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Random Thought of the Day: Econ Soc Vs. Behavioral Econ

Sunday, September 13, 2009 at 02:16 PM EDT

Why has behavioral economics been so much more influential in mainstream economics and popular debate than economic sociology? Perhaps this question is too easy, and admits too many good answers, but I wonder if there is something to be learned by asking it. Both subfields/perspectives have come to the fore in the last 30 years (with 1981-1985 being the genesis of the new economic sociology, roughly, and behavioral econ starting perhaps in the late 70s with Kahneman and Tversky). Both position themselves as strong critiques of prevailing economic orthodoxy, and both are grounded in critiques of the neoclassical homo economicus. But reading stories about the failures of recent economic theory to predict or help in the current crisis, and the likely directions forward, it’s clear that behavioral econ will be a big star (for example, Akerlof and Shiller’s new book uses behavioral explanations for the financial crisis). Economic sociology, on the other hand, has not really showed up, in spite of the many works written by economic sociologists of potential relevance, or that look at the crisis head on. We’re just off the radar – too small, or too wacky, or too impenetrable. I’m not sure.

I’m not writing this post to complain about Sociology’s policy irrelevance, but rather to question what makes the two critiques differently influential. One obvious place to look, sayeth my sociological training, is the institutions and actors and resources pushing for each. But I have a nagging feeling that there is something deeper at play here, something to do with the accessibility of arguments about individual rationality vs. those about the social constructions (in various ways) of economic actors. Economists have long had the nagging feeling, sometimes stated sometimes not, that their models of human action are too stripped down and too perfect. Behavioral econ offers a way forward that adds some seeming realism to those models by adding in the most obvious calculative errors, but does not fundamentally criticize an individuals-first world-view. The semi-rational man replaces the rational one, bubbles form and burst, recessions and depressions are explained, and the underlying ontology of the world persists.

Economic sociology, I would argue, claims that the individual is not the building block of society, but rather that individual actors are incomprehensible outside of their networks, and that the individual and society co-constitute each other. That is, like the broader discipline, sociologists argue that individuals are not prior to the social. How exactly we do this varies. Granovetter strongly opposed norm-driven models that replaced the undersocialized economic actor with an oversocialized Parsonian one, whose actions were determined by society’s needs. More recent work, influenced by the Actor-Network tradition in science studies, examines the construction of economic actors through overlapping webs of organizations and technologies, eschewing discussions of “society” entirely for a focus on the local (although a local that can be quite large). Either way, the economic actors of economic sociology are not simply rational agents with trembling hands, but rather a different sort of thing, constructed actors with histories and contexts. That historicity (which is not the opposite of reality! cf. Murphy 2000) challenges dominant liberal notions across American society (at least).

Perhaps this difference can help explain (in addition to all those classic arguments about dollars and prestige and whatnot, although prestige itself is endogenous here) why so many of the same substantive conclusions are reached by behavioral economists and economic sociologists and yet the former have become prominent while the latter remain a bit more underground.