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“Talk with your family about [Medicare] Part D over Thanksgiving dinner”: How markets require bounded relationality

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Question: What do the following three scenarios have in common?

Scenario A.  Congrats, you’re turning 65 years old!

You’re turning 65 years old.  In the US, if you have worked enough units, you are eligible for Medicare; you must select health insurance by choosing among traditional Medicare and HMO plans.  You also need to choose insurance that will cover  your current or anticipated prescription medications.  Depending on where you live, this could involve comparing around 50 different plans.

You start by consulting the Medicare booklet and wading through the flood of mail from insurance providers.  Despite this information, you’re having difficulties understanding the differences among plans and determining how much plans will charge for your medications.  Moreover, you’re not quite sure which medications that you’ll need in the upcoming year.  Each year after this, you’ll have an almost two-month-long window for making these decisions – a period that is happening now, ending Dec. 7.

If you have a long life, you’ll have plenty of practice working with this market.  How do you select a plan appropriate to your needs right now and then in the future?

Scenario B.  Congrats, you’re getting ready to enter high school!

You are a student at a NYC public middle school.  Since students are not automatically assigned to public high schools, you and your family must choose from among 750 programs and rank order your choices.  (If you are two years old or older, your parents must do the same for public pre-K and kindergarten school programs.)  To learn about your options, you can look at a directory of descriptions of these programs and then research each school online.  If possible, you and your family will also attend information fairs and schools’ open houses and tours, where you might be asked to fill out additional forms or leave your information.

Some schools have different criteria for what kinds of prospective students they prioritize, and most selective programs don’t provide rubrics for how they rank prospective students – information crucial for ascertaining your chances of acceptance.  After you submit up to 12 rank-ordered choices, an algorithm, modelled after a medical residency matching program designed by a economist, will generate a match based on schools’ priorities and your listed options.  And, btw, charter schools and private schools have their own admissions processes and admissions deadlines.

How do you choose and rank public high school programs?  Should you try to maximize your choices by also applying to charter schools and, if you have the financial resources, private schools?

Scenario C.  Congrats, you’re rich!

You have amassed enviable, immense wealth.   But, your mattress is bursting, and you distrust regular banking.  And, for whatever reason, you’re not fond of having the state taking a portion to support the common good, social insurance, military spending, etc.  Thinking ahead, you worry about your family having unfettered access to your financial legacy; relatives might fritter away that wealth!  Also, you have a few relationships that other family members don’t (yet) know about, and you want to make sure that those loved ones are also taken care of after your inevitable passing.  So, what to do?

Answer: Most likely, you’ll need what I call “bounded relationality” to assist you with entering complex markets and making exchanges.   To explain what bounded relationality is, I’ll preview excepts from my advance, online first article “Bounded relationality: how intermediary organizations encourage consumer exchanges with routinized relational work in a social insurance market.”

The bounded relationality concept combines two of my favorite theories: (1) economic sociology’s relational work by Viviana Zelizer, Fred Wherry, and Nina Bandjel* and (2) Herbert Simon’s theory about how organizations compensate for people’s bounded rationality, or difficulties with making decisions.

During several years of my research on organizations that support older adults, I observed workshops and meetings for organizational representatives and professionals, including social workers, on topics such as how to select Medicare insurance plans.

At one of these workshops, a representative from the Centers for Medicare & Medicaid Services, described officials’ hopes that families would discuss prescription plans at family get-togethers: ‘We tried to say, “Talk with your family about [Medicare] Part D over Thanksgiving dinner,” but we don’t know if people did.’   His comment revealed how much the market relies upon relational work, or connections formed and sustained with other persons (Zelizer 2012) and organizations.

Using observations of US governmental, advocacy, and human service organizations’ (GAHSOs) talks, I show how these intermediary organizations endorsed “bounded relationality” when teaching conventions for participating in the market of social insurance.  Unlike conventional consumer goods and services markets, insurance options are difficult to evaluate and exchanges are challenging to switch.  Decisions are also consequential, with suboptimal decisions impacting personal well-being and requiring support or intervention by family members, if they are available.

Read more about bounded relationality after the jump: Read the rest of this entry »

Why the debate on “public intellectuals” is faulty (pt. 1 of 2)

Hi, Tom Medvetz here, checking in with my fourth OrgTheory guest post (posts 12, and 3 here). Today I’ll sketch a few notes about one of the big issues my book speaks to: the complex relationship between social knowledge and public action in the US. Perhaps the best-known debate on this topic is the one associated with Russell Jacoby’s 1987 book, The Last Intellectuals, which famously lamented the disappearance of “public intellectuals” from American life. In the years since its publication, Jacoby’s book and the idea of the “public intellectual” have earned enormous attention from journalists, pundits, and scholars.

However, reading over some of the major entries in this debate, it’s hard to shake the feeling that the “public intellectual” discussion has yielded more heat than light. In the first place, it’s striking how much disagreement still attends the central question a quarter-century later: Is public intellectualism declining or thriving in America? It depends on who you ask. Three days ago, Henry Giroux’s Counterpunch essay “The Disappearance of Public Intellectuals” seemed to take the basic truth of Jacoby’s thesis for granted. Meanwhile, many other writers have taken the opposite stance by arguing that public intellectuals are alive and well in the US. A good example is Daniel W. Drezner’s 2008 paper “Public Intellectuals 2.0,” which maintained that “the growth of online publication venues has stimulated rather than retarded the quality and diversity of public intellectuals.”

A second glance at this debate reveals a likely reason for the disagreement. Put simply, there has never been any consensus about the proper definition of the term public intellectual. In fact, it’s fair to say that how a given writer operationalizes the term tends to determine where he or she stands on the issue.

Read the rest of this entry »

Written by Tom Medvetz

October 12, 2012 at 12:41 am

Thank you orgtheory for hosting a forum on relational work

We also want to thank Fred Block, Kieran Healy, Josh Whitford, Gabriel Rossman and Viviana Zelizer for their important contributions to our discussions about relational work in the past two weeks. They, and all the commentators, show that there is enough excitement to move our understanding of relationality in economic life beyond static structure of ties into a continued investigation of the creative effort people make establishing, maintaining, negotiating, transforming, and terminating economic relationships, and how asymmetries and conflict, meaning and affect play into that process and shape its outcomes.

There is also promise that economic sociologists will continue to investigate how relational work is structured by organizational and institutional contexts, and develop useful typologies and testable hypotheses about relational work.

With much appreciation, we look forward to a continued dialogue!

Nina and Fred

Written by ninabandelj

September 7, 2012 at 7:49 pm

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Talking about Relational work with Viviana Zelizer

Nina and Fred: How did you develop the concept of relational work?

Viviana: Before answering, let me say how glad I am to read this ongoing blog discussion. About your question: I certainly did not start out as a relational analyst, but rather as a cultural social historian. In fact, it took some time until I was officially designated an economic sociologist! And even then, I concentrated on specific investigations, ranging from life insurance to the value of children and the meaning of money.  Teaching economic sociology for the first time in 1998 forced me to think hard about some of the field’s crucial puzzles. Specialists in the field had pioneered brilliant efforts to show how and why standard economic models were imperfect explanations of real-life economic activity.

But I felt constrained by certain features of mainstream economic sociology’s theoretical approaches plus the field’s concentration on firms and corporations as research sites. I questioned what exactly constituted the economic activity described as “embedded” in social relations and structures? If they are not simply equalizing resources, maximizing advantage, or reducing risk, what exactly are people doing when they engage in the economic activities of production, consumption, distribution, and transfer of assets? Why and how did shared meanings, so marginalized by economic sociology’s emphatically structural models, matter? Over the years, a relational approach gradually emerged as part of the effort to answer such questions.

More specifically, I developed the concept of relational work as one possible approach to analyze the continuously negotiated and meaningful interpersonal relations constituting economic activity. I did so in spirited collaboration with Chuck Tilly, an early enthusiast of the concept. Let me add that Fred Block’s generous initiative of assembling the Davis conference (see his Tuesday blog from last week) prompted me to write an extended paper for that meeting which forced me to clarify further the ideas developed in Purchase of Intimacy.

Nina and Fred: What exactly does relational work mean and how do you study it? In what ways do you claim it differs from other analyses of relations in economic activity? Is adding culture its main contribution?

Viviana: By relational work, I mean the creative effort people make establishing, maintaining, negotiating, transforming, and terminating interpersonal relations. Relational work goes on continuously, shaping boundaries that differentiate relations that might become confused with deleterious consequences for one party, both parties, or third parties.

Let’s be clear. Relational work does not simply assert that relations exist: that would not be a surprising discovery! Nor does it simply “add-culture-and-mix” into current explanations of economic activity. Instead it identifies specific processes that take place within consumption, production, distribution, and asset transfer. More concretely, it focuses on four elements common to all economic activity:

1) distinctive social ties: connections among individuals or groups involved in the economic activity.

2) a set of economic transactions: interactions and social practices conveying goods and services (e.g. compensation, gift, loan, bribe, theft).

3) media for those transactions: representations of rights to goods and services, often in the form of concrete tokens, ranging from state-issued legal tender or electronic monies, to more restricted forms such as credits in baby-sitting pools, casino chips, or food stamps. Media can also include such items as time, in-kind goods, or favors.

4) negotiated meanings: participants’ understandings concerning the meanings of relations, transactions, and media including their moral valuation, combined with constant negotiation, modification, and contestation of those meanings.

Variable connections among such elements constitute what I call relational packages. These consist of combinations among a) distinctive interpersonal ties, b) economic transactions, c) media, and d) negotiated meanings. Here’s an example: the relationship between X and Y might fit into the category of friends or the category of lovers each with its own meanings, economic transactions, and media, determining for example who pays, how, when, for what, how much, how often, for how long, and with which currency. The identity or social category of transactors (e.g. gender, race, age) introduces further crucial variation in relational packages.

Relational work consists in creating viable matches among those meaningful relations, transactions, and media. For a concrete application of the concept, my Politics & Society paper, “How I Became a Relational Economic Sociologist and What Does That Mean?” offers an alternative understanding of monetary differentiation contrasting it with the mental accounting individualistic framework (on this, see Fred Wherry’s comments two days ago).

Nina and Fred: Does relational work apply primarily to intimate relations and exclusively to micro-level analyses?

Viviana: Emphatically not. While in my own research, I have concentrated on intimate transactions and interpersonal interaction, the approach extends much further. Certainly, as last week’s postings by our 2 Freds over predatory lending or Josh Whitford’s paper in the Politics & Society issue show, relational work helps us analyze transactions outside of households or other intimate settings.

It also applies to economic activity at the macro-level, including relational work by organizations, nations, and legal systems. See for example exemplary investigations by Nina Bandelj of foreign direct investment as well as forthcoming books by Dani-Lainer Vos on economic connections between diaspora groups and homeland communities and Simone Polillo on financial innovation in Italy and the US.

Let me add how hopeful I am about the future of economic sociology. I read the work of young scholars with great admiration for their imagination and theoretical scope. And not just those who are applying the concept of relational work, although many are doing so in ways that greatly improve my analysis.

—-

Viviana Zelizer, Sociology, Princeton

Nina Bandelj, Sociology, UC Irvine

Fred Wherry, Sociology, Columbia

Written by fredthesociologist

September 6, 2012 at 1:42 pm

Beyond Nuance

As many of the contributors to this series will remember, the late Marvin Bressler used to amuse the Princeton grad students with such jokes as saying that all job talk questions were special cases of two general questions: “But, is it really so simple?” or “But, is it really so complicated?” In Kieran’s contribution to this forum he notes that relational work scholarship runs the risk of devolving into an endless series of works that basically ask the first question of a strawman other (be they a garden variety economist, a behavioral economist, an embeddedness/networks economic sociologist, or whatever). A lot of this work ends up basically saying, when you dig into the details of social life you see how it’s all so much richer and more nuanced than it first appears. Much like thick description or history, this can be fascinating when applied by a talented researcher to an interesting case, but in less felicitous circumstances quickly degrades into one damn thing after another. Even under the best circumstances though it’s hard to see how the “is it really so simple” research question builds up to a distinct theoretical perspective rather than a sort of atheoretical empiricism with nihilism towards the idea of theory-building and general mechanisms.

For some people such theoretical nihilism is satisfactory, as the whole point is building a Philippic against the reductionist other. However, as Kieran argues, this isn’t relational work at its best and he draws attention to work by Zelizer herself, Almeling, and Quinn that plays up the institutional and organizational context in which relational work is performed. I fully agree that it is important to treat such contexts as structured ones, and not merely places where tacit understandings are made explicit and documented for the convenience of sociologists who later on dig through case law or other bureaucratic records. Understanding how such contexts shape relational work provides an opportunity for positive contribution by the school rather than just critique of others.

In addition to the institutional context which many of us already do a good job of taking seriously, I think we need to take seriously the idea that relational work can be categorized and schematized. This is the first step to identifying more or less consistent patterns and contingencies in how relational work is applied. That is, going from a (valuable) sensitizing concept to an articulated theory.

In the last few years Zelizer has taken the lead in this issue with the concept of circuits: who exchanges what with whom for what else. This is an important step, but for the most part it remains a sensitizing concept, encouraging us to identify and document circuits where they occur and identify patterns among them. Fortunately, one of our sister disciplines has a long tradition of work closely parallel to circuits and has developed some sophisticated theories for understanding these issues.

Anthropology has been seriously into issues that closely parallel relational work but we don’t cite them very much and are the poorer for it. Now, perhaps I am confessing nothing of more general interest than my own ignorance. Still, I have to confess that to the best of my recollection I never encountered this literature in any of my undergraduate or graduate coursework and until recently I was mostly ignorant of it and so I suspect that my experience is not entirely unique. Likewise I seldom see this work cited in relational work publications (here’s an exception). Fortunately a few things came together for me (a deliberately thin quantitative project provided me with a windfall finding about relational work in payola, a very well-written and much discussed ambitious and insightful book on the subject was published, and I started attending the relational models lab) and so I got interested in the anthro literature, much to my benefit.

Early versions of economic anthropology were much like relational work in that they were more a sensitizing concept or critique than an articulated positive theory with a typology of theoretical constructs and mechanisms for their interaction. So in his “Essay on the Gift” Mauss talks about all sorts of gift relationships but is mostly interested in sensitizing us to the contingent nature of market exchange. So while Mauss describes both peer and clientelist gifts he doesn’t really emphasize a schema distinguishing between them as the important thing is that gifts (of whatever variety) are not market exchange. In the 1950s anthro saw the development of a “spheres of exchange” model with publications like Bohannan’s work on the Tiv people. In this work, Bohannan describes three ordinal categories for objects, with exchange of objects within a category being much more acceptable than exchange across categories. So traditionally a Tiv could trade chickens for beans, slaves for brass rods, and brides for brides, but to trade brass rods for either beans or brides could be accomplished only with great difficulty and what we would call elaborate relational work. In Debt, Graeber surveys a wide range of similar cases and argues that such incommensurable exchanges are never really final, being possible only on an “it’s a purchase, not a rental” kind of basis in which the qualitatively inferior good can work to service debt but where the qualitatively superior principal can only be repaid in-kind.

The thing I find to have the most potential to move relational work forward is Alan Fiske’s relational models typology of communal sharing, authority ranking, equality matching, and market pricing.* You can and should follow the link to see what each of those terms covers, but for my purposes the really important point is that there is a typology. Moreover, the typology has a richly articulated set of contingencies and covariates and so it rises to the level of a theory rather than just a sensitizing concept. Of course we all here recognize the “market vs. else” dichotomy, but such a dichotomy accomplishes little more than facilitating a now tired critique of economics so as to pile up a mass of things beyond econ’s purview to serve as a sort of defensive fortifications against that discipline’s occasional imperialist adventurism. To build a positive theory of non-price-theory exchange requires not just treating it as the complement to the market, but disaggregating it into its constituent varieties and identifying systematic properties to these types. It is in this respect that we can move our own model forward by accepting the theoretical gifts of anthropology and reciprocating with citations.

* Note that in Debt Graeber has a closely parallel typology of “communism,” “hierarchy,” and [gift|market] “exchange.” As best as I can tell, Graeber and Fiske did not directly influence each other but rather they drew similar conclusions from a common research tradition.

Written by gabrielrossman

September 5, 2012 at 4:08 pm

relational work and big metal things

Fred Block, Nina, Kieran and Fred Wherry have already outlined some basic stakes to the claim that an economic sociology more attentive to “relational work” might “succeed Granovetter’s ’embeddedness’ framework.” Those stakes are pretty straightforward: the character of exchanges are negotiated by parties in ways that cannot adequately understood absent reference to the cultural, organization, and institutional structures that enable and constrain peoples’ abilities to get what they want out of those exchanges. This makes my task here easier. I’m one of the folks who contributed to the special issue of Politics and Society that Fred Block (and others) mentioned, so I’ve obviously got a view on matters. By coming in after them, I get to avoid some preliminaries. I can just react to/follow up on things that have been said. Read the rest of this entry »

Written by Josh Whitford

September 4, 2012 at 9:05 pm

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the fallacy of adumbration in relational work

Fred Wherry, Sociology, Columbia University

As the debate advances on what relational work is and how it may be applied to studying economic phenomena, it is helpful to revisit what Robert K. Merton called the fallacy of adumbration: if a new concept is indeed novel, its critics will claim that it simply can’t be true; and if it is true, it was already foreshadowed (vaguely) or handled (thoroughly) by pre-existing concepts. Yet “until the concept… [is] coined and refined, the common character and significance of these phenomena remain obscure” (Portes 2001: 184).

Let’s take a look at one of many empirically testable propositions in Zelizer’s article in the Politics and Society volume. She compares mental accounting with her approach to earmarking money. The former hones in on individuals; but the latter, the relationships and relational work in which these individuals are engaged: “To compare both perspectives, take the case of Christmas savings club…. Mental accounting proponents… explain depositors’ apparent irrationality as evidence of how individuals use institutions for self-control or as precommitment devices, in this case protecting themselves from using those funds for other purposes. Yet the history of Christmas savings clubs suggests that these accounts also guarded funds away from specific others” (p. 160). Specific types of relationships may be tied to specific categories of expenditure, so it is the management of these relationships rather than an inherent self-control problem that may be operative. Relational work directs our attention to these empirically identifiable mechanisms that would have, otherwise, remained obscure.

In her conversation with the mental accounting, Zelizer’s relational work promises an empirical advance that can both complement and supplant existing explanations of economic decision-making. The agenda is to identity how a relational work perspective directs us to understudied mechanisms and unrecognized outcomes for specific classes of phenomena. The concept is, yes, new and true—its propositions, testable.

Written by fredthesociologist

September 4, 2012 at 8:06 pm