How does a sociological perspective on the economy differ from the study of economics?

What Is Economic Sociology?

Economic sociology is a branch of sociology that studies economic phenomena. This subfield approaches the economy as a social system that is embedded within society at large.

In many ways, this field challenges mainstream economic theory in that it rejects the assumptions that people are self-interested, rational agents acting in isolation. Instead, economic sociology views individuals as intrinsically connected to each other via interpersonal relationships, social networks, institutions, and shared culture.

Key strands of economic sociology include embeddedness, relational approaches, and the performativity of economic models. Other strands also exist.

Key Takeaways

• Economic sociology is a subfield of sociology that studies economic phenomena.
• Economic sociologists conceive of economic actors as socialized, economic institutions, conceptualizing firms and markets as social systems.
• Embeddedness, relational work, and performativity are three important strands of economic sociology.

Economic sociology today largely stems from rejecting mainstream models of neoclassical economics, understanding economic actors as social actors and economic systems as social systems.

Embeddedness

Mainstream economic interpretations of interactions among people assume rational, self-interested behavior affected minimally by social relations or social context. This is the “under-socialized” view of economic action. At the same time, sociologists tended to view human behavior as entirely scripted by social norms and institutions, or the “over-socialized” view. Economic sociology initially took a middle-ground approach known as embeddedness—the argument that economic activity is embedded in durable social structures. This recognizes that human beings can act in a calculating, self-interested manner at some times and in some situations but behave more like social actors in others.

Individuals guide their economic choices based on past interactions with people and continue to deal with those whom they trust. If there is trust, people tend to deal with one another on a more personal basis. If there is a lack of trust, people tend to go to the market and transact with anonymous others.

Relational Approaches

The embeddedness approach, however, has been criticized for creating artificial boundaries between that which is economic (the market) and that which is social (embedded). Relational approaches to economic sociology try to blur the boundaries by arguing that even what appear to be wholly market-based transactions are imbued with social forces. It suggests that economic activity among friends and family reveals and reinforces the symbolic meaning of those relationships. For instance, it may be comfortable to borrow or lend from a parent but uncomfortable to do so from your boss. In such cases, economic activity is coupled with a process of relational work to match economic exchanges with their social meaning and context.

Through relational work, money can become differentiated via earmarking, or rendering certain money non-fungible with other money due to its relational history: who the money came from, for what purpose, and who and what it is intended for. Earmarking money means that certain monies can become subjectively more or less valuable than others (e.g., money from regular income treated as less “special” than money received as a gift from a loved one).

Another finding is that people engage in relational work to obfuscate or obscure the true nature of an otherwise illicit or amoral exchange. For instance, a bribe may be recast as a gift or purchasing the services of a sex worker obfuscated with the trappings of a romantic date.

Performativity

Another strand of economic sociology suggests that economic systems are greatly influenced by the academic discipline that is economics. The theory argues that economic and financial models may actually shape social reality rather than describing objective reality in an unbiased and distant way.

For instance, if many people start following a particular pricing model for a certain asset, then the market prices for that asset may converge on what the model suggests it ought to be, making it a sort of self-fulfilling prophecy. Unlike models proposed in physics or chemistry, economic models describe social systems, and unlike bodies in motion or atoms, human beings can change their behavior based on these models.

While they may sound similar, economic sociology and socioeconomics (also known as social economics) differ somewhat. Socioeconomics is a branch of economics that deals with social justice and improving social welfare.

Classical Economic Sociology

Many of the classic sociologists were interested in studying the economy and economic behavior. Max Weber, Émile Durkheim, Karl Marx, and Georg Simmel, all thought to be among the founders of modern sociology in the 19th century, were keenly interested in topics like capitalism, industrialization, the division of labor, money, and exchange. Marx, for instance, theorized that how the production of commodities is organized (e.g., as capitalism with workers organized in firms to produce for business owners) generates a template for how society itself will function and how social groups form into classes.

For Weber, economic actions are driven by not only economic interest but also social forces like religion, values, tradition, and emotions. According to Weber, economic activity always involves relationships that can take various expressions, including conflict, competition, and attempts to impose one’s will on the other, or exhibiting power. We can think of several examples like employer–employee, borrower–creditor, and buyer–seller. A market, like many other economic phenomena, is centered around a conflict of economic interests—in this case, primarily between sellers and buyers. But exchange is not all there is to a market, according to Weber; there is also competition. Competitors must first fight it out to see who the final seller and the final buyer will be.

Durkheim argued for the social dimension of the division of labor—how it helps to integrate society and make it cohesive, by creating a multitude of interdependencies. As society evolves toward a more advanced division of labor (i.e., toward advanced capitalism), the legal system also changes. Having been predominantly repressive in nature, and having drawn on penal law, it now becomes restitutory and draws on contract law instead of physical punishment.

Durkheim also argued that people need a set of rules and norms to guide their economic actions, and they react very negatively to anomic or anarchic situations. He also criticized the idea of the rational economic actor on the grounds that it is impossible to separate the economic element from social life and ignore the role of society. As opposed to the economic individual, he writes, “[the] real [person]—the [person] whom we all know and whom we all are...is of a time, of a country...has a family, a city, a [country], a religious and political faith; and all these factors and many others merge and combine in a thousand ways, converge in and interweave their influence without it being possible to say at first glance where one begins and the other ends.”

Who are some prominent economic sociologists?

Some important economic sociologists around today include Mark Granovetter, Viviana Zelizer, Paul DiMaggio, Richard Swedberg, Jens Beckert, and Donald MacKenzie, among several others.

Which academic journals publish economic sociology?

While important economic sociology papers are found in general social science journals, at least three subfield journals exist that publish this type of theory and research explicitly: Socio-Economic Review; Economy and Society; and Finance and Society.

What topics are covered in economic sociology?

Economic sociology can cover both micro and macro topics, including individual economic behavior, consumption, informal exchange, borrowing and lending, firms, organizational behavior, markets, money, central banking, financialization, capitalism, global value chains, labor and labor markets, fintech, cryptocurrencies, and more.

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