Mutual dependence of Social Structure and Economy

Rituparna Choudhury

Sept. 5, 2020

Image retrieved from www.brewminate.com

 

In Passions and Interests (1977), Albert Hirschman shows that an important strand of intellectual history from the time of Leviathan (1651) to that of the Wealth Of Nations (1776) consisted of the watering down of Hobbes’s problem of order by arguing that certain human motivations kept others under control and that in particular the pursuit of economic self-interest was typically not an uncontrollable ‘passion’ but a civilized, gentle activity.[1] This is reflective of the intricate relationship between social structure and economy. Contrary to it, much of the utilitarian tradition, including classical and neoclassical economies assume rational, self-interested behaviour affected minimally by social relations. It has long been the majority view among economists, political scientists and historians that such behaviour was heavily embedded in social relations in premarket societies but became much more autonomous with ‘modernization’. This view sees the economy as an increasingly separate, differentiated sphere in modern society with economic transactions defined no longer by the social and kinship obligations but by rational calculations of individual gain.[2]

However, there was a marked shift in epistemological traditions with the advent of sociology as a unique discipline and we need to understand the sociological contributions that paved the way to forming thread-like connections between society and economy. Sociology as a distinct discipline emerged as a reaction to capitalist modernity and the profound interplay between social structure and economy has seen considerable sociological importance since the classical phase of sociological tradition. The mutual interdependence of social as well as economic factors has seen satisfactory epistemological groundings since the works of thinkers like Karl Marx, Emile Durkheim, Max Weber and Georg Simmel, to name a few, each of whom who had their individual contributions to the idea of economic sociology, a term coined by William Stanley Jevons in 1879.

The foremost work that must be considered prior to any other, when referring to the relationship between social structure and economy, definitely has to be the seminal work titled Origin of the Family, Private Property and the State: in the Light of the Researches of Lewis H. Morgan by Friedrich Engels, first published in 1884. Considered to be one of the first major works on family economics, it is a treatise on historical materialism. Engels vividly highlights on the nature of historical transition of the society from a matrilineal clan in primitive society to that of a modern civilisation and how the concept of family as a primary social institution emerged with the development of private property, prior to which there existed communal households consisting of women co-existing with bonds of solidarity. The question of demarcating and protecting one’s property was determined by ensuring fidelity of the women. Important to understand, thus, is that ownership of property created the first significant division between men and women. Marx’s contribution in the form of a theory of class struggle has seen widespread acceptance and popularity. Related to this idea is his notable concepts of modes of production and the associated idea of relations of production that has a parallel stand. The ontological chemistry between the two reflects the strong idea of how economic relations are simultaneously understood with the context of social relations, where material identities form the base in the form of economy (both forces as well as relations of production) above which lie all other forms of relations including mainly ideological relations that exist in a particular society, a concept that is referred as ‘base-superstructure’ model. His materialist philosophy is primarily based on as a vision by which he comprehended the fundamental conditions of human existence. This aspect of materialism, or as we say, Marx’s materialist method, involves the study of the real economic and social life of man and of the influence of man's actual way of life on this thinking and feeling. In the preface of A Contribution to the Critique of Political Economy (1859), Marx writes: “I was led by my studies to the conclusion that legal relations as well as forms of state could neither be understood by themselves, nor explained by the so-called general progress of the human mind, but they are rooted in the material conditions of life…” [3] As an extension of his materialist philosophy, the idea of historical materialism or materialist conception of history is primary to understanding the course of historical progress.

Emile Durkheim essentially saw the relationship between social structure and economy in terms of solidarity, an idea associated with his functional approach, in his major work The Division of Labour in Society (1893). He conceptualised on the ideas of mechanical and organic solidarity respectively for ‘traditional’, ‘small-scale’ societies and ‘modern’, ‘industrial’ societies. The idea of solidarity is related to a kind of social cohesion that occurs in both types of societies, however disposed of different varieties of interdependence, where the former is marked by solidarity through similarities and the latter, by solidarity through differences. In quite a different position, Weber introduces his interactive approach through a method he referred to as Verstehen in order to have an interpretive understanding of what he called as social action, his main area of study. By causality, he meant that the probability that an event will be followed by another and that it was not enough merely to look for historical repetitions as many historians do but to look for reasons and multiple causes as well as meanings of historical changes. His historical approach enabled in understanding the multiple layers of relationship among all categories of knowledge in the society. It is necessary to understand his contribution to structural analysis that initially has a macro-level approach in terms of his attempt to understand the relationship among factors like size of the population, the rates of contact and interaction among its members, the level of differentiation of activities and sub-groupings in a population and the pattern of integration. It is macro-structural in terms of how a structure is formed out of the society’s interaction and how it, in turn, is coercive of individual action. His concepts of class, status and power reflect a dynamic understanding of social stratification in the society. He suggests the difficulty of relying on one plain theory to understand stratification as concepts of class, status and power have different dimensions. For example, he understands class purely in economic terms and a person’s ‘class situation’ in terms of his ‘market situation’, i.e, the capacity to sell of goods and services in the market, status in terms of locating oneself in a particular ‘status situation’ and in terms of having privilege of social honours, party in terms of groups that are specifically concerned with influencing policies and making decisions in the interests of their membership. The fact that the status situation and market situation may or may not overlap each other determines the complexities of stratification and of understanding the inter-relational position of social structure and economy. Additionally, his master work The Protestant Ethic and the Spirit of Capitalism (1905) establishes another magnificent dimension to the intricate relationship between religious faith as a social element and economic success, through his study of the emergence of modern capitalism in the West as caused by a particular spiritual ethic, that of Protestantism. Simmel, known as a micro sociologist, viewed society as a set of interactions and said relatively little directly about the large-scale structures of society. In fact, at times, given his focus on patterns of interaction, he denied the existence of that level of social reality. The Philosophy of Money (1900) is his major work that contributes to the analysis of the wider social implications of economic affairs, where he argues on economic exchange as being understood as a form of social interaction.[4]

The well-known concept of Kula Ring proposed by social anthropologist Malinowski in his ethnological masterpiece titled Argonauts of the Western Pacific (1922) on the Trobriand people draws another shade to the understanding of the co-existence and co-evolution of social structure and economy. A particular interpretation could be that the main function of the Kula is the creation of a social order by establishing a network of stable, peaceful social relationship among stateless tribal societies, thereby fostering economic trade among them.[5] Thus, although the ring is basically a system of circular, ceremonial exchange of gifts, it eventually evolves into a form of material exchange that can be valorised. The trading of items create life-long, permanent relationships among the buyers and takers. Also, the hierarchical ranking of the Kula valuables ensures the hierarchisation of the relationships. Moreover, the Kula partnerships enable the inter-island exchange of utilitarian items back and forth in the course of Kula expeditions.[6]

In context to India, the Indian society has been an exemplar of diverse social backgrounds and it has seen stark structural changes with the advent of the British. With a mass transformation of the Pre-British feudal Indian society to that of a capitalist economy, several notable changes were seen in the structure of the Indian society. A.R Desai comments, “The history of the progressive British domination of India is therefore, at the same time, the history of the progressive transformation of the feudal economy………it is bound up with the decay and even extinction of old land relations and artisans and handicraft industries, and with the emergence of new land relations and modern industries.” Indian sociologist M.N Srinivas understands social structure as constituting all social relations of person to person.[7] The differentiation of individuals and of classes by their social role is another way of identifying social structures. [8]The differential social positions of men and women, of chiefs and commoners, of employers and employees, are just as much determinants of social relations as belonging to different clans or different nations.[9]An important part of his study on the caste system is his concept of dominant caste which he formulated during his study in Rampura village, which helps us better understand the correlation between social structure and economy. The fact that the peasants in Rampura enjoy considerable power and prestige because of their numerical strength and also owing to their economic command over the rest of the population, being the biggest landowners, shows how social and economic positions influence each other. Education and literacy among them also contribute to their effluent stature.[10]

The concept of ‘socionomics’, coined by Robert Prechter refers to an idea he states as social mood being the driver of financial macroeconomic and political behaviour, in contrast to the conventional notion that such events drive social mood.[11] Similarly, professor of economics and sociology at the University of Chicago, Garey Stanley Becker had interesting contributions to family economics through his idea of human capital and Rotten Kid Theorem. His insight into New Home Economics, i.e, an approach to the study of consumption, labour supply and other family decisions revolving around the household, enables his further studies. In regards to human capital, he was of the view that individuals make choices of investing in human capital based on rational benefits and cost that include return on investment as well as cultural aspects. His landmark work on the family and household production throw light on the idea of a family as a kind of little factory—a multi-person unit producing meals, health, skills, children, self-esteem, knowledge etc.[12] He uses basic economic assumptions of maximizing behaviour to analyse the allocation of time to child care as well as to careers, to marriage and divorce in polygynous as well as monogamous societies.[13] Moreover, these findings have an impact on public policy as well as social welfare programs are found to have significant effects on the allocation of resources within the family.[14]The Rotten Kid Theorem, used by Becker in A Theory of Social Interactions (1974) asserts that if a family has a head who “cares sufficiently about all other members to transfers general resources to them, then redistribution of income among the members would not affect the consumption of any member, as long as the head continues to contribute to all.”[15]

Going back to the advent of economic sociology, an important contributor to contemporary economic sociology is Mark Granovetter, an American sociologist whose contribution to the social network theory and on the spread of information in social networks are remarkable examples of explaining and understanding the interrelationship between social structure and economy. Basic to his idea is that contrary to utilitarian assumptions, economic action is typically a form of social action and that it is highly positioned by the society and economic outcomes have serious impacts from social structures, primarily in the forms of—(a) Allocation of labour, i.e, social networks play an important role in most real markets where bilateral asymmetry is seen between both employer and employee as they have information about their own qualities that the other needs. Also that each prefer to learn about the other from sources they trust- social capital.[16] Moreover, there is a continuous flow of information about job-related aspects through social networks that are maintained in turn mainly for non-economic purposes. Social capital is a concept profoundly used and applied by French philosopher Pierre Bourdieu, initially introduced in his work Outline of a Theory of Practice (1972), a concept which is a part of his notion of capital as extended beyond the notion of material assets to capital that maybe social, cultural or symbolic. Bourdieu referred to social capital as “durable network of more or less institutionalised relationships of mutual acquaintance and recognition.”[17] The network established is in turn because of the rich cultural capital that is in turn a consequence of proper investment of economic capital. Also, it has to be “usable” in the future and not merely acquired for “nothing”. (b) Social structure and prices, i.e, when people trade with others they know, the impact of knowing each other on the prices varies with their relationship, the cost of shifting to different partners and the market situation. Economic flexibility of the system depends on the social structure of the trade relation and cannot be predicted without knowing the former.[18] (c) Social structure, productivity and compliance, i.e, one’s position in a social group can also be a central influence on productivity owing to the fact that serious cooperation from others and valuable interaction with them enable in advancing productivity, along with shaping skills through group norms and cultural ethos. [19] Among his major ideas is the notion of economic embeddedness, i.e, “the economy is embedded in the society.” Originally proposed by Karl Polanyi in his book The Great Transformation (1944), Granovetter incorporated it in his 1985 paper ‘Economic Action and Social Structure: The Problem of Embeddedness’, where he insists that economic action is closely embedded in the networks of interpersonal relations and argues on trust being a crucial determiner of economic outcome, which results from social relations rather than from institutional arrangements or generalised morality.[20]What Granovetter attempts to imply in another sense is that economic relations donot exist in an abstract, idealised market but rather in real, social relations. Innately related to his notion of embeddedness is his concept of ‘the strength of weak ties’, a concept which he incorporated in his seminal paper ‘The Strength of Weak Ties’ (1973). Conceptualising on the usefulness of certain types of ties (i.e, weak ties) in certain situations, he defines a tie as, “ a combination of the amount of time, the emotional intensity, the intimacy(mutual confiding), and the reciprocal services which characterize the tie.”[21] According to him, strong ties are not as advantageous as weak ties owing to the fact that lesser the ties, the less will the circle of friends overlap, thus stronger the opportunities of flow of novel information. He also argues that strong ties aren’t usually bridges whereas weak ties are local bridges that create a path or network and that removing the average weak ties would do more damage to transmission probability than would average strong ties. Crucial to these concepts is the importance of structural holes as Granovetter argues on the importance of the way the different parts of networks are bridged, rather than the quality of any particular tie. Thus, through these ideas, Granovetter focuses primarily on the issues of ties, trust and information flow as strong determiners of economic outcomes. A study carried out by him on people who had found a job through contacts that they often saw. It was found that 56% saw their contacts only occasionally and 28% saw them rarely.

In contemporary times, numerous research works have been conducted by the American academia that reflect on several vantage points through which we can understand the dual existence and influence of social structure and economy. Partly as a part of behavioural economics, these studies are a valuable contribution to social analysis of economic behaviour. To begin with, Ryan McDevitt, Assistant Professor of Economics at Duke University brought out an interesting study on the impact of social interactions on economic transactions. Professor McDevitt studied the purchasing behaviour of customers as influenced by the social nature of transactions.[22] To do so, he examined changes in two different retail formats that reduced a ‘social friction’ that would otherwise inhibit consumers due to an implicit cost associated with ordering certain items in social settings, especially when those items might be ‘embarrassing’ (for example, liquor). He places these findings in the context of online transactions that require almost no social interaction, showing how firms might best respond to this phenomenon. In an easier understanding, he sought to study how this effect has become more prominent given the increasing prevalence of online transactions. What he found is that with online transactions, the sales of ‘embarrassing’ items rise and so does profit-making. Behavioural economist Keith Chen, currently an Associate Professor of Economics at UCLA’s Anderson School of Management, suggests that the language one speaks might have an impact on the way he/she thinks about his/her future. In his paper titled ‘The Effect of Language on Economic Behaviour’, Professor Chen suggests about the unique characteristic of interaction of language and economic decision-making by which he correlates two different language types- weak FTR language ( future time reference) like Chinese and German that force the speakers to speak about the future as if it is the present (no strong distinction between the present and future) and strong FTR languages like English, Greek, Italian etc, which force speakers to grammatically realize that the future is different from the present, with different rates of saving for the future, a connection he calls the “futurity” of languages.[23] Languages lead speakers to talk similarly about the present and future and also feel similarly about the present and future. This might be important because if that’s true then such people thus would/should have easier time saving. The study was based on average savings rate (% GDP) of OECD (1985-2010). OECD are the rich, first world countries that have open markets and liberal democracies.The findings were such that on an average, countries which speak strong FTR languages save 4.75% less than weak FTR language-based countries. US lies on the second lowest savings country from below. Weak FTR language-based countries have been found to have multiple languages. Weak FTR language speaking households are seen to be 30% more likely to save in a year and accumulate 25% more in retirement savings.[24] This study seems relevant in personal stand because language forms an important part of social relations as all social positions including status and role play have language as the main communicative tool.

These are some of the larger stock of explanations and instances that describe the elaborate relationship between social structure and economy and how both co-exist. Economy is thus deeply “embedded” in the social elements of the society. The repetitive patterns of social relationships that form a social structure can be understood and in turn help in understanding economic behaviours, outputs or consequences. However, such structures have evolved throughout human history as modes of production and forms of economic deliberations have transformed from one form to another, and will continue to do so, bringing out newer forms of social and economic interactions, a striking example being today’s cashless economy and its associated forms of transnational social relationships.

 

References


[1] Mark Granovetter, “Economic Action and Social Structure: The Problem of Embeddedness.” American Journal of Sociology. 1985. Volume 91. Pg 488

[2] Ibid.

[3] Karl Marx, “Author’s Preface” A Contribution to the Critique of Political Economy. 2nd German Edition. Translated by N.I Stone. Pg. 11

[4] Georg Simmel-A note on the Philosophy of Money. Retrieved from: www.cardiff.ac.uk/socsi/undergraduate/introsoc/simmel11.html

[5] Rolf Ziegler, “The Kula Ring of Bronislaw Malinowski: Co-evolution of an Economic and Ceremonial Exchange System.”Review of European Studies. 2012. Pg. 15.

[6] The Kula Ring. Retrieved from: www.umanitoba.ca/faculties/arts/anthropology/courses/122/module5/kula_ring.html

[7] MN Srinivas. “Social Structure.” Sociological Bulletin. 1964. Pg. 12-21.

[8]Ibid.

[9] Ibid.

[10]Dipankar Gupta. “The Dominant Caste in Rampura.” By MN Srinivas.Social Stratification. 2014. Pg. 308.

[11] Robert Prechter, Socionomics. Retrieved from: http://en.wikipedia.org/wiki/Robert_Prechter#Socionomcs

[12]A Treatise on the Family. Harvard University Press. Retrieved from: www.hup.harvard.edu/catalog.php?isbn=9780674906990

[13] Ibid, A Treatise on the Family.

[14] Ibid.

[15] Theodore C. Bergstrom, “A Fresh Look at the Rotten Kid Theorem— and Other Household Mysteries.” Journal of Political Economy. 1989. Pg. 1138.

[16]Mark Granovetter, “The Impact of Social Structure on Economic Outcomes.” Journal of Economic Perspectives.2005. Pg. 36.

[17]The Forms of Capital. Retrieved from: http://www.marxists.org/reference/subject/philosophy/works/fr/bourdieu-forms-capital.htm

[18]Granovetter. Op cit. Pg. 38

[19] Ibid. Pg 41.

[20]Granovetter, op cit. 1985.

[21]Mark Granovetter, “The Strength of Weak Ties.” American Journal of Sociology. 1973. Pg. 1361.

[22]The Effect of Social Interaction on Economic Transactions. Retrieved from: http://www.youtube.com/watch?v=IXljhER6xgs

[23]Keith Chen’s research suggests that the language you speak may impact the way you think about your future. Retrieved from:

http://www.ted.com/speakers/keith_chen

[24]The Impact of Language on Economic Behaviour. Retrieved from: http://www.youtube.com/watch?v=CiobJhogNnA

 

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