The Sociology of CultureThe Sociology of Culture

Culture and the EconomyCulture and the Economy

Mankiw’s 10 Principles of Mankiw’s 10 Principles of EconomicsEconomics

#1 People face tradeoffs#1 People face tradeoffs #2 The cost of something is what you give up to #2 The cost of something is what you give up to

get itget it #3 Rational people think at the margin#3 Rational people think at the margin #4 People respond to incentives#4 People respond to incentives #5 Trade can make everyone better off#5 Trade can make everyone better off #6 Markets are usually a good way to organize #6 Markets are usually a good way to organize

economic activityeconomic activity #7 Governments can sometimes improve market #7 Governments can sometimes improve market

outcomesoutcomes #8 A country’s standard of living depends on its #8 A country’s standard of living depends on its

ability to produce goods and servicesability to produce goods and services #9 Prices rise when the government prints too #9 Prices rise when the government prints too

much moneymuch money #10 Society faces a short-run tradeoff between #10 Society faces a short-run tradeoff between

inflation and unemploymentinflation and unemployment

““Thinking at the Margins”Thinking at the Margins”

Hmmm, oranges are $.25 each. I'm Hmmm, oranges are $.25 each. I'm going to buy one, because my going to buy one, because my marginal value exceeds the market marginal value exceeds the market price. Now I'm going to buy a second price. Now I'm going to buy a second one, because my marginal value still one, because my marginal value still exceeds the market price...exceeds the market price...

Mankiw’s 10 Principles of Mankiw’s 10 Principles of EconomicsEconomics

#1 People face tradeoffs#1 People face tradeoffs #2 The cost of something is what you give up to #2 The cost of something is what you give up to

get itget it #3 Rational people think at the margin#3 Rational people think at the margin #4 People respond to incentives#4 People respond to incentives #5 Trade can make everyone better off#5 Trade can make everyone better off #6 Markets are usually a good way to organize #6 Markets are usually a good way to organize

economic activityeconomic activity #7 Governments can sometimes improve market #7 Governments can sometimes improve market

outcomesoutcomes #8 A country’s standard of living depends on its #8 A country’s standard of living depends on its

ability to produce goods and servicesability to produce goods and services #9 Prices rise when the government prints too #9 Prices rise when the government prints too

much moneymuch money #10 Society faces a short-run tradeoff between #10 Society faces a short-run tradeoff between

inflation and unemploymentinflation and unemployment

Economists’ View of Human Economists’ View of Human BeingsBeings

Rationally CalculatingRationally Calculating People are utility-maximizingPeople are utility-maximizing

They seek maximal calculated utility from every They seek maximal calculated utility from every exchangeexchange

They have stable preferences (allowing them to They have stable preferences (allowing them to calculate utility)calculate utility)

People are perfectly, or near-perfectly, People are perfectly, or near-perfectly, informedinformed

AtomisticAtomistic People are very egotisticalPeople are very egotistical People make every decision as isolated from People make every decision as isolated from

the pastthe past

Question:Question:

Individuals in pre-capitalist Europe Individuals in pre-capitalist Europe felt more personally connected to felt more personally connected to their peers, than we do today.their peers, than we do today.

Agree or Disagree?Agree or Disagree?

Mark Granovetter on Mark Granovetter on Economy and SocietyEconomy and Society

It has long been the majority view among It has long been the majority view among sociologists, anthropologists, political scientists, sociologists, anthropologists, political scientists, and historians that [economic] behavior was and historians that [economic] behavior was heavily embedded in social relations in premarket heavily embedded in social relations in premarket societies but became much more autonomous societies but became much more autonomous with modernization. This view sees the economy with modernization. This view sees the economy as an increasingly separate, differentiated sphere as an increasingly separate, differentiated sphere in modern society, with economic transactions in modern society, with economic transactions defined no longer by the social or kinship defined no longer by the social or kinship obligations of those transacting but by rational obligations of those transacting but by rational calculations of individual gain. It is sometimes calculations of individual gain. It is sometimes further argued that the traditional situation is further argued that the traditional situation is reversed: instead of economic life being reversed: instead of economic life being submerged in social relations, these relations submerged in social relations, these relations become an epiphenomenon of the market. become an epiphenomenon of the market. (Granovetter, 1985)(Granovetter, 1985)

Avner Greif TermsAvner Greif Terms

Agency: A system that allows certain Agency: A system that allows certain people to act on behalf of other people’s people to act on behalf of other people’s interests (i.e. as “agents” for other people)interests (i.e. as “agents” for other people)

Trust: A relationship between two or more Trust: A relationship between two or more people, where these people all mutually people, where these people all mutually believe that the others are disposed to act believe that the others are disposed to act positively on their behalfpositively on their behalf

Transaction Cost: The costs necessary to Transaction Cost: The costs necessary to make a transaction.make a transaction. Transaction costs are extrinsic (not part of) the Transaction costs are extrinsic (not part of) the

price of the product being purchased.price of the product being purchased.

Maghribi TradersMaghribi Traders

Sub-group of the Jewish population Sub-group of the Jewish population living in the Mediterranean region of living in the Mediterranean region of Europe and North Africa in the 11th C. Europe and North Africa in the 11th C.

Economically they were very successful Economically they were very successful in competitive Mediterranean trading in competitive Mediterranean trading during this period.during this period.

Greif’s Model for Maghribi Greif’s Model for Maghribi SuccessSuccess

Honesty

Trust

Lower Cost forObtaining Information

Lower Transaction Costs

Lower Price in the Market