The economy is social

“Our economic decisions are shaped not just by financial interests but by relationships, history, and emotional bonds,” writes Virginia Postrel in a 24 July 2005 article called “Market Share” for the Boston Globe.

Ms Postrel introduces us to the topic of ‘economic sociology’ – a new science which seems to be taking over the minds of not just economists or sociologists the world over, but that of business executives as well. The descriptor “new”, of course, refers to the developments in this field in the last 15 years or so, although economic sociology has been in practice as long as economics or sociology has been.

The good news is, economic sociology seems to be mitigating much of the rancour that has clouded the differences between economics and sociology for many years. Rather than concentrating on the “rational-choice models” of economics, and doing away with the “unrigorous hodgepodge” of sociology, economic sociology focuses on the market as “a complex human endeavour”. Naturally, business houses have taken a keen interest in this, as the possibilities of economic sociology can be endless.

Applications abound in economic sociology – such as, in finding jobs through social networks, or formulating appropriate remuneration for job applicants. “In predicting wages, for instance, economists might include not only individual characteristics like education or experience but social relations. A well-connected person might expect higher pay than someone with similar skills but a narrower range of contacts.”

This is indeed a new point of view. And obviously, ‘social networks’ play an important part in the development of this new science. Economic sociologists are at work, trying to understand human behaviour from various aspects… like history and culture. They believe, as I do, “neither economics nor sociology alone can explain how real human beings manage their economic and social lives.”