guard against trouble.

Granovetter argued that especially in periods of institutional

development it is very important to look at the impact of social net-
works on market outcomes. The moment an institutional framework
has crystallized, whether or not it is the most efficient framework,
some equilibria gradually become locked in and other equilibria
become locked out. This is due to path dependency and increasing
returns to scale. In such highly institutionalized situations the impact
of social relationships will be less important.

2. Markets are networks of relations

Harrison White’s (1981) analysis of production markets as role struc-
tures was one of the first substantive work of the new economic soci-
ology of markets. He elaborated both on Granovetter’s sociological
network approach and on economic signaling theory and strategic
action theory. The key feature of his theory of markets is the notion
that economic actions are enmeshed in institutions, social networks,
and social structures. Markets consisting of social structures are repro-
duced through signaling or communication between the participants.
The typical market of which White writes is a production market; the
reason for this choice is that production markets, as opposed to
exchange markets, are typical of industrial economies. A production
market, White argues, most of the time consists of about a dozen of
firms that come to view each other as constituting a market and are
perceived as such by buyers. Markets are in his opinion tangible
cliques of producers watching each other and transacting with buyers
as a separate but aggregated clique. Each side continually monitors
reactions of the other through the medium of a joint social construc-
tion, the schedule of terms of trade. This schedule reduces to constant
price only in limiting cases. This means that production markets are
not equilibrium price driven, as defined by a set of buyers, nor are the
producers obsessed with speculation on an amorphous demand.
The key mechanism of market reproduction is a stable status order of
producers. In this order there is a differentiated niche for each firm and
each firm plays its role according to its market status. What a firm
does in a market is to watch the competition in terms of observables.

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Each producer is guided in choice of volume by the tangible outcomes
of other producers and not by hypothetical reactions of buyers to
its actions. The correspondence between local status orders on both
the producers’ and buyers’ sides of the market – rather than prices –
therefore shapes market equilibrium in White’s theory.

The basic problem facing firms in production markets lies in maxi-

mizing profits by determining the volume and quality of goods to pro-
duce. A firm frequently does not know in advance which option will
produce the highest profit. In these circumstances, the only tangible
guidance available to the actor is that which can be inferred from the
pattern and outcomes that emerge from relations among producers and
buyers (Leifer and White (1987)).

Because each firm is distinctive, they are engaged not in pure com-

petition but in finding and sustaining roles with respect to one another
given an environment of discerning buyers. The market emerges as a
structure of roles with a differentiated niche for each firm. White’s
model of markets creates an image of markets as mechanisms built
from distinct role behavior and giving guidance to the production deci-
sions that underlie distinct roles (Leifer (1985)). By emphasizing role
behavior White makes a well-considered move from the model of man
of the homo economicus to that of the homo sociologicus.

White extended his analyses later on (see White (1992) and (1993))

by stressing struggles of control and autonomy that generate the mar-
ket as a social phenomenon. In a recent book (White (2002)) he pro-
poses and applies a family of mathematical models to answer the ques-
tion as to by what mechanism production markets work and how
markets do embed among dispersed and heterogeneous networks of
relations. His basic idea is to catch up market existence and properties
as interactional regularities that reinforce each other to keep producing
the market as a social construction. Context and setting matter, of
course, but only as they filter through the infrastructure of interaction.

3. Structural holes explain multiple competitive equilibria

Ronald Burt ((1983), (1992), (1997) and (2002)) has pursued a slightly
different network approach in his studies of contemporary markets
and competition. His conceptualization of structural holes – the
absence of ties between groups of individual or corporate actors, i.e.,
“holes” in the network structure – appeared not only to be a provoca-
tive idea but also a fully operationalized empirical project. Burt has

245

been mainly concerned with showing how individual and corporate
actors whose ties span these structural holes, and can therefore inter-
act with different groups, benefit economically by acting as “brokers”
between groups. Much of competitive behavior and its results can,
according to Burt, be understood in terms of actor access to these
holes in the social structure of a competitive arena. Structural holes are
entrepreneurial opportunities for information access, timing, referrals,
and control. Actors with networks rich in structural holes, i.e., net-
works that provide high structural autonomy, have a competitive
advantage and enjoy high returns on investment.

In a perfect market, one price clears the market. In an imperfect

market, there can be multiple prices because disconnections between
actors, holes in the structure of the market, leave some actors unaware
of the benefits they could offer one another. Certain actors are con-
nected to certain others, trusting certain others, obligated to support
certain others, dependent on exchange with certain others. Assets get
locked into suboptimal exchanges. An actor’s position in the structure
of these exchanges can be an asset in its own right. That asset is social
capital. Social structure renders competition imperfect by creating
entrepreneurial opportunities for certain actors and not for others.

B. The cultural approach in market sociology

In an important programmatic article Zelizer (1988) has argued that
the structural approach in market sociology looks at culture with
unwarranted suspicion. It prevents sociologists from fully under-
standing the role that different types of values and norms play in the
market place. Rational actors do not only operate in socially but also
in culturally structured markets, which helps them act meaningfully
despite the incomplete knowledge in the situation at hand. They do not
only adjust their decisions and actions to supply and demand in the
market, but also act the way they do because they belong to particu-
lar (sub)cultures and are in a specific way located in social structures
(Therborn (1991)). Zelizer (1979), for example, showed earlier how
difficult it has been to establish a market in life insurance in the United
States. The difficulties arose especially because of popular resistance
to putting a price on human life. Zelizer (1985) also showed how
children at a certain moment in time were removed from the labor
market; having children got a high emotional value, that preceded
over their contribution to household income. Zelizer (1988) is not

246

advocating a full cultural theory of markets, believing such a theory
would not be very effective. Instead she calls for a “multiple markets”
model, i.e., the market as the interaction of cultural, structural, and
economic factors. In doing so, she seeks to avoid the two horns of
Granovetter’s dilemma: at one extreme the oversocialized conception
of economic action and at the other the undersocialized one.

DiMaggio (1994) is more or less of the same opinion as Zelizer.

He argues that economic processes have an irreducible “cultural” com-
ponent, but we must guard against “culturalist” accounts that claim too
much or generalize too broadly. Because we explore in this paper the
prospects of a sociology of market regulation DiMaggio’s view of
the regulatory role of culture is especially important. He refers in
this respect particularly to the work of those who study the role of
conventions and norms in regulating the quest for economic gain.
The notion that the pursuit of self-interest must be restrained by moral-
ity formed the very foundations of economics. Adam Smith argued
that “self-love” is ultimately the source of succesful economic activity.
A society, however, cannot subsist unless the laws of justice are
tolerably observed. Once one accepts the position that a minimal com-
mitment to norms of reciprocity and fair dealing is required for mar-
kets to operate at all, however, many questions remain unanswered.
The first question DiMaggio raises is where normative and legal insti-
tutions that regulate market behavior come from and why they take the
forms they do. Why do such norms and conventions vary cross-nation-
ally? Why, for example, have American policymakers worried so
much about corporate collusion in restraint of trade (and defined it so
broadly) in comparison to their European counterparts? Provisional
answers to these questions can be found in the cultural- or judicial-
political approach in market sociology.

C. The cultural-political approach in market sociology

The second major point on which the structural approach has been
criticized by other sociologists, has to do with its failure to properly
incorporate a legal- or cultural-political dimension into the analysis.
The strength of the structural approach is its focus on social networks,
which are at the core of markets to the degree that they reflect social
relations between individual and corporate actors. Its major limitation
is that networks are sparse social structures, and it is difficult to see
how this approach can account for all or most of what we observe in

247

markets. The structural approach contains no model of politics, no
social preconditions for the economic institutions in question, and no
way to conceptualize how actors construct their worlds. The structural
approach does not explain why governments remain important in mar-
ket society in general and why there appear to be so many “national
capitalisms” (Fligstein (1996)).

1. Stable interactions are a prerequisite for market efficiency

That the state plays a key role in structuring the market is an impor-
tant theme in many recent theories of the market (Swedberg (1994)).
It has, for example been pointed out that certain individual and cor-
porate actors try to use the state to improve their own positions in the
market and thereby bypass competition in the economic sphere. It has
also been argued that the state must somehow lower the level of
“marktness” in the economy if the market is not to self-destruct.
Others have noted that by manipulating property rights the state can
influence the way that a market works. Still others argue that various
state agencies regulate different markets and thereby maintain “the
moral order” of a particular market and “trust” in the economic sys-
tem as a whole (see Swedberg (1994) for references).

There is in standard neo-classical economics a tendency to embrace

the idea of a disembedded economy, i.e., the belief in the separation
of politics from markets as a desirable condition (Lie (1997)). Eco-
nomic sociologists, however, are of the opinion that power and author-
ity are crucial facts of economic and social life, whether one seeks to
understand individual and corporate actions in the market or the regu-
latory actions of the state. The frequently invoked opposition between
market and state, in which the state is viewed as intrusive and ineffi-
cient, and the market as efficient is in their opinion wrong. Fligstein’s
work can serve as an illustration of how one can expand the structural
sociological analysis in this respect. In his opinion firms operate
against an extensive backdrop of common understandings, rules and
laws. Or in other terms within a cultural frame that is most often sup-
plied by the state. The state plays a key role in validating the general
perception that individual and corporate actors hold of how to solve
their competitive problems. The state is always the final arbitrator of
any market. His (Fligstein (1990), (1996) and (2001); Fligstein and
Mara-Drita (1996)) basic insight is that the social structures of mar-
kets and the internal organization of firms are best viewed as attempts

248

to mitigate the effects of competition with other firms. He uses
the metaphor “markets as politics” to discuss how these social struc-
tures come into existence, produce stable worlds, and are transformed.
This metaphor has two dimensions.

2. The state generates stability...

First, he views market-building as part and parcel of state-building.
Modern states with capitalist economies create the institutional con-
ditions for markets to be stable. Stable, non-rent-seeking governments
make the difference between societies where markets are possible and
those where they are not. Some states have greater capacities for inter-
vention than others, and the likelihood of intervention depends on the
nature of the situation and the institutional history of a particular state.
Fligstein makes a distinction between direct intervention and regula-
tion. At the very most, states directly intervene in market practices to
produce stability. Interventionist states (e.g., France) are involved in
making substantive decisions for many markets. They may own firms,
direct investment, and heavily regulate firm entries, exits, and com-
petition in markets. At the very least, states have to ratify firms’ abil-
ities to use various structures that mediate competition and conflict.
In contrast to interventionist states, regulatory states (e.g., the United
States) create agencies to enforce general rules in the market, but do
not decide who can own what and how investments proceed. Second,
he argues that processes within a market reflect two types of political
projects: the internal firm power struggle and the power struggle
across firms to control markets. Actors try to produce a system of
domination within both the firm and the market. Following White
(1981) his focus is on the organization of modern production markets.
The purpose of individual and corporate actors in a given market is
to create and maintain a social world stable enough that they can
sell goods and services at a price at which their firms will survive.
The search for stable interactions with competitors, suppliers, and
workers is the main cause of social structures in markets.

3. ...but markets also produce stable sets of rules

Next, Fligstein argues, that the production of market institutions is not
only a political, but also a cultural project. Capitalist firms could not
operate without collective sets of rules governing individual and

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corporate action and interaction. Modern states establish rules for eco-
nomic actors such as property rights, governance structures, concep-
tions of control, and rules of exchange. They define the social insti-
tutions necessary to make markets. Markets themselves, however, also
produce collective sets of rules embedded in local cultures that pre-
scribe how competition will work in a given market. These local cul-
tures also provide individual and corporate actors with cognitive
frames to interpret the actions of others. Fligstein (1990) has called
these local understandings conceptions of control. In Fligstein’s world
of economic institutions, stability and survival ultimately trump com-
petitiveness and profitability, rather than vice versa.

Economics gets its normative edge from the idea that market forces

are the principal way to efficiently allocate a society’s resources. But if
Fligstein is right, it is within a very wide set of social relationships that
firms get their chance to become efficient producers. Without this
wider web or nexus, and without legally accepted tactics to stabilize
competition, the allocation of resources to efficient uses would be
impossible.

D. Empirical evidence

Fortunately, there has been a huge follow up of the pioneering mar-
ket sociological research of the above-mentioned authors in the last
decade. The empirical developments in market sociology have over-
whelmingly taken place in the domain of the structural approach.
The core agenda of this approach has been answering the question of
which social structures are consequential for market organization and
to what extent and why. This agenda has led to exploring the social
organization and dynamics of different varieties of markets. To get an
idea of the long and the short of this kind of research I will retell some
of the findings.

1. Larger networks face higher price volatility

Wayne Baker ((1984) and (1990)) for example could empirically dis-
tinguish at least two different types of market networks between firms:
small, rather dense networks and larger, more differentiated and looser
ones. Whether a particular market is structured according to a denser
or a looser model has an impact on the way this market operates.
Larger, fragmented networks cause much more price volatility than

250

smaller, more intense ones. This finding runs opposite to received eco-
nomic wisdom, which would expect volatility to be minimized within
the largest and most expansive networks. Baker’s studies showed the
error of old ideas such as the proposition that a market is more per-
fect the more actors are involved and the statement that concrete mar-
ket relations are an undifferentiated mass. Real market ties are to
a high degree the result of deliberate management. They are often
products of intentional efforts by individual and corporate actors to
reduce dependence and uncertainty and attain efficiency. These actors
apply specific practices to marshal and mobilize the social capital in
markets.

2. Critical transactions typically involve trust

DiMaggio and Louch (1998) inquired whether economic sociology’s
view of markets as being socially embedded is applicable to consumer
markets. They found, among other things, that buyers turned to their
friends when making large unique transactions such as house or car
purchases. Their research suggests that some price variation may
reflect not only interpersonal variation in the possession of informa-
tion, but also heterogeneity across transactions in buyer-seller rela-
tionships. Apparent deviations from equilibrium prices, they presume,
may present either quasi-insurance costs to buyers, investments in
long-term relationships by either party, or other moves in systems of
dyadic or generalized reciprocity.

3. Closer networks improve firm performance

Uzzi, in his studies of the apparel industry (Uzzi (1996) and (1997))
and banking (Uzzi (1999), Uzzi and Gillespie (2002)), found similar
evidence. While arm’s-length transactions were more numerous over-
all, the majority of critical transactions involved close personal rela-
tionships. Results from the apparel industry study reveal that embed-
dedness is an exchange system with unique opportunities relative to
markets and that firms organized in networks have higher survival
chances than do firms that maintain arm’s-length market relationships.
In his banking studies he found that social embeddedness beneficially
affects the finance performance of a firm. At the network level firms
are more likely to get loans and to receive lower interest rates on
loans if their network of bank ties has a mix of embedded ties and

251

arm’s-length ties. These network effects arise because embedded ties
motivate network partners to share private resources, while arm’s-
length ties facilitate access to public information on market prices and
loan opportunities so that the benefits of different types of ties are
optimized within one network.

4. Which networks are best?

In the social networks literature, a debate has arisen over the form of
network structures that can appropriately be regarded as beneficial
(Walker, Kogut and Shan (1997) and Ahuja (2000)). According to one
view, densely embedded networks with many connections linking actors
to each other are facilitative for these actors, and social structures are
seen as advantageous to the effect that networks are “closed”. These
networks can be conceived of as a form of social capital (Bourdieu
(1985), Coleman (1988) and (1990)). Firms may tend toward the repro-
duction of existing social networks to maintain the value of their inher-
ited social capital. According to an alternate view, however, social struc-
tural advantages derive from the brokerage opportunities created by an
open social structure (Burt (1992)). Actors can build relationships with
multiple disconnected clusters and use these connections to obtain infor-
mation and control advantages over others. Closed, i.e., dense inter-
connected networks, enable trust, but limit the inflow of diverse and
fresh insights. Open, i.e., disconnected networks, provide informational
benefits, but inhibit trust development. Empirical tests of whether closed
or open networks are the optimal social structure did not lead to defi-
nite conclusions. Walker, Kogut and Shan (1997) looked at biotech-
nology start-ups and found that network formation and industry growth
were significantly influenced by the development and nurturing of
social capital. They argued, however, that structural hole theory may
apply more to networks of market transactions than to networks of
cooperative relationships. Ahuja (2000) looked at firms in the interna-
tional chemicals industry. He found that direct and indirect ties both
had a positive impact on innovation, but the number of a firm’s direct
ties moderated the impact of indirect ties.

E. Sociological lessons for market regulation

What are the lessons we can learn from the structural and cultural
approaches in market sociology regarding market regulation?

252

1. Models of man should be enriched

First there is a lesson to be learned about the model of man to be used
in the analysis of the prospects of market regulation. Since the last few
decades a convergence between economics and sociology has taken
place and the conventional division of labor has more or less broken
down. Thanks to the post-A – D research program in economics and
the new economic sociology there have been exertions to integrate
the economic and the sociological model of man into a new homuncu-
lus that is empirically more accurate: the homo socio-oeconomics. This
means that the model of man to be used in analyzing market regula-
tion has become more complex – integrating the behavioral mecha-
nisms involved in both rational choice and norm-following behavior
– and more tailored to the phenomena in question. At the cost, how-
ever, of losing some analytical power. In the new economic sociology
there have been interesting initiatives to develop this new model of
man (Lindenberg (1990), Montgomery (1998), Podolny (1993)). These
initiatives are, however, still in their infancy.

2. Market forces and intervention can destroy cost reducing habits

The second lesson is that the analysis of what the prospects of mar-
ket regulation are in a concrete market place cannot take place fruit-
fully if one deals with individual and corporate actors as if they are
autonomous, fully informed decision makers who are situated in a
structural and cultural vacuum and are only guided by the invisible
hand of the price mechanism. In concrete – almost by definition
imperfect – markets these actors are confronted by uncertainty that
sometimes can, but quite often cannot be reduced to calculated risks.
Because of incomplete information and the resulting uncertainty mul-
tiple equilibria might emerge. One of the distinctive contributions
of the new economic sociology to the analysis of how economic
actors reduce uncertainty and how they choose between equilibria is
the development of a heuristic that points to four recurrent devices
(Beckert (1996)). All of these devices have consequences for market
regulation. Firstly, by acting on the basis of habits, traditions and rou-
tines actors avoid the costs of calculating and make their behavior
predictable to third parties. Market forces and government interven-
tion can destroy traditions, habits, and routines. New habits, however,
will develop as a result and become again a moral force in regulating

253

economic life. The ensuing lesson is that we have to be attentive to
the unintended consequences of market regulation. Second, norms and
institutions create reciprocal expectations for interaction and limit the
choice set of actors, thereby reducing uncertainty. Institutions and
norms have to gain legitimacy within a given social order and are
therefore rooted in a specific social context. The lesson is that there
are limits to an institutional design that is purely efficiency driven.

3. Position in network determines economic behavior

Third, economic behavior of individual and corporate actors is influ-
enced by the specific position of an actor within the social networks
and structures of market-players. Because the complete information
needed to pursue maximization and efficiency is not available the only
tangible guidance comes from the patterns and the outcomes that
emerge from the network relations with other actors. The lesson is
that enhancing market transparency is an important means to attain
efficiency. Trying to attain transparency by destroying particular social
networks does, however, not avoid the emergence of new ones.

4. Power makes behavior predictable

Fourth, power structures social relations in the economy. Individual
and corporate actors are always faced with power problems, questions
of policy, of the formation of collective decisions, and the imposition
of their objectives in the market. Individual and corporate actors will
use power to improve their chances in the market, and they will make
attempts to derive power and influence from acquired economic
strongholds. The lesson is that not only state power, but also author-
ity relations in organizations, and market power are central to the
understanding of economic processes. State power over market-players
reduces the possible responses of these players and makes their
behavior predictable for the strategic considerations of the state and
vice versa.

The structural and cultural approaches in market sociology teach

that economic action is always embedded in social structures and
cultures. The judicial-political approach studies how these actions are
culturally and structurally embedded within a particular society and
state. National governments, laws, institutions, social networks and
cultures not only play a pivotal part in how markets are structured, but

254

also determine to at least some degree what the possibilities for and
results of market regulation can be. Although increasingly market
structures and rules are being established on a transnational basis, as
in the European Union, the World Trade Organization, or the North
American Trade Agreement there are still national styles of market
regulation. Therefore the sociology of market regulation that can be
found in the literature, albeit only in statu nascendi, has a strong cross-
national comparative streak. To illustrate the value of such a socio-
logical approach a specific case will be discussed. This is the case of
the European common market.

III. TOWARDS A COMPARATIVE SOCIOLOGY OF MARKET

REGULATION

If the metaphor “markets as politics” applies to one case, then it is the
European common market. Using insights from the cultural-political
approach in market sociology I will look at three issues. First, I answer
the question of how the single European market plan emerged and
was successfully implemented. Second, I look at alternatives to direct
government intervention and competition for coordinating economic
behavior in the European common market. Third, I focus on the social
dimension of the single European market.

A. The single market plan

In the 1950s and 60s Europe had to cope with the so-called “Ameri-
can challenge” (Servan-Schreiber (1967)). In the 1970s and 80s fol-
lowed a “Japanese challenge” (Zukin and DiMaggio (1990)). Although
in Western Europe in the post-war decades economic integration more
and more developed and the trade between the European economies
increased as a result of the founding of the European Economic Com-
munity, the result was disappointing: slow economic growth and high
and persistent unemployment. Although the member states were com-
mitted to “ever closer union”, business and political leaders across
Western Europe became increasingly of the opinion that the Japanese
and American corporations were more efficient and were likely to take
even more market share across industries in the near future. There was
a general sense that the European economies were experiencing what
was termed “Eurosclerosis”. Because of the diminution of sovereignty

255

that was a consequence of increasing economic integration the mem-
ber states were no longer able to engage in independent economic
action using fiscal or monetary policy. They were losing their ability
to control their economies, but they could not figure out any collec-
tive solutions to the problems at hand. A crisis or rather a series of
crises ensued. In every crisis, however, there are not only difficulties
to overcome but also chances to be seized.

1. Respect for cultural sovereingty made a single market possible

Fligstein and Mara-Drita (1996), and to a lesser degree Therborn
(1995), have used a cultural-political approach to describe and explain
how the European Commission averted these crises. They describe
how the European Commission devised and successfully imple-
mented the so-called single market plan. A plan that was approved by
the European Council and European Parliament and that became
effective when the member states in 1986 signed the Single Euro-
pean Act. The single market plan started in 1981 as a modest project
to remove custom booths across Europe, level value-added taxes, and
expedite the movement of goods. In the course of time, however, this
project became part of a bigger project for institutional change, a
market-building project. This project was not directed from a central
leadership typical of modern national states, but from a set of closely
interacting networks, in which decisions evolved in elusive forms, in
which both informal contacts and protocol had their parts. The sin-
gle market plan was seen as a deregulatory solution to the problem
of Europe’s lack of competitiveness. Through the elimination of bar-
riers to trade and the boost to competition a more competitive Euro-
pean market place would emerge that would have an economic pay-
off. It was not a direct assault upon national sovereignty. It did not
create new European-wide regulatory capacity. It did not force har-
monization of different national traditions in the organization of cap-
ital. Yet, it did bond the member states closer together according to
the overriding goal as it was formulated in the Maastricht Treaty of
December 1991. It allowed for the freer flow of goods, services, and
labor across national borders and facilitated exporting industries.
It was concerned with the creation or extension of markets, rather
than with using them. It also set up the possibility for new institu-
tional arrangements (the Single European Act and the Treaty on Euro-
pean Union).

256

2. Institutional arrangements reflected existing powers and interests

Fligstein and Mara-Drita (1996) theorize the described political
processes by combining economic and cultural-political theories of
institution building. In an existing crisis corporate actors with fixed
preferences, given a set of institutions, might not be able to bargain new
rules. In the case of the European Community they were not able to do
so, and this opened opportunities for institutional entrepreneurs such as
the European Commissioners Karl Heinz Narjes and Jacques Delors to
construct new projects. These projects were not produced in a vacuum
but with the help and cooperation of organized groups with different
interests. The resulting institutional arrangements therefore reflected
existing centers of power and the interests they represented. The net
effect of these institutional arrangements has been more cooperation at
the European level and more competition at the level of industries.

Economists are used to treat interest group concertation as cartels,

and associative action as a major cause of inefficient, sub-optimal
resource allocation. The lesson for market regulation to be learned
from the case of the single European market plan is that there is grow-
ing evidence that there is a certain range of policy areas for which
institutions of interest group self regulation may produce better results
than either the market process or government intervention (Streeck
and Schmitter (1985)).

B. The European single market and social capital

In the 1990s and the early 2000s the economy of Japan stagnated and
found itself in a seemingly never-ending recession. Of a “Japanese chal-
lenge” nothing was heard any more. There was, however, in those years
a revival of the discussion about the “American challenge”. As the
American economy boomed, so European countries sought to emulate
its success. Once again pleas were heard to heed the American call and
to rely in Europe even more than today on competition than on direct
government intervention. There was a wave of deregulation and priva-
tization. Dissenting voices are, however, arousing within the economic
community to look for a solution to increase success. That solution can
be found in market sociology and listens to the name of social capital

The concept of social capital has been used by a number of authors

from a variety of disciplines since the 1920s. The social mechanism
to which this concept refers remained, however, obscure until two

257

major sociologists Pierre Bourdieu and James Coleman elaborated on
it (Portes (1998)). What followed was the emergence and develop-
ment of a social capital research program on relational resources, their
creation, use, and effects (Flap (2002)). There is both an objective,
structural and subjective, cultural dimension to social capital (Newton
(1999) and Paxton (1999) and (2002)). According to the structural
approach in market sociology social capital has as the crucial com-
ponent durable social networks of more or less institutionalized pos-
itive relationships. According to the cultural approach, social capital
consists primarily of a set of values and attitudes of citizens relating
to trust, reciprocity, and willingness to cooperate.

1. Social capital helps co-ordinating individual decisions...

Economists have recently come to argue that the coordination of indi-
vidual decisions that is necessary to create the wealth of nations does
not only have to rely on the lure of market gains or the whip of state
authority. In order to achieve coordination one can also have recourse
to community mechanisms such as social capital (Gelauff (2003)).
Bowles and Gintis (2002) argue, for example, that communities can pro-
vide less costly solutions to various principal agent and collective good
problems than can markets or government interventions. Social capital
theory in its economic shape emphasizes the importance of social rela-
tionships among people, of trust and norms of reciprocity to bring about
transactions. To achieve complex transactions informal institutions can
be helpful. The relations and values embedded in these institutions can
offer an intrinsic motivation to adhere to implicit contracts. If people
keep to contracts or comply with laws because of the values they cher-
ish and the company they keep there is less need for complicated con-
tracts that provide for all eventualities, for bringing civil actions against
transaction partners or for police surveillance and prosecution.

2. ...and is conducive to growth

The counterpart of community at the national level is the civil soci-
ety. Civil society creates social capital. Norms of reciprocity, citizen-
ship, and trust are not only embodied in networks of civic associations,
but also positively influenced by them. A strong and vibrant civil
society characterized by a social infrastructure of dense networks of
face-to-face relationships that crosscut existing social cleavages will

258

underpin a strong and responsive government and a strong and
resilient economy (Edwards, Foley and Diani (2001)). So, at least,
the argument goes. But is it true? Putnam et al. (1993), studying Italian
regions, found that social capital matters in explaining the differences
in economic and institutional (government) performance. Knack and
Keefer (1997) found evidence that trust and civic cooperation have
significant impact on aggregate economic activity. Beugelsdijk and
Van Schaik (2003) analyzed the relation between social capital and
economic growth for 54 European regions. To look at the regional
level is important because recently the networks of European steering
have widened by the growth of various interregional links. They found
that social capital in terms of (active) group membership contributes
to regional economic growth in Europe. Social capital in terms of trust
appeared, however, to be not related to economic growth at the
regional level. Beugelsdijk and Smulders (2003) have tried to further
specify the effect of social capital on regional economic growth in
Europe by distinguishing bridging from bonding social capital. They
argued that bridging social capital, i.e., participation in networks that
span different communities, generate trust and protect members
against rent-seeking activities. They found that the relationship
between bridging social capital and regional economic growth tends
to be positive, whereas such a positive relationship does not exist for
bonding social capital and economic growth.

3. Respecting social diversity raises benefits of integration

What are the implications of all this for market regulation in the Euro-
pean Union? A provisional answer to this question can be found in
Bovenberg (2003), who argues that explicit, legal contracting and
government intervention are increasingly costly in modern economies.
Explicit contracts and government regulations are too rigid to do jus-
tice in the complex, dynamic world we live in. As a substitute for legal
contracts and government intervention based on explicit regulation,
social capital is increasingly seen as instrument to internalize exter-
nalities, thereby benefiting both the adaptability and the growth per-
formance of economies. Looking at the cultural aspect of social capi-
tal he argues that whereas European integration requires convergence
to a homogeneous set of essential public core values, it may actually
also benefit from diversity in non-essential, heterogeneous private
values. For the internal market to function properly there must be a

259

synergy between high levels of general morality, an effective legal sys-
tem and well-functioning reputation mechanisms. Cultural pluralism,
however, does not need to be an obstacle to European integration.
Instead, it increases the potential for intra-European trade and allows
Europe to benefit from the specific strengths of each of the cultural
traditions. The internal market encourages each region to increasingly
specialize in its comparative advantages, which are in part shaped by
its specific social capital. The insight that diversity is produced by and
raises the benefits from European integration strengthens the arguments
in favor of subsidiarity, according to Bovenberg.

The same kind of argumentation can be found in the work of eco-

nomic sociologists like Castells ((1996), (1998)). To make the Euro-
pean Union even more of a success, he argues, the legitimacy of the
European institutions must be enhanced. The key element in gradually
establishing the European Union’s legitimacy, without jeopardizing its
policymaking capacity, is the ability of its institutions to link up with
subnational levels of government, regional and local. This feat can be
accomplished by a deliberate extension of the subsidiarity principle,
under which the Union institutions only take charge of decisions that
lower levels of government, including nation states, cannot assume
effectively. This adds dynamism to regions and cities around Europe.
Both cities and regions have already established European networks
that coordinate initiative, and learn from each other, putting into action
a novel principle of cooperation and competition. In this way the Euro-
pean Union becomes a network society in statu nascendi, which is a
highly dynamic, open system, susceptible to innovating without threat-
ening its balance and characterized by the sharing of authority.

4. The role of the European Union in sustaining social capital

The European Union, the governments of the member states and other
public agencies have a diffuse, but collectively powerful influence on
social capital formation. One option might be to improve social capi-
tal at areas or communities that can be identified as lacking social cap-
ital. The OECD (2001) has suggested some ideas (support for families
and voluntary initiatives, empowerment of citizens, new forms of ICT,
linking health care to communities) worthy of further developments,
pilots and evaluation. As examples of such policies for social capital
building the OECD refers to a program to strengthen communities and
families to support children in Italy, to a program to build bridges

260

through community development in Northern Ireland, and to a pro-
gram to stimulate innovation through networking in Denmark.

C. The European single market and social policy

When the European Economic Community was created in 1957, social
policy was a minor consideration. Since then, the social dimension to
“Europe” has become increasingly important and also the part played
by national policies in the welfare of citizens has expanded consider-
ably. Although the single European market plan primarily focussed
on deregulation and more competition there was also a social dimen-
sion to it. It sought to balance the greater play of market forces and a
new-found freedom for business with an element of social protection
and participation for labor.

Leibfried (1992) has argued that one might predict that due to

increased internal and internal competition the European welfare states
would come to resemble the targeted “lean and mean” welfare state of
the USA. Sykes (1998) likewise argues that the effect of economic con-
straints and attempts to compete in the global market will be for the var-
ious European national governments to engage in a process of welfare
retrenchment. Only a minimal welfare “safety net” along the lines of
US welfare provision will then remain in most of Europe. In the new
global economy there is a requirement for “less state and more market”.
The social dimension of European policy should therefore accommo-
date, rather than counteract, market forces, making European social
regimes more competitive and more efficient (Palier and Sykes (2001)
and Prior and Sykes (2001)). This position corresponds with the Global
Economy scenario of the Netherlands Bureau for Economic Policy
Analysis (De Mooij and Tang (2003)). In this scenario European gov-
ernments concentrate on their core tasks, such as the provision of pure
public goods and the protections of property rights, but also use their reg-
ulatory powers to ensure effective competition on markets. They engage
less in income redistribution and public insurance. The social conse-
quences are more income inequality and higher socio-economic mobility.

1. European model fits European preferences best...

The question of whether these predictions, scenario’s and recommen-
dations eventually will come true depends among other things on the
input-orientated political legitimacy (‘government by the people’) and

261

output-orientated socio-economic legitimacy (‘government for the
people’) of a retrenchment directed European social policy. As far as
the input orientated political legitimacy is concerned sociological opin-
ion research provides information as to the extent to which the gen-
eral public in European countries is still committed to their “old” wel-
fare states. Studies addressing cross-national variations in the level of
support for welfare state arrangements have demonstrated that, there
is generally a high level of public support for state welfare provisions.
Gelissen (2002) for example found that the “old” European welfare
states were still strongly legitimated among their citizens at the begin-
ning of the 1990s, even after a period of intense restructuring. In every
country, the majority of the population was then strongly – or very
strongly – in favor of an extensive and intensive welfare state.
The highest levels of support were found in liberal welfare states,
which are the most market oriented ones, whereas the social-democ-
ratic welfare states had the lowest levels of popular support. One could
explain these differences by referring to the fact that the extent of
government intervention in providing welfare is more limited in liberal
welfare states, and that therefore these citizens may have more to gain
from more government intervention than those of social-democratic
welfare states. Gelissen investigated also the extent of support for
government intervention in the field of social protection in twenty
welfare states (within and without Europe) in the second half of the
1990s. Again there was overwhelming support for governments pro-
viding welfare and as expected the support was significantly lower in
the USA and to a lesser degree Canada, than in European countries.

Economists often criticize sociological surveys for showing social

desirable response patterns without putting a price to these desires.
To meet these objections Boeri, Börsch-Supan and Tabellini (2001)
surveyed the opinions of citizens in France, Germany, Italy and Spain
on their welfare states and on various reform options by using con-
tingent valuation, i.e., they posed the questions about policy options
as trade-offs. They too found strong majoritarian support for the wel-
fare-states-that-be. A majority of citizens opposes cuts to social secu-
rity and welfare spending, but also opposes further increases.

2. Preferred goals are best served

One could raise, however, the question of whether output-orientated
economic legitimacy is not much more important for people than

262

input-orientated political legitimacy. Is it not better to address the
question of what the best institutional arrangements are for promoting
each of a variety of socio-economic and other values that welfare
states have historically been supposed to serve? Goodin et al. (1999)
have answered this question in the affirmative and have applied behav-
ioral instead of attitudinal panel data for the decade 1985-1994 for an
assessment of the “best cases” of the liberal, conservative, and social-
democratic worlds of welfare capitalism: the USA, West Germany,
and the Netherlands. Their point of departure was the economists’ cri-
tique of the welfare state as being inefficient. The inefficiencies intro-
duced into the economy by welfare policies are said by economists to
hinder economic growth and through that people’s “well-being”,
broadly construed. Goodin et al. emphasize, however, that choosing
between alternative welfare regimes is not only a question of an effi-
cient allocation of resources. People have multiple motivations and
governments have multiple goals. Any of the welfare regimes they
reviewed is better in promoting economic efficiency, reducing poverty,
increasing equality, promoting social integration and avoiding social
exclusion, underwriting social stability or furthering autonomy, than
is the uncorrected market. We must recognize, so they argue, that effi-
ciency is not an ultimate value but merely an instrumental one. It is
good only in so far it enables welfare states to achieve more of the
goals they are pursuing. The three types of welfare states have
the same goals but prioritize them differently. The liberal state
(the USA) prioritizes economic growth and efficiency and targets wel-
fare benefits only to those in greatest need. The corporatist welfare
state (West Germany) gives high priority to stability, especially house-
hold income stability. The social democratic welfare state (the Nether-
lands) claims high priority for reducing poverty and inequality. Goodin
et al. expected that each type of welfare state would perform best in
pursuing its “own” economic and welfare priorities, and less well
in regard to the priorities of other states. Many of their expecta-
tions turned, however, out to be incorrect. Why? Because the Dutch
welfare state performed best in pursuing its own priorities and was at
least equal to the other two welfare states on (nearly all of) their pri-
orities. This result suggests, according to them, that there is no sharp
trade-off between equity and efficiency in modern welfare states as
economists presume.

The conclusion from these empirical studies is that the prospects of

a European welfare state along the lines of the “lean and mean” US

263

welfare state are not favorable. There are not only empirical, but also
theoretical arguments that support this conclusion. This argument is
often rendered in terms of path dependence and lock-in effects,
whereby policy choices made in the past become difficult to reverse,
even in the face of serious external pressures. Welfare state regimes
are contexts of complex social interdependence, and in such contexts
new institutions often entail high fixed and start-up costs, and they
involve considerable learning effects, coordination effects, and adap-
tive expectations (Pierson (2000)). Effectiveness and efficiency rein-
force path dependency, external pressure for change weakens it. It is
highly unlikely that new challenges will push European welfare states
toward residualism, i.e., an increasing reliance on means tested ben-
efits and privatization, as is the case in the USA. Even if the salient
trend is state retrenchment, this trend makes it indirectly possible for
somewhat downsized European welfare states to survive (Arts (2002)).
Because of the fact that the preferences and ideas connected with par-
ticular welfare state regimes are internalized and deeply embedded in
institutional structures the diffusion and adaptation of new social poli-
cies will be gradual and piecemeal and will fit with existing institu-
tional capabilities and policy options (Kurzer (2001)).

The lesson to be learned with respect to market regulation is firstly

that both the input-orientated and the output-orientated legitimacy of
measures matter. As far as the latter is concerned one should realize
that individual and corporate actors have multiple motivations and
goals. Taking these motivations and goals seriously means accepting
at least some market distortions, understanding the inevitable contin-
ued existence of inefficient structures and sub-optimal decision-
making. Secondly, with regard to path-dependency, past decisions limit
the choice-set of future decisions, due to switching-costs and learning-
curves, but also sunk-costs, which are not to be disregarded as pre-
scribed by economic theory. The argument of path-dependency can
be used for the understanding of the selection of a specific equilibrium,
if multiple equilibria are detectable (Beckert (1996)).

IV. CONCLUSION AND DISCUSSION

At the end of the 19th and the beginning of the 20th century classical
sociologists showed a more than passing interest in market phe-
nomena. After half a century of inattention, contemporary sociologists

264

have begun to revive the sociological study of economic exchange
and economic institutions. Recent studies in the new economic soci-
ology bring distinctive perspectives to bear on the analysis of market
regulation. Reviewing the state-of-the-art Baron and Hannan (1994)
see evidence of a convergence of interest between sociologists and
economists in this regard. Sociologists are embracing the study of
markets. Economists, meanwhile, are increasingly interested in norms,
institutions, and organizational practices. In their view, economists
and sociologists have much to gain by integrating their insights into
the evolution of markets. They point especially to recent economic
theorizing regarding the finding that multiple equilibria often exist in
economic life and the fact that economists are consequently hard
pressed to explain why a specific equilibrium path might be pursued.
Krugman (1998) argues that this theorizing has been a product of the
“increasing returns/imperfect competition”-revolution that has swept
through economics over the last few decades. Baron and Hannan argue
that sociological work that situates economic actions and relations in
their broader social context may provide insights into the social effi-
ciency or inefficiency of alternative equilibria. This is according to
them one place where sociologists can make an enormous potential
contribution and where fruitful integrations of economics and sociol-
ogy are possible. By specifying how historical, cultural, political,
social, and psychological forces make some equilibria more viable
than others, and by articulating the sources of resistance to change in
social systems, sociologists could help to transform the study of path-
dependent development from historicism into a field in which pre-
diction and comparative assessment are possible. Several sociological
literatures may prove, according to Baron and Hannan, particularly
useful to economists in this regard. They refer especially to sociolog-
ical network theory and methodology on the one hand and the socio-
logical literature regarding the social and cultural embeddedness of
economic action on the other. What economists are sometimes forced
to interpret as market imperfections and aberrations, they argue, often
appear instead to sociologists as important and predictable (at least in
principle) elements of the way markets are socially constructed and
legitimated.

Baron and Hannan put, however, a proviso to their optimistic con-

clusion: “If this work makes progress…” Looking at this paper’s sur-
vey of the new economic sociology of market regulation we can con-
clude cautiously that the fragile progress that has been made till this

265

moment promises well for the future. Especially, the structural
approach in market sociology seems promising where it seeks to ana-
lyze the structure and dynamics of markets in sociological network
terms. The cultural and cultural-political approaches in market soci-
ology increasingly take a comparative, cross-national perspective.
They inquire especially into the cultural and legal embeddedness of
economic activities and document how social and political forces
influence the orientations and options available to individual and cor-
porate actors in market exchange. To illustrate the value of a com-
parative, cross-national approach in market sociology for analyzing
market regulation we discussed the case of the still developing Euro-
pean common market system.

One can imagine that from the vantage point of economics the dis-

cussion of this case is too impressionistic to be conclusive. One has
to realize, however, that the comparative sociology of market regula-
tion is still in its infancy, whereas there is a long respectable tradition
of theoretical thinking and empirical research about market regulation
within economics. The comparative sociology of market regulation is
still a budding research program and one has to treat such programs
leniently. It may take decades before they really get of the ground and
become empirically progressive (Lakatos (1978)). The conclusion is
warranted, however, that this program has to a certain degree got of
the ground in the past decades and that real theoretical and empirical
progress has been made. So at least some credit must be given where
credit is due.

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