Economic Sociology Research Paper

As a recognized specialty, economic sociology only began to fulfill Fairchild’s vision some four decades after his 1936 exhortation. True, economic activity has figured importantly in sociology from the time of Karl Marx, Max Weber, and Emile Durkheim (Swedberg 1998). As economists’ studies of economic growth proliferated after World War II, furthermore, sociologists often joined them in examining the interplay of economic growth with changes in population, family structure, education, and other social phenomena. But those sociologists typically defined themselves as specialists in modernization, development, social mobility, or social change rather than as economic sociologists. Talcott Parsons and Neil Smelser’s (1956) attempt to synthesize economic and sociological approaches attracted considerable attention, but failed to galvanize a new specialty.

Economic sociology as such began to gain coherence and strength in the 1980s. Arthur Stinchcombe, for example, published his Economic Sociology in 1983 and two years later Mark Granovetter (1985) published an influential article on embeddedness. Here are some other milestones: the Encyclopedia of Social Sciences published in 1937 contained no articles devoted to sociologists’ treatments of explicitly economic processes; the International Encyclopedia of the Social Sciences (1968) included a general article on Economy and Society but none called economic sociology.

In its recent form, economic sociology offers a sociological account of economic phenomena, more specifically, the production, consumption, distribution, and transfer of assets, goods, and services. In the process, it goes well beyond Fairchild’s vision. It subverts the division of labor prescribed by Fairchild. The new agenda treats economic processes and behavioral assumptions—such as markets, rationality, or self-interest—as products of underlying social processes. As Harrison White (1988, p. 232) puts it, market activity is ‘intensely social—as social as kinship networks or feudal armies’ (for other general statements, see e.g., Smelser and Swedberg 1994a, Dobbin 1994, Barber 1995, Beckert 1996, Ingham 1996, Bourdieu 1997, Swedberg 1997, Fligstein 1998, Collins 1999).

Recent changes in the world economy have made the agenda of economic sociology both more urgent and more promising. Growth of international capital markets, expansion of multinational firms, pursuit of global commodity marketing, collapse and transformation of centrally planned economies, and recognition that capitalist economies depend on complex institutional infrastructures all challenge economic sociologists to locate economic transactions in their social settings.

1. Approaches To Economic Activity

Within recent economic sociology, we find three somewhat distinct approaches to economic phenomena. They vary with respect to economics in two regards: their proximity to standard economic explanations, and their proximity to conventional economic subject matters. We might call them extension, context, and alternative.

Extension theorists apply relatively standard economic models to social phenomena economists themselves have not treated extensively or effectively, for example, household behavior, sporting competition, religious recruitment, and compliance with states.

A context approach identifies features of social organization that work as facilitators or constraints on economic action. This position is intent on revamping economists’ portrayals of individual and collective decision-making, for example, by specifying conditions other than short-term gain that influence decisions. Advocates of context often speak of the ‘embeddedness’ of economic phenomena in social processes, and often refer to interpersonal networks when they do so. As Michel Callon (1998, pp. 10–11) puts it: ‘What benefits accrue from social network analysis? Answer: a simple explanation of the possibility that agents have of calculating, when caught up in situations of extreme uncertainty. They do not have to open up to their environment in order to exchange or get information, or to negotiate and coordinate their decisions so as to lay the foundations of a possible order. They are open and connected: it is from these connections that they derive their ability to calculate. Homo clausus of economic activity is re- placed by homo apertus of social network analysis.’ Given their orientation to the agenda of economics, followers of this approach have continued to focus on firms and different kinds of markets.

In the alternative perspective, sociologists propose competing accounts of economic transactions. Rather than expanding the economic approach or complementing it, one prominent view argues that in all areas of economic life people are creating, maintaining, symbolizing, and transforming meaningful social relations. As a result, the subject matter certainly includes firms and markets but also ranges over households, immigrant networks, informal economies, welfare transfers, or organ donations. Indeed, economic sociologists who pursue extension and context strategies often fail to recognize alternative analyses as part of their specialty.

By and large the extension approach pays little attention to culture, interpersonal ties, or categorical differences, such as class, gender, race, or nationality. Context theorists typically take just one of these— culture, ties, or categorical differences—and make them an explicit part of the explanation. Alternative perspectives give more explicit attention to combinations of culture, networks, and categories.

To detect differences among the three approaches in concrete areas of economic life, it is therefore convenient to ask repeatedly to what extent and how they employ culture, interpersonal ties, and categories as part of their explanation. Let us employ those rules of thumb in looking at four contrasting areas of economic life: firms, labor markets, households, and consumer markets. The first two sectors figure prominently in standard economic analyses, the second two, less so.

1.1 Firms

Economic sociologists study features of firms that managers and economists have thought to be ruled by rational efficiency and show how these corporate features depend on social categories, interpersonal ties, and culture. What, for instance, motivates workers in capitalist firms? The simplest economic answer is that employer and worker strike a bargain in the exchange of human capital for wages. Economists and economic sociologists have moved out of that efficiency-driven position by examining other organizational rationales for payment systems. Trond Petersen (1992), for instance, documents how variation in types (and not just levels) of payment within department stores establishes a hierarchy of jobs and returns from work.

As Aage Sorensen’s (1994) useful synthesis of standard thinking about systems of compensation shows, the literature on payment systems divides between analysis from employers’ perspectives and from workers’ perspectives. From the employers’ perspective, the literature looks at variation in payment systems as incentive structures, techniques for manipulating motivation. From the workers’ perspective, a less abundant literature portrays payment systems as opportunity structures.

While such analyses provide thin organizational context for a well-known economic process, other sociologists offer competing accounts of organizational rationales. A case in point is Calvin Morrill’s (1991) ethnography of executives employed by a large American corporation. Responding to structural transformations within the firm along with a rash of hostile takeovers these executives generated a new public style of competition and conflict resolution. The new system by no means simply matched material rewards to task performance.

Instead the system demanded adherence to a symbolically charged code of honor. Honorable executives or ‘white hats’ who followed the rules were rewarded not only by reputation and esteem but, Morrill found, expanded power and greater access to resources than their dishonorable ‘black hat’ colleagues enjoyed.

This sort of analysis takes the economic sociology of firms in a far different direction than wage: performance matching. Pure efficiency explanations of payment systems, as effective performance measures or reward structures, fail to account for the creation, changing acceptability, and diversity of arrangements for compensation.

1.2 Labor Markets

When it comes to labor markets, many economic sociologists have shifted radically away from models assuming socially unfettered rational exchanges between workers and employers. Instead, sociologists identify a vast set of structural, cultural, and categorical factors shaping the operation of labor markets. Consider the problem of how people find jobs. Traditional economic accounts of labor markets look at the intersection of two search procedures: workers searching for job opportunities, employers searching for workers. The individual on each side, the theory tells us, is trying to maximize self-interest by looking for the best possible bargain. Employers want to find the worker with the best qualifications, while workers are seeking the highest price for their labor.

Mark Granovetter’s 1995 [1974] study seriously complicated this neat equation by introducing third parties. A job seeker’s existing social networks, he showed, shaped the job search process in fundamental ways, by providing information and access to jobs. Granovetter coined the term ‘strength of weak ties’ to convey a key finding: connections to distant acquaintances were significantly more effective referral sources than close friends or family. More generally, Granovetter points out that economic transactions are embedded in complex social relations which constrain them.

In a similar vein, other economic sociologists have examined the operation of migration networks, informal economy, ethnic niches, and internal labor markets (see e.g. Portes 1995). Such studies extend into the examination of culture (e.g. within the segments of labor markets) and of categorical difference (e.g. discrimination by gender, race, and ethnicity). In his detailed analyses of labor markets within corporations, for example, Ronald Burt (1998) has shown that, on the whole, men’s breadth of connections to the firm’s various power centers directly affects their relative success while involvement in self-contained cliques inhibits men’s advancement. For women, however, involvement in a small circle that includes a powerful boss actually enhances their chances for success.

This work frequently moves away from contexts or extensions of standard economic work into clear alternatives. Economist Chris Tilly and sociologist Charles Tilly (1998, p. 19) state the program for a fullfledged alternative in the following terms: ‘What vision, then, do we hold of work and labor markets? At the center of our analysis stands an image of a worker and an employer, each involved in extensive social networks that connect them not only with each other but with many others inside or outside the place of employment. The worker and employer are bargaining out the terms of work, using the material and/organizational resources (including existing and available technologies) at their disposal. They draw on previously existing social relations—both work generated and otherwise—in seeking their advantages. In the process, they generate new agreements, understandings, and social ties, which in turn constrain subsequent interaction. They interact within strong limits set by their shared culture and by the previous history of the productive organization.’

2. Households

Firms and labor markets occupy center stage in mainstream economic thought. Household economies, in contrast, have typically remained at the sidelines, part of a nonrational social world seemingly run by affect, not efficiency. The predominant model of what Amartya Sen (1983) calls the ‘glued-together’ family further discourages questions about the allocation, distribution, and expenditure of family resources among family members. Reacting to the pioneering work of Gary Becker (1981), feminist economists and their allies in economic sociology have challenged straightforward applications to households of firm-level models. Their work has integrated bargaining models, multiple utility schedules, and gender differences into the analysis of household economies. Another group of sociologists studying families and gender dynamics addresses parallel issues, but works in almost complete isolation from economic sociology.

One difficult problem has preoccupied both groups of researchers in sociology: causes and effects of household divisions of labor. Why do wage-earning women continue to do the bulk of household work? Why does men’s household work respond so little to changes in household circumstances, and indeed, even tend to decline when their wives’ income surpasses theirs? Why are household tasks often as segregated by gender as are labor markets? Why are women’s earnings, even when substantial, commonly treated as discretionary income?

Answers to the housework puzzle have ranged from extensions of economistic models which see women’s unpaid household labor as exchange for their husband’s economic support to culturalist models where ideologies of gender shape material household exchanges. Julie Brines (1994) combines both perspectives. Brines argues that what she calls a dependency model accounts for women’s domestic labor, but it fails to explain their husbands.’ When it comes to men, Brines claims, adhering to masculine gender expectations leads dependent husbands to do less, not more, housework. Housework, from this perspective, acts as a symbolic marker of traditional gender relationships.

To get beyond this dichotomy will require us to find a model of interaction and bargaining within households. Marjorie DeVault’s (1991) observations on food preparation as a bargaining form of social interaction among wives, husbands, and children points in that direction. Thus labor markets and household economies yield similar lessons. Without models of meaningful social interaction, economic sociology cannot get much farther in explaining such complex phenomena.

3. Consumption

If households have remained peripheral to economics and economic sociology, consumption splits down the middle. Some aspects of consumption have long been recognized and extensively documented by both groups of specialists. Other dimensions of consumption have become the province of specialists in family, class, gender, ethnicity, and community, in studies significantly removed both from economics and economic sociology.

Within self-defined economic sociology explicit studies of consumption have taken second place to the study of production. To be sure, for half a century sociologists and economists collaborated in surveys of consumer expenditures and behavior, a line of work that significantly influenced market research. Yet that nucleus excluded many aspects of consumption, such as family dynamics of consumption and social connections among consumers. On their own, economic sociologists have related consumption to inequality and class position. The best documented cases tell of the acquisition of goods as cultural markers of class position, one aspect of which Thorstein Veblen (1953 [1899]) treated as ‘conspicuous consumption’ and another aspect of which Pierre Bourdieu (1984) identifies as the formation of ‘cultural capital.’

The representation of class through consumption is only a special case of the relationship between social position and consumption patterns: other studies establish variation by ethnicity, gender, race, and locality. All such studies pose the classic economic sociology problem of embeddedness. Given variation in consumption from one social location to another, how do social relations actually shape the acts of consumption?

Paul DiMaggio and Hugh Louch (1998) provide one answer. They survey pre-existing noncommercial ties between buyers and sellers in consumer transactions involving the purchase of cars, homes, as well as legal and home repair services. DiMaggio and Louch find a remarkably high incidence of what they call within-network exchanges. A substantial number of such transactions take place not through impersonal markets but among kin, friends, or acquaintances. Noting that this pattern applies primarily to risky one-shot transactions involving high uncertainty about quality and performance, DiMaggio and Louch conclude that consumers will be more likely to rely on such noncommercial ties when they are unsure about the outcome. As in studies of firms, labor markets, and households, analyzing relations between economic transactions and social ties promises great returns for economic sociology.

Meanwhile, outside of economic sociology, in company with numerous anthropologists, historians, and social critics, sociologists have created a wide-ranging literature on cultures of consumption. Three questions dominate these studies: how does consumption vary with social position? How do changing patterns of consumption affect the quality of social life? and how does material culture create social meaning? This work has produced an enormous range of rich descriptive material and a great variety of conflicting interpretations. For example, students of consumption outside of self-defined economic sociologists have reproduced a great controversy that has troubled social commentators for centuries: do commodification and monetization of goods and services depersonalize and corrupt the social relations involved? Or, on the contrary, does their contribution to efficiency, productivity, and connections actually augment social wellbeing? Economic sociologists and other students of consumption would greatly benefit from closer interaction between their separate spheres of investigation.

Firms, labor markets, households, and consumption do not of course exhaust the range of economic sociology. Scholars have investigated a wide variety of economies, from financial markets, gift economies, industries, international flows of goods and capital, to ethnic economies, education, religion, health, sexual economies, leisure, and the environment. They have paid attention as well to comparative and historical developments (see e.g. Smelser and Swedberg 1994b). In these various fields we again find examples of extension, context, and alternative models. For example in the study of technological change, some sociologists elaborate on existing economic choice models, some examine the immediate social context of innovation and its applications, while others treat technological innovation as a form of power struggle.

Although it is convenient to distinguish extension, context, and alternative, we should not exaggerate the rigidity of the boundaries between them. Indeed, in recent sociology, lines of investigation that began as attempts to provide contexts for economic analysis (for example, in studies of informal economies and gender inequality) have repeatedly developed into alternatives to standard economic analyses. Nor should we imagine that economists have stood still in these regards; institutional economists have been moving into intensive conversations with economic sociologists of all three tendencies.

In the immediate future it would be unwise to try to forward one perspective to the exclusion of the others. Each yields its own insights into the joint agenda of economics and sociology. Extension views build on existing economic theory, context accounts provide the challenge to improve on existing economic theory, correcting it when necessary, while alternative models replace existing economic theory with other principles of explanation. In the long run, the alternative perspective opens up the prospect of going beyond the embedding of economic activity. It examines ostensibly economic phenomena as the construction of meaning, formation of relationships, and/organization of categories.

For understanding the complex economies of the twenty-first century, the analytical contribution of sociologists will be crucial.

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