Conceptualizing Professionalism: Why Economics Needs Sociology

American Journal of Economics and Sociology, The, Oct, 1999 by Jennifer Roberts, Michael Dietrich

MICHAEL DIETRICH [*}

ABSTRACT. The main argument presented here is that economics provides a necessary but not sufficient analysis of professionalism. A sufficient analysis can only be generated by recognizing the sociological significance of professionals, and in particular the institutionalization of a professional ethic. In this way we suggest that economics needs sociology to provide an effective conceptualization of professionalism as a form of organization and as a mode of behavior. Equally, however, sociology needs economics, because while the sociological context provides an explanation of the way power is institutionalized, an economic focus is necessary to maintain a role for individual agency. These arguments are illustrated with a discussion of the historical and institutional complexities of professional organization; we look particularly at nursing and certain routinized areas of legal work and accountancy.

I

Introduction

THE BASIC ARGUMENT presented in this paper is that economics can provide only an incomplete account of professionalism. Economics is therefore a necessary but not sufficient analysis. In the economics literature the characteristics of professional organization, involving institutionalized control of entry and policing of behavior, are traditionally viewed as a departure from free market functioning for either efficiency or rent seeking/market power reasons (Posner 1974; Stigler 1971; Friedman 1962; Arrow 1963). But equally these characteristics apply to other organizational forms, such as trade unions, the household and cartels. A sufficient analysis requires identification of the unique characteristics of professionalism. This sufficiency can only be generated by recognizing the sociological significance of professionals, and in particular the institutionalization of a professional ethic. Economics needs sociology to provide an effective conceptualization of professionalism as a form of organization and as a mode of behavior. Equally, however, sociology needs economics, because while the sociological context provides an explanation of the way power is institutionalized, an economic focus is also necessary to maintain a role for individual agency, This conceptualization follows Granovetter (1985) in avoiding both under- and over-socialized analyses.

The link between structure and agency is constructed on the basis of a professional ethic that institutionalizes power. A professional ethic channels behavior by requiring social recognition to be effective. In addition, individual agency reinforces power relationships. Two implications follow from this: firstly, some "economic professions" may not be socially recognized as such, and some socially recognized professions may have no economic rationale. Secondly, an emphasis on structure and agency provides each profession with a unique historical dynamic. Therefore a process-based approach is suggested, conceptualized in terms of a professional life cycle based on structure-agency interaction. In developing this approach we depart from the usual static, ahistorical analysis that characterizes the existing economic literature on the professions.

The characteristic efficiency-based economic justification for professional organization can be formulated in terms of a market failure arising from principal-agent problems in which the principal (in our case the consumer of services) has problems motivating the agent (the supplier of services) because of an information asymmetry to the latter's advantage. We pre-empt later discussion here by stating that information asymmetries on their own are not a sufficient justification for professionalism (Matthews 1991). As we will explain shortly, the economic literature suggests that appropriately structured individual and autonomous contracting can be used to overcome information disadvantages. Hence other factors must exist in combination with information asymmetry to justify professionalism even from a narrowly economic perspective.

We will demonstrate that, as far as economic explanations are concerned, professionalism is required to deal with decision-making complexity where the policing of agreements by individually based legal sanction is not feasible. Establishing an economic basis in this way may be considered a minor success. But an economic rationale for professionalism is not the same as a complete analysis and here the economic approach falls short. In establishing the economic rationale, we discover an inevitable trade-off between the efficiency gains that professional organization can bring, and the monopoly power that this necessarily entails. More effective professional organization embeds the power of professionals which, if challenged, leads to deteriorating efficiency advantages. This implies that efficiency and power are not alternative explanations, but rather are required parts of a more general framework. An emphasis on agency over structure in the economic approach results in a failure to cope with the concept of p ower which is central to discussions of professions and professionalism. A combined efficiency and power perspective can only be developed by understanding the sociological bases of power.