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tions on credit, the concept of interest, and the emergence of homo economicus. Evenually, however, Durkheimian economic sociology declined.
Despite the slowing in economic sociology during the years 1920–80, there were several noteworthy developments, especially the theoretical works of Joseph Schumpeter, Karl Polanyi, and Talcott Parsons (for contributions by other sociologists during this period, see Swedberg 1987, 42–62). All three produced their most important works while in the United States, but had roots in European social thought.
Joseph Schumpeter
We preface our notes on Schumpeter (1883– 1950), an economist, by noting some contributions by economists more generally to economic sociology. One example is Alfred Marshall (1842– 1924), whose analyses of such topics as industries, markets, and preference formation often are profoundly sociological in nature (Marshall [1920] 1961, 1919; cf. Aspers 1999). Vilfredo Pareto (1848–1923) is famous for his sociological analyses of rentiers versus speculators, business cycles, and much more (Pareto [1916] 1963; cf. Aspers 2001a). The work of Thorstein Veblen (1857– 1929) sometimes appeared in sociological journals, and his analyses include such topics as consumer behavior (“conspicuous consumption”), why industrialization in England slowed down (“the penalty of taking the lead”), and the shortcomings of neoclassical economics (Veblen [1899] 1973, [1915] 1966, [1919] 1990; cf. Tillman 1992). Final mention should also be made of Werner Sombart (1863–1941), who wrote on the history of capitalism, on “the economic temper of our time,” and on the need for a “verstehende economics” (1902–27, 1930, 1935).
The contributions of Schumpeter are especially noteworthy (see, e.g., Swedberg 1991b). His life spanned two periods in modern economics—the period around the turn of the century, when modern economics was born, and the period of a few decades later when it was mathematized and secured its place as “mainstream.” Schumpeter similarly spanned two distinct periods in sociology— from Max Weber in the first decade of the 20th century through Talcott Parsons in the 1930s and 1940s. Schumpeter is also unique among economists for trying to create a place for economic sociology next to economic theory. In this last effort Schumpeter was clearly inspired by Weber and, like the latter, referred to this type of broad economics as Sozialökonomik, or “social economics.” Schum-
peter defines economic sociology as the study of institutions, within which economic behavior takes place (e.g., 1954, 21).
Schumpeter produced three studies in sociology. The first is an article on social classes that is of interest because of his distinction between economists’ and sociologists’ use of the concept of class. While for the former, he argues, class is a formal category, for the latter it refers to a living reality. The second study is an article about the nature of imperialism that can be compared to the equivalent theories of Hobson, Lenin, and others. Schumpeter’s basic idea is that imperialism is precapitalistic and deeply irrational and emotional in nature—essentially an expression for warrior nations of their need to constantly conquer new areas or fall back and lose their power. The third study is perhaps the most interesting one from the viewpoint of contemporary economic sociology, “The Crisis of the Tax State” (1918). Schumpeter characterizes this article as a study in “fiscal sociology” (Finanzsoziologie); its main thesis is that the fi- nances of a state represent a privileged position from which to approach the behavior of the state. As a motto Schumpeter cites the famous line of Rudolf Goldscheid: “The budget is the skeleton of the state stripped of all misleading ideology (Schumpeter [1918] 1991, 100).
Schumpeter did not regard Capitalism, Socialism, and Democracy (1942) as a work in sociology, but its main thesis is nonetheless sociological in nature: the motor of capitalism is intact but its institutional structure is weak and damaged, making it likely that socialism will soon replace it. On this point Schumpeter was evidently wrong. His analysis of the forces that are undermining capitalism may seem idiosyncratic at times. Nonetheless, Schumpeter should be given credit for suggesting that the behavior of intellectuals, the structure of the modern family, and so on, do affect capitalism. Of special importance are his insights about economic change or, as Schumpeter phrased it with his usual stylistic flair, “creative destruction.”
Entrepreneurship is at the heart of Schumpeter’s treatment of economic change (1912, chap. 2; 1934, chap. 2; 2003). He himself saw his theory of entrepreneurship as falling in economic theory, more precisely as an attempt to create a new and more dynamic type of economic theory. Nonetheless, many of his ideas on entrepreneurship are sociological in nature. His central idea—that entrepreneurship consists of an attempt to put together a new combination of already existing elements— can be read sociologically, as can his idea that the
main enemy of the entrepreneur is the people who resist innovations.
Karl Polanyi
Trained in law, Polanyi (1886–1964) later taught himself Austrian economics as well as economic history and economic anthropology. Though he was interdisciplinary in approach, his main specialty was economic history, with an emphasis on nineteenth-century England and preindustrial economies.
Polanyi’s most famous work is The Great Transformation (1944), conceived and written during World War II (e.g., Block 2001, 2003). Its main thesis is that a revolutionary attempt was made in nineteenth-century England to introduce a totally new, market-centered type of society. No outside authority was needed; everything was automatically to be decided by the market (“the self-regulating market”). In the 1840s and 1850s a series of laws was introduced to turn this project into reality, turning land and labor into common commodities. Even the value of money was taken away from the political authorities and handed over to the market. According to Polanyi, this type of proceeding could only lead to a catastrophe. When the negative effects of the market reforms became obvious in the second half of the nineteenth century, Polanyi continues, countermeasures were set in to rectify them (“the double movement”). These measures, however, only further unbalanced society; and developments such as fascism in the twentieth century were the ultimate results of the illfated attempt in mid-nineteenth-century England to turn everything over to the market.
Polanyi also cast his analysis in terms of interests and argued that in all societies, before the nineteenth century, the general interests of groups and societies (“social interests”) had been more important than the money interest of the individual (“economic interest”). “An all too narrow conception of interest,” Polanyi emphasizes, “must in effect lead to a warped vision of social and political history, and no purely monetary definition of interest can leave room for that vital need for social protection” ([1944] 1957, 154).
The theoretical part of The Great Transformation is centered around Polanyi’s concepts of “embeddedness” and “principles of behavior” (later changed to “forms of integration”). The fullest elaboration of this line of work is to be found in
Trade and Market in the Early Empires (Polanyi, Arensberg, and Pearson [1957] 1971), and especially in Polanyi’s essay “The Economy as Institut-
Introduction 13
ed Process” ([1957] 1971). Polanyi criticized economic theory for being essentially “formal”—a kind of logic focused on choice, the means-end relationship, and the alleged scarcity of things that people want. There is also “the economistic fallacy,” or the tendency in economics to equate the economy with its market form ([1944] 1957, 270). To the formal concept of economics Polanyi counterposes a “substantive” concept, grounded in reality and not in logic. “The substantive meaning of economic derives from man’s dependence for his living upon nature and his fellows” ([1957] 1971b, 243). While the notion of economic interest is directly linked to “the livelihood of man” in substantive economics, it is only an artificial construction in formal economics (Polanyi 1977).
The most famous concept associated with Polanyi’s work is “embeddedness,” which, however, he used in a way different from its contemporary use. According to the current use, an economic action is in principle always “embedded” in some form of social structure. According to Polanyi, economic actions become destructive when they are “disembedded,” or not governed by social or noneconomic authorities. The real problem with capitalism is that instead of society deciding about the economy, it is the economy that decides about society: “instead of the economic system being embedded in social relationships, these relationships were now embedded in the economic system” ([1947] 1982, 70).
Another set of conceptual tools for economic sociology is Polanyi’s “forms of integration.” His general argument is that rational self-interest is too unstable to constitute the foundation for society; an economy must be able to provide people with material sustenance on a continuous basis. There are three forms of integration, or ways to stabilize the economy and provide it with unity. These are reciprocity, which takes place within symmetrical groups, such as families, kinship groups, and neighborhoods; redistribution, in which goods are allocated from a center in the community, such as the state; and exchange, in which goods are distributed via price-making markets (Polanyi [1957] 1971b). In each economy, Polanyi specifies, there is usually a mixture of these three forms. One of them can be dominant, while the others are subordinate.
Talcott Parsons
Talcott Parsons (1902–79) was educated as an economist in the institutionalist tradition and taught economics for several years before he switched to sociology in the 1930s. At this time he
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developed the notion that while economics deals with the means-end relationship of social action, sociology deals with its values (“the analytical factor view”). In the 1950s Parsons recast his ideas on the relationship of economics to sociology, in a work coauthored with Neil Smelser, Economy and Society (1956). This work constitutes Parsons’s major contribution to economic sociology, but both before and after its publication Parsons produced a number of studies relevant to economic sociology (Camic 1987; Swedberg 1991a).
In The Structure of Social Action (1937) Parsons launched a forceful attack on utilitarian social thought, including the idea that interests represent an Archimedean point from which to analyze society. Interest theorists, Parsons notes, cannot handle the Hobbesian problem of order; they try to get out of this dilemma by assuming that everybody’s interests harmonize (what Elie Halévy referred to as “the natural identity of interests”; Parsons [1937] 1968, 96–97). What is not understood by the utilitarians is that norms (embodying values) are necessary to integrate society and provide order. Interests are always part of society, but a social order cannot be built on them (405).
In Economy and Society (1956) Parsons and Smelser suggested that both sociology and economics can be understood as part of the general theory of social systems. The economy is a subsystem, which interchanges with the other three subsystems (the polity, the integrative subsystem, and the cultural-motivational subsystem). The concept of a subsystem is reminiscent of Weber’s notion of sphere, but while the latter refers only to values, the economic subsystem also has an adaptive function as well as a distinct institutional structure. It may finally be mentioned that Economy and Society got a negative reception by economists and failed to ignite an interest in economic sociology among sociologists. Smelser’s attempt to consolidate economic sociology in the next decade helped fix economic sociology as a subfield in the minds of scholars and in the curricula of colleges and universities, but did not spawn distinct new lines of research (see especially Smelser 1963, 1965, 1976).
THE CURRENT REVIVAL OF ECONOMIC
SOCIOLOGY (1980S–)
Despite the efforts of Parsons and Smelser in the mid-1950s and the 1960s to revive economic sociology, it attracted little attention, and by the 1970s the field was somewhat stagnant. A number of
works inspired in one way or another by the Marxist tradition—and its general revival in the late 1960s and the early 1970s—made their appearance in this period. Among these were Marxist analyses themselves (e.g., Gorz 1977), dependency theory (Frank 1969; Cardoso and Faletto 1969), world systems theory (Wallerstein 1974), and neo-Marxist analyses of the workplace (Braverman 1974; Burawoy 1979).
In the early 1980s, a few studies suggested a new stirring of interest (e.g., White 1981; Stinchcombe 1983; Baker 1984; Coleman 1985). And with the publication in 1985 of a theoretical essay by Mark Granovetter—“Economic Action and Social Structure: The Problem of Embeddedness”— the new ideas came into focus. The same year Granovetter spoke of “new economic sociology”— yielding a tangible name.
Why economic sociology, after decades of neglect, suddenly would come alive again in the mid1980s is not clear. Several factors may have played a role, inside and outside sociology. By the early 1980s, with the coming to power of Reagan and Thatcher, a new neoliberal ideology had become popular, which set the economy—and the econo- mists—at the very center of things. By the mid1980s economists had also started to redraw the traditional boundary separating economics and sociology, and to make forays into areas that sociologists by tradition saw as their own territory. It is also during this period that Gary Becker, Oliver Williamson, and others came to the attention of sociologists. Likewise, sociologists began to reciprocate by taking on economic topics.
To some extent this version of what happened resembles Granovetter’s version in 1985. He associated “old economic sociology” with the economy and society perspective of Parsons, Smelser, and Wilbert E. Moore, and with industrial sociol- ogy—two approaches, he said, that had been full of life in the 1960s but then “suddenly died out” (Granovetter 1985b, 3). Parsons’s attempt to negotiate a truce between economics and sociology had also been replaced by a more militant tone. According to Granovetter, new economic sociology “attacks neoclassical arguments in fundamental ways,” and it wants to take on key economic topics, rather than focus on peripheral ones.
Since the mid-1980s new economic sociology has carved out a position for itself in U.S. sociology. It is well represented at a number of universities. Courses are routinely offered in sociology departments. A section in the American Sociological Association has been formed. A number of high-
quality monographs have been produced, such as
The Transformation of Corporate Control (1990) by Neil Fligstein, Structural Holes (1992) by Ronald Burt, and The Social Meaning of Money (1994) by Viviana Zelizer. These three works draw on the insights of organization theory, networks theory, and cultural sociology, respectively. The subfield has also seen the appearance of several anthologies, readers, a huge handbook, a textbook, and a general introduction to the field (Zukin and DiMaggio 1990; Guillén et al. 2002; Dobbin 2003; Granovetter and Swedberg 1992, 2001; Biggart 2002; Smelser and Swedberg 1994; Carruthers and Babb 2000; Swedberg 2003).
Granovetter on Embeddedness
While several attempts have been made to present general theories and paradigms in new economic sociology, the perspective that continues to command most conspicuous attention is Granovetter’s theory of embeddedness. Since the mid1980s Granovetter has added to his argument and refined it in various writings that are related to his two major projects since the mid-1980s: a general theoretical work in economic sociology entitled
Society and Economy: The Social Construction of Economic Institutions, and a study (together with Patrick McGuire [1998]) of the emergence of the electrical utility industry in the United States.
The most important place in Granovetter’s work where embeddedness is discussed is his 1985 article, which operated as a catalyst in the emergence of new economic sociology and which is probably the most cited article in economic sociology since the 1980s. His own definition of embeddedness is quite general and states that economic actions are “embedded in concrete, ongoing systems of social relations” (Granovetter 1985a, 487). Networks are central to this concept of embeddedness (491). An important distinction needs also to be drawn, according to Granovetter, between an actor’s immediate connections and the more distant ones— what Granovetter elsewhere calls “relational embeddedness” and “structural embeddedness” (1990, 98–100; 1992, 34–37).
The most important addition to the 1985 article has been connecting the concept of embeddedness to a theory of institutions. Drawing on Berger and Luckmann (1967) Granovetter argues that institutions are “congealed networks” (1992, 7). Interaction between people acquires, after some time, an objective quality that makes people take it for granted. Economic institutions are characterized
Introduction 15
by “the mobilization of resources for collective action” (Granovetter 1992, 6).
Granovetter’s argument on embeddedness has been widely discussed and sometimes criticized. An attempt to elaborate it can be found in the work of Brian Uzzi, who argues that a firm can be “underembedded” as well as “overembedded,” and that a firm is most successful when it balances between arm’s-length market ties and more solid links (Uzzi 1997). Several other critics have pointed out that Granovetter omits consideration of many aspects of economic action, including a link to the macroeconomic level, culture, and politics (e.g. Zukin and DiMaggio 1990; Zelizer 1988; Nee and Ingram 1998). Zukin and DiMaggio suggest that to remedy this lacuna, one should not only talk of “structural embeddedness,” but also of “political,” “cultural,” and “cognitive embeddedness.”
Contributions Using Structural Sociology and
Networks
Structural sociology has played a crucial role in promoting and adding to network analysis in sociology, including economic socioloy. This approach is centered around the proposition that the relations of persons and positions are crucial to the social process (Mullins and Mullins 1973, 251–69). Its practitioners often use a mathematical approach, focus on social mechanisms, and avoid regression analysis and similar quantitative methods. Its most prominent scholars are Harrison White and his students, such as Mark Granovetter, Scott Boorman, and Michael Schwartz. White’s work in economic sociology has concerned networks, vacancy chains, and markets. He begins his analysis from people’s physical dependence on their surroundings but notes that interests are soon embedded in social relations (White 1970, 1981, 1992, 24).
Network studies have been at the center of the new economic sociology. Many studies have been made of the links between corporations and, more generally, within so-called industrial districts (Ebers 1997; Saxenian 1994). Burt (1992) analyzes competition by drawing on Simmel’s idea that you are in a good position if you can play out two competitors against one another (tertius gaudens, or “the third who benefits”). Brian Uzzi’s study of embeddedness from 1997 also makes use of networks, as does Granovetter’s essay (1994) on business groups. A multitude of other fine studies could be mentioned (see, e.g., Powell and LisaDoerr 1994, this volume). One criticism of the
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network approach is that it has ignored the role in economic life of politics and culture (Fligstein 1996, 657).
Contributions Using Organization Theory
New economic sociology has been very successful in using organization theory to explore a number of important topics, such as the structure of firms and the links between corporations and their environments. One fine example is Nicole Woolsey Biggart’s Charismatic Capitalism (1989), which deals with a very special type of organization: direct selling organizations, such as Tupperware and Mary Kay Cosmetics. Three theoretical approaches in organization theory have been especially important for the development of new economic sociology: resource dependency, population ecology, and new institutionalism.
Resource dependency, as its name suggests, rests on the postulate that organizations are dependent on their environments to survive. An example of this approach is work by Burt (1983), who suggests that three important factors that affect profits are the number of suppliers, competitors, and customers. The more “structural autonomy” a firm has, the higher its profits; that is, a firm with many suppliers, few competitors, and many customers will be in a position to buy cheaply and sell expensively.
In population ecology the main driving force of organizations is survival. It has been shown that the diffusion of an organizational form typically passes through several distinct stages: a very slow beginning, then explosive growth, and finally a slow settling down (e.g., Hannan and Freeman 1989). Individual studies of this process in various industries, such as railroads, banks, and telephone companies, fill a void in economic sociology (e.g., Carroll and Hannan 1995).
New institutionalism is strongly influenced by the ideas of John Meyer and is centered around what may be called cultural and cognitive aspects of organizations (see Powell and DiMaggio 1991). Meyer argues that organizations seem much more rational than they actually are, and that specific models for organizing activities may be applied widely—including to circumstances they do not fit. It has been argued that the strength of new institutionalism is its exploration of “factors that make actors unlikely to recognize or to act on their interests” and its focus on “circumstances that cause actors who do recognize and try to act on their interests to be unable to do so” (DiMaggio 1988, 4–5). The possibility of uniting a more traditional interest analysis with new institutionalism is exem-
plified by Fligstein’s (1990) study of the large corporation in the United States. Fligstein notes that the multidivisional form of organization spread for mimetic reasons—but also because this organizational form made it easier for firms to take advantage of new technology and the emerging national market.
Contributions Using Cultural Sociology
A group of economic sociologists is committed to a cultural approach, and a substantial number also refer to symbols, meaning structures, and the like in their studies of the economy. Cultural economic sociology owes much to the work of its two most prominent representatives, Viviana Zelizer and Paul DiMaggio. In a programmatic statement Zelizer criticized contemporary economic sociology for its tendency to reduce everything to social relations and networks—“social structural absolutism” (1988, 629). She also rejected the alternative of reducing everything in the economy to culture (“cultural absolutism”). The goal should be to take economic and cultural factors into account. DiMaggio has been similarly skeptical of a full-scale cultural analysis of the economy, but argues that it should include a “‘cultural’ component”—but not more (DiMaggio 1994, 27; cf. Zukin and DiMaggio 1990, 17–18). According to DiMaggio, culture can be either “constitutive,” referring to categories, scripts, and conceptions of agency, or “regulative,” referring to norms, values, and routines.
Viviana Zelizer’s work on culture occupies a central position (however, see also Dobbin 1994; Abolafia 1998). Her first major work (1979) was a study of life insurance in the United States, with special emphasis on the clash between sacred values and economic values. Over time the economic emphasis came to dominate. Later Zelizer published Pricing the Priceless Child (1985), which describes a similar movement, but this time in reverse. Children, who in the nineteenth century had had an economic value, would in the twentieth century increasingly be seen in emotional terms and regarded as “priceless.” In her most recent major study (1994), Zelizer argues that money does not constitute a neutral, nonsocial substance, but appears in a variety of culturally influenced shapes (“multiple monies”).
Contributions Building a Historical and
Comparative Tradition
A number of comparative and historical studies, bringing Max Weber’s monumental works to