Post-classical political economy: Polity, society and economy in Weber, Mises and Hayek - Austrian School Perspectives - Max Weber, Ludwig Von Mises, Friedrich A. von Hayek

American Journal of Economics and Sociology, The, Jan, 2002 by Peter J. Boettke, Virgil Henry Storr

Although he stresses that action is embedded in social relations (and, by implication, that economic activity takes place within society), Granovetter does recognize, albeit superficially, that the arrow of influence also runs in the opposite direction, that is, from the individual to the social context and from the economy to the society. "That business relations spill over into sociability and vice versa, especially among business elites," he argues, "is one of the best-documented facts in the sociological study of business" (ibid., p. 495). And, in a more recent presentation of his theory of embeddedness, he states that "economic institutions do not emerge automatically in response to economic needs. Rather, they are constructed by individuals whose action is both facilitated and constrained by the structure and resources available in social networks in which they are embedded" (1992, p. 7; emphasis added).

It is our contention, however, that these statements by Granovetter do not go far enough in recognizing the multiple levels of embeddedness. Noting that "business relations spill over into sociability," for instance, is a weak acknowledgment of that fact that some social relations are economically conditioned. And, although Granovetter's work emphasizes that economic institutions are "constructed by individuals," he insists on placing that construction in an ever-expanding, all- encompassing web of social networks. How these social networks come to be established and what meaning individuals attach to them are questions that are not considered. This silence results not because economic sociology is incapable of dealing with these issues, but instead because the "new sociology of economic life" is inadequately rooted in Weberian traditions. (10)

III

Weber's Sozialokonomik: Toward a Richer Conception of Embeddedness

WEBER HAS DESCRIBED "social economics" as the study of (a) economic phenomena, (b) economically relevant phenomena and (c) economically conditioned phenomena. (11) "The first of these categories covers economic phenomena in a strict sense, such as economic events and economic institutions; and Weber has little to say about this category except that it includes phenomena 'the economic aspects of which constitute their primary cultural significance for us'" (Swedberg 1998, p. 19). Economically relevant phenomena describes events and institutions that are not economic in the strict sense but that do have economic consequences. Protestantism, to the extent that it impacts the work ethnic of its adherents, would be an economically relevant phenomena according to this schema. (12) As would, to the extent that they shape economic motives, many of the sociological categorizations employed by the social sciences, such as family, community and society. Granovetter's work on embeddedness similarly falls into this catego ry of Weber's Sozialokonomik.

The third of Weber's categories, economically conditioned phenomena, is what distinguishes his notion of embeddedness from what we have hitherto referred to as "single embeddedness" (the conception of embeddedness articulated by Granovetter and the "new economic sociologists"). By economically conditioned phenomena, Weber means to describe "behavior in non-'economic' affairs [that] is partly influenced by economic phenomena"' (3) "Objectivity," cited in Swedberg 1998, p. 193). The public choice arguments articulated by the Virginia school of political economy (e.g., the work of Buchanan and Tullock) would fall into this category, in which politicians and public servants motivated by a desire for power and votes engage in pork-barrel spending, log-rolling and rent-seeking activities. And, although Weber would reject the tenor of Marx's historical materialism, particularly since it leaves no room for anything but economically conditioned phenomena, Marxist arguments, albeit less sweeping, would also fall into W eber's schema. Additionally, when the "new institutionalists" describe the development of institutions such as property rights, contracts, contract law and even norms and values as being a response to economic incentives, they are characterizing them as what Weber has called economically conditioned phenomena. Recognizing that these sorts of phenomena exist alongside the economically relevant phenomena considered in the embeddedness arguments is merely a first step, however, in moving us beyond the concept of "single embeddedness" that we have criticized above.