Concept And Definition Of Economic Sociology

The economic sociology regarded economic action as a form of social action. In contrast to modern economic theory, it does not go out of the benefit calculation of the individual. Economic decisions and transactions are influenced by social influences and collective patterns of interpretation. Social background, norms, routines, networks, organizations and institutions to go from the perspective of economic sociology not only as a cost in the rational calculation of economic operator a, but provide only the action orientation of the actors. 

Accordingly, markets and companies will not be understood as an aggregation of individual decisions, but as a social order with embossing force for economic activity. It builds the economy sociological critique of the theoretical assumptions of the standard model of economic theory on:

Uncertainty and coordination problems

The Homo economics of economic theory makes decisions in accordance with the utility maximization. But economic decisions are very often decisions under uncertainty, i.e. the actions and reactions of the other players in the market or within the company are unpredictable for individuals. The determination of expected values or transaction costs does not solve the problem because the response patterns of the other market participants in many situations themselves are too complex and unstable to be calculable risks as having a stable expected value. 

Thus, utility-maximizing decisions cannot rationally calculate and there are systematic coordination problems that arise from the unforeseen contingency of action of the stakeholders and environmental changes. Given this uncertainty orient economic actor is to routines, networks or social norms and institutions. This economic rationality remains a socially and culturally defined space limited regarded as relevant information, which changes with the historical context and the specific situations of action. Coordination processes in markets and companies cannot be derived from the individual decisions of the players, but only through the involvement of the social context.

The problem of unstable preferences

After the theoretical economic model of homo economics, the market players make their decisions based on a fixed order of preference that reflects the subjective value system of goods and services. Reviews and preferences, however, are changing endogenously through interaction on the market or in companies. Affect advertising and marketing, but also the situational, spatial context of the exchange or the competition, as the actors’ goods, services and factors of production rate and to pay what price they are willing. 

Moreover, these weights are not necessarily the exchanged objects inherently, but depend on many markets, such as the arts or the financial markets, of the judgment of experts and thus of a complex communication process from. This means then also that the separation of fixed order of preference and situational decision cannot be maintained, but that the preferences of the actors may change depending on context at any time.

The problem of dynamics

Josef Schumpeter described that significant elements of capitalist economics such as profit, innovation, growth and crises with the equilibrium model of economic theory cannot be explained. On this conceptual gap of (static) economic theory is linked to the economic sociology. Especially for the modern economy are the dynamic elements of paramount importance. 

The same is true for economic institutions and organizations: they do not arise necessarily, such as suggested by the transaction cost theory, as effective solutions to coordination problems, but their origin and their transformation often follow paths to inner dynamics of the institutions themselves or external social and political influence can be recycled. Therefore, they are neither necessarily efficient nor stable. To shift the opportunities for buyers and sellers in the market is not only by exogenous shocks.

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