economic sociology

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The fundamental problem in economics is to explain how the limited productive resources and effort of a society are allocated among the wide range of alternative uses to which they might be put. Conventional economic theory seeks to address this issue by adopting a position of methodological individualism. It also makes a number of abstract assumptions for purposes of analysis. First, relationships of competition exist between the producers of a commodity, between its consumers, and between producers and consumers collectively, the whole constituting a set of market relationships. Second, both competition and economic co-operation are outcomes of the rational pursuit of economic advantage by individuals and groups. This is the paradigmatic example of a rational choice theory. Third, the propositions of the theory do not simply describe the institutions and motivations of so-called market societies alone; they formalize what is an inevitable and natural set of determining influences in any society, as soon as the issue of scarce resources (means) and competing possible uses (ends) arises.

Economic sociology can also be said to be concerned with resource allocation; and, like economics, it can trace its origins to classical political economy. However, early sociology was very often a critique of the tendencies towards individualism and abstraction within political economy, on which economics subsequently built. For example, Karl Marx was among the first to claim that resource allocation through unregulated market competition is fundamentally anarchic rather than orderly, and reproduces already existing inequalities of class power and privilege. In modern times, a similar view has been taken of market discrimination in relation to race and gender. Such arguments mean that the investigator is obliged to approach society with a degree of methodological holism which is unacceptable to many economists.

Another influential controversy is the link between economics and various versions of liberal political theory in which state regulation of economic and social policy is rejected as an infringement of individual liberty. It is claimed that welfare is more likely to be maximized by encouraging free enterprise and unrestricted market competition. This view is associated with neo-classical economics which argues that the fundamental momentum of a competitive economy is towards optimum distribution of resources and equalization of the incomes of factors of production. It is a serious mistake, however, to assume that intellectual criticism of this orthodoxy in economic theory amounts in itself either to an attack on liberal political values or (a criticism often levelled at sociological thought) inevitably implies an underlying socialistic bias. On the contrary, many of the sociological critics of competitive market theories have themselves subscribed to the broader values of liberalism and individualism, yet at the same time have argued either that neoclassical theory is intellectually inadequate or that political reliance on supposed laws of the marketplace will have unintended consequences which place liberal values in jeopardy. Examples include Max Weber on bureaucracy and Émile Durkheim on anomie. Moreover, a similar controversy has existed within modern economics itself, especially since the revolution in economic theory initiated by John Maynard Keynes and his followers. Keynesian economics claimed that the equilibrium of a whole economy may occur at a point where aggregate resources are less than optimally utilized-even though individual markets are in equilibrium.


Subjects: Sociology.

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