Do we still need economic sociology?

08May10

Historically, economic sociology defined itself by distinction with, if not in opposition to, mainstream economics. Traditional criticisms pointed to economists’ narrow notions of self-interest and rationality as well as their abstract mathematical modelling. In contrast, sociology presented itself as better grounded in reality and focused on inter-personal ties, social norms, and non-selfish behaviour.

Yet economics now places more emphasis on empirical work and incorporates a broader range of behaviour including cognitive biases, non-selfish motives, and adherence to norms. If earlier criticisms have been addressed, then, what remains of the economic sociology tradition?

My viewpoint is that economic sociology can still provide much insight into the social determinants of economic behaviour and its interpersonal dimension –the contextual complement to cognitive factors in explaining economic behavior and its effects. In particular, I see a great deal of potential for cross-fertilisation in today’s research on social networks.

Broadly speaking, social networks can be seen as structures of relationships between economic agents. They act both as opportunities for economic behavior (channels to access resources) and as constraints (in that some configurations of ties may limit access to resources). Social networks constitute a bridge between the micro and macro levels of analysis: while agents make relational choices that lead to tie formation, maintenance or destruction, the structure of ties impinges on individual choice. In this sense, network analysis may shed light on the social determinants of those observed behaviors that do not fit with economic rationality, but can hardly be explained by cognitive limits alone.

Both economists and sociologists work on social networks. The former explore them in game-theoretic perspective and/or in efforts to address endogeneity concerns posed by relational data. The latter adopt a more holistic approach, highlighting the overall embeddedness of economic behaviour in social structures of ties. Yet economists feel that sociologists’ models are reduced forms, not sufficiently rigorous; sociologists, in turn, believe that economists’ emphasis on strategic thinking at dyadic level leaves aside the whole issue of social structures.

Still, there would be much to gain from improved inter-disciplinary dialogue. In particular, the networks approach in sociology has provided much insight into areas that have always been of great interest to economists –from the functioning of the labor market to technological diffusion and the co-existence of competition and cooperation between firms. Sociology is also allowing for new developments in the study of network dynamics and the co-evolution of network and behavior.

In future, I would like to see increased efforts in three directions. First, combining sociological results on competition and cooperation with insight from economic thought may help to address open questions on market mechanisms. Second, new research on network effects on adherence to norms, and vice versa, may lead to a better understanding of various forms of economic governance. Third, adoption of a networks-and-norms framework may shed further light on corporate giving and companies’ involvement in philanthropic activities.

Overall, economic sociology is now sufficiently rich and mature to engage in a constructive dialogue with today’s renewed economics, in place of the older confrontational stance.

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