Viviana A. Zelizer Princeton University February 5, 2007
Welcome to a conversation between economists and sociologists. Avinash Dixit and I hope we can make it less of what the French call a dialogue de sourds: a dialogue of the deaf.
For me, it’s a fairly new conversation. I started my academic career with a vision of economics as a different world, talking about different things in a language I did not understand. I now feel a bit like Molière’s Bourgeois Gentilhomme. In some sense, like Monsieur Jourdain, I have been speaking economic prose all my life but didn’t realize it. That is partly the fault of economics and sociology as disciplines.
When I started a few decades ago studying economic institutions and processes, very few people saw much overlap between sociology and economics. In fact, both groups divided between two beliefs, one more benign than the other. The first belief said that sociology and economics simply dealt with different phenomena: the social and the economic. Worse yet, the second declared that economics and sociology were incompatible ways of explaining the same phenomena. We have by no means left the division entirely behind.
Of course, back to the 19th century, such sociological greats as Max Weber, Emile Durkheim, Karl Marx, and Georg Simmel had plenty to say about economic processes. But during the 20th century, economics and sociology developed in quite different directions. The dialogue diminished.
About 20 years ago, however, sociologists returned to the analysis of economic activity. They built the now vibrant field of economic sociology. During those start-up years of what people call the “new economic sociology,” scholars clung closely to mainstream economics, either extending its main ideas to ostensibly more sociological subjects, or identifying social contexts that constrained economic activity – still mostly assumed to behave according to precepts of neo-classical economics. Economic sociologists then dealt almost exclusively with firms and markets, those favorite subjects of economists. They concentrated on what we can call extension and context accounts.
Extension theorists applied relatively standard economic models to apparently non-economic processes, like religious congregations, household behavior, or professional sports teams. Context analysts looked at standard economic phenomena, such as labor markets, commodity markets, or corporations, showing how social organization as context shaped the options of economic actors. Advocates of context spoke of the “embeddedness” of economic phenomena in social processes. They often referred to interpersonal networks as they did so. This context approach made the implicit assumption that economists had gotten some phenomenon, such as bargaining or price-setting, right. What was missing, according to the economic sociologists? Economists, argued context theorists, had neglected the cultural and social setting that mattered, such as previously existing connections among potential economic partners.
My own work during this period did not look like part of either economics or economic sociology. People called it cultural history and sociology. For my entire career, I have worked on different economic processes, with books on how life insurance became acceptable, on the valuation of children, on interpersonal monetary practices, and more recently on the economy of intimate social relations, as well as shorter forays into such eminently economic topics as consumption and children’s work. For years, no one, including me, called what I was doing economic sociology.
A lot has changed recently on both sides of the line between economics and sociology. Over the last 10 to 15 years I have been surprised as anyone else to see myself become part of the economic sociology establishment. Six years ago, I found myself elected first chair of the American Sociological Association’s economic sociology section. Similarly unexpected, people trying to make French economics internationally competitive in something called the Paris School of Economics have been calling on me to help plan their organizational and academic changes.
So what is new? First, how has economic sociology changed in the past decade or so? By moving away increasingly from extension and context accounts towards the formulation of truly alternative, socially based description and explanation of economic activity. (An impressively energetic parallel surge has occurred within French social science). This alternative analysis attempts to identify social processes and social relations at the very heart of economic activity, including the previously sacred and unexplored territory of markets themselves. Many of these analysts rally to Harrison White’s declaration that markets are deeply social creations rather than autonomous arenas on which social processes merely impinge.
During his final years the late Pierre Bourdieu was moving in the same direction. In the 2000 version of his Structures sociales de l’économie, he declared:
Attempts to "correct" the errors or omissions of a paradigm without challenging the paradigm itself . . . remind me of Tycho Brahe's heroic efforts to save Ptolemy's geocentric model from the Copernican revolution.
In general, sociological seekers after an alternative economic sociology criticize the idea of embeddedness, which implies that social processes supply the economy’s shell, but the shell’s real contents consist of economics’ rational exchange systems. In this egg, say alternative theorists, social interaction is the yolk, not the shell. Just as institutional economists, shocked by the failure of markets alone to transform post-socialist economies, were beginning to portray economic activities as social processes, economic sociologists were venturing into the cores of firms, markets, organizations, and financial institutions.
Through these changes, I found that my own concentration on meaningful interpersonal aspects of economic activity no longer stood at the periphery of what was going on. Now, from the inside, I can see more clearly that the process of expansion continues. As one sign, browse the table of contents in Neil Smelser and Richard Swedberg’s (2005) second edition of their Handbook of Economic Sociology. It prominently features new institutionalism, emotions, behavioral economics, and law, all subjects absent from the first edition’s table of contents only eleven years earlier.
Even more is going on in economic sociology. New topics and emphases include:
Multiple markets: from an earlier almost exclusive focus on production, economic sociologists are now expanding their analysis into other markets, especially financial markets, consumption markets, markets for personal care, and what they loosely call the informal economy.
The culture of firms: economic sociologists are finally shedding their structural armor, and studying how the meaningful content of social ties shapes transactions and alignments within firms.
The production and reproduction of inequality, notably gender inequality. Economic sociologists increasingly challenge status attainment models that account for inequalities as results of encounters between biased market selection and attributes of individuals.
Households as intense sites of economic activity. Here economic sociologists, along with their allies in economics and anthropology, not only identify extensive, consequential production, consumption, distribution, and transfers of assets but also interaction patterns that defy representation as short-term spot markets.
Meanwhile, as economic sociology changed, big transformations were taking place within economics. Some economists began to look seriously at culture and social relations, thereby opening up new possibilities for alliances between economics and sociology.
Take just two recent examples. First, economist Robert Gibbons’ 2005 article “What is Economic Sociology and Should any Economists Care,” in the Journal of Economic Perspectives. Gibbons answered yes to his rhetorical question, reporting that his own interest began “when I recognized that some sociologists were working with independent and dependent variables that were barely mentioned in the economics literature, but seemed potentially quite important.” Gibbons calls for a “Pareto-improving dialogue between the appropriate margins of economics and sociology.”
Second, Luigi Guiso, Paola Sapienza, and Luigi Zingales, in a Spring 2006 article in the same journal ask “Does Culture Affect Economic Outcomes?” and also answer a resounding yes. Although they do not cite economic sociologists (with the exception of praising Paul DiMaggio’s work), they treat culture -- by which they mean collective beliefs, identities, and preferences -- seriously, not as outcome but as an independent causal factor. They conclude that “importing cultural elements will make economic discourse richer, better able to capture the nuances of the real world, and ultimately more useful.”
However, if they want to have a serious impact on economics, economic sociologists cannot simply wait for bright-eyed economists to notice what they are doing. Economists pay serious attention when analysts make direct and cogent bids to revise existing economic analyses. Notice the great difference in impact by three bodies of relevant innovative work that have grown up over the last 20 years: game theory, behavioral economics, and economic sociology itself.
Game theory for all practical purposes has become an integral part of economic theory. Every economics student learns game theory. Game theory has made it perfectly legitimate to set up analyses of economic choice situations not as individual cognitive decision-making but as a form of social interaction. It’s a success story for a research program which at one point was alien to neo-classical economics.
Behavioral economics, despite its remarkable success, still remains at a half- way point. It may well follow game theory, but there is still a question whether it will fundamentally modify mainline economic theory or remain a critical, dissident movement within economics. In a review of Advances in Behavioral Economics, Wolfgang Pesendorfer notes that behavioral economics “remains a discipline that is organized around the failures of standard economics.” This “symbiotic relationship with standard economics,” notes Pesendorfer, “works well as long as small changes to standard assumptions are made.” Despite the economics Nobel Prize shared by Vernon Smith and our own Daniel Kahneman, we have yet to see the micro-foundations of standard economics transformed as the behavioral economists claim they should be transformed.
Economic sociology certainly has some of same potential as game theory or behavioral economics, but it has remained far outside the conversation. So far, it attracts only dissidents within economics. It is certainly not something that economics students routinely learn about. Economic sociologists face an interesting choice: plunge into the core models of economics in the wake of game theory and behavioral economics, or continue their current business in hope that friendly economists will do the importing for them.
The first choice means deploying the concepts, models, mathematics, and econometrics that have become economists’ stock in trade. As economist Dan Silverman points out for the so far incomplete success of behavioral economics, it typically involves identifying processes that standard economic models must treat as anomalies, rewriting relevant economic models so they account for the anomalies, and establishing the empirical validity of the revised models. It may also mean reducing the dialogue with the rest of sociology. But the second choice means remaining peripheral to the exciting current transformations of economics. Given my own limited knowledge of technical economics and my preference for direct observation of economic interactions, of course, I hope that some of each – both integration of economic sociology into economic theory and sociological inquiry into economic processes -- will happen for the foreseeable future.
It won’t be easy, if only because the exemplary cases of game theory and behavioral economics involve modification, but not elimination, of economic models’ deep individualism. It will take great theoretical, technical, and even rhetorical finesse to make interpersonal processes including culture genuine foci of economic analysis. How will sociologists rewrite economic models so that they incorporate the culturally drenched dynamics of organizations, households, institutions, and interpersonal ties?
Evidence that a rapprochement is possible in principle, however, comes from a fourth innovative field that I’ve hardly mentioned so far: institutional economics. Economic institutionalists in the style of Douglass North haven’t reshaped microeconomics to anything like the degree that game theorists and behavioral economists have. But they have had a profound impact on macroeconomics, especially development theory. Institutional economists have plenty in common with institutional and economic sociologists: awareness of organizational processes, concerns about contract enforcement, openness to culture, and more. Although I hope we can continue the dialogue about small-scale economic processes and microfoundations, we also have an opportunity for an innovative economics-sociology alliance on the large scale. Our workshop takes a few steps in these new directions.