Economic Sociology

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Economic sociology

Ilan Talmud University of Haifa, Israel

abstract This article surveys contemporary trends in economic sociology, detailing how the emergence
of the social embeddedness metaphor has led to various sub-disciplines in the field. Economic sociology
depicts the market as a socially constructed feature, (a) structured by networks of social actors who com-
pete, imitate, exploit, and cooperate with one another, (b) enabled and reproduced by social and political
institutions according to (c) the basic rules of capitalist political economy, and (d) perceived and enacted
by cognitive procedures and normative regimes entailing ideal types, professional language games, myths,
and ritualistic processes.
keywords economic sociology ◆ embeddedness ◆ markets ◆ uncertainty

Introduction
Economic sociology applies a ‘sociological perspective economic values and procedures? These are but a few
to economic phenomena’ (Smelser and Swedberg, of the questions that arise from the rich, diverse,
2005: 3), arguing that economic life is embedded in developing, and vibrant field of economic sociology.
the larger social structure. Economic sociology is a The link between the economy and society has
broad based endeavor to contextualize economic attracted analytical attention since the founding of
actions, processes and structures in the wider societal sociology. The discipline’s forerunners and founding
context. While they use different emphases, theories, fathers formulated analytical schema and theoretical
and methodologies, all economic sociologists argue problems to determine the relationship between social
that economic phenomena have to be understood in institutions and economic behavior. For example,
relation to the social mechanisms that facilitate, form, Marx was mainly interested in the systemic causes and
and maintain them. These practices include shared consequences of economic inequality. Weber’s theory
meanings (culture), institutions, political structures, was centered on economic ideas and structures.
and social networks (Guillén et al., 2005; Zelizer, Durkheim’s division of labor was about the pre-con-
2010). Economic sociologists also reject the notion tractual elements of exchange, while Simmel dealt
that the social, political or cultural dimensions of soci- with capitalist life and the emergence of calculability
ety ‘interfere’ with the smooth functioning of the in social relations (see Granovetter, 1990; Guillén et
economy (Zelizer, 1985, 1989). Rather, social mecha- al., 2005; Swedberg, 1994, 1997 for reviews; for a
nisms routinely promote effective economic operation review of political economy see Caporaso and Levine,
(Beckert, 2007). 1992).
Economic sociology deals with a variety of research Classic sociologists studied economic phenomena
questions such as how are markets possible? What are in terms of social classes, status groups, institutional
the social mechanisms that facilitate cooperation in analysis, work and occupations, and economic devel-
the economic sphere, especially under conditions of opment (see Guillén et al., 2005; Swedberg, 1994 for
uncertainty? To what extent are social relations impor- a review). The dominant Parsonian paradigm advocat-
tant to cooperation and competition in economic ed a division of labor in the social sciences that left
exchanges? How do political regimes, national institu- most aspects of the investigation of economic phe-
tions, business networks, and conventions shape local nomena to the discipline of economics. This division
business strategy? What are the social mechanisms has led to the emergence of the economy and society
that determine economic values? To what extent do paradigm in which the economy is perceived as a self-
the moral order and public perceptions affect regulating sub-system (Beckert, 2007: 4; Guillén et

Sociopedia.isa
© 2013 The Author(s)
© 2013 ISA (Editorial Arrangement of Sociopedia.isa)
Ilan Talmud, 2013, ‘Economic sociology’, Sociopedia.isa, DOI: 10.1177/2056846013121

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Talmud Economic sociology

al., 2005). Subsequent theoretical developments led constrained by structural arrangements such as insti-
scholars away from a holistic approach and into nar- tutions, power relations, or networks (Burt, 1983;
rower research areas with key methodological Friedman and Hechter, 1988; Hechter and
advancements. Throughout this period, different Kanazawa, 1997; Zafirovski, 1999). The latter view
subfields within sociology studied economic phe- economic action as using phenomenological or prag-
nomena from narrow, specialized foci such as com- matic assumptions, where actors interpret their envi-
plex organizations, work and occupations, social ronment to ‘make sense’ of their economic action.
stratification, professions, economic development, Proponents of the ‘culturalist school’ treat the
and culture. Arguably, the segmentation of econom- economy as a cultural endeavor and even a moral
ic sociology into specialized subfields was a key fac- project in which actors are constantly engaged in
tor in preventing the possible construction of a intersubjective, symbolic interactions, which in turn
systematic, comprehensive sociological theory of are shaped by cultural scripts. In other words, the
economic phenomena (Guillén et al., 2005; culturalist school views the economy as an outcome
Swedberg, 1997). of the social construction of reality (Swedberg,
Since the 1980s, however, the ‘new economic 1997). According to this view, symbolic interaction
sociology’ has gradually embarked on a novel and sense-making devices play a crucial role in form-
research agenda: an explicit attempt to create a sys- ing economic actions. Furthermore, constructivists
temic sociological inquiry into economic phenome- typically claim that the distinction between func-
na. This significant step forward was essentially tional and symbolic values is somewhat blurred
facilitated by the publications of White’s model of (Beckert, 2013), and that even modern rational cal-
the market as social relations (White, 1981), Burt’s culability is viewed as a cultural and historical proj-
analysis of production markets (Burt, 1983), and ect, maintained by institutional devices and social
Baker’s (1984) and Abolafia’s (1996) studies of finan- carriers (Fourcade and Healy, 2007; Guseva and
cial markets as social relations and cognitions. These Rona-Tas, 2001).
publications were formulated as a novel research Moreover, because methodological tools stem
agenda in Granovetter’s (1985) seminal program- from epistemic assumptions, there is a general asso-
matic paper on social embeddedness. Granovetter ciation in economic sociology between the epistemic
framed these and other relational studies into an communities and the methodological style each
ambitious, meso-level, structural research agenda. camp uses. Researchers who support the structuralist
Nevertheless, there was no unified approach to theory, which accepts the postulates of rationality
contextualize economic actions within society. The implicitly and explicitly, are more likely to use quan-
new economic sociology was split into specialized titative network models. By contrast, scholars who
research questions and theoretical schools, often adhere to the interpretative viewpoint tend to adopt
using diverse and even divergent theoretical lenses. a qualitative, hermeneutical methodology designed
While some analyzed the structure of the market as to decipher symbolic meanings in the field. As Rona-
a social network using a structural approach with Tas (2011: 598) succinctly articulates: ‘Our foremost
quantitative network models, other scholars studying job as sociologists is not to iron out the wrinkles of
the relationship between economic markets, cultural reality with our theories. Our key task is to see how
frames, and the moral order utilized neo- actors deal with those wrinkles, how they manage
Durkheimian and culturalist theories in ‘soft,’ quali- what they see as inconsistent, uncertain or incompat-
tative investigations. By contrast, the main tool for ible and how that dissonance can force them to come
studying the effects of political regimes and power up with new solutions.’
relations on economic performance was a compara-
tive historical approach. The multiplicity of diver-
gent analytical lenses and methods has intensified The problem of social order and
the theoretical split of the new economic sociology uncertainty in economic exchange
into ‘theory camps’ (Fligstein and Dauter, 2007),
thus thwarting attempts to construct a solidified, Durkheim and Malinowski already showed that eco-
integrative sociological theory of economic life. nomic exchange could be facilitated only through
More importantly, behind the division of eco- ‘pre-contractual elements’ of exchange, or by embed-
nomic sociology into different research agendas, ding economic relations in a sacred, Kula alliance.
there is an epistemic split. The major divide is Similarly, Jens Beckert argues that social devices are a
between instrumental (or structuralist) and con- necessary condition for the smooth operation of eco-
structivist, interpretative approaches to economic nomic exchange (Beckert, 2003, 2007). In his prag-
action. The former regard economic actors as purpo- matist approach, Beckert explicitly negates the
sive, rational utilitarian agents whose horizons are established distinction in the economic and business

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Talmud Economic sociology

literature between risk and uncertainty, where the characteristics of contemporary economies (Beckert,
former is perceived as the assignment of probability 2005).
to future outcomes, while ‘uncertainty is understood Granovetter’s frame of embeddedness takes a dif-
as the character of situations in which agents cannot ferent approach. He attempts to contextualize eco-
anticipate the outcome of a decision and cannot nomic action in the larger social structure, but also
assign probabilities to the outcome’ (Beckert, 1996: devises an intermediate, network level of analysis
804). Beckert claims that all economic action raises between two theoretical extremes: ‘oversocialized’
problems of uncertainty, which, in turn, create three and ‘under-socialized’ perceptions of social action. In
obstacles to economic action: the valuation of goods, other words, Granovetter emphasizes the relational
competition, and cooperation (Beckert, 2007). conception, ontology, and methodology of econom-
Moreover, in sharp contrast to the theory of rational ic life. Granovetter’s formulation of embeddedness is
choice, Beckert maintains that people even use ‘fic- more a meta-theoretical metaphor than an unam-
tional expectations’ as a narrative to set up econom- biguous theory. Thus, his formulation of the idea of
ic action on many levels. These expectations range embeddedness has been subject to a number of cri-
from the narrative of central banks to business strate- tiques, most of which center on the ‘theoretical
gies, and analyst evaluations of a firm, business plan, vagueness’ of the concept and the fact that it is a
or corporate prospectus (Beckert, 2013; White, meta-theoretical metaphor rather than a precise
1992). mechanism of explanation (Krippner et al., 2004;
To illuminate the problem of valuation, some Lie, 1991; Portes, 1995).
researchers study cases that seem to have high levels Zukin and DiMaggio (1990) offer a corrective
of uncertainty and lack a quantitative scale of stan- extension of Granovetter’s formulation and provide
dards of values (Beckert and Aspers, 2011). more social context by distinguishing among differ-
Examples of such cases include illegal markets ent aspects of it: structural embeddedness, cognitive
(Beckert and Wehinger, 2013), art markets (Lewicki, embeddedness, cultural embeddedness, and political
2013), wine markets (Beckert and Rössel, 2013) and embeddedness. Structural embeddedness describes
the funeral home industry (Akyel, 2013). Others the social networks that sustain economic relations.
have shown that the problem of uncertainty is inher- It is comprised of the social positions of the econom-
ent in any market, even those that have a scale of ic agents, the organization of real markets and other
standards. Baker (1984), for example, shows how forms of economic exchange. Cultural embedded-
price volatility of financial derivatives is affected by ness manifests the ways cultural assumptions are
the network structure of the traders even when a organized and shared. Political embeddedness
standard formula sets the price. He found that the describes the ways power dispersions and systemic
social distance among the traders increases prices contradictions of the contemporary welfare state
variation. Likewise, in their study of the credit mar- affect economic outcomes. Finally, cognitive embed-
ket in Moscow, Guseva and Rona-Tas (2001) show dedness refers to the cognitive devices of economic
that the calculation of probabilities (and economic interaction and to the ways performative techniques
rationality in its formal sense) ‘is not an innate bring economic action into existence (Zukin and
human ability but a social capacity that exists DiMaggio, 1990).
because of institutional arrangements.’

Structural embeddedness as networks


Attempting to resolve economic order:
social embeddedness At the center of Granovetter’s approach is the con-
cept of networks. Networks are perceived as a valu-
The term ‘embeddedness’ was first coined by Karl able means for transferring nuanced or ‘fine-grained
Polanyi to describe the complex relationship between information’ (Uzzi, 1996, 1997), and social relations
a society and its economic sphere. Polanyi uses the are an effective source of ‘enforceable trust’
term to define the economy as ‘an instituted process (Granovetter, 1985, 2005). Sociologists who use the
… embedded and enmeshed in institutions, eco- structural formulation of embeddedness, usually
nomic and non-economic’ (Lie, 1997). However, operationalized via network models of social struc-
Polanyi’s original notion of embeddedness is too ture, are able to demonstrate how the social organi-
vague (Barber, 1995; Beckert, 2007; Block, 2003) zation of competition systematically benefits certain
and consists of internal tensions (Gemici, 2008). economic actors at the expense of others. In other
More importantly, it lacks a clear specification of words, while social networks provide a social device
theoretical tools that account for the concrete mech- for cooperation, social position within a network
anisms of embedding and the variations between the often provides a competitive advantage. Given that

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Talmud Economic sociology

economic transactions are not only ‘embedded’ in moral order, and the political control of the econo-
social devices (Burt, 1983), but are also a social my.
device per se, they can be analyzed using basic socio- Beckert further argues, ‘The notion of embed-
logical concepts of power, asymmetric exchange, and dedness has led economic sociology to pass over the
social control (Burt, 1992; Uzzi, 1999). question of the foundation in action theory from
Burt has repeatedly shown how central firms in which to understand action in economic contexts.’
transaction networks have the benefits of controlling Beckert attacks the sociological conceptualization
and manipulating, receiving non-redundant infor- that ‘simply appropriates the rational actor model’
mation from their disconnected trade and dictating (Beckert, 2003). In other words, the parsimony and
prices to their trade partners (Burt, 1983, 1992, uni-dimensionality of the structural approach to
2000). This was an important step for economic embeddedness come at the expense of ignoring the
sociology. In sharp contrast to neoclassical econom- richness and complexity of economic transaction
ics, where every agent is considered a ‘price taker’ (Emirbayer and Goodwin, 1994). This, in turn, has
who cannot control prices through their conduct, arguably led to disagreement among network ana-
studies using network models have found that the lysts as to ‘what networks actually do’ (Fourcade-
structural embeddedness of the firm determines its Gourinchas, 2007), because the actual enactment of
degree of control over its ‘price making’ leverage. the tie in a network remains hidden from the struc-
Economic power, therefore, is a function of the tural researcher. In order to fill this gap, Zelizer
degree of control a firm has (directly and indirectly) (2012) suggested a concept of ‘relational work’ to
in its exchange network. By contrast, firms that are denote the mental accounting, buffering, selecting,
dependent on their trading partners in an asymmet- and negotiating of economic ties at the micro level.
ric way suffer from ‘network constraint,’ which Another flaw in the structuralist approach is its
restricts their freedom or ‘space of possibility’ attention to the immediate context of direct and
(Bourdieu, 2005; Burt, 1992, 2000). indirect ties. However, these ties are overlaid by mul-
Collectively, network analysts have created a solid tiple layers of embeddedness, as Krippner succinctly
body of research that is an antidote to the atomistic contends: ‘Every transaction, no matter how instan-
view of the economy. In addition, they have demon- taneous, is social in the broader sense of the term:
strated how relational patterns create power inequal- congealed into every market exchange is a history of
ities between economic actors, resulting in struggle and contestation that has produced actors
differential returns (Burt, 1983, 1992; Podolny, with certain understandings of themselves and the
2005; Talmud, 1992, 1994; Talmud and Mesch, world that predispose them to exchange under a cer-
1997). This strand of research negates the notion of tain set of social rules and not another. In this sense,
a perfect competition model and pure rationality. the state, culture, and politics are contained in every
These scholars usually assume that the choices of market act; they do not variably exert their influence
rational agents are constrained by the structural on some kinds of markets more than others’
arrangements of opportunities. Using network mod- (Krippner, 2001: 785). Moreover, Krippner argues
els is an effective analytical tool for demonstrating that ‘quite paradoxically, the basic intuition that
that ‘imperfect competition’ (in the form of structur- markets are socially embedded – while containing an
al embeddedness) facilitates both economic trade important insight – has led economic sociologists to
and the micro-power relations of asymmetric take the market itself for granted. As a result, eco-
exchange (Burt, 2000). nomic sociology has done scarcely better than eco-
Nevertheless, network analysts did not go far nomics in elaborating the concept of the market as a
enough. Arguably, network analysis has cured eco- theoretical object in its own right’ (Krippner, 2001;
nomic accounts of the ideal image of perfect compe- Krippner et al., 2004). Similarly, Portes (1995)
tition. However, it neglected the very nature of attacked the vagueness to the ‘meta-theoretical
resource flow in a network and the ‘relational work’ assumption, which is often erroneously treated as an
(Zelizer, 2012) actors engage in when sharing inter- explanatory mechanism per se’.
pretations and intentions (Beckert, 2003). Another In addition, the cumulative evidence in econom-
weakness in the structural approach is its implicit ic sociology has documented the prevalence of other
assumption that the actors’ rational calculations are forms of instrumental business conduct. Such instru-
bounded solely by network variables. However, this mental vehicles include interlocking directorates,
is not the only context in which social agents must relational management, social coordination, coopta-
choose between socially defined alternatives (Callon, tion, and learning devices that economic firms con-
1998). In other words, proponents of the structural- struct to facilitate performance. By conceding that
ist perspective of embeddedness typically overlook capitalists often pursue relationships to further busi-
the economic impact of cognitive frameworks, the ness goals, we indirectly gain a deeper appreciation

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Talmud Economic sociology

for the limits of markets (Curruthers and Uzzi, al equivalent to an institutional setting. Guseva and
2000; Zuckerman and Sgourev, 2006). There is also Rona-Tas (2001) found that Russian banks lack the
an analytical tension between those who view the institutional underpinning for the transformation of
market as a relational form (Podolny, 2005; White, uncertainty into calculative, probabilistic risk.
1992, 2002), and those who depict social embed- Consequently, the banks face higher degrees of
dedness as a social overlay on top of the market uncertainty. As a result, they rely on trust, extending
(Burt, 1983, 1992; Mizruchi, 1992; Mizruchi and their existing social ties, forming other relationships,
Schwartz, 1987; Uzzi, 1996, 1997, 1999). For the and even exploiting their customers’ own networks.
latter, the market remains a theoretical lacuna The general claim in the network literature is that
(Portes, 1995). (For an elaborated extension, see the stable social relations in the form of networks pro-
Polanyi symposium in Krippner et al., 2004.) vide an effective way to mitigate uncertainty at the
individual and collective levels, and are a flexible
governance structure of concrete economic con-
The network view of the markets: straints. A counter-argument is that uncertainty
coordination in the face of uncertainty facilitates creativity and innovation (Beckert, 2013;
Stark, 2009). Vedres and Stark (2010) trace a net-
For structuralists, social networks are an effective work topology that encourages creativity called the
route for cooperative behavior and sharing privileged ‘structural fold,’ in which actors operate as multiple
information and contextual knowledge, creating insiders in overlapping groups and thus can generate
trust, and reducing risks, and uncertainty (e.g., Burt, new knowledge by recombining resources.
1992; Nahapiet and Ghoshal, 1988; Uzzi, 1996, Network structures vary dramatically across
1997; White, 1995). Unlike information, knowledge national, industrial, and business contexts, thus pro-
involves interpretation in accordance with an epis- viding rich contexts for a conditional specification of
temic culture or social context (Aspers, 2006, 2009). network strategy. Moreover, social networks are only
While information is typically described as easily a single building block of the market. As I will
articulated and transferred, standing objectively as a demonstrate in the next section, economic sociology
‘social fact,’ contextual or tacit knowledge is trans- takes into account cultural and institutional mecha-
ferred only by social interaction among people and nisms as well.
resists ‘objective’ codification (Knorr-Cetina, 1981, The structure of networks is not the only relevant
1999). Knowledge is a building block of markets. aspect of social embeddedness that affects price.
Darr and Talmud (2003), for example, compared an Shared cognition is a valuable social asset in assessing
inter-organizational network in markets for emer- values, especially when multiple sources of evalua-
gent technologies, in which products are fully cus- tion exist, when limits are set by moral practice, or
tomized, to a network within a more standard mass when the values at stake are ambiguous. This means
market. They found that the inherent problem asso- that in some markets, assigning economic value to
ciated with the transfer of contextual and non-stan- artifacts requires intrinsic or contextual knowledge
dard knowledge tightened the structure of of the commodity or the actors.
micro-level ties, putting technological experts at the
center of communication.
Network analysts have often attempted to From cultural views of the markets to
demonstrate that market uncertainty is mitigated or moralized markets
managed through social ties in a variety of different
contexts (Powell, 1990). They were able to show how Economic sociologists reject the idea that economic
quasi-integration via social networks enjoys both actors make perfect rational choices based on perfect
economies of scale and operational flexibility, which and complete knowledge and information about the
are necessary to confront market uncertainty (Jones consequences of their alternatives. Rather, they claim
et al., 1997; Powell, 1990; Uzzi, 1997). A typical that economic actions, especially under conditions
example is Podolny’s (1994) study of relational man- of uncertainty, are shaped by institutionalized con-
agement among investment banks. He posits that ventions, customs, norms, shared cognitions, expres-
organizations overcome the problem of market sive symbols, and taken-for-granted scripts used as a
uncertainty by adopting a principle of exclusivity in ‘toolkit’ or entrenched repertoires of action (Bandelj,
selecting exchange partners. The greater the market 2008; DiMaggio, 1994; Zelizer, 2010).
uncertainty, the more the organizations engage in Furthermore, these cultural repertoires serve as pro-
exchange relations with those of similar status with tective social devices against risk or an uncertain
whom they have transacted in the past. future (Beckert, 1996). These economic mental
Social networks often serve as a partial function- models, conventions, or habitus eliminate the need

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Talmud Economic sociology

for complex calculations (especially those of search, other institutions of a calculative agency, which rais-
measurement, and costs) that are rare resources in es epistemic ideas such as ‘efficiency’ into a moral
any social action (Bourdieu, 2005: 85). Surely, cul- virtue. In addition, economic policy and discourse
tural interpretations and enactments depend on the are full of normativity. ‘In both their commonsensi-
social position of the actors. Business people, for cal and more elaborated forms, ideas about fair
example, may be accustomed to playing the role of prices, fair wages, fair competition, and now fair
entrepreneurs enjoying the beneficial roles of the trade are predicated on moral views about what
middle man (DiMaggio, 1994), just as some immi- things are really worth or how much power is too
grant or ethnic groups may be accustomed to much’ (Fourcade and Healy, 2007: 303). This
(Portes, 1995). By contrast, those in the lower class- approach is demonstrated in Marion Fourcade’s
es may adhere to a working-class culture (DiMaggio, study of three major legal cases about environmental
1994) or to cultural tastes and styles used to express pollution. Fourcade (2012) links the conditions
their status group (Bourdieu, 2002). The economic under which detrimental moral action is linked to
mentality or habitus is socially structured and deter- monetary valuation. She points to the general posi-
mined, and therefore, confined (Bourdieu, 2005: tion of money as the metric for subjective value in
84). ‘It is conditioned and limited spontaneity,’ society, and the rhetorical devices actors use in order
which is affected by ‘conventional, conditional stim- to extract monetary value where value is hard to
uli’ (Bourdieu, 2005: 85). Conceivably, cultural ascertain.
repertoires take a more prominent place especially
under uncertainty. Bandelj (2008) illustrates this
point by using the case of the cultural objects of the Cognitive embeddedness:
public debates surrounding foreign investment in intersubjectivity and sense-making
post-socialist Slovenia, where institutional settings
were radically transformed. Given that economic Precisely because homo economicus does not operate
consequences are uncertain, and may be conceived in a social vacuum, economic action is embedded in
by social actors who use ‘multiple, even contradicto- the ways in which actors perceive their economic
ry’ scripts, public debates are shaped by the ‘social world, interpret it, and re-enact it with others.
identities of actors and historical and macro-struc- Cognitive embeddedness refers to the ‘social struc-
tural conditions of post-socialism’ (Bandelj, 2008: turation of worlds of meaning whose enactment is
671). based on interpretations’ (Beckert, 2003: 771).
Culture is not an abstract system, but socially Cognitive frames are affected and molded via eco-
entrenched repertoires (Bandelj, 2008; Zelizer, nomic interactions, where intersubjective definitions
2010). The impact of culture on economic life is of the situation are explicitly or tacitly constructed.
mitigated through institutional and social interac- In addition, economic policymaking takes place at
tion because economic culture is fortified by institu- various levels following the guidance of professional
tional devices, operated via ongoing frames, that are economists in academia, industry, or government
reinforced by the social relationships of individuals agencies.
and organized groups who jointly construct their More specifically, a growing interest in financial
cultural tools in the sphere of the market (Biggart sociology has drawn attention to the investigation
and Beamish, 2003). A more recent culturalist claim of the manner in which economic writers, profes-
is that the market is not just an ‘exchange arena,’ but sional analysts and consultants such as academic
a cultural and institutional project that not only economists, bankers, bloggers, and traders construct
defines economic action, but also shapes the collec- financial institutions, products, and markets, and
tive identity of societies. A prime example of this how they frame financial documents. Borrowing
viewpoint is Fourcade and Healy’s (2007) paper on from Bruno Latour’s Actor-Network-Theory
the moral views of market society. Fourcade and (ANT), mainly applied in the sociology of science
Healy shift the culturalist frame to a more radical and technology, Michel Callon (1998) proposed the
viewpoint. They depict markets as cultural phenom- performativity concept to denote the construction of
ena and moral projects, setting an agenda to study economic settings, actors, and institutions by narra-
the mechanisms and techniques by which such proj- tives such as academic economics. Performativity is
ects are realized in practice. They demonstrate the an activity that creates what it describes. Callon con-
moral elements of market society by pointing out the siders the science of economics not merely as an
role of markets in the creation of moral boundaries abstract form of knowledge, depicting an already
between persons or societies, defining the moral existing economic ontology, but as a set of textual
virtue of the ‘modal person.’ Market society also has and social mechanisms that contribute to the
normative aspects regarding policy prescriptions and formation and maintenance of economic practices,

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Talmud Economic sociology

specialized arenas, and institutions (MacKenzie et their individual biases and limitations. More partic-
al., 2007: 2). This approach depicts markets as ularly, they analyze the opportunities and dangers
‘evolving reified abstract construction that orient created by financial models. Through ethnographic
[sic] actors in their efforts to coordinate successfully, observations in the derivatives trading room of a
and stressing the necessarily inter-subjective nature major investment bank, they found that traders use
of markets’ (Biggart and Beamish, 2003: 458). The models in reverse to guard against possible errors in
materialization of business models is a typical case of their financial estimates of their rivals. Academic
perfomativity. Doganovaa and Eyquem-Renaultb economists developed the theoretical basis for mod-
studied the role played by business models in the eling practice, which is known as ‘backing out’
innovation process of entrepreneurial firms. They (MacKenzie and Millo, 2003). Nevertheless, such
illustrated the multiple forms of business models ‘reflexive modeling’ produces ‘cognitive interdepend-
that are used, and concluded that the business model ence.’ When enough traders overlook a key issue,
‘is a narrative and calculative device that allows their positions send the wrong message to the rest of
entrepreneurs to explore a market and plays a perfor- the market. The resulting lock-in brings about arbi-
mative role by contributing to the construction of trage disasters. In a comparable way, Buenza and
the techno-economic network of an innovation’ Garud (2004) conceive of financial analysts as mak-
(Doganovaa and Eyquem-Renaultb, 2009: 1559). ers of ‘calculative frames’ as a cognitive device. They
Callon’s theory has excited intense debate in eco- revealed that economic reports offered a new ‘calcu-
nomic sociology. On one hand, it has been heralded lative frame,’ allowing investors to analyze firms in a
as a compelling tool for analyzing the social impact context of uncertainty, even when no stable informa-
of economics on the construction of financial mar- tion or shared predictions about a firm’s future exists.
kets (e.g., MacKenzie, 2003, 2011; MacKenzie and Successful framing creates temporary markets,
Millo, 2003), but on the other hand it has also been attracting investments that will fuel the bubble. Over
criticized as a danger to the sociological critique of time, if mismatches emerge between the predictive
economics (Fine, 2003). Moreover, students of eco- time frame and the real pattern of an asset’s conduct
nomic cognition found that even the pitfalls of eco- in the market, the bubble will collapse.
nomic and financial theory contribute to successful How, then, is consensus reached in a global sin-
performance. In a counter-intuitive argument, Millo gle financial market? Knorr-Cetina and Bruegger
and MacKenzie claim that the deficiencies of aca- (2002) address this question by studying how actors
demic and financial economic models are often construct global transactions through computer-
deemed successful precisely because of their inaccu- mediated communication. They refer to this process
racy. Economic and financial models thus contain as a ‘global microstructure,’ a distinct form of a mar-
the inherent capacity for ‘interpretative flexibility’ ket coordination mechanism that supplements rela-
(Darr and Talmud, 2003), which can leave space for tional or network forms of coordination. Their
social interactions to fill in confusions or gaps with research reveals how ‘the reciprocal interlocking of
concrete, negotiated meaning. Furthermore, Millo time dimensions has brought into view a level of
and MacKenzie (2009) attribute the growth of the inter-subjectivity that points beyond network per-
modern financial risk management industry precise- spectives’ (Knorr-Cetina and Bruegger, 2002: 944).
ly to the augmented inaccuracy and unreliability of It seems that there is noticeable variation in the
risk models. They even argue that the remarkable power of perfomativity. Some economic contexts are
success of contemporary financial risk management more inclined to be ‘performed’ than others. Aspers
methods is attributable primarily to their commu- shows that a performativity approach is more effica-
nicative and organizational usefulness, and less to the cious for analyzing non-standard markets than stan-
accuracy of the results they produce. Millo and dard ones (Aspers, 2007, 2011). Likewise, Fourcade
MacKenzie (2009) corroborate Beckert’s (2007) (2009) contends that the efficacy of economic per-
argument that institutional practices and conven- formativity depends on other kinds of embedded-
tions are merely social devices to protect against ness. She shows that the difference between the
uncertainty and unintended economic conse- position of economists in France and the US is
quences. Using primary documents and interviews, explained by various national, institutional, and
Millo and MacKenzie demonstrate how financial intellectual historical sedimentations, as well as the
risk management became an integral part of key different career patterns of the profession in both
market practices. countries. In particular, ‘the general embeddedness
Similarly, Buenza and Stark (2006) criticize and of expertise in the institutional form of the market’
challenge those who advocate a behavioral approach in the US contrasts with the proximity of French
to finance by identifying the root of systemic risk in economists to the authority of the state (Fourcade,
the calculative tools used by the actors, rather than in 2009: 29).

7
Talmud Economic sociology

Political institutions and political organization in South East Asia. They found that the
economy three distinct patterns of industrial organization in
Japan, Taiwan, and South Korea – manifested in the
Political embeddedness expresses the ways in which ways in which corporate structures and inter-organi-
the authoritative allocation of resources by political zational authority evolved and the manner in which
actors, power rivalries, and conflicts in the political legitimation strategies are conceived – are best
sphere – as well as the systemic contradictions in the explained by the history of control in the country.
political steering of the economy – affect economic Hence, the social, political, and institutional history
actors and their behavior. Under the umbrella of in each country explains the mode in which the
political embeddedness one can find theories of industrial organization crystallized.
political economy and the new institutional theory. Esping-Andersen (1990) points out three factors
Political economy mainly investigates the struc- of great importance in the understanding of the dif-
tural tensions inherent in the political control of the ferences between welfare state regimes: the nature of
economy, the ways in which economic policymaking class mobilization (especially of the working class),
processes in the political sphere take place and the class–political coalition structures, and the historical
implications of societal power relations for econom- legacy of regime institutionalization. The interaction
ic action, and how economic power facilitates polit- between class politics and the development of state
ical action (Mizruchi, 1992; Zukin and DiMaggio, institutions accounts for the different paths of wel-
1990). Political economy puts more emphasis on fare state development. Esping-Andersen also distin-
the systematic linkage between the polity and the guishes among three basic types of regimes in
economy, with special attention paid to the role of capitalist societies: the liberal, the corporatist, and
the state in steering the economy (Block, 1981, the social democrat. In the liberal welfare state
1994; Block and Evans, 2005; Goldthorpe, 1978), regime, modest benefits are given to a clientele of
including the inherent contradictions of the welfare low-income individuals. The United States, Canada,
state (Esping-Andersen, 1990). and Australia are the archetypal examples of this
The new institutional theory puts more emphasis model. In the corporatist regime, social rights are
on the impact of ‘path dependence’ and modes of granted from above and are an integral part of the
economic coordination on subsequent economic integration of the citizen into the nation-state and
progression, on coalition formation, and on the the consolidation of the various economic, social,
shaping of economic regimes. Still, both political and political elites into a single hierarchy. Social
economy and the new institutional theory strongly democrat connotes a gradual integration of labor
emphasize the role of history, path dependence, movements into the state’s social security regime.
political institutions, business groupings, and collec-
tive action in explaining contemporary economic
behavior (Amable and Palombarini, 2009; Dobbin, From political economy to
1994, 2004; Esping-Andersen, 1990; Ghezzi and comparative capitalism
Mingione, 2007; Hamilton and Biggart, 1988;
Streeck, 2011). In contrast to the large body of literature focused on
Most accounts of political embeddedness employ national labor movements or neo-corporatist litera-
a relational or institutional view of economic actors, ture that influenced political sociology and social
often interwoven with how regulation regimes, insti- stratification (e.g., Block, 1981; Esping-Andersen,
tutional settings, and forms of economic coordina- 1990; Schmitter, 1981), the ‘varieties of capitalism’
tion affect economic performance (Amable and approach assumes that firms are the central actors in
Palombarini, 2009; Esping-Andersen, 1990; the economy, and their behavior aggregates into
Fligstein, 1996, 2001; Ghezzi and Mingione, 2007; national economic performance. Adopting a rela-
Streeck, 2011). Typically, the study of political econ- tional view of the firm, this perspective assumes that
omy and mainstream economic sociology grew in the key to success in each of these actions is efficient
relative isolation from each other. The former was coordination with other actors. Actors are considered
primarily engaged in the study of the macro-struc- to be generally rational in the sense that firms (which
tures of market coordination, while economic sociol- are the central agents in this perspective) seek to
ogy was chiefly preoccupied with economic advance their interests. Institutions (formal and
interactions between economic actors (Beckert and informal) and conventions are considered resources,
Streeck, 2008). not active collective actors. The ‘varieties-of-capital-
An influential example of comparative economic ism’ approach views institutions as containers of
sociology is Hamilton and Biggart’s (1988) and spell resources, deemed to provide opportunities for
study of the systematic differences in industrial specific economic and entrepreneurial action, and

8
Talmud Economic sociology

especially for business’s collective action (Hall, tions, and (4) the relationship between capitalism
2007). The varieties of capitalism framework and democracy. For example, Streeck depicts con-
emphasizes that the political economy is replete with temporary capitalism as an ‘institutionalized social
all kinds of institutions. Emphasizing the effects of order, with characteristic rules and mechanisms for
institutional interactions, the varieties of capitalism their enforcement, and with actors institutionally
approach argues that the strategies of firms are con- expected to be endowed with typical values, inter-
ditioned simultaneously by multiple institutions, ests, preferences and strategies.’ Based on this defini-
often in different spheres of the political economy tion, Streeck attempts to distinguish between
(Hall and Soskice, 2001: 21–36). These actions are ‘capitalism proper’ (as an abstract mechanism of sur-
facilitated by political coalitions and resource mobi- plus value appropriation) and its ‘social contain-
lization as well. By doing so, firms and institutions ment,’ thus enabling the analysis of ‘objective’ rules
gain direct coordination of their ‘complementarities’ of capitalism (political economy) and the sociopolit-
(Allen, 2013). Therefore, the main problems facing ical regime that facilitates, mitigates, and steers its
firms are coordination problems involving other outcomes (Streeck, 2011). Additionally, Beckert
actors in the economy. The varieties of capitalism (2013) attempts to provide a socioeconomic micro-
approach distinguishes between two modes of coor- foundation for political economy, enumerating vari-
dination: the liberal market economy versus the ous interpretative ‘management of expectations’
coordinated market economy. In the first, firms modules nested within four key areas of capitalism:
coordinate with other actors primarily through com- credit, commmodification, competition, and creativ-
petitive markets, characterized by arm’s-length rela- ity. These analytical endeavors aim at bridging the-
tionships and formal contracting, in a similar way as oretical gaps between political economy and other
described in the neoclassic economic literature. In forms of economic sociology.
the other form of coordination, firms strategically
coordinate via institutional mechanisms. Hall and
Soskice (2001) were able to demonstrate the exis- Types of markets as outcomes of
tence of different modalities of regulatory regimes order, standards, and values
across countries. These modalities are evident in the
linkage between the modes of coordination across Markets are structured by the relationships between
axes of labor arrangements, infrastructure regulation, market actors according to the roles and identities
and corporate governance. The perspective of vari- they play, and the knowledge and transactional prop-
eties of capitalism is very close to the literature on erties deemed necessary for the facilitation of pro-
comparative business groups and national varieties duction and trade (Carruthers and Uzzi, 2000;
(cf. Morgan et al., 2005), and is primarily concerned Podolny, 1993; White, 1992, 2002). Given that rela-
with the estimation of the impact of complementar- tional and contextual properties – structural, discur-
ities in labor relations and corporate governance on sive, and cognitive – are fundamental elements of
economic performance, usually measured by rates of markets, economic sociology does not depict the
growth. Another focus of this approach is on institu- ‘market’ as a single entity. In economic sociology,
tional stability and change. Thus, proponents of this there are many types of markets. For example, Patrik
school conduct a comparative institutional analysis Aspers distinguishes between two kinds of markets,
of economic performance, attempting to draw con- fixed-role markets and switch-role markets. In fixed-
clusions about institutional advantages. role markets, such as the garment industry, actors are
Deeg and Jackson (2007) challenge the relevance identified as either buyers or sellers. In switch-role
of the current analytic schema of comparative capi- markets, such as the stock exchange or currency mar-
talism by pointing out a few contemporary occur- ket, actors are not identified with one role. The other
rences: the emergence of transnational governance, distinction he makes is between standard and status
the growing heterogeneity across firms within markets. In a status market, such as the art or wine
national economies, the apparent functional change markets, social order is maintained because the iden-
in institutions despite their formal stability, and the tities of the actors on both sides of the market are
major transformations in national business systems. ranked according to status. This is a more well-estab-
Attempting to bridge the gap between political econ- lished social construction than the commodity trad-
omy and economic sociology, Beckert and Streeck ed in that market. By contrast, in a market
(2008) developed a research agenda derived from characterized by standards, the situation is reversed:
both areas, targeting four aspects of the inquiry into the commodity is a more deep-rooted social con-
modern capitalist economies: (1) the nature of struction than the social status of the actors in the
rational economic action, (2) the constitution of market (Aspers, 2009: 125).
markets, (3) the emergence and change of institu- Darr (2006) makes a similar distinction when he

9
Talmud Economic sociology

differentiates between markets according to the pos- cation. The centrality of technical experts in the
sibility of having knowledge about prices and quali- emerging technology network also allows experts to
ty that the buyers and sellers possess. Economists communicate and coordinate the contextual knowl-
and economic anthropologists maintain that there is edge needed for the construction of a common
uncertainty about the asymmetric distributions of image of the product being co-developed. In con-
information regarding the quality and cost of the trast, faceless relationships and sequential develop-
products being exchanged. They distinguish between ment typify the activities of actors in the network of
two market archetypes (craft and mass) based on the the more standard market (Darr and Talmud, 2003).
level of uncertainty they exhibit. In mass markets, The construction of market typology based on
there are low levels of uncertainty regarding quality endemic characteristics such as knowledge, roles, and
and cost because social institutions such as brand coordination regimes helps economic sociology pro-
names and industry standards allow buyers to count- duce a realistic, sensitive, and conditional theory of
er the uncertainty about quality and cost. market structure and operation. Another example is
Consequently, only buyers in a mass market engage Zuckerman’s (2012) attempt to specify the condi-
in an extensive information search about a product’s tions under which objective, structural properties
quality and cost. They seek additional offers to ones limit the capacity for the social construction of mar-
already received from sellers (Geertz, 1978: 31). In ket. Attempting to mitigate between market realism
mass markets, buyers and sellers also have a common and market constructivism, Zuckerman further
image of how the product could be used. By con- identifies distinctive mechanisms of market valua-
trast, in craft markets there are high levels of uncer- tion and stability, mainly stemming from the relative
tainty about a product’s quality and cost. Sellers in a degree of social construction in the market in rela-
craft market, often the producers, possess intimate tion to objective constraints (such as concentration
knowledge about the product’s quality and produc- ratio).
tion costs. However, this knowledge is not shared
with the buyers, who must engage in an intensive
information search about the products. The buyers Conclusion
must explore in depth each offer received from the
sellers (Geertz, 1978), rather than simply seeking Embarking on a new research agenda, economic
additional offers. In craft markets an intensive infor- sociology has been able to demonstrate that the
mation search is costly for the buyers as well as for economy is a relational social space created by cul-
the sellers, who must spend time replying to the cus- tures, moral communities, arenas of political action,
tomers’ detailed questions. However, similar to mass institutional practices, and shared and often rein-
markets, sellers and buyers in a craft market agree on forced cognitions and frames (Abolafia, 1996; Burt,
the products’ applications. 1992; DiMaggio, 1994; Fligstein, 2001; Fligstein
Recently, anecdotal evidence has emerged that and Mara-Drita, 1996; Fligstein and Sweet, 2002;
the current digitalization of production systems and Granovetter, 1985; Podolny, 1993, 1994; Uzzi,
services is creating markets for emerging technolo- 1996, 1997; White, 1981, 1992, 2002; Zuckerman,
gies in which actors engage in distinct exchange 2010). Economic sociology focuses on four dimen-
behaviors. Here, the feasibility of the customization sions shaping the economic structure and behavior:
process becomes a source of uncertainty for buyers networks, power, institutions, and cognitions
and sellers (Darr, 2006). The sellers’ engineers must (Dobbin, 2004; Fourcade-Gourinchas, 2007,
overcome this obstacle by engaging in an intensive Fourcade, 2009; Krippner, 2001). Economic sociol-
information search. Given the lack of standardiza- ogists have shifted their research interest from
tion, buyers in emerging technology markets tend to peripheral subjects to the core of the economic struc-
be uncertain about the quality and cost of products, ture – the sociology of finance and money, including
so they form strong, frequent ties across firms, con- analyses of financial bubbles (cf. Abolafia, 2010;
veying contextual clues back and forth (Darr and MacKenzie, 2011; Swedberg, 2010; Zuckerman and
Talmud, 2003). Consequently, compared to the net- Sgourev, 2006) – and even suggested policy-related
work of standard products, emerging technology regulatory correctives (Zuckerman, 2010).
markets are more heterogeneous in occupational Moreover, in the last two decades more comparative
terms, more concentrated, and more hierarchical, and historical work has been done, resulting in a
with experts located at the center of the communica- more profound understanding of the social context
tion network. By contrast, the seller–buyer network of economic action at the state, institutional, and
of standard products is more homogeneous, sparser, firm level of analysis.
and less hierarchical, with administrators rather than I argue that despite the critical and diverse attacks
technical experts located at the center of communi- on Granovetter’s concept of social embeddedness,

10
Talmud Economic sociology

the metaphor has focused sociologists’ analytical ease some of the contradictions between the various
attention on the relational aspects of economic theoretical camps in economic sociology. However,
action. Paradoxically, the relative vagueness of scholars involved in this task need to be trained in
Granovetter’s definition was fruitful in provoking many methodological styles and to be agnostic about
divergent formulations of the relationship between their assumptions, especially regarding the analytical
the economy, culture, politics, and society. This is primacy of each dimension of social embeddedness.
somewhat ironic, as Granovetter sought to construct Unfortunately, most sociologists tend not to do so.
a clear relational formulation of embeddedness,
inspired by network analytical studies. Nonetheless,
because of the epistemic split in sociology in general Annotated further reading
and in economic sociology in particular, every epis-
temic and theoretical camp interprets and reformu- The reader can find classic and contemporary works in
lates the metaphor according to its own assumptions. economic sociology in Dobbin F (ed.) (2004) The New
Consequently, a plethora of research agendas still Economic Sociology, Princeton University Press;
exists in the field. Overall, this abundance is not an Granovetter M and Swedberg R (2011) The Sociology of
impediment, but a blessing. It enables students of Economic Life, 3rd edn, Westview. More elaborated
discussions on the nature, development, and direction of
economic sociology to make use of multiple view- economic sociology one can find in Swedberg R (2003)
points of the social context of economic life, though Principles of Economic Sociology, Princeton University
at a price of systemic theoretical integration. Press; Smelser, N and Swedberg R (eds) (1994) The
Since its revival, epitomized by the emergence of Handbook of Economic Sociology, Princeton University
Granovetter’s (1985) formulation of embeddedness, Press; Smelser N and Swedberg R (eds) (2005) The
the field has crystallized, thematically and institu- Handbook of Economic Sociology, 2nd edn, Princeton
tionally, even though it still has some fragmented University Press; and Guillén M, Collins R, England P
structure of divergent research programs. The ambi- and Meyer M (eds) (2005) The New Economic Sociology
guity of the metaphor of embeddedness was con- Developments in an Emerging Field, Russell Sage
structive. It has enabled multiple operationalizations Foundation. An updated and accessible review of
and stirred sharp disputes in the field. As a result, economic sociological accounts of markets appears in
Aspers P (2011) Markets, Polity Press.
different ‘theory camps’ contributed to sociological
comprehension of the social context of economic life
using distinctive analytical lenses. Structural sociolo-
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Ilan Talmud (PhD, Columbia University) is the head of the Economic Sociology Graduate
Program in the Department of Sociology and Anthropology, University of Haifa. His main
interests are economic sociology, relational devices of uncertainty management, social networks,
and Internet studies. His most recent book is Wired Youth: The Social World of Adolescence in the
Information Age (with G Mesch; Routledge, 2010). [email: talmud@soc.haifa.ac.il]

résumé Cet article passe en revue un certain nombre de tendances contemporaines en sociologie
économique. Il montre comment la naissance de la métaphore de l’encastrement social a conduit diverses
sous-disciplines de la nouvelle sociologie économique à décrire le marché comme une fonction construite
socialement, a) structurée par des réseaux d’agents sociaux qui s’imitent, s’exploitent, sont en compétition
et coopèrent les uns avec les autres; b) provoquée et reproduite par les institutions sociales et politiques
selon c) les règles fondamentales de l’économie politique capitaliste, et d) est perçue et mise en œuvre par
des procédures cognitives et des régimes normatifs qui contiennent des archétypes, des jeux de langage
professionnel, des mythes et des processus ritualistes.
mots-clés enchâssement ◆ incertitude ◆ marches ◆ sociologie économique

resumen Este artículo examina las tendencias contemporáneas de la sociología económica. Describe
las formas en que la aparición de la metáfora de incrustación social (social embeddedness) ha llevado a
diversas sub-disciplinas de la nueva sociología económica a representar el mercado como socialmente
construido, es decir (a) estructurado por redes de actores sociales que compiten, imitan, explotan, y
cooperan, (b) activado y reproducido por instituciones sociales y políticas de acuerdo con (c) las reglas
básicas de la economía política capitalista, y (d) la percepción promulgada por los procesos cognitivos y
los regímenes normativos que implican tipos ideales, profesionales juegos de lenguaje, mitos, rituales y
procesos.
palabras clave incertidumbre ◆ incrustación ◆ mercados ◆ sociología económica

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