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

To see this, imagine three circles of potentially different sizes representing the society, the polity and the economy, respectively. If we were to arrange these circles in a configuration that would reflect Granovetter's embeddedness argument, we would have to conceive of the circle representing the society as the largest, the polity as the second largest and the economy as the smallest, located within the larger two (see Figure 1). Economic life, in this configuration, is always located within "concrete ongoing social relations"; it is always society that influences and constrains economic behavior. Note, however, that there is nothing that is logically inconsistent with imagining an entirely opposite configuration. We could, for instance, place the society within the economy. Indeed, this is precisely the configuration that Marx, when he conceived of the base, profound and pervasive effect it has on the superstructure (society within economy), had in mind.

To a lesser degree, this is also how the "new institutionalists" conceive of the relationship between society and economy. Economic motives are extrasocial. Institutions are constructed, organizations are established and relationships are developed in an endogenous manner so that economic life can be more efficient. Society is shaped by economic considerations. Consider, for instance, how the "new institutionalists" understand the evolution of property rights, as seen in North's statement that "[c]hanges in relative prices or relative scarcities of any kind lead to the creation of property rights when it becomes worthwhile to incur the cost of devising such rights" (North 1990, p. 51). (14)

Rather than privileging one or the other of these configurations, however, Weber's analysis suggests a third way of conceiving the relationship between the society, the economy and the polity. Whereas the embeddedness argument suggests that we place the economy within the society and Marx's materialist arguments suggest the opposite, Weber's insistence that we consider both economically relevant and economically conditioned phenomena suggests that we view the economy, the society and the polity as three overlapping circles (see Figure 2). The society, the polity and the economy are elevated, if you will, to the same level of prominence, and dual and treble notions of embeddedness are conceived of and utilized. As such, discussing the economy becomes nearly impossible without discussing social more; and political and legal institutions. Similarly, discussing the society be comes nearly impossible without discussing the economy and the polity and discussing the polity is nearly impossible without discussing the other two. (15) This is nowhere more evident than when Weber discusses "the spirit of capitalism," protestantism, bureaucratization, the legal system, "capitalism and rural society in Germany" and the caste system in India. (16) This is what we meant when we conjectured that Weber had a richer conception of embeddedness than is found in Granovetter and in the "new economic sociology." Why is Weber able to arrive at this richer conception of embeddedness when others are not? It is our conjecture that Weber avoids articulating a "single embeddedness" argument by embracing a sophisticated form of methodological individualism.