Random Thought of the Day: Econ Soc vs. Behavioral Econ

Why has behavioral economics been so much more influential in mainstream economics and popular debate than economic sociology? Perhaps this question is too easy, and admits too many good answers, but I wonder if there is something to be learned by asking it. Both subfields/perspectives have come to the fore in the last 30 years (with 1981-1985 being the genesis of the new economic sociology, roughly, and behavioral econ starting perhaps in the late 70s with Kahneman and Tversky). Both position themselves as strong critiques of prevailing economic orthodoxy, and both are grounded in critiques of the neoclassical homo economicus. But reading stories about the failures of recent economic theory to predict or help in the current crisis, and the likely directions forward, it’s clear that behavioral econ will be a big star (for example, Akerlof and Shiller’s new book uses behavioral explanations for the financial crisis). Economic sociology, on the other hand, has not really showed up, in spite of the many works written by economic sociologists of potential relevance, or that look at the crisis head on. We’re just off the radar – too small, or too wacky, or too impenetrable. I’m not sure.

I’m not writing this post to complain about Sociology’s policy irrelevance, but rather to question what makes the two critiques differently influential. One obvious place to look, sayeth my sociological training, is the institutions and actors and resources pushing for each. But I have a nagging feeling that there is something deeper at play here, something to do with the accessibility of arguments about individual rationality vs. those about the social constructions (in various ways) of economic actors. Economists have long had the nagging feeling, sometimes stated sometimes not, that their models of human action are too stripped down and too perfect. Behavioral econ offers a way forward that adds some seeming realism to those models by adding in the most obvious calculative errors, but does not fundamentally criticize an individuals-first world-view. The semi-rational man replaces the rational one, bubbles form and burst, recessions and depressions are explained, and the underlying ontology of the world persists.

Economic sociology, I would argue, claims that the individual is not the building block of society, but rather that individual actors are incomprehensible outside of their networks, and that the individual and society co-constitute each other. That is, like the broader discipline, sociologists argue that individuals are not prior to the social. How exactly we do this varies. Granovetter strongly opposed norm-driven models that replaced the undersocialized economic actor with an oversocialized Parsonian one, whose actions were determined by society’s needs. More recent work, influenced by the Actor-Network tradition in science studies, examines the construction of economic actors through overlapping webs of organizations and technologies, eschewing discussions of “society” entirely for a focus on the local (although a local that can be quite large). Either way, the economic actors of economic sociology are not simply rational agents with trembling hands, but rather a different sort of thing, constructed actors with histories and contexts. That historicity (which is not the opposite of reality! cf. Murphy 2000) challenges dominant liberal notions across American society (at least).

Perhaps this difference can help explain (in addition to all those classic arguments about dollars and prestige and whatnot, although prestige itself is endogenous here) why so many of the same substantive conclusions are reached by behavioral economists and economic sociologists and yet the former have become prominent while the latter remain a bit more underground.

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2 Comments

  1. Natalie

     /  September 13, 2009

    Take a look at Hargadon, Andrew B. and Yellowless Douglass. 2001. “When innovations meet institutions: Edison and the design of the electric light.” Administrative Science Quarterly 46: 476-501. It describes well a mechanism that is similar to what you’re getting at. Abstract: “This paper considers the role of design, as the emergent arrangement of concrete details that embodies a new idea, in mediating between innovations and established institutional fields as entrepreneurs attempt to introduce change. Analysis of Thomas Edison’s system of electric lighting offers insights into how the grounded etails of an innovation’s design shape its acceptance and ultimate impact. The notion of robust design in is introduced to explain how Edison’s design strategy enabled his organization to gain acceptance for an innovation that would ultimately displace the existing institutions of the gas industry.”

  2. Ben

     /  September 14, 2009

    Dan, it’s an interesting question you pose. I think there are several things going on.

    Firstly, I think there is a broader question of which this is just another instance. Why is psych so much more successful than sociology? Why are some quite extremist views, such as those of evolutionary psychology and evolutionary economics (yikes) given attention and taken seriously, when sociology is not?

    Perhaps there are two broad reasons.

    Firstly, those that have an impact are either scientific, or more likely, scientistic. But they appear, at least to the lay person, as unchallengeable scientific fact. So economics or psychology is scientific fact while sociology is fluff. (Put econ and psych together and you have a powerhouse).

    Secondly, and perhaps more importantly, are ideological reasons. Sociology is generally challenging and critical. While economics and psych purport to show us the natural state of things, sociology is shouting ‘No! This is socially constructed, and therefore it can be changed’. Which is rather revolutionary and threatening.

    In regards to your specific question of why behavioural economics rather than economic sociology, I would say there are two further dimensions. The first is to do with ‘dirty hands and clean models’. When neoclassical is losing some legitimacy because of the obviously flawed assumptions it is built on, behavioural economics brings in a method that appears to be more grounded in empiricism. More scientific. But actually it’s scope is rather limited to micro-studies of actual economic action, or else game-theoretical type studies, which I think are often as methodologically questionable as econometrics. And these do not pose fundamental challenges to orthodox economics.

    Why not economic sociology? I would say that the dominant strands of American economic sociology don’t really offer much of an alternative at all. As Fligstein and Beckert (among many others) have argued, although there is criticism of homo economicus, the field has failed to provide an alternative micro-foundation. The problem, as you have suggested, is that Grannovetter wants to steer between under- and over-socialised. But in the wholesale rejection of Parsons, and with it a whole lot of other important stuff on norms and values, he ends up with the individualist vision of network theory. Which is very close to homo economicus really. (See Emirbayer & Goodwin on the impoverished notions of culture and agency in network approaches more generally).

    [sidebar: this reminds me that I was going to suggest that you add two works to your C.20th syllabus, which looks like a great idea to me by the way. They are J. Alexander’s Twenty Lectures, and the recent book by Hans Joas of the same name but which takes a very different view.]

    Individuals in networks is not the same thing as society and culture. I’m sorry to say that most of the American economic sociology is pretty underwhelming. I read somewhere recently that a good test of significance would be how much economic sociology influences general sociology, and the answer at this stage is surely very little. And perhaps this is a symptom of the reverse problem: economic sociology is too little influenced by general sociology. General theories of action, culture and structure – the most important basis stuff of sociology – that are broadly examined in other subfields seem to be almost completely missing.

    This is a long way from Weber, Durkheim and Marx. And it is nothing at all like Polanyi’s notion of embeddedness which directly challenged mainstream economics. The classics directly challenged orthodoxy, with critical and difficult ideas. Economic sociology based on networks is ideologically palatable, and therefore problem incapable of offering adequate explanations of the GFC.

    Didn’t Marx do that that already anyway? Trade cycles, boom and bust and all that.

    Anyway, I’m rambling. But in a nutshell I think that it is the appeal of an apparently scientific method on the one hand, the failure to offer an adequate alternative on the other.

    Cheers,

    Ben