discussion of the paper "economic action and social structure: the problem of...

Motivation Argument Conclusions References

Discussion

Economic Action and Social StructureThe Problem of Embeddedness

by Mark Granovetter

American Journal of Sociology, v.91, n.3, Nov.1985, p.481-510

Matheus Albergaria de Magalhães

Economia das Organizações IIFundamentos Econômicos da Estratégia (20151)

Universidade de São Paulo (USP)May 27th, 2015


Economic Action and Social Structure (Granovetter, 1985)


SECTIONS

Motivation

Argument

Conclusions

References




MOTIVATION

Once upon a time, there was a node..




MOTIVATION

..but this node had a name..




MOTIVATION

..and this name was not just anybody..




MOTIVATION

She had a friend!!




MOTIVATION

And another friend..




MOTIVATION

..and friends..




MOTIVATION..and friends..




MOTIVATION

..and friends!!




MOTIVATION

There was another node with a name..




MOTIVATION

But he was more like everybody (an "average" type of guy)..




MOTIVATION

..although he also had a few friends..




MOTIVATION

..and his friends had friends..




MOTIVATION

..and their friends had friends..




MOTIVATION

..and more friends!




MOTIVATIONWhen everybody was together, the world seemed extremelysmall to them..




MOTIVATIONWTH, even Kevin Bacon has a lot of friends!!

Source: Google Images.




MOTIVATION

Figure 1Examples of Networks

Source: Christakis and Fowler (2009).




MOTIVATION

Figure 2Examples of Networks

Source: Christakis and Fowler (2009).




MOTIVATION

Figure 3Examples of Networks: High School Friendships

Source: Jackson (2008).




MOTIVATION

Figure 4Examples of Networks: 15th Century Florentine Marriages

Source: Jackson (2008).




MOTIVATION

What is the Main Question?

Granovetter (1985) tries to answer a long-standing questionin social theory:

How behavior and institutions are affected by social relations?




MOTIVATION

Why are these questions important?

Embeddedness: economic actions and social relationships aredeeply intertwined (Karl Polanyi).

"...the behavior and institutions to be analyzed are so constrained byongoing social relations that to construe them as independent is a grievousmisunderstanding” (Granovetter, 1985, p.482).




ARGUMENT

How does the author plan to go about providing an answer?

Roadmap:

1. Criticizes over- and under conceptions of human action inSociology and Economics.

2. Relates concepts such as embeddedness, trust andmalfeasance.

3. Revisits and criticizes some of Oliver Williamson’scontributions ("Markets and Hierarquies").

4. Ends with discussions and new proposals.




ARGUMENT

Two main views:

1. Oversocialized: economic behavior was heavily embeddedin social relations in premarket societies.

2. Undersocialized: embeddedness was not substantiallygreater than the low level found in modern markets.

Author’s own view: embeddedness of economic behavior islower in nonmarket societies than previously claimed; but thislevel has been and continues to be more substantial than isallowed by economists.




ARGUMENT

The views:

1. Oversocialized: people seen as overwhelmingly sensitiveto the opinions of others and obedient to the dictates ofconsensually developed systems of norms and values(Modern Sociology).

2. Undersocialized: atomized conception of human action;disallowing any impact of social structure and social relationson production, distribution and consumption (Economics).




ARGUMENTAn Irony..

I Under- and Oversocialized views have in common aconception of action and decision carried out by atomizedactors.

I Undersocialized: atomization results from narrowutilitarian pursuit of self-interest.

I Oversocialized: atomization is the result of behavioralpatterns being internalized; ongoing social relations haveonly peripheral effects on behavior.

I Fruitful analysis of human action requires avoidance ofatomization: actors’ purposive actions are embedded inconcrete, ongoing systems of social relations.




ARGUMENTGranovetter (1985) criticizes Williamson’s problem of "Marketsand Hierarquies" (Williamson, 1975).

Problem: under which circunstances economic functions areperformed within the boundaries of hierarchical firms ratherthan by market processes outside the firm?

According to Williamson (1975), there are two reasons for that:

1. Bounded Rationality (Simon, 1955): inability of economicactors to properly anticipate the complex chain ofcontingencies relevant to long-term contracts.

2. Oportunism: rational pursuit by actors of their ownadvantage, with all means at their command (includingguile and deceit).




ARGUMENT

A few problems related to Williamson’s (1975) analysis:

1. The efficacy of hierarchical power within the firm isoverplayed.

2. Williamson fails to deeply explore the influence of socialrelations on market behavior.

3. He also fails to explore the network of social relationswithin the firm.

4. Power issues are left aside.




ARGUMENTExplanation:

I Even with complex transactions, a high level of order canoften be found in the "market".

I Whether these occur, depends on the nature of personalrelations and networks of relations between and withinfirms.

Predictions:

1. Pressures toward vertical integration in markets wheretransaction firms lack a network of personal relations.

2. On the other hand, where a stable network of relationsmediates complex transactions and generates standards ofbehavior between firms, such pressures should be absent.




CONCLUSIONS

Main goal of the paper: argue that most behavior is closelyembedded in networks of interpersonal relations and that suchan argument avoids the extremes of under- and oversocializedviews of human action.

Proposal: all market processes are amenable to sociologicalanalysis and that such analysis reveals central, not peripheral,features of these processes (focus on trust and malfeasance).




CONCLUSIONSMy Impressions:

I Aggressive, but inovative attempt to highlight theimportance of social relations in economic transactions.

I When considered with other contributions (Coleman, 1990;Granovetter, 1973, 2005), this can lead to several interestinginsights related to the areas of Economics and Strategy.

I Good news: economists have been taking social networksseriously over the past decades (Jackson, 2014; Munshi, 2014),but this is not the whole picture..

I ..since we still need to find convincing and betterexplanations for certain economic and social observedbehaviors (e.g., trust, identity and power).




REFERENCES

Christakis, N.A.; Fowler, J.W. O poder das conexões. Rio de Janeiro: Campus.

Coleman, J.S. (1990). Foundations of social theory. Cambridge: HarvardUniversity.

Granovetter, M. (1973). The strenght of weak ties. American Journal ofSociology, (6), 1360–1380.

Granovetter, M. (1985). Economic action and social structure: the problem ofembeddedness. American Journal of Sociology, 91(3), 481.http://doi.org/10.1086/228311.




REFERENCES

Granovetter, M. (2005). The impact of social structure on economic outcomes.Journal of Economic Perspectives, 19(1), 33–50.http://doi.org/10.1257/0895330053147958.

Jackson, M. O. (2008). Social and economic networks. Princeton: PrincetonUniversity.

Jackson, M. O. (2014). Networks in the understanding of economic behaviors.Journal of Economic Perspectives, 28(4), 3–22.http://doi.org/10.1257/jep.28.4.3.

Munshi, K. (2014). Community networks and the process of development.Journal of Economic Perspectives, 28(4), 49–76.http://doi.org/10.1257/jep.28.4.49.




REFERENCES

Simon, H. A. (1955). A behavioral model of rational choice. Quarterly Journalof Economics, LXIX(1), 99–118.http://doi.org/10.2307/1884852.

Williamson, O.E. (1975). Markets and hierarchies. New York: Free.




Thank YouMatheus Albergaria de Magalhães

[email protected]

http://www.sites.google.com/site/malbergariademagalhaes



[email protected]

http://www.sites.google.com/site/malbergariademagalhaes

discussion of the paper "economic action and social structure: the problem of...

Economy & Finance

magalhes economic action

social structure granovetter

magalhes economia

problem of embeddedness

fundamentos econmicos

paulo usp

average type of guy