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Kindly do not reproduce or cite without permission
The Toolkit of Economic Sociology
by
Richard Swedberg,
Cornell University, Department of Sociology, Uris Hall 328
rs328@cornell.edu
April 1, 2004
MIT/Harvard Economic Sociology Seminar
This paper is the first version of an article written for Barry Weingast and Donald
Wittman (eds.), Handbook of Political Economy. The final version will probably look
quite different (though the size will remain the same: 6,000 words including references).
For this reason, comments are very welcome.
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Economic sociology is a term that was rarely heard a decade ago but which has
become popular again. Today sociology departments get ranked according to their
prominence in this field, and a respectable number of articles and books that label
themselves “economic sociology” appear every year. While the standard definition of
economic sociology – the application of the sociological perspective to economic
phenomena – shows that economic sociologists are primarily interested in analyzing the
economy and its main institutions, a quick look at some representative studies show that
these often also include a political dimension in the analysis. The modern economy, the
argument goes, is deeply influenced by political powers.
This tendency in contemporary economic sociology to highlight the interface
between economics and politics is so strong that one may even speak of an emerging
economic sociology of politics (e.g. Evans 1995, Fligstein forthcoming). What this type
of analysis may look like, can be illustrated by one of the first examples in this genre,
namely the analysis of taxation in Schumpeter’s “The Crisis of the Tax State”. The main
idea of fiscal sociology (Finanzsoziologie), as Schumpeter called it, is to analyze the role
that economic factors play in the actions of the state with the help of sociology, and
thereby get a better and less ideological handle on what the state is all about. “The budget
is the skeleton of the state stripped of all misleading ideology”, to cite a famous line from
Schumpeter’s study (1991a:100).
To focus on the interface of politics and economics is not the exclusive task of
economic sociology; it also is something that e.g. political economy does. An important
difference, however, is that political economy draws on a type of analysis that is deeply
influenced by analytical economics. Political economy, in contrast to contemporary
economic sociology, makes use of a variety of economic ideas, such as constitutional
economics, game theory and so on. One may even define the field of political economy
as the logic of economics applied to political phenomena.
In this chapter I will argue that economic sociology would do well to follow the
example of political economy and pay more attention to analytical economics and its
ideas. Contemporary economic sociology, I argue, focuses far too much on social
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relations and see the impact of these as the explanation to most of what happens in the
economy. What is wrong with this approach is that it disregards the importance of
interests or the forces that drive human behavior, not least in the economy. What needs to
be done – and this will be the red thread throughout of this chapter – is to combine social
relations and interests in one and the same analysis. If we do this, I argue, we will be able
to unite some of the basic insights from economics, with some of the basic insights from
sociology (Swedberg 2003).
To proceed in this manner would clearly necessitate the existence of a
sociological concept of interest and, as we shall see, such a concept did in fact emerge
around 1900 in the work of Max Weber and a few others. This concept, however, has
long been forgotten and needs to be revived. More generally, I will argue that MaxWeber
is a model to follow for economic sociologists in that he often took ideas from analytical
economics and introduced them into his sociological analysis – while giving them a twist
of his own.
Following in the spirit of economics I will present economic sociology in this
article as a toolkit of concepts. The idea of presenting one’s analysis as “a box of tools”
comes from modern economics, more precisely from The Economics of Imperfect
Competition by Joan Robinson (1933:1). This “unsurpassably felicitous phrase”, as
Schumpeter has called it, was then incorporated into mainstream economics (Schumpeter
1954:15). In the pages to come, the reader will therefore find a presentation and
discussion of concepts such as embeddedness, field and so on
For the political economist who also wants to know which the main texts in
economic sociology are, a few titles will be supplied. For the reader who is interested in
contemporary economic sociology, the following two works contain the essential: The
Handbook of Economic Sociology and the reader entitled The Sociology of Economic Life
(Smelser and Swedberg, 1994, forthcoming; Granovetter and Swedberg 2001). For the
reader who has a bit more time, and who is more interested in the wheat than in the chaff,
the following works are strongly recommended: Max Weber, Economy and Society;
Joseph Schumpeter, Capitalism, Socialism and Democracy and his sociological essays;
Karl Polanyi et al, Trade and Market in the Early Empires; Mark Granovetter, “Economc
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Action and Social Structure: The Problem of Embeddedness”; and Pierre Bourdieu, The
Social Structures of the Economy.
# 1: Interest
The first thing that needs to be done in an economic-sociological analysis is to
figure out which interests are involved and how the actors try to realize their interests.
This often entails going beneath the surface of things, since what is involved are the basic
motives or forces that drive the actor in the particular case. The actor is presumed to be
rational (until otherwise proven), and by “rational” is meant that efforts are made by the
actor to realize his or her interests.
The emphasis is not, to speak with Amartya Sen, on rational choice as
consistency, but on rational choice as interest realization (Sen 1986). Sen’s formal terms
for the former is “the interest consistency approach”, and for the latter “the interest-
correspondence approach”. While the actor can hardly realize his or her interests without
somehow, and to some extent, figuring out which these interests are and how to realize
them, the emphasis in the interest-correspondence approach is nonetheless more on the
interests themselves than on the decision process.
The reason why interests have to be taken into account in the first place (and this
is less evident to sociologists than to economists!), is that interests represent the primary
driving force of human action. They are, metaphorically speaking, the motor that drives
the boat or the spring that makes the clock tick. Interests provide the human actor with
the strength to meet the challenges of the day – be it to clean offices, run a corporation or
to write a scholarly article.
Social life also entails the bringing together of individuals and their interests into
larger forces, in the form of families, tribes, corporations, nation states, and so on. The
individual is assumed to know his or her interests the best, and also when they diverge
from those of other individuals, as they are apt to do. In the latter case, the interests of
individuals may have to be aligned, coerced or the like, since collective forces are
necessary in society. In economics, agency theory covers many cases of this type.
Interests may also block and conflict with one another; and this goes for
individual interests as well as for larger interest constellations. Traditional interests may,
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for example, block interests in change or entrepreneurial interests. In The Religion of
India Max Weber describes how the religious interests of Hindus in reincarnation
blocked the Hindu artisans’ interests in improving their tools (Weber 1958b:112).
Social science literature is filled with examples of interests that clash and oppose
one another. One famous example of this can be found in the work of Marx, where the
clash of class interests drive the historical development. Weber, who was suspicious of
class interests since he was a methodological individualist, nonetheless proclaimed à la
Marx that conflicts are very much present in all societies. Competition, for example, is
defined by Weber as conflict with non-coercive means. And a market, from Weber’s
perspective, represents a social order that is the result of two types of conflicts: between
sellers and buyers over who will be the final seller and buyer; and between the final buyer
and seller over the price. Conflicts in markets typically end with a compromise, Weber
argues.
While economics and sociology share the insight that interests are essential to the
understanding of society, they nonetheless differ on at least two points. First, economics
tends to only take one type of interests into account, and that is economic interests.
Second, economics operates with a non-sociological concept of interest. Both points need
some explication; and one way to go about this is to say something about the history of
the concept of interest.
According to the standard history of the concept of interest, people such as David
Hume, Adam Smith, Tocqueville and so on made use of a wide variety of interests in
their analyses (e.g. Hirschman 1986, Holmes 1990). Towards the end of the 19
th
century,
however, economic analysis went through a period of formalization (relating to the
invention of marginal utility theory). And as part of this process, other interests than
economic interests were eliminated from the economist’s repertoire. Interests were
equated with utility, just as half a century later the economic concept of interest would be
further impoverished through revealed preference theory. According to this theory, actual
economic behavior is directly equated with underlying preferences or interests,
something that eliminates the tension between a possible and an actual realization of
interests.
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What is not included in the standard history of the concept of interest is that
towards the end of the 19
th
century, a sociological concept of interest was developed. By
this is simply meant that the concept of interest was introduced into many of the different
types of sociological theory that were now being developed. This goes especially for
those by Georg Simmel and Max Weber. An interest can be expressed in many different
social forms, Simmel argued, and similarly different interests can be expressed through
one and the same social form (Simmel 1971). An economic interest can be expressed in
the form of a firm, buying of securities, and so on; while, say, competition may exist
between buyers, sellers, admirers of the same woman, and so on. Weber added an
interpretative dimension to this argument – interests always have to be subjectively
perceived by the actor – and also the idea that interests can only be realized through
social relations. Weber’s embrace of the idea of a plurality of interests as well as interests
being social comes out very clearly in his famous statement about the relationship
between ideas and interests:
Not ideas, but material and ideal interests, directly govern men's conduct. Yet
very frequently the 'world images' that have been created by 'ideas' have, like
switchmen, determined the tracks along which action has been pushed by the
dynamic of interest. (Weber 1946:280)
How can the concept of interests be of use in analyzing the intersection of economics
and politics? One answer has already been given – that of Schumpeter in “The Crisis
of the Tax State” - and this is that a focus on the economic interests of the state allows
the analyst to cut through some of the ideological trappings of politics. Another
example would be Mancur Olson’s theory of the free rider - but with a sociological
dimension added. What this means for Olson’s theory is simply that it is qualified and
modified in a number of ways – say by taking the actors’ perception of their interest
into account, their social history, the pre-existing social structure, and so on.
#2. Economic and Social Action
Economic and social action constitutes the second major concept in economic
sociology. The concept of economic action, as used in economics, differs from the
concept of economic and social action in that its social part is not highlighted and
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theorized. The fact that economic action typically consists of some kind of interaction is
ignored, partly because of parsimony but probably also because economic analysis was
formalized well before there was a sophisticated concept of social action. Both
economics and economic sociology argue that action in the economy is driven by
economic interest; but while economics derives action directly and exclusively from the
interest, economic sociology does not. In economic sociology an additional assumption is
made that economic action is also social action, and that this will significantly influence
how the action unfolds. To put it differently, while economics can be said to focus on the
shortest distance involved (“as the crow flies”), economic sociologists try to capture the
“real” distance involved when the economic actor tries to get from A to B.
The concept of economic and social action, as used in economic sociology, is a
sub-category of social action; and the structure of the latter was first outlined by Max
Weber in Economy and Society. In this work we find Weber’s famous definition of
sociology: “sociology…is a science concerning itself with the interpretive understanding
of social action and thereby with a causal explanation of its course and consequences”
(Weber 1978:4). Social action is defined in the next sentence as follows:
We shall speak of “action” insofar as the acting individual attaches a
subjective meaning to his behavior – be it overt or covert, omission or
acquiescence. Action is “social” insofar as its subjective meaning takes
account of the behavior of others and is thereby oriented in its course.
(ibid.)
Economic and social action (Weber uses a single term: Wirtschaften) differs from
social action by having the satisfaction of a “desire for utilities” as its goal (ibid., pp. 63-
4). The reason for this awkward-sounding phrase is that Weber not only wants to include
the satisfaction of needs but also profit-making.
Weber’s definition of social action, as just cited, is very concentrated, and some
of its implications need to be spelled out. First of all, Weber’s position is one of
methodological individualism, but we are here confronted with a methodological
individualism of a social type. What makes it social is that it is oriented to another actor.
A quick look at Fig. 1 may help to clarify.
/Fig. 1 about here/
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It should be emphasized that social action can be part of an interaction, but does
not have to be so. A social action is by definition oriented to another actor - and this
means that a much wider range of actions can be included in the analysis than if social
action was simply equated with social interaction. An actor may, for example, take
another actor into account without the latter being aware of this. As we shall see later on,
in the discussion of the concept of order, the concept of “orientation to” also facilitates
the analysis of institutions.
Finally, there is an interpretive dimension to the concept of social action that is
characteristic of economic and social action, and which differentiates it from economic
action. While economics operates with a stylized and single-dimension concept of
meaning (in the form of utility, preferences, and so on), Weber opens up the concept of
economic and social action to a cultural definition of meaning as well as to much greater
empirical variety, through his emphasis on the need for the actor to invest his or her
action with a meaning. “Behavior” only becomes ”action”, according to the definition
just cited, when the actor invests his or her behavior with meaning.
The concept of economic and social action can be useful when it comes to
analyzing what is happening at the interface of economics and politics. Take, for
example, the following two typical examples: an economic actor whose actions are
influenced by some political authority; and a political actor whose actions are influenced
by the economic structure of society. In the first case we would start the analysis by
assuming that the economic actor is driven by economic interest and attempts to satisfy
his or her desire for utilities, while orienting his or her actions to (say) the state. And
similarly, the political actor who has some political goal in mind, will simultaneously
take (say) some powerful corporations into account. In both cases as well, some of the
answer to what is going on will also have to be sought in the actor’s understanding of
how this orientation to others influences his or her actions.
# 3 Economic Order
Economic order constitutes the third major concept in economic sociology, and
lays the foundation for economic sociology together with interest and economic and
social action. The way that economic order is linked to the earlier concepts is as follows.
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An individual action cannot only be oriented to another actor, but also to something that
Weber terms an order (Ordnung).
The concept of order includes, among other things, what in today’s social science
is referred to by such concepts as norms, organizations and institutions. The reasons for
following the example of Weber in bringing all of these together under one single
conceptual heading are primarily two. First, the concept of order theoretically links
together a number of otherwise independent concepts. Second, it also economizes on
space in this brief article, which would be seriously incomplete without some kind of
mention of norms, organizations and institutions.
An order, we learn from Economy and Society, can roughly be defined as a
prescription for how to act that has acquired a certain independence in the minds of
individual actors (e.g. Weber 1978:3-24, 33-6, 48-50). Its origin is in a set of interactions
between individuals, which can either take the form of a spontaneous relationship or be
agreed upon. The fact that an order appears as independent of the actor, makes it possible
for him or her to orient his or her actions to the order – and in this way introduce a social
element into the action, similarly to what happens when the action is oriented to another
actor.
An order is valid or legitimate if it is seen as binding or obligatory to the actors. A
norm (Weber’s preferred term is “convention”) is characterized as a valid order, which is
guaranteed through disapproval (ES:34). An organization is defined as an order that is
guaranteed to be carried out by specific individuals: a head and often also an
administrative staff with representative powers (ES:48). An institution (a term that Weber
does not use in his general sociology) can be described as an order that consists of a
general model for behavior, often enforced by a staff emanating from the political order
(see Fig. 2).
/Fig. 2 about here/
It should be emphasized that the most important factor in making norms,
organizations and institutions so powerful in social life (and thereby also difficult to
change) has to do with their links to interests. A norm often describes the type of
behavior that is unofficially prescribed by a group in order to realize an interest. If a norm
is official and also backed up by a staff, it becomes a law according to Weber (ES:34-6).
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An organization, on the other hand, has a staff whose main task is to realize the purpose
(interest) of the organization. Institutions, finally, can from this perspective be seen as
large complexes of prescriptions for how to act, in order to realize interests. They are
typically backed up by law, that is, by a staff linked to the political order.
The concept of order that Weber uses ties together a set of concepts that are
usually defined independently of one another. It is also a very flexible tool. Weber
himself, for example, uses it in his famous definition of law; and in this article I have also
extended it to the concept of institution. One may use it as well to get a handle on such
concepts as group and network – two terms that Weber does not use, but which denote
phenomena that he discusses under other headings in his general sociology.
Concepts such as norms, organizations and institutions are also useful in
analyzing the economy. For an illustration of this, the reader may want to consult the
chapter on economic sociology in Economy and Society (Weber 1978:53-211). Here, as
well as in the main chapter on political sociology in this work, one can also find many
examples of how these concepts are used to analyze the interface of economics and
politics. It is in the main chapter on political sociology that we, for example, find
Weber’s famous typology of legitimate political order or rule (rational, traditional and
charismatic rule; ES:212-301). These three types are all linked to the economy in various
ways. For one thing, their staffs need to be paid (from the ruler’s personal resources, from
tributes or from taxes). There is also the fact that each of these forms of legitimate
political order either furthers or impedes the development of the various forms of
capitalism (rational, political and traditional-commercial capitalism).
# 4. Reciprocity-Redistribution-Exchange
Up till now only classical economic sociology has been drawn on for conceptual
tools in this article. The reason for this is that Weber’s contribution to this field is still
unsurpassed when it comes to creativity and sophistication. Nonetheless, also more recent
economic sociology has produced some key concepts, and Karl Polanyi’s three “forms of
integration” are prominent among these (Polanyi et al 1971:243-69). According to
Polanyi, every economy needs to be stabilized, and this can basically only occur in three
ways: through reciprocity, redistribution and exchange. Reciprocity roughly means
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sharing; redistribution, allocation via a center; and exchange, distribution via a price-
making market.
While Polanyi ‘s three forms of integration may not seem very exciting at first,
they are in reality quite handy and useful. Polanyi himself, for example, points out that an
institutional structure answers to each of the forms of integration. Reciprocity may take
place in a family; redistribution in a socialist state; and exchange in a modern market.
Every economy, Polanyi also notes, typically contains a mixture of the three forms of
integration. A modern Western economy, for example, is not only characterized by
exchange (in the form of sophisticated and specialized markets), but also contains
elements of redistribution (say through the state or the non-profit section), and of
reciprocity (say through the household).
The dynamic nature of capitalism may be illustrated with the help of Polanyi’s
concepts as well. While all economies start with production and end with consumption,
their rhythm differs widely with the mechanism that is chosen for the distribution of
production. While reciprocity and redistribution at best lead to slowly expanding
economies, exchange creates an economy that has an inherent tendency to dynamic
expansion (see Figure 3).
/Fig. 3 about here/
Polanyi’s three forms of integration may also be of help in analyzing the
economics/politics interface. Redistribution, for example, is typically handled by the state
and is therefore a political-economic category par excellence. When the Soviet Union
collapsed, state-led redistribution grinded to a halt, and a crisis immediately developed
since markets had been repressed for a long time. In this situation reciprocity emerged –
between neighbors, acquaintances, family members and so on – as an alternative
mechanism.
# 5 Embeddedness
The concept of embeddedness is the most famous concept that has been developed in
contemporary economic sociology. While the term itself can be found in the work of
Polanyi, it was rarely used in his days and had to wait till the 1980s and Mark
Granovetter to be thrust into prominence. While the centrality of embeddedness to what
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has become known as “new economic sociology” (mid-1980s-) is beyond doubt, its
analytical status, on the other hand, is contested. While many see it as a useful tool with
which to show what is distinctive about the approach of economic sociology, many
economic sociologists also contest its usefulness.
One reason why the concept of embeddedness is so controversial may well be its
many meanings, which range all the way from being a slogan or advertisement for the
sociological approach, to a more analytical vision, as in Granovetter’s own work
(Granovetter 1985; cf. Granovetter 1992, 1995). Polanyi, who invented the term, used
embeddedness as part of his attack on liberalism and market-oriented ideologies more
generally. The first half of his analysis is well known: in pre-capitalist society the
economy is integrated into, or embedded in, the rest of society, especially its political and
religious institutions; but with the advent of capitalism the economy was separated out
and has come to dominate society. The second half of Polanyi’s argument is less known,
but follows logically from its first half: for society to become healthy again, the economy
has to be re-embedded or integrated into society. Political and other collective institutions
have to acquire precedence over market concerns.
Through his well-known article in the mid-1980s Granovetter introduced a
different and analytically more useful concept of embeddedness. He first of all
challenged the political dimension of Polanyi’s ideas by arguing that the pre-capitalist
economy was as embedded as the capitalist economy, in the sense that both are social or
embedded in social structures. Secondly, he brought some analytical sharpness to the
concept of embeddedness by insisting that all economic actions are embedded in
networks of social relations. There is no embeddedness of the economy in general; all
economic actions, however, do take an interpersonal expression; and thanks to network
theory this expression can be traced with precision.
One may finally also speak of a third way in which the term embeddedness is
used. This may well be the most popular (and least interesting) meaning, since
embeddedness is simply synonymous with “social”. The general hostility that
sociologists often feel towards economic analysis may well be at the roots of this usage.
Whatever the reason may be, the analytical content of this meaning is close to zero.
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What makes the concept of embeddedness so useful, many economic sociologists
argue, has to do with its close links to network theory. This type of approach, which is
quite popular in current economic sociology, provides the analyst with a metric to
analyze social interactions, including economic ones (e.g. Wasserman and Faust 1994).
To some extent, through its reliance on a method that has a strikingly visual dimension,
network theory also gives the analyst a sense that he or she is getting close to tracing the
social structure of reality.
Critics of the embeddeness approach in its strongest version (that is, the version
that Granovetter represents) have pointed out that it ignores the political and cultural
dimensions of society; that it is unable to handle economic phenomena at the macro level;
and that it is inadequate and confusing as a metaphor (e.g. Zukin and DiMaggio 1990,
Nee and Ingram 1998). To this may be added that it does not single out and theorize the
role of interest, and thereby runs the risk of attaching far too much importance to the role
of social relations in economic life.
That the concept of embeddedness can be used to analyze what happens at the
interface of the economy and politics is clear from what has already been said. One may
even argue that Polanyi developed the concept of embeddedness precisely to give voice
to his discontent with the way that the economy and politics are separated from each
other in capitalist society. While Granovetter’s concept of embeddedness has been
accused of ignoring the impact of political forces on the economy, it is nonetheless
obvious that that it provides the analyst with a very useful tool with which to trace the
exact relations between, say, a political actor and an economic actor, between some
corporations and state agencies, and so on.
# 6. Field
The second most important concept in “new economic sociology” is that of the
field. This term can be defined as a distinct area of social space, in which all the relevant
actors are influenced by its structure. This definition is admittedly somewhat vague, and
just as embeddedness, the concept of field has a number of critics.
There currently exist two versions of the concept of the field: one that has
emerged in the sociology of organizations in the United States, and one that has Pierre
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Bourdieu as its author. While they overlap to some extent, these two versions are also
different on important points. Sociologists of organization basically use the concept of
field in the sense of organizational field – that is, for phenomena in social life that can be
conceptualized as a number of similar and related organizations. A field, from this
perspective, typically denotes a number of organizations that belong together, either by
virtue of directly interacting with one another or because they take each other into
account in some other way. To cite a standard text in organizational sociology: “by
organizational field we mean those organizations that, in the aggregate, constitute a
recognized area of institutional life: key suppliers, resource and product consumers,
regulatory agencies, and other organizations that produce similar services or products”
(DiMaggio and Powell 1991:64-5). Examples of fields include industries, professions
and national societies.
For Bourdieu, in contrast, a field is not so much a middle-range concept as an
integral part of his general theory of society. The field, in all brevity, constitutes together
with the concepts of habitus and different types of capital (social capital, symbolic
capital, and so on) the basic building stones of Bourdieu’s theory of society. There exist a
huge variety of fields in society, Bourdieu says, such as the fields of art, photography,
literature, the economy, an industry, a firm, and so on (e.g. Bourdieu and Wacquant
1992:94-115).
The main function of the concept of field, Bourdieu argues, is to represent the
structure of some part of society. This structure is primarily important in that it assigns a
specific place to each actor and also exerts pressure on each actor to remain in his or her
position. Each field is centered around a specific interest; and the actors in a field all
basically pursue the same interest – be it prestige in the field of art, market share in an
industry or personal power in a firm.
The advantage with the concept of field, according to its advocates, is that it is not
restricted to what happens in direct interactions. If you rely primarily on networks and the
theory of embeddeness, you are restricted to actual interactions, and thereby miss the
impact of the structure of the field (e.g. Bourdieu 2000:242). But it is also well
understood in sociology that it is hard to trace the exact impact of a field, and that the
social mechanisms involved are often neglected. Even the advocates of “field theory”
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agree that this is the case – but argue that the positive outweighs the negative (e.g. Martin
2003).
Can the concept of the field be of help in addressing issues at the interface of the
economy and politics? Its advocates in economic sociology say “yes”. While they
acknowledge that politics is its own field, just as the economy is, they also note that the
political field typically impinges on the economic field. As an example of direct impact,
one may mention Bourdieu’s argument that the French state has profoundly influenced
the country’s construction industry by introducing various loans for private home
ownership (Bourdieu 2001). And as an example of a more mediated influence, one can
mention Neil Fligstein’s argument that “the conception of control” (or general strategy)
of large American corporations has been deeply influenced by antitrust legislation
(Fligstein 1990).
Final Remarks
Before ending this brief article on the toolkit of economic sociology it should be
noted that economic sociology lacks a single coherent structure, in the sense of an agreed
upon set of basic concepts that are taught in, say, introductory courses and textbooks.
Another way of saying the same thing is that it is harder for economic sociologists than
for economists to agree upon what should be included in the toolkit and what should not.
Some economic sociologists may argue, for example, that networks constitute one of its
main tools, while I prefer to present network theory as closely related to the idea of
embeddedness. There also are those who attach great importance to “performativity” or
the idea that modern economics does so well because it first helps to create the reality
that it later analyzes (e.g. McKenzie and Millo 2003).
A final remark on the concept of toolkit is also in order. In 1998 Ronald Coase
commented on this metaphor in American Economic Review and said that it had become
problematic since contemporary economics pays so much attention to its analytical task
that it has lost its subject matter, namely concrete economic reality. The whole thing
reminded him of a modern poem, Coase said, which reads as follows:
I see the bridle and the bit all right
But where’s the bloody horse? (Coase 1998:72)
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While I would argue that economic sociology still has quite a bit to go, when it comes to
having a fully developed toolkit, it also deserves some praise, as I see it, for holding on to
“the bloody horse”.
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Fig. 1 Economic Action according to Mainstream Economics and Economic Sociology
1. Mainstream Economics
Actor
A
utility
economic
interest
2. Economic Sociology
Actor A
utility
Actor B
economic
interest
(subjectively
perceived)
Comment: Economic action, Max Weber argues, is theorized in different ways in
mainstream economics and in economic sociology. Two major differences can be seen in
this figure: economic sociologists, in contrast to economists, see economic action as not
only oriented to utility but also to another actor; economic interest also has to be
subjectively perceived.
Source: Max Weber, Economy and Society, pp. 1-24, 63-69.
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Fig. 2. Different Types of Order to Orient Your Action to, according to Weber
norm organization other orders (e.g. law, political order, etc.)
order (Ordnung)
Actor
B
Actor A
Comment: The actor may orient his or her action to an actor or to an order – and thereby
make it social.
Source: Max Weber, Economy and Society, pp. 3-24, 33-6, 48-50.
19
Fig. 3. Different Ways of Organizing the Economic Process according to Karl Polanyi
A. The Economic Process
B. The Economic Process where Redistribution is Predominant
C. The Economic Process where Reciprocity is Predominant
D. The Economic Process where Exchange is Predominant
production
redistribution
consumption
production
reciprocity
consumption
production
distribution
consumption
20
Comment: The distribution of what has been produced in an economy can be organized in
fundamentally three ways which, following Polanyi, we may call redistribution, reciprocity
and exchange. Exchange characterizes the capitalist organization of the economy; and this
type of economy derives its dynamic from the fact that the end goal of the economic process
is not exclusively consumption, but also profit. The more that this profit is reinvested into
production, the more dynamic the economy will be. The two key mechanisms in capitalism,
in other words, are organized exchange (the market) and the feedback loop of profit into
production. It is the use of these two social mechanisms, it should be stressed, that makes
the organization of economic interests in the form of capitalism into such an effective
machinery for transforming economic reality.
production
exchange
consumption
profit
21
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