Society and Economy: Framework and Principles

by Mark Granovetter

Society and Economy ―a work of exceptional ambition by the founder of modern economic sociology―is the first full account of Mark Granovetter’s ideas about the diverse ways in which society and economy are intertwined.

The economy is not a sphere separate from other human activities, Granovetter writes. It is deeply embedded in social relations and subject to the same emotions, ideas, and constraints as religion, science, politics, or law. While some actions can be understood in traditional economic terms as people working rationally toward well-defined ends, much human behavior is harder to fit into that simple framework. Actors sometimes follow social norms with a passionate faith in their appropriateness, and at other times they conform without conscious thought. They also trust others when there is no obvious reason to do so. The power individuals wield over one another can have a major impact on economic outcomes, even when that power arises from noneconomic sources.

Although people depend on social norms, culture, trust, and power to solve problems, the guidance these offer is often murky and complicated. Granovetter explores how problem solvers improvise to assemble pragmatic solutions from this multitude of principles. He draws throughout on arguments from psychology, social network studies, and long-term historical and political analysis and suggests ways to maneuver back and forth among these approaches. Underlying Granovetter’s arguments is an attempt to move beyond such simple dualisms as agency/structure to a more complex and subtle appreciation of the nuances and dynamics that drive social and economic life.

Genres: Economics, Sociology, Politics, Social Science, Nonfiction

256 pages, Hardcover

Published February 27, 2017

About the author

American sociologist and professor at Stanford University who has created theories in modern sociology since the 1970s. He is best known for his work in social network theory and in economic sociology, particularly his theory on the spread of information in social networks known as "The Strength of Weak Ties" (1973).

Reviews

[علاء عبد · Rating 2 out of 5]

أحد أبرز مشكلات تضخم المعرفة ظهور لغة الحواشي التي يستتر فيها بيان المؤلف خلف ضخامة النقولات ومناقشة العبارات وكثرة الإحالات؛ فكأنك تقرأ نقاش المؤلف مع مصادره بدلا من ان يخاطبك المؤلف في عرض فكرته بوضوح.

[Miriam · Rating 3 out of 5]

Mark Granovetter e unul dintre cei mai însemnați sociologi contemporani. ,,Societate și Economie” este primul dintre cele două volume care sintetizează gândirea și modelul de analiză sociologică ale autorului. A fost gândit ca un volum axat pe dezbaterea unor elemente teoretice precum rolul și originea normelor, al rețelelor sociale, al instituțiilor economice, etc.

[Jerrod · Rating 2 out of 5]

This was a rather disappointing text. Granovetter is most known for his work on how social connections (especially weak ties) can aid in employment search. The book is an effort to summarize his (and others') work on how the social environment (with its social networks, norms, individual beliefs, etc.) affect people's choices and how much sociology and economics either presents models in which individual choices are over-socialized (e.g. class analysis) or under-socialized (e.g. atomistic agents). There is much to be said for that, but he presents his case (especially when critiquing economic models) against strawman versions of other approaches (which no doubt exist in the literature, but presumably you want to do a little better than that). This seems to come from his confusion over instrumental and consummatory goals and instrumental rationality (i.e. you can be instrumentally rational even when pursuing consummatory (i.e. the theoretical inelastically demanded) goals). I'm not sure how much to trust him when he says things like this: "One kind of trouble that the equation of economic action with rational and gentlemanly [aside: where did he get this characterization] behavior caused for economic argument is that it deflected attention away from the analysis of deception and fraud in the economy". You'll find talk of fraud in economics from The Wealth of Nations through to today's most cutting edge research. Not sure where he gets that characterization. And this: "Most experimental social psychology has dealt with negatively connected networks, which have, by definition, a zero-sum aspect. Such exchange is similar to that analyzed by microeconomics." Walk into any economics class, and the discussion will 90% of the time be about positive sum exchange (that's the whole reason behind economic growth!).

No doubt there are many economic models that are under-socialized, but I'm honestly not sure how much an economist would learn reading this book. I'd recommend Elinor Ostrom or Avner Greif or Barak Richman for better understanding of how to integrate the social environment into models of economic decision making. Maybe Granovetter will do better in the constantly-reference sequel volume.

Miscellaneous notes:

- in discussing Adam Smith's famous quote "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices", Granovetter interprets Smith as suggesting that truly competitive markets require social atomization. I'd interpret Smith a bit more charitably as saying that social networks have strong impacts and when sellers of the same goods meet together regularly, they will be less likely to compete vigorously. Bare in mind this is only talking about the sellers' side and only discusses their social networks relating to their own industry (which does not deny social ties outside of that industry) and does not take into account new entry into an industry.
- critiques a strawman version of neoclassical economics where agents only pursue their narrowly defined (i.e. monetary) self-interest
- bit of confusion over instrumental goals and instrumental rationality. Granovetter makes frequent references to instrumental and consummatory (seeking things as ends in themselves and not pursued based on consequences) behavior. Basically what he is saying is that instrumental behavior exhibits downward sloping demand (i.e. sensitive to costs) while consummatory behavior exhibits a vertical demand curve. If you want a decent prediction of group/aggregate behavior, modeling agents as insensitive to costs will probably not yield useful insights.
- "One kind of trouble that the equation of economic action with rational and gentlemanly [aside: where did he get this characterization] behavior caused for economic argument is that it deflected attention away from the analysis of deception and fraud in the economy." I would like some citations for this ridiculous claim.
- "This trust and obligation result from how a society patterns its institutions of kinship and friendship, and any economic efficiency gains that result are a typically unintended consequence." An unintended consequence? Yes. But should we expect to see lots relationships an institutions surviving which do not (on many margins) exhibit efficiency properties? As a general rule, probably not.
- the talk of "logics" (national, institutional, etc.) was a bit opaque to me (though perhaps talk of "thinking at the margin" and "opportunity cost" might be similarly opaque to non-economists)
- When discussing the economic impact of norms, he seems to get confused about overall economic efficiency in the absence of a norm and economic efficiency conditional on the existence of the norm.
- Cites Aghion for his interlocutor on the economic view of trust, but there are many other economists more associated with studying trust, such as Seabright, Tabellini, Zingales, or Alesina
- defines trust: act in ways that make them vulnerable to others assuming that these others will not take the opportunity to harm them or their interests
-"Most experimental social psychology has dealt with negatively connected networks, which have, by definition, a zero-sum aspect. Such exchange is similar to that analyzed by microeconomics." He needs to explain in what way microeconomics study zero-sum situations
- "Economists long avoided the general question of why firms become larger or smaller and what explains their size until Penrose (1959)." Um. No. Coase's Nature of the Firm was published in 1937.
- "We can appreciate such apparently unlikely combinations of organizational forms more readily if we see cultural, structural, and normative patterns as assembled by actors from a variety of existing materials." Yes.
- He's not a fan of the law and economics field (especially when it suggest some strange arrangement is economically efficient)
- "Actors impacted by institutions use them to solve problems, and if they are not successful in this, they then cast about for workarounds that do provide solutions."
- Modularity in car manufacturing was supposed to obviate relying of trust, but it was the firms that had the best interlinkage of employee networks (and more trust) in which modularity worked best
- recruiting through social ties as the added benefit of the newly hired employee not wanting to look like an idiot in front of people he knows when he is working (this is not something employers can pay to create)
- It is necessary to see objects outside of their cultural context in order to see profit opportunities (Barth and the Arab traders)
- He's not much for grand theorizing or putting together his observations into a neat theoretical package
- he constantly makes reference to his "sequel work"

[Hesham Elsayed · Rating 3 out of 5]

كتاب استفدت منه كمدخل لموضوعه

لكن الترجمة تحتاج الي إعادة صياغة للجمل والفقرات

[Gamal soliman · Rating 1 out of 5]

المؤلف؟
تحدث كثيرا ولم يقل شيئا

[Evan Gold · Rating 5 out of 5]

Mark is my neighbor. As you might imagine, Society and Economy is dense. Not even Mark would describe it as a pleasure read. But I loved it.

Specifically, I found the chapters on social brokerage fascinating. Mark provides a great connection between the macro and micro evaluations of social network theory. It is interesting to consider that the worlds most powerful individuals leverage connection between groups in which factor prohibit direct collaboration.

[Erika RS · Rating 4 out of 5]

This is a dense-in-a-good-way look at some of the ways that the economy interacts with society. It's more of an outline of key issues than a presentation of answers. Granovetter makes that explicit in the closing of the book: "And so what I hope to have done here is to present informed researchers with an assemblage of crucial concepts that must be combined in ways that particular cases dictate with the larger goal of creating generalizations that will inform future theory."

So what does that mean for the more casual reader of this book? First, note that the book is dense academic prose. I happen to like that, but if that is not your thing, then you probably won't enjoy this book. However, for those who are happy (or at least willing) to get through that, there are a lot of valuable observations.

Granovetter's core position is that the assumptions that underlie neoclassical economic theory are flat out wrong. Humans are not selfish, rational individualists. He rejects the other extreme as well. Humans are not irrational bundles of instinct and internalized norms. Nor is our behavior fully defined by culture. Rather, he presents a more complex view of humanity where individual interests interact with relationships to form broader group and cultural norms. These norms are highly influential but they are also plural, meaning that individuals in practice have a lot of flexibility about which norms they follow, how they combine norms, and how norms evolve.

The key insight, perhaps not surprising given that Granovetter's contribution to the popular vocabulary is weak ties, is that it's relationships, on a 1-to-1 and group level, which are key to explaining the connection between individual desires and group norms. Without understanding this connection, those trying to understand the other tend to fall into either/or distinctions: either group identity matters or individual personality and situation matter; either selfish rationality drives economic decisions or culturally influenced irrationality. Granovetter turns this around and makes it a both/and situation. Relationships are critical to individuals so individual rationality entails taking larger relational and group norms into account. Economic decisions are rational, but more than purely economic factors play into the rationality of those choices. Humans are relationally embedded creatures.

Granovetter doesn't just state this. He invokes a variety of academic arguments and case studies from across many domains to demonstrate that a pragmatic hybrid approach much better explains observations than more simplistic models. At the same time, Granovetter cautions us to beware of cherry picking. We should not consider his examples evidence of his theories but merely as evidence that there is something intriguing to research here.

The book goes into depth on the topics of trust and power as well as how institutions and individuals interact with each other. These explorations are interesting, especially because they sometimes defy standard economic reasoning. For example, it's a truism in neoclassical economic theory that trust reduces economic efficiency. If trust is necessary than less economic activity is going on than should be and if trust is privileged then it leads to corruption. But when perfect information, that sneaky assumption of economics, is neither possible nor comprehensible at scale, trust can play a vital role in increasing economic efficiency by allowing people to engage in transactions that they would otherwise avoid.

The book contains many more interesting discussions with more examples. It was a good read and one I expect to revisit. (Also, there's a promised companion volume of case studies which hasn't come out yet. The constant allusions to it were vaguely annoying, but I'm excited anyway!)

[Brittany McLaughlin]

nice annotated bibliography for sense of importance of trust, power, norms in economic phenomenon