PDF

Economic Sociology

Université Paris-Sorbonne, France

Abstract

Economic sociology is the study of economic activity in relation to various dimensions of social life, such as family, gender, morals, law and politics. This approach rejects the idea that political economy is a separate science. From the beginning to the present, the history of economic sociology is deeply intertwined with the history of political economy; however, it is convenient to start with the end of the eighteenth century and then to focus on the last decades of the nineteenth century when economic sociology was explicitly made a part of economic theory in Stanley Jevons’ proposal to redesign the structure of political economy. Economic sociology blossomed from the 1890s to the 1920s, with major economists and sociologists such as Emile Durkheim, Vilfredo Pareto and Max Weber buttressing the intellectual development of an economic sociology.

From 1760 to the 1870s

The physiocratic school claimed that the ‘New science of political economy’ belonged to the moral and political sciences – ‘Les sciences morales et politiques’ was the subtitle of their journal Les Ephémérides du citoyen at the end of the 1760s. The Theory of Moral Sentiments and The Wealth of Nations demonstrates that Adam Smith also had a broad view of economic activity. On the Continent, Jean-Baptiste Say explained in the introduction of his massive Cours complet d’économie politique pratique that political economy would be better labelled ‘social economy’ (économie sociale) since its subject is the life of society, not politics. Later on, Jean-Charles-Léonard Simonde de Sismondi followed the same path with his collection of studies of the social sciences (Études sur les sciences sociales, 1836), two volumes being devoted to political economy. French political economists still hold that broad view and joined other social scientists in the Académie des sciences morales et politiques from 1832 to the end of the period under review. In Karl Marx’s Capital, capital is not a set of material goods and services necessary for the production of commodities but a social relation necessary to the accumulation of wealth.

However, none of them claimed to be economic sociologists since sociology was not yet in existence. Sociology dates from Auguste Comte’s lectures on positive philosophy at the end of the 1830s. Understood as the study of complex social facts, sociology was the last layer in his classification of the sciences, crowning the existing domains of knowledge (mathematics, astronomy, physics, chemistry and biology) when, and only when, each domain had reached the status of positive science. This is the reason why Comte had a negative opinion of eighteenth-century political economy, a premature endeavour to create a social science capable of dealing with the issues raised by an industrial society.

Given Comte’s views on the role of the government and his strong argument that egoism had to be contained by altruism, which was the principal challenge that industrial society confronted (Comte 1851–3, II: ch. 2), he initially placed sociology in opposition to political economy as a more comprehensive and balanced view of the functioning of societies, permitting adequate moral ideas (altruism) to be fostered. This had immediate consequences: Marx, French socialist thinkers and French liberal economists all agreed on rejecting Comte’s sociology.

Certain English thinkers were more receptive. John Stuart Mill was favourably impressed by Comte’s broad views on science and society, even if his defence of an abstract science of wealth based on the behaviour of a homo œconomicus limited his enthusiasm, since Comte was definitively opposed to the grounding of any social science on this restricted utilitarian behaviour. Nevertheless, in his Principles of Political Economy (1848) the sociological approach is associated with political economy, even if sociology proper is never mentioned. First, in the opening pages of Book II dedicated to distribution issues, Mill explained that

the distribution of wealth is a matter of institutions solely’ and thus gave a leading role to ‘the opinions and feelings of mankind […] consequences of the fundamental laws of human nature, combined with the existing state of knowledge and experience, and the existing condition of social institution and intellectual and moral culture.

Second, he endorsed the Comtean distinction between the static and the dynamic in Book IV (‘Influence of the progress of society on production and distribution)’, pointing out the role of collective action as the major source of progress.

Herbert Spencer and Stanley Jevons

Herbert Spencer was instrumental in legitimizing the sociological approach in nineteenth-century social science. He explicitly admitted his debt to Comte in the very essay in which he explained his disagreement with several general principles related to the classification of the sciences. Among the points of agreement were the distinction between statics and dynamics, the concept of social consensus (i.e. interdependency between the various institutions at work in society), and the necessity of a class of scientists devoted to building a synthetic view grounded in the achievements of the specialists. Finally, he adopted the word ‘sociology’ and wrote a series of volumes (Descriptive Sociology, 1873; the multi-volume Principles of Sociology that appeared from 1876 to 1896) that were widely circulated among the educated classes all over the world in the last decades of the nineteenth century. However, Spencer firmly rejected the idea that the government might have a larger and positive role in the future, claiming that in the future a minimal state would afford the greatest freedom to citizens contracting with each other. This view of sociology made it much more palatable to economists.

Finally, sociology was explicitly made a part of political economy by William Stanley Jevons (Gislain and Steiner 1995). In 1876, celebrating the publication of Smith’s Wealth of Nations, he proposed dividing the domain of political economy into several branches so that economists could specialize and better keep in touch with developments in that part of the science with which they were concerned. One aspect of this was directly connected to Spencer’s views on sociology, understood as a dynamic approach to societies, political economy being found wanting in this domain: ‘We must take into account the long past out of which we are constantly emerging. Whether we call it sociology or not, we must have some scientific treatment of the principles of evolution as manifested in every branch of social existence’ (Jevons 1876: 195). This bold move was aimed at solving the crisis in the political economy of his time. Three years later, in the preface to the second edition of his Theory of Political Economy, he proposed a division of political economy into five branches: commercial statistics, the mathematical theory of economics, systematic and descriptive economics, economic sociology and fiscal science (Jevons 1879: xvii). He was therefore the first political economist to suggest that economic sociology should play a part in the development of economics. Given the enduring intellectual crisis within political economy, three great social scientists of the next period pushed the idea further.

The ‘Great Decades’: 1890–1920

By the end of the nineteenth century political economy was in a critical situation. First, a debate on method was started by the German historical school, whose centre was in Germany but which, since German universities attracted many scholars from Europe and the United States, had international influence. Furthermore, a historical orientation was then common among economists – Alfred Marshall’s work is a good illustration of this influence (Marshall 1890). Second, the development of an economics based upon more abstract reasoning and mathematical methods was at this time in its early stages. Some leading scholars, such as Vilfredo Pareto, relentlessly repeated that pure political economy had very limited power of explanation and should be complemented by other approaches. Finally, the period was marked by a series of attempts to institutionalize political economy within universities and to create specialized journals in which economists could publish the results of their research.

It is in this context that economic sociology appeared to be a possible solution. Three different strategies were then proposed: Emile Durkheim (1858–1917), a French philosopher by training and a leading French sociologist, suggested a strategy in which political economy would be superseded by economic sociology. Pareto (1848–1923), trained as an engineer and applied mathematician and Léon Walras’s successor at Lausanne University, proposed a strategy of progressive complexification, going from pure political economy to applied political economy and then to economic sociology. Finally, Max Weber (1864–1921), an economist from Schmoller’s Verein who became a sociologist in the very last part of his life, was in favour of a strategy that would connect the abstract theory at the core of the Austrian economic theory to the empirical data produced by historical research. Each strategy was grounded in a complex set of methodological and theoretical statements on the one hand and empirical research on the other.

Durkheim: economic sociology against political economy

Durkheim initially directed his research at issues related to economic life with a doctoral dissertation on the division of labour (On the Division of Social Labour, 1893). He then devoted much of his attention to corporations and their regulatory functions in order to find a solution to the unsatisfactory situation of industrial society, exemplified by the rising rate of suicide all over Europe. He also lectured on socialism, a topic of great interest to economists of the time, and on the role of government in industrial society. At the end of the nineteenth century he left economic issues to focus on the sociology of religion, pointing out that economic events should also be connected to their religious underpinnings – but he did not himself explore this hypothesis (Steiner 2011: chs 2 and 5). As a philosopher he was well versed in the methodological problems that plagued political economy at the end of the nineteenth century, as illustrated by the German debate on method. Concepts and abstraction are necessary tools in social sciences, explained Durkheim; nevertheless, he was not satisfied with the concepts used by economists: these concepts were not inductively grounded and therefore they were nothing but normative statements. They expressed what a rational actor should do in order to be rational, not what these actors actually do in their economic life. A second fundamental critique appeared in one core chapter of his dissertation, where he criticized Spencer’s view of industrial society, in which social life would be primarily founded upon free contractual relationships. This was impossible, argued Durkheim, since the increasing number of contractual relations would exceed the capacity of individuals to bargain and monitor contracts; instead, individuals had to rely upon ready-made contracts in which duty would to a great extent impinge upon contractual freedom. This means that there are non-contractual elements in a contract, and these elements do not come from nowhere: they are social facts or institutions that impose themselves on individuals. The institutional embeddedness of economic exchanges became a key point for understanding economic activity.

Due to his emphasis on the religious dimension of social life, Durkheim did not develop these methodological critiques in his own work; the task was taken up by two of his disciples, François Simiand (1873–1935) and Maurice Halbwachs (1877–1945), who were at the head of the ‘Economic Sociology’ section of the Durkheimian journal, L’Année sociologique (1897–1913). Simiand had a polemical turn of mind that led him to criticize both the German historical school, for its lack of clear theoretical basis, and the neo-classical school, mathematical economics included, which was found wanting in its approach to empirical data (Simiand 1912). Rejecting ‘theories without facts and facts without theories’, arguing for a political economy founded upon statistics and history on the one hand and sociological theory on the other, he endeavoured to fill the gap with a theory of economic action (effort versus routine and increasing income versus status quo) in his doctoral dissertation on wages in the mining industry – which, later on, he made the basis of his work on business cycles (Simiand 1932).

Pareto: economic sociology as the final layer of political economy

Alongside a sequence of innovative work devoted to pure political economy and to mathematical economics, Pareto claimed that political economy considered as a separate science was an epistemological and practical dead end. These two dimensions of Pareto’s thinking were clearly present in the introduction to his Manuale d’economia politica (1906, translated into French in 1909 with a substantial appendix on mathematical economics), where he explained that pure political economy was a powerful but limited tool of enquiry in the sense that its subject matter was strictly limited to the behaviour of logical (i.e. rational) actors considering nothing but the economic aspect of the social world. According to his complex theory of rationality, actions are ‘logical’ in the sense that a) the actor has a subjective goal, b) a scientifically qualified observer can attach an objective goal to this action, and c) these two goals coincide. Economic actions, he said, are as logical – with an important exception considered below – as military ones. However, there is a large set of non-logical actions that do not meet one of the three criteria. Pure economics was about logical action performed in the economic domain, whereas applied political economy was based upon a broader view of an economic man who, while considering only the economic side of the social world, was subject to passion – something Pareto had witnessed with Italian monetary and banking policy at the end of the nineteenth century – that may encroach upon the rationality of economic behaviour. To this, Pareto added a sociology that had to deal with a large number of non-logical actions. Pareto’s emphasis on the circulation of various elites (governing and non governing elites) lent a major role to political sociology. Nevertheless, the economic dimension of this sociology is very important, as one can see in the two last chapters of Pareto’s Traité de sociologie générale (1917). One example will make clear the significance of economic sociology for Pareto. Throughout his life Pareto fought against protectionism. His position was clearly founded upon pure political economy; the general equilibrium approach to international trade theory demonstrates that protectionism would preclude achieving the optimal allocation of productive resources and thus the largest output possible. Thus, applied political economy was necessary to explain the existence of protectionism and the ‘demand for protectionism’ in terms of the economic passions of both entrepreneurs and politicians. Pareto conceptualized this issue in terms of what is now called ‘the free rider’ mechanism: to fight against protectionism could be more expensive than passive acceptance of this form of spoliation unless all citizens paid the cost of a campaign against protectionism. An alternative solution could be found in the moral or political commitment of citizens willing to act against protection, even if it is not economically rational. In the economic sociology part of his work Pareto added a final component to his analysis of protectionism. He explained that, paradoxically, protectionism could provide a larger output than free trade. Does it mean that pure political economy is wrong? No, answered Pareto. This means that protectionism has both direct and indirect economic consequences: the former are those negative consequences demonstrated by political economy; the latter are the possible positive economic consequences of the social changes following the implementation of protectionism. Such policy changes the governing elites in such a way that more innovative and economically effective elites would gain power; in the long run, this socio-political change offered more possibilities to entrepreneurs and, ultimately, greater economic output. Economic sociology is therefore the most complicated part of Pareto’s view of social sciences since it involves economic and social interdependencies in providing a better explanation of economic events.

Weber: economic sociology as a bridge between theory and history

Weber was trained as an economist and a jurist and was not formally appointed as a sociologist before 1919, when he accepted a chair in Munich, a year before his death. Nonetheless, his contribution to economic sociology was of the first order in designing a strategy combining economic history and economic theory. Weber always considered that the Austrian version of neo-classical economics with which he was familiar was crucial to the understanding of empirical data – those who were not happy with it, he wrote, have to provide a better theory! – and to causal imputation. But connecting theory and historical events is not an easy task and Weber suggested that economic sociology could provide an intermediary conceptualization to make such a connection possible. For example, Weber accepted Eugen von Böhm-Bawerk’s views on the existence of a positive interest rate between present and future goods, based upon the rationale of a preference for the present. Going beyond this theoretical view, Weber wanted to know when and how such rational behaviour can really be implemented. Accordingly, Part I of Economy and Society offers the most comprehensive conceptual framework in the domain of economic sociology, putting together an expanded theory of rationality where instrumental rationality goes hand in hand with value-oriented rationality and a conceptualization of the various social arenas (markets, organizations, political parties, etc.) in which these rational behaviours are performed.

Beyond this conceptual apparatus, Weber studied empirically some of these social arenas, such as the financial markets. His famous essay The Protestant Ethic and the Spirit of Capitalism is a case in point: he explained the birth of the rational economic ethos (i.e. economic behaviour based upon deeply internalized values) through a careful analysis of the religious reformation of the seventeenth century, before Puritanism came ‘to its dissolution into pure utilitarianism’ (Weber 1920: 122). In this essay, Weber explained how religious change in the sixteenth century (primitive Puritanism) created an economic ethos fitted to the development of modern capitalism. The religious dimension of this explanation came from the idea that many Protestant sects considered that Christians must continuously look for confirmation of their religious status in the daily business of their life. Accordingly, owing to their value-rational behaviour, the Protestant ethos legitimized behaviour that fostered the accumulation of wealth and, finally, the instrumental rationalization of the entire life of believers to the point where Weber considered that ‘the Quaker is a kind of “walking law of marginal utility”’ (Weber 1920: 116). This essay is thus a remarkable demonstration of the interconnection between the various spheres of social life and of the role of (religious) institutions in the development of crucial elements of economic activity and theory, namely utility maximizing behaviour.

The 1920s

Durkheim, Pareto and Weber died in the early years of the twentieth century. Who was to continue their work in economic sociology?

In the case of Durkheim, the heirs came from the group of scholars created around his journal L’Année sociologique. Simiand devoted his scientific work to economic sociology in the interwar period. He was very active in the domain of the so-called French positive economics or economic sociology of wages, money and business cycles. He wrote as well an innovative piece on money according to which any money (fiat money or gold) is nothing but a ‘social reality’ in the sense that it performs its economic task on the basis of economic agents’ trust and faith in the continuity of social life and institutions. Accordingly, there is a social component at the basis of the key institution of a market economy. Mauss should also be acknowledged here for his path-breaking contribution on the gift (Mauss 1925) in which gift-giving is conceptualized in terms of three obligations: to give, to receive, and to give back. As well as his analysis of archaic exchanges of gifts, Mauss explained that these alternative approaches to exchange was giving birth to those institutions that we now call the welfare state.

In the case of Pareto and Weber, the situation was quite different, since they did not create a ‘school’ as Durkheim had done. Pareto had no direct followers; his approach may be pragmatically considered a dead end, even if Talcott Parsons (1935) made him one of the four pillars of his general theory of action (Weber, Durkheim and Alfred Marshall being his three other references), aiming at a general approach to economy and society. Weber fared much better since a contemporary ‘new’ economic sociology is significantly influenced by Weber’s method and approach. Joseph Schumpeter’s definition of the subject in his History of Economic Analysis makes this clear. After distinguishing economic history, statistics and theory as techniques of political economy, he added a fourth element:

It is easy to see that when we introduce the institution of private property or of free contracting or else a greater or a smaller amount of government regulation, we are introducing social facts that are not simply economic history but are a sort of generalized or typified or stylized economic history […] Borrowing from the German practice, we shall find it useful, therefore, to introduce a fourth fundamental field to complement the three others, although positive work in this field also leads us beyond mere economic analysis: the field that we shall call Economic Sociology [Wirtschaftssoziologie].

(Schumpeter 1954: 20–1)

Furthermore, Schumpeter studied connections between economic and social events, whether in the domain of monetary theory, fiscal policy or the entrepreneur.

The entrepreneur deserves a specific comment, for while it is central to the evolution of a market economy, his behaviour does not enter easily into the economic man’s form of rationality. Schumpeter thought that the entrepreneur was led by a ‘super rationality’ and the desire to create an economic empire; Pareto for his part had suggested that the entrepreneur acted in a non-logical way, since his action, guided by the desire to make a profit, brings the economy to an equilibrium in which profits are nil; Marshall (1907) emphasized the ‘chivalric’ dimension of the entrepreneur and suggested that they should be honoured with rewards for their contribution to the progress of societies. In brief, the entrepreneur is a central character of economic theory, and also a central one for economic sociologists when they claim that non-economic motives and ultimate values must be taken into account for explaining the behaviour of key economic actors.

The emphasis put on institutions by Durkheim and the Durkheimians on the one hand and by Schumpeter on the other makes a connection with American political economy at this point. The old institutionalist school, elaborated first by Thorstein Veblen, then by John Commons and Wesley Mitchell, has striking similarities to economic sociology (Gislain and Steiner 1999). Mitchell translated and summarized various passages from Simiand’s book on the critique of the method of ‘orthodox’ political economy, and pointed out many similarities between the Durkheimian approach and Veblen’s views. Later on, Commons toyed with the idea of labelling his main book ‘Economic Sociology’ instead of Institutional Economics (Commons 1934, introduction).

Conclusion

During the ‘years of high theory’ in the 1930s, economic sociology lost its grip on the profession. The disciplinarization of the social sciences compounded this situation and for some decades created a major divide between economists and sociologists. This was acknowledged in the opening pages of Talcott Parsons and Neil Smelser’s essay:

The work of Marshall and Weber, considered together, constituted a level of rapprochement between economics and sociology which has not been matched since. From a somewhat different point of view, Pareto also made a notable attempt at synthesis which has greatly influenced our thinking […] But the initiative of these men failed to gain momentum. Indeed, we feel that there has been, if anything, a retrogression rather than an advance in the intervening half century.

(Parsons and Smelser 1956: xvii)

References

  • Comte, Auguste (1851–3 [1895]), Système de politique positive, Paris.

  • Durkheim, Emile (1893), De la division du travail social, Paris: Alcan.

  • Gislain, Jean-Jacques and Philippe Steiner (1995), La sociologie économique (1890–1920): Durkheim, Pareto, Schumpeter, Simiand, Veblen et Weber, Paris: Presses universitaires de France.

  • Gislain, Jean-Jacques and Philippe Steiner (1999), ‘American Institutionnalism and Durkheimian Positive Economics: Some Connections’, History of Political Economy, 31 (2), 273-296.

  • Jevons, William S. (1876), ‘The Future of Political Economy’, in H. Higgs (ed.) The Principles of Economics: A Fragment of a Treatise on the Industrial Mechanism of Society, New York: Kelley.

  • Jevons, William S. (1879 [1965]), The Theory of Political Economy, 2nd edition, New York: Kelley.

  • Marshall, Alfred (1890 [1961]), Principles of Economics, variorum edition, London: Macmillan.

  • Marshall, Alfred (1907) ‘The Social Possibilities of Economic Chivalry’, in A. C. Pigou (ed.) (1925) Memorials of Alfred Marshall, London: Macmillan, pp. 323–346

  • Mauss, Marcel (1925 [1954]), The Gift: Forms and Functions of Exchanges in Archaic Societies, New York: The Free Press.

  • Mill, John Stuart (1848 [1900]), Principles of Political Economy, with Some of Its Application to Social Philosophy, New York: The Colonial Press.

  • Pareto, Vilfredo (1909 [1981]), Manuel d’économie politique, in Œuvres complètes de Pareto, vol. 7, Geneva: Droz.

  • Pareto, Vilfredo (1917 [1968]), Traité de sociologie générale, in Œuvres complètes de Pareto, vol. 12, Geneva: Droz.

  • Parsons, Talcott and Neil J. Smelser (1956), Economy and Society: A Study in the Integration of Economic and Social Theory, London: Routledge & Keegan.

  • Schumpeter, Joseph (1952), History of Economic Analysis, London: Allen & Unwin.

  • Simiand, François (1912), La méthode positive en sciences économiques, in F. Simiand (2006) Critique de l’économie politique, Paris: Presses universitaires de France, pp. 31–144.

  • Simiand, François (1932), Le salaire, l’évolution sociale et la monnaie, Paris: Alcan.

  • Simiand, François (1934), ‘La monnaie, réalité sociale’, Annales sociologiques, Série D, 1, pp. 1–81.

  • Shionoya, Yuichi (1995), Joseph Schumpeter and the Idea of Social Science: A Metatheoretical Study, Cambridge: Cambridge University Press.

  • Steiner, Philippe (2011), Durkheim and the Birth of Economic Sociology, Princeton: Princeton University Press.

  • Swedberg, Richard (1998), Max Weber and the Idea of Economic Sociology, Princeton: Princeton University Press.

  • Weber, Max (1920 [2002]), The Protestant Ethic and the ‘Spirit’ of Capitalism, London: Penguin Books.

  • Weber, Max (1922 [1980]), Economy and Society: An Outline of interpretative Sociology, Berkeley: University of California Press.

  • Wieser, Friedrich von (1914 [1967]), Social Economics, New York: Kelley.