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"Ambitious, erudite, and compelling, this is the first book to encompass systematically the fundamentals of economic sociology. It offers a uniquely readable and learned overview, while also setting an agenda for the field."—Bruce Carruthers, Northwestern University
"Swedberg is a veritable encyclopedia in the fields of economics and economic sociology, and he brings his wide knowledge of both fields to bear in this book. The result is a comprehensive textbook that is a 'must-read' for scholars, and is still accessible and lively enough to be the perfect introduction for juniors, seniors, and graduate students."—Frank Dobbin, Princeton University
THERE exists a rich and colorful tradition of economic sociology, which roughly began around the turn of the twentieth century and continues till today. This tradition has generated a number of helpful concepts and ideas as well as interesting research results, which this and the following chapter seek to briefly present and set in perspective. Economic sociology has peaked twice since its birth: in 1890-1920, with the founders of sociology (who were all interested in and wrote on the economy), and today, from the early 1980s and onward. (For the history of economic sociology, see Swedberg 1987, 1997; Gislain and Steiner 1995). A small number of important works in economic sociology-by economists as well as sociologists-was produced during the time between these two periods, from 1920 to the mid-1980s.
The main thesis of this chapter, and of this book as a whole, is as follows: in order to produce a powerful economic sociology we have to combine the analysis of economic interests with an analysis of social relations. From this perspective, institutions can be understood as distinct configurations of interests and social relations, which are typically of such importance that they are enforced by law. Many of the classic works in economic sociology, as I shall also try to show, hold a similarview of the need to use the concept of interest in analyzing the economy.
Since my suggestion about the need to combine interests and social relations deviates from the existing paradigm in economic sociology, a few words will be said in the next section about the concept of interest as it has been used in social theory. This may seem as something of a detour, but the reason for beginning with a general section on interests is that it will help explain why this concept is so useful. This presentation will then be followed by a section on what I call classical economic sociology and that primarily discusses the work of Tocqueville, Marx, Weber, Durkheim and Simmel. A few pages will be devoted to what happened after the classics and before the current revival (which started in the 1980s). The key persons during this period are Schumpeter, Polanyi, and Parsons.
The Role of Interest in Social Analysis
Ever since the Middle Ages, one form or another of what can be called interest analysis has been widely used to study society in the West. (The history of this type of analysis is little known; see, however, Orth et al. 1982; Hirschman 1986; Holmes 1990; Peillon 1990.) The term "interest" was originally economic in nature (as in "rate of interest") and can be found in such places as Roman law. During this early stage the term "interest" was restricted in meaning and held at best a peripheral place in the discourse of the time. This changed when the concept of interest started to be used in political life. During the seventeenth century interest became a fashionable concept, oscillating between a synonym for ruthless, Machiavellian behavior on the part of the rulers and simply a helpful way of analyzing people's behavior. It was during this time that the maxim "Interest Will Not Lie" became popular. References were also made to various group interests, such as "legal interests," "landed interests," and "monied interests" (Gunn 1968).
During the seventeenth century, especially in French moral philosophy, a psychological concept of interest was developed by people like La Rochefoucauld and Pascal (see Heilbron 1998). Some of the complexity that these authors brought to it can be illustrated by La Rochefoucauld's maxim "Self-interest blinds some, but enlightens others" ( 1959:42). Several eighteenth-century philosophers, most importantly David Hume, were also fascinated by the role of interests in human affairs, as is evident from A Treatise of Human Nature (1739-40) as well as from Essays (1741). Hume broke, for example, with the idea that interests were somehow fixed, once and for all, and were the product of human nature and biology: "Though men be governed by interest, yet even interest itself, and all human affairs, are entirely governed by opinion" ( 1987:51). On this point he differed from the French philosopher Hélvetius, who a little later stated that "as the physical world is ruled by the laws of movement, so is the moral universe ruled by laws of interest" (cited in Hirschman 1977:43).
That economists also found the concept of interest useful is clear from a number of passages in The Wealth of Nations (1776) by Adam Smith. The most famous of these reads as follows:
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages ( 1976:26-7).
As is well known, Smith also suggests that individual interests somehow end up furthering the general interest, as if guided by "an invisible hand." But even if Smith was fascinated by the positive role of self-interest, he was also well aware that interests other than self-interest drive the individual. In the opening line of The Theory of Moral Sentiments he notes, for example, that "However selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it" ( 1976:47).
By the nineteenth century the concept of interest made possible a flexible type of social analysis, with interests opposing one another, blocking one another, reinforcing one another, and so on. Individuals had their interests and so did groups; there was "the public interest" as well as the interests of each and every citizen. The concept of interest also plays a key role in the analysis of such subtle thinkers as John Stuart Mill and Tocqueville. Toward the end of the century, however, economists began to restrict the term to mean exclusively "economic interests" and eventually also to replace it with other terms, such as utility and preferences. Economic interest now became part of homo economicus, that is, of the isolated, all-knowing, and maximizing economic agent (see, e.g., Persky 1995). Instead of suggesting hypotheses to be explored empirically, the analysis now began as well as ended with (economic) interests. A restricted type of interest analysis, in brief, began to replace the rich and complex type of interest analysis that had been used during the earlier centuries. During the twentieth century this tendency solidified and is still the one that prevails in economics and, to a large extent, in social science as a whole.
One fact that is not mentioned in the histories of the concept of interest is that a sociological concept of interest was developed during the late nineteenth and the early twentieth centuries, especially in the works of Weber and Simmel. More will be said about this development later. Here it suffices to note that central to this idea is that interests can only be conceptualized, expressed, and realized in social terms and through social relations-a position that runs counter to that of modern economics.
My own view of interests is close to that of Weber, and I shall therefore start out by saying a few words about what is undoubtedly Weber's most famous statement on interests. It is to be found in a programmatic part of his work in the sociology of religion and has already been cited in the preface:
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 ( 1946b:280).
According to this quote, interests drive people's actions but the social element (here, religion) determines what expression and direction these actions will take. Interests can be material as well as ideal (that is, religious, political, and so on). All interests are social in the following two ways: they are part of the society into which the individual is born; and the individual has to take other actors into account when she tries to realize her interests.
There are several advantages to using the concept of interest in a sociological analysis of the economy. For one thing, there is a chance that one would otherwise fail to understand the strength that underlies an action. What makes people go to work every day, and what drives each and every private corporation, is first and foremost economic interest. The concepts of power and power resources cover some of the same phenomena as interest, but by no means all. Secondly, interests may help to explain why one route of action was taken, rather than another. While some alternatives may be very attractive to the actor, due to her interests, others may have no interest at all. In other words, interests influence the decision of the actor, or her choice.
Similarly, by using the idea of economic interest a dynamic is brought into the analysis, which differs from the one that is driven exclusively by social interaction. Interests can oppose each other, they can reinforce each other, and so on. Economic interests, a little like sexual interests, are often to be found somewhere in the background, waiting for an opportunity to be realized. And if they are repressed, they may still pop up-a bit like a black market usually appears if the state forbids the sale of an item. Finally, through the concept of interest, we can establish a natural link not only to the biological side of human beings but also to their environment. Economic interests are ultimately rooted in the needs of the human organism and its dependence on the environment.
Equally as important as introducing the concept of economic interest into economic sociology, I argue, is to avoid the stance of mainstream economics vis-à-vis interests, which is usually profoundly asociological and even naturalistic in nature. Several points need to be made here. First, the notion of interest that I am advocating is close to what Alfred Schutz calls a "construct of the second degree," namely an analytical concept that has been invented by the social scientist to analyze social reality ( 1971:6). The concept of interest, in other words, is an analytical tool.
Second, in realizing her interests the actor has to orient herself to other actors in various ways; the social structure must consequently always be part of the analysis. Third, as opposed to the economists, for whom there only exists one type of interest (which, by assumption, is fully understood by the maximizing economic actor), economic sociology is free to draw on the rich tradition of interest analysis, which goes far back in Western thought. According to this tradition, many different types of interests exist, and these can all enter into different combinations with one another. Finally, in economics the concept of interest is sometimes used as a tautology, and this is obviously something that has to be avoided in a sociological interest analysis.
Once the difference has been properly outlined between the sociological concept of interest and the type of interest that can be found in mainstream economics, it should immediately be emphasized that an extra advantage to using the concept of interest for economic sociologists is precisely that it allows for a natural dialogue with the economists. In economics the concept of interest has been at the very center of the analysis since the days of Adam Smith. If there ever is to be a unified social science of economics, the concept of interest-together with the idea of social interaction-is likely to be its foundation (for further discussion of the concept of interest in sociology, see pp. 297-99).
Classical Economic Sociology and Its Predecessors
The first use of the term "economic sociology" is thought to have occurred in 1879, when it appeared in a work by British economist Jevons ( 1965:xvii). The term was then taken over by the sociologists, and it can be found in the works of Durkheim and Weber during the period 1890-1920 (for example, "sociologie économique," "Wirtschaftssoziologie"). It was also during these decades that classical economic sociology was born, in such works as The Division of Labor in Society (1893) by Durkheim, The Philosophy of Money (1900) by Simmel, and-by far most importantly-Economy and Society (written between 1908 and 1920) by Weber. What characterizes classical economic sociology, as I shall call it, is primarily the following: First, there was a sense among Weber and his colleagues of being pioneers and of constructing a new type of analysis. Secondly, there was a focus on such fundamental questions as, What is the role of the economy in society? How does the sociological analysis of the economy differ from that of the economists? To this must be added that there was also an attempt to size up capitalism and understand its impact on society-"the great transformation," as Polanyi put it.
In hindsight there are clearly several works from before the 1890-1920 period that in one way or another prefigure some of the insights of economic sociology. Important reflections on trade and other economic phenomena can, for example, be found in The Spirit of the Laws (1748) by Montesquieu. This work also contains a pioneering comparative analysis of the way in which economic phenomena are influenced by different political regimes (republics, monarchies, and despotic states). The role of labor in society is central to the work of Saint-Simon (1760-1825), who also helped to popularize the term "industrialism" (1964). The only two figures before Weber who will be discussed here, however, are Tocqueville and Marx. Tocqueville is of special interest since his analysis of economic phenomena, including its sociological dimension, has attracted next to no attention. Marx is a towering figure in nineteenth-century thought and very much part of a tradition that helped to inspire the creation of economic sociology.
Alexis de Tocqueville
The first contributor to economic sociology whom I shall discuss-Alexis de Tocqueville (1805-59)-had been trained in law, and most of what he knew about economics came from his own studies as a young man (mainly of the work of Jean-Baptiste Say). Later in life he also would learn quite a bit about economics from conversation with friends such as John Stuart Mill and Nassau Senior. Tocqueville was mainly interested in politics, but in his analysis he typically covered all of society and often touched on economic topics. As one of his admirers, Joseph Schumpeter, expressed it: Tocqueville "painted to a considerable extent in economic colors" (1954:820). Tocqueville's most important works, in so far as his analysis of the economy goes, are his two major studies: Democracy in America (1835-40) and The Old Régime and the French Revolution (1856). Some additional information can also be found in Tocqueville's minor writings, such as "Memoir on Pauperism" (1835).
Democracy in America is important to economic sociology primarily for its analysis of American economic culture in the early nineteenth century and for its attempt to contrast aristocratic and democratic societies, in their political as well as in their economic dimensions. Coming from a society that was highly regulated by the state, Tocqueville marveled at the United States, which he traversed for nine months in 1831-32. The citizens in this "commercial nation" had a totally different attitude to risk than the Europeans; they were also much more tolerant of economic failures and bankruptcies. When Tocqueville described the relationship of Americans to economic matters, he often used expressions that mixed interests with emotions: "commercial passions," "love of wealth" and the like. This did not mean that the Americans were not rational. In a lengthy discussion of what he called "the principle of self-interest rightly understood" Tocqueville argued that Americans thought that it was in their self-interest to behave morally and in accordance with religion-and that this taught them patience as well as made them methodical and efficient in economic affairs: "It is held as a truth that man serves himself in serving his fellow creatures and that his private interest is to do right" ([1835-40] 1945, 2:129). Tocqueville often referred to different types of interest in Democracy in America, such as "self-interest," "public interest," "material interest," and so on. He also argued that while the family was the key unit in aristocratic societies, in democratic societies it is the individual with her interests.
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List of Tables and Figures ix
Chapter I. The Classics in Economic Sociology 1
Chapter II. Contemporary Economic Sociology 32
Chapter III. Economic Organization 53
Chapter IV. Firms 74
Chapter V. Economic and Sociological Approaches to Markets 104
Chapter VI. Markets in History 131
Chapter VII. Politics and the Economy 158
Chapter VIII. Law and the Economy 189
Chapter IX. Culture and Economic Development 218
Chapter X. Culture, Trust, and Consumption 241
Chapter XI. Gender and the Economy 259
Chapter XII. The Cat’s Dilemma and Other Questions for Economic Sociologists 283