Abstract
This paper reconsiders classical and neoclassical economics’ significance for or affinity and convergence with sociological theory. The paper identifies certain types or elements of classical and neoclassical economics that are potentially significant or convergent with sociological theory: pure market economics, the economics of society cum the “rational choice model”, and social or sociological economics. First, it argues that as pure economics economic theory’s significance for or affinity and convergence with sociological theory is low because the first is inconsistent with or divergent from the latter, notably theoretical economic sociology. Second, the paper suggests that as the economics of society economic theory’s significance for or affinity and convergence with sociological theory is non-existent or minimal, because the “rational choice model” is missing or an exception within conventional economics. Third, the paper proposes and demonstrates that classical and neoclassical economics’ main significance for or affinity and convergence with sociological theory lies in social economics as its second ingredient, alongside market economics. The paper aims to contribute to a better understanding of the relationship between economic and sociological theory and economics and sociology overall.
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Notes
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In 1935 Parsons published his article “Sociological Elements in Economic Thought” (in two parts) in a major economics journal. He explores “sociological elements” in “orthodox” economics, in addition to ““institutionalist” or other unorthodox” schools (Veblen, Mitchell, the German Historical School, etc.). Within “orthodox” economics, he considers the “classical school” represented by Smith’s theory of “moral sentiment”, Ricardo’s of the “habits and customs of the people”, Malthus’s “principle of population”, J. S. Mill, yet no sociological elements mentioned, including his “science of social economy”, and Marx unorthodox “introduction of the power element” and by implication “social relations of production” in general, and also “marginal utility economics and Marshall with the same elements identified as in Structure of Social Action (Parsons 1935a, 415), including Jevons, but only on the account of his “discovery of the principle of marginal utility” (not mentioning Walras and Menger as co-discoverers) as well as Pareto (also identical to those in Structure). From the stance of the present analysis, relevant omissions include especially J. B. Say’s implied “social economy”, effectively Mill, and to a lesser extent Senior and Cairnes from classical political economy and Walras and Wicksell and their “social economy”, Jevons, whose idea of “economic sociology” curiously is not even registered, Wicksteed and his (implicit) sociology of the market, the entire Austrian School, notably von Wieser (1967) and his project of “social economics”, as well as “pure” marginalists J. B. Clark, Fisher, Edgeworth, and Pigou. Parsons’ articles are broader than the present analysis on the account of their considering both orthodox and heterodox economic theory, but narrower in virtue of their coverage of the first, especially “marginal utility economics”, being more limited with many pertinent omissions. In turn, Parsons’ treatment of orthodox vs. unorthodox economics, especially his negative evaluation of Veblenian economic institutionalism, has been criticized by Camic (1992).
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Conversely, some economists may ponder sociological theory’s significance of or convergence/affinity, if any, with economic theory, though most of their “pure” versions (alongside with “libertarians” a la Hayek et al.) tend to dismiss or downplay sociology’s relevance to or influence on economics (e.g., Samuelson 1998). Still, since economists-sociologists Pareto and Schumpeter as the key figures in this respect analyses of this issue within economics have been rare, sporadic, or implicit, with some important exceptions (Acemoglu 2010; Acemoglu and Robinson 2008; Akerlof 2007; Becker and Murphy 2000; Boulding 1957; Robbins 1998).
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Edgeworth (1967, 108) suggests that the “Calculus of Variations” in utility (i.e., marginal utility) is the “most sublime branch” of economic analysis and the “branch most applicable to Sociology”, while referring to Comte. Similarly, Edgeworth (1967:6) remarks that “this is the very quantitative relation which is proposed to apply in mathematical sociology” on the ground that “the principal inquires in Social Science may be viewed as maximum-problems, just as in economics.”
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Edgeworth (1967, 13), using Walrasian French original terms, envisions, as does Walras before, that “‘Mecanique Sociale’ may one day take her place along with “Mecanique Celeste”, throned each upon the double-sided height of one maximum (utility) principle, the supreme pinnacle of moral as well as physical science.” In passing, such statements and concepts confirm that Edgeworth was mostly the follower or developer of Walras’ and especially Jevons’ marginalism and to that extent relatively unoriginal or secondary within neoclassical economics compared to the two (plus Marshall and Pareto).
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Blaug (2001, 160) comments that in neoclassical, Walrasian pure economics, “as equilibrium came increasingly into the limelight, disequilibrium virtually dropped out of the picture and with it any minimal description of market institutions. At long last, it can be said that the history of general equilibrium theory from Walras to Arrow–Debreu has been a journey down a blind alley, and it is historians of economic thought who seem to have finally hammered down the nails in this coffin.” In his view, “it has been a dead alley because the most rigorous solution of the existence problem by Arrow and Debreu turns general equilibrium theory into a mathematical puzzle applied to a virtual economy that can be imagined but could not possibly exist, while the extremely relevant “stability problem” has never been solved either rigorously or sloppily” (Blaug 2001, 160).
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Parsons (1935b, 667) suggests that the independence of economics as a science does not imply that of the economy, namely that “economic action can be conceived as taking place in a social vacuum”.
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Edgeworth (1967, 28) suggests “to gather up and fix our thoughts, let us imagine a simple case—Robinson Crusoe contracting with Friday.”
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Pure market economists like libertarians a la Friedman et al. like to say and emphasize that “there is no such thing as free lunch”, as probably correct in the formal or trivial meaning of cost-revenue accounting (“income statements”), though not in the substantive sociological sense of social stratification, including exploitation or distributive injustice, predation, or extortion effectively making all supposedly scarce and costly economic resources into “free goods” for the exploiter or predator, generally for the ruling class or other group. However, they hardly ever say or recognize that also there is no such thing as the market and the economy without society, including state (assumed away as the “enemy” of “free enterprise”) and other social institutions.
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Parsons (1935a, 427) suggests that “the theory of a system of “pure” economic individualism operating without control by any other agency is a form of anarchism” a la “laissez-faire.”
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Parsons (1935a, 426) comments that in orthodox economics “in general the tendency has been to concentrate on the analysis of a limited sector of concrete relationships—those roughly of market value, price and the distribution of wealth (i.e., the economy)” rather than the “generalization” of such analysis to “virtually (or in limiting type, absolutely) all of social life.”
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While making some pertinent contributions to economics, especially to the theory of pure, perfect competition, viz. the “Edgeworth contract curve” (Samuelson 1983; Stigler 1957), Edgeworth generally is not considered to be of the same stature and originality in neoclassical and generally conventional, mainstream economics as are his contemporaries Jevons, Walras, Menger, and Marshall as, in Parsons’ (1937, 13) words, the “most eminent economist of his generation”, as well as his predecessors Smith, Ricardo, and Mill, respectively. In essence, Edgeworth was a self-confessed follower of Jevons fully adopting the latter’s marginal utility theory and utilitarianism overall (see also Samuelson 1983, 92–6), as well as Walras and Marshall, and to that extent a neoclassical economist with secondary originality or relevance compared with these pioneers and other figures of marginalism and/or neoclassical economics (though an able mathematical analyst). For illustration, Edgeworth (1967, 108–9) builds his entire construction of “pure catallactics” on what he calls “Professor Jevons’ (marginalist) Formulae of Exchange”, notably, in his words, “Jevons’ law of diminishing (marginal) utility, our first postulate.”
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Similarly, social Darwinism or perhaps socio-biology is non-problematic, like any sociological theory, per se but becomes problematic if its adherents claim for it the theoretical basis and justification in Darwin’s theory of biological evolution. Simply, its modern advocates, if any, may ground and justify social Darwinism by invoking, say, Spencer’s sociological conception of “survival of the fittest” (societies or groups, not individuals) and even, as Keynes suggest, Ricardo’s classical economic theory of unrestricted free market competition and its neo-classical versions, but not Darwin’s evolutionism.
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In a broader formulation or interpretation, social economics includes economic sociology as its integral part, alongside other disciplines, e.g., economic history and pure economic theory in Weber’s view (also, Swedberg 1998). In any case, social economics is identical to economic sociology, so to speak, plus or minus economic history. In fact, Weber often explicitly or implicitly includes economic history into economic sociology, thus making social economics identical to the latter, as do many contemporary economic sociologists and economists.
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Solow (1990, 275–82) says “I disagree with the notion of economics as physics” in favor of “sociological economics” because “different social institutions impose different constraints on what constitutes acceptable (economic) behavior.”
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In a sense, virtually all of “unorthodox” or “heterodox” economic theory constitutes or implies social economics. Thus, Parsons (1935a) incorporates in “unorthodox” economics first of all the Marxian “introduction” of the “power factor” and “class difference” exemplifying what Marx (1967) emphasizes as “social relations of production”, thus leading to a “basic reconstruction” of classical political economy. He also includes the German Historical School, including Sombart (deemed crucially influenced by Marx), and Weber as the younger members (correcting Schmoller’s older “extreme empiricism”) and the Veblenian “institutionalist” economics described as an “extreme” school of “positivistic empiricism” (see also Camic 1992). In turn, Knight (1958) describes Weber and Sombart’s as “sociological economics” and thus equivalent to Durkheimian “economic sociology”. To the extent, the problem of unorthodox economics’ significance for or affinity and convergence with sociological theory, notably that concerning economy and society, simply of its “sociological elements”, is a non-issue and its investigation or resolution redundant or trivial. In Merton’s (1968) terms, this would amount to the investigation of “manifest functions”, i.e., obvious, planned-for, or expected sociological elements in unorthodox, historical-institutionalist economics, in contrast to that of latten functions—non-obvious, unplanned-for or unexpected sociological elements in orthodox economics—as leading to more “significant increments in sociological knowledge.”
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Parsons (1935a) includes and considers Malthus in some detail but mainly on the account of his “principle of population” termed “Malthusianism”, in passing rejected or relaxed as the demographic explanation of advanced capitalism (versus pre-capitalism) by most economists (e.g., Galor and Weil 2000), rather than his economic theory proper or political economy. By and large, apart from the notoriety of his demographic theory, Malthus’ “political economy” does not appear to be deemed as being of the same stature or relevance as those of his contemporaries like Smith, Say, and Ricardo, as well as Mill, and to some degree even neglected or downplayed within the history of economics . And even if considered more pertinent (as is in terms of the “notion of the insufficiency of effective demand” by J. M. Keynes 1936) than here, Malthus’ (1968) political economy implies only minor Ricardian elements of social economics such as the limitation of consumption by the “structure and habits” of society, and no “rational choice theory”. In addition, the “principle of population” is more a biological or demographic than a sociological factor, as Parsons (1935a, 432) recognizes in remarking that through such a principle “Malthus was one of the first to invoke biological considerations in the explanation of the “economic” facts confronting him.” And, his theology, especially Christian (Calvinist) pessimism in the form of la “the original sin of man” as the “torpor and corruption” of humans (Malthus 1993), contaminates and perverts Malthusian demographic theory into a sort of religious-moralistic pamphlet against Enlightenment rationalism, secularism, individualism, and optimism, viz., what Parsons (1935a) call “optimistic radicals like Godwin and Owen” (also, Somers and Block 2005).
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For the purpose of this article, Marx is not considered a typical representative of classical political economy but rather an unorthodox economist, thus outside of the present scope, as well as mostly a sociologist and philosopher of history, though he was all of the above, as Pareto and Schumpeter (and Weber and Parsons), suggest. Moreover, Pareto (1932) considers Marx primarily to be a sociologist appreciating and developing his class conflict theory into that of elite rule and circulation, and only secondarily as an economist rejecting his (Ricardian) labor theory of value. Also, Parsons (1935b, 651) comments that Pareto “praises Marx as a sociologist for emphasizing the importance of the class struggle, not as an economist.” Curiously, Parsons (1935a, 430) himself attributes to Marx introducing the “power element within the economic system” and thus leading to a “basic reconstruction of economic theory itself” in an “unorthodox” direction, including the German Historical School represented by Sombart and Weber (plus Schmoller et al.) and “institutionalist” economics associated with Veblen, etc. (Mitchel, Commons). For example, Parsons (1935a, 447) remarks that “in his treatment of capitalism, Sombart’s principal predecessor is a thinker not usually reckoned to the Historical School, Karl Marx. Marx as an economic theorist in the narrow sense belonged mainly to the classical school, differing from his predecessors in that tradition mainly by his explicit recognition of the power factor and the resultant class struggle.” Also, he places Veblen’s economic theory within the “unorthodox school” in that it “centers around an emphasis on the power factor which brings him in this respect close to Marx” (Parsons 1935a, 437). In short, Marx is deemed an unorthodox economist, so not within the scope of the present article. By contrast, while influenced by both Weber and Durkheim, as well as Marx, Schumpeter’s sociological works and writings are widely seen as of secondary relevance and impact compared with his those in economics, even among most contemporary sociologists. Moreover, Schumpeter is almost commonly regarded in economics and sociology alike as an economist, though a sociologically minded one to a degree largely unmatched by mainstream economists until these days, with some recent salient (yet unorthodox) exceptions (e.g., Akerlof 2002).
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Classical pure market economics or catallactics is epitomized by two main interrelated elements, first, the labor/cost of production theory of exchange value or prices for products and factors of production (e.g., Ricardo’s “iron law” of subsistence wages), second, the conception of the market as the exchange mechanism, free competition as its normal pattern (including free trade), and market equilibrium, with their various specifications and implications.
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In turn, Chamberlin (1951, 356), the proponent of the theory of monopolistic competition as an alternative to neoclassical “pure competition” theory, suggests “economics deals only with one aspect of social reality”, and hence is does not constitute or entail “rational choice theory” cum the “economic approach to all human behavior”.
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In passing, the specification of the end point of neoclassical economics or marginalism (the 1920–30s vs. the 1940–50s, etc.), if any (modern economics as “neoclassical”), is more fluid and debatable in the literature than that of classical political economy (the 1870s), and conversely, the beginning of the latter being more so (the 1770s or before) than that of the former (the 1870s). Also, it is apparent that the temporal specification of classical, neoclassical, and modern economics is similar but not identical to that of classical and contemporary sociological theory: the end point of neoclassical economics and its development into contemporary economics is almost the same as the evolution or transition from classical to contemporary sociological theory, the late 1920s and early 1930s, though sociology does not have a “neoclassical” type or phase or designation between its classical and contemporary types or stages or designations by contrast to economics.
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By analogy to its classical precedent, neoclassical, more precisely marginalist, market economics or catallactics is premised on two principles, first, the marginal utility theory of exchange value and prices, including marginal productivity theory of wealth distribution, and second the conception of markets as exchange mechanism and pure, perfect competition, market equilibrium (optimum), and the like (having in mind Marshall’s neoclassical synthesis of classical cost of production and marginal utility theories of exchange value and thus resolution of their contradictions). Apparently, neoclassical economics, namely marginalism, sharply and deliberately deviates from classical political economy in the theory of exchange value and prices, while adopting and reinforcing the conception of markets and competition. It is with reference to the first element that Schumpeter (1954, 919) describes marginalism as a “Copernican revolution” in economics and warns that “there is no more sense in calling the Jevons-Menger-Walras (marginalist) theory (of value) neo-classic than there would be in calling the Einstein theory neo-Newtonian.” In sum, “neoclassical” market economics is non- and even anti-classical in respect of the theory of exchange value and prices (until Marshall’s synthesis of the two at least) and truly neoclassical in terms of the conception of the market and competition.
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Appendix: Robbins’ An Essay on the Nature and Significance of Economic Science Revisited
Appendix: Robbins’ An Essay on the Nature and Significance of Economic Science Revisited
Lionel Robbins wrote in the 1930s a highly influential and cited book An Essay on the Nature and Significance of Economic Science influencing also sociologists like Parsons during his early career. This work does not explicitly deal with the question of economics’ significance for or convergence/affinity with sociological theory, though it is often interpreted as a sort of “rational choice” attempt at expanding the domain of economic science by defining the latter as the study of “human behavior as a relation of ends and means which have alternative uses”, notably the “study of human behavior influenced by the scarcity of means (i.e.) of the conflict of choice” regardless of its economy or non-economics domain, and by considering the “scarcity of means for satisfying ends” as an “almost ubiquitous condition of human behavior” (Robbins 1932:6–15).
However, such a “rational choice” interpretation of economics is contradicted or relaxed by Robbins (1932:126–7) stating that “economic laws have their own limits” (evoking Walras and Wicksteed) notably that “a regime of law” obtains only in the area of the market, and not in production (sic), within the economy. For if economic laws have “limits” even within the economy, they do even more beyond and thus cannot be plausibly assumed to fully operate in the entire society unless it is construed as the extended “marketplace” of universal exchange and thus not only economics but all social science as catallaxy, yet Robbins (1981) does not fully embrace the latter (especially Mises-Hayek’s “extreme” version). At any rate, Robbins’ main work is considered to be within early contemporary rather than neoclassical economics (though he is usually described as a “neoclassical” economist) and thus outside the scope of the present analysis. In turn, Hodgson (1999, 103) objects that Robbins’ has been “influential but ahistorical definition of economics as the ‘science of choice’ “rather than of the economy or the economic system.
In passing, Robbins’ concept of the “scarcity of means” seen as an “almost ubiquitous condition of human behavior” seems to misconstrue or extend beyond recognition the classical and especially neoclassical concept of scarcity, as do consequently or subsequently ‘rational choice’ theorists (mis)led by his influential redefinition of the (extended) domain of economics. As a rule, classical and neoclassical economics uses the concept of scarcity with respect to material goods or commodities only, and not to non-material, non-economic ‘goods’, while Robbins explicitly incorporates into the ‘scarcity of means’ both ‘economic and non-economic ways of the attainment of given ends’, as do following or echoing him ‘rational choice’ theorists (including the ‘scarcity’ of children, spouses, and the like as non-material ‘commodities), thus extending the concept beyond its original meaning and scope.
Moreover, Robbins seems to misinterpret or extend beyond the original intent the concept of scarcity from the Austrian school and neoclassical economics overall as his major theoretical influence (Hodgson 1999), specifically Menger’s and Wicksteed-Wicksell’s marginalism. For instance, as the probably major theoretical influence on Robbins, Menger (1950:152–5; 1963:77) uses the concept of scarcity strictly in the sense of a material ‘object’s scarcity’, i.e., for what he calls ‘quantities of economic goods’, viz., consumption commodities as ‘goods of first order’ and means of production like capital as ‘goods of higher order’, as does following him the Austrian school overall, but not for non-economic “goods” seen as beyond the scope of economics. Thus, following Menger von Wieser (1956) clearly equates “scarcity” with the “limitation of supply” of economic “goods generally”, as does Böhm-Bawerk (1959) using the notion of the “scarcity of the goods” of production and consumption, including the “scarcity of capital”, but not non-economic “goods” or “means”. Even their presumptive “rational choice” developer Hayek (1937), defining like Robbins economics as the “pure logic of choice”, refers to “each kind of scarce resource” in the clear sense of material goods such as “some raw material.” Also, Wicksteed (1933:47), another neoclassical economist Robbins admires (writing preface to the 1933 edition of his main work), applies the concept of scarcity, just as its opposite “abundance”, to the supply of economic goods, i.e., as the “scarcity [and abundance] of the thing” in the material sense of a “commodity” or means of production like capital or labor (“skill”), and not of non-economic “means”. And, yet another neoclassical economist admired by Robbins (also prefacing the 1934 English edition of his key work), Wicksell (1934:32) states that “marginal utility represents a synthesis of utility and scarcity” with respect to material goods only, more precisely consumption commodities, rather than both economic and non-economic “means”.
In sum, Robbins’ seems to be either an extant “rational choice” misinterpretation or unwarranted generalization of the marginalist concept of scarcity from economic goods or commodities to all “goods” or “means”, in either case overlooking and violating the original intent and domain of the concept and of neoclassical economics overall. Now, Robbins’ expanded “rational choice” conception of scarcity and thus the domain of economics may prove original and influential, but the ground or precedent for such an expansion is, contrary appearances or expectations, not be found in classical and even neoclassical economics, notably marginalism a la Menger (or Wicksell) as his major acknowledged inspiration.
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Zafirovski, M. What is the Main Significance of Economic for Sociological Theory?. Am Soc 44, 177–197 (2013). https://doi.org/10.1007/s12108-012-9169-y
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DOI: https://doi.org/10.1007/s12108-012-9169-y