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thank you, economic sociology & shameless self-promotion…

Fabio

Many thanks for Brayden, Teppo & Omar for that warm Elvisian welcome. It’s good to be here and I look forward to a lot of good discussion and enlightenment. If we can convince Jeremy Fresse to change his name to “Da Freeze,” every sociology blogger would have a rockin’ online handle.

Now, for something completely different: Peter Klein at the Organizations and Markets blog has linked to a forthcoming paper I have on economic sociology. It’s a review/theory piece that takes a critical look at recent trends in economic sociology & organization theory.  Here’s what Klein says about the essay:

A review and critique of contemporary economic sociology, the paper points out that “research findings and theoretical developments [in economic sociology] are rarely reconciled or integrated with economic research.” Moreover, the critics tend to deal with a stylized, and rather stale, caricature of neoclassical economics, rather than the best work in modern organizational economics, Austrian or evolutionary economics, or the newer strand of behavioral research (a point made repeatedly on these pages). A good read.

Forthcoming in the Novmember issue of The Journal of Institutional Economics – check it out!

Written by fabiorojas

September 14, 2006 at 5:30 pm

4 Responses

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  1. Fabio, this is an excellent paper. Very ambitious and commendable in its integrative goals. I wonder, however, whether you did not soften the edge somewhat in relation to White’s differences with mainstream economics. For one, he’s very clear that he’s departing from what he refers to as a “Knightian” framework were uncertainty is a given, rather than from the more traditional approach that attempts to translate uncertainty into quantifiable risk (in this respect White’s approach can be classified as “institutionalist”).

    Second, it seems that White’s contention that producers in an industry need not have any reliable information regarding consumer preferences is a radical departure from any approach in industrial economics which assumes that producers have at least fairly reliable knowledge about the preferences of their potential consumer base. White’s contention that producers need only attend to other producer’s volume/revenue schedules (“the one way mirror”) would probably be rejected by most economists.

    Third, I think White’s contention that the empirical world should have counterparts corresponding to various areas of the parameter space defined by his version of the Cobb-Douglas function, is an important difference from “orthodoxy” and contribution, insofar as it emphasizes what ultimately matters according to your piece: empirical implications that are different from traditional economic models or which are only handled by economic theory in a piece-meal and not unified fashion (i.e. markets that show economies (or diseconomies) of scale, markets where costs decline with quality, or Veblenian markets were consumer satisfaction declines with volume offered.

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    Omar

    September 14, 2006 at 6:43 pm

  2. I liked the paper quite a lot too. I share your general sentiment that economics and economic sociology should talk to each other. I also commend your for summarizing (very succinctly) an array of sociological studies of the economy in a way that economists will likely understand and appreciate.

    Like Omar I think White offers a fairly significant departure from economics, but at times I’m skeptical (and I’m a huge fan of White!). Most economic models (particularly the Hayekians) believe that it’s not necessary to know consumer preferences so long as producers can adjust price accordingly. Price is hence the most important signal the market has to offer. White, on the other hand, thinks that the observable behaviors of peers in one’s market profile as the primary signal. Therefore, knowing one’s position in the structure and who are your peers is crucial to the functioning of any market. But what’s not clear to me in White’s model is what role, if any, price plays. White’s discussion of price is extremely under-developed (see pg. 32, for example). I’ve wondered if White substitutes identity for price, but they are essentially performing the same function. If you’re an economist you choose price, but if you’re a sociologist it has to be position in a profile.

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    brayden

    September 14, 2006 at 8:16 pm

  3. Thanks for the kind words, Omar. A few responses:

    1. I think that the depdence on volume/schedules is actually a good example of where knowledge of more recent economics could help. I think a natural explanation is signalling. A nice aspect of modern game theory is that you don’t really even have to know what kind of player you are dealing with. You can still model behavior in situations where you very limited knowledhe of the actor you are dealing with.

    2. Regarding the different regions of the paramter space, I do acknowledge that this is the main contribution of the text. And it *is* an impressive attempt to construct a more systematic framework for the study of markets.

    However, the link to empirical examples is often confusing. My favorite example: on page 98, mud drilling is labled as an industry characterized by high quality sensitivity and low/modest volume sensitivity. So are the disposable diaper and log home construction industries. Why? I can cook up a story in my head, but I have been presented with no citation or other evidence that this is indeed the case.

    I understand the typical Harrison White strategy at work – formulate a mathematical model and find a combination of parameters that describes a counter-intuitive behavior which has been ignored or undervalued in prior research. The strategy worked for kinship structures and now he’s trying to pull it off for markets.

    But for me to completely buy the argument, I would have to see a whole world of new, weird markets that I didn’t see before. Otherwise, I am presented with interesting curiosities, or amusing paradoxical cases that can be resolved with better theorizing, or just admitting there are a few theoretical pathologies out there. Maybe economists ignored these cases simply because they are rare and goofy – how many platypus biologists do we have?

    3. On a sociology of science note, White is one of those rare persons who breaks out of the Kuhnian cycle. He’s not a normal scientist, nor does he really break out and create entirely new ways of seeing things. My opinion is that he creates interesting mathematical extensions of existing models, which creates new possibilities for deductive reasoning. Though I slam White in this particular work, I am also a strong admirer and see his research as a untapped strategy in social sciences.

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    Fabio Rojas

    September 14, 2006 at 8:24 pm

  4. Brayden said:”White’s discussion of price is extremely under-developed (see pg. 32, for example). I’ve wondered if White substitutes identity for price, but they are essentially performing the same function. If you’re an economist you choose price, but if you’re a sociologist it has to be position in a profile.”

    You know, sometimes I think this is common. Folks in different social science disciplines will often label or relabel processes and make it look a world of difference.

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    Fabio Rojas

    September 14, 2006 at 8:33 pm


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