The Sociology of Economic Life

PREFACE TO THE SECOND EDITION

About ten years after the first edition of this book appeared (1963), Prentice-Hall’s sociology editor recommended a second edition. I welcomed this on several counts. First, though the first edition was still being used in college courses, many parts of it were becoming seriously outdated. Furthermore, I had developed some second thoughts about the first edition, and some new thoughts about the interplay between economic and social forces in the meantime. Revision offered me the opportunity to correct, refine, expand, and modernize the book.

In revising I did not find it necessary to alter the basic framework for presenting economic sociology; thus the chapter titles and many of the main headings within the chapters are the same as before. Under most of these headings, however, little of the original content survives. In particular, chapters 3 and 4 have been greatly expanded and reoriented in the light of accumulated research. Chapter 5 has been recast substantially as well. Finally, I have attempted to update and remove blemishes from the first two chapters, though their revision has not been as extensive as that in the other chapters. I hope that in this second edition I have recorded the advances in our knowledge of the workings of economy and society, while at the same time indicating the many remaining areas of ignorance and uncertainty.

Early in the revision several colleagues directed me to lines of relevant research in economics and anthropology. These were Professors Frederick Balderston of the University of California, Berkeley; George Dalton of Northwestern University; Frederic Pryor of Swarthmore College; and Benjamin Ward of the University of California, Berkeley. I thank them for their advice. Jacques Brissy, a graduate student at the University of California, Berkeley, directed me to literature on managers and stockholders which I might not otherwise have located. I should also like to record my gratitude to staffs of the libraries of the University of California, Berkeley; the London School of Economics and Political Science; and the British Museum; who supplied, efficiently and without complaint, the innumerable books and journals I wished to consult.

INTRODUCTION

To understand and predict any aspect of social life, we cannot ignore economic forces. Consider only one timely example of this principle: the energy crisis of 1973 and 1974 that was occasioned in part by the price increases and temporary export restrictions by many of the oil-producing nations. The economic threat posed to industrialized nations by these measures encompassed a shortage of oil products, inflation, unemployment, and a slowdown if not a reversal of economic growth. These economic effects, moreover, threatened to penetrate the entire social and political order. They threatened to exacerbate group conflicts, as groups such as workers and pensioners found their economic position deteriorating while they witnessed record profits for large oil companies. They threatened to undermine the use of many items requiring energy consumption—cars, boats, distant summer homes—that occupy a central place as status symbols. They occasioned a setback for efforts to preserve the environment, as clean-air requirements were postponed, and environmental objections to offshore drilling and to opening new areas like Alaska gave way to a heightened interest in exploiting reserves. They posed a threat to those parts of child socialization that are dependent on private transportation, such as carting children to school, music lessons, and friends’ houses. Nothing was untouched, and we were forcefully reminded, if reminding was necessary, how dependent is our entire way of life on the economic forces built into Industrial society.

In turn the noneconomic aspects of social life affect the economic. The crisis in the supply of oil, an economic fact, could not be understood without knowing the relations between the Arab states and Israel—relations dependent on political and religious factors as well as economic—and America’s history of political and economic support of Israel. America’s support, moreover, could not be understood without reference to the political role of the Jewish minority in the United States. And the resumption of oil exports by the producing nations, while dependent in part on market forces, was also the result of international negotiation and political compromise.

Even something so intimate as friendship may condition economic processes. If a clique of workmen in a factory do not accept management’s goals of production, they often deliberately slow their output. Moreover, they use the lever of friendship and loyalty to enforce these restrictive practices. Members often go along with the group norms because they wish to remain in good standing in the clique.

It is essential to regard the social world as made up of many aspects—economic, political, religious, familial, educational, and others—all of which can be defined independently of one another, but all of which influence one another. Corresponding to these aspects are various branches of the social sciences. Economics and political science, for instance, concentrate more or less exclusively on the range of problems that arise in the economic and political areas, respectively. Sociology covers a number of social aspects, as indicated by its subfields—sociology of religion, sociology of education, and so on.

This book concerns the economic aspect of life, but it is not a book on economics, as the term is generally employed. Rather, it is concerned with the relations between the economic and noneconomic aspects of social life—how they overlap, how they influence one another. It is also concerned with the sociological analysis of economic activity itself. We refer to this subject as economic sociology.

Economic sociology has grown in shreds and patches. Its contributors go under many labels—economists, labor relations experts, industrial sociologists and psychologists, demographers, economic sociologists, and those who study in areas known as the sociology of work, the sociology of leisure, the sociology of occupations, the sociology of formal organizations, and the sociology of economic development.

In pulling together some of these strands of thought and research, we shall be guided by three kinds of questions:

1.  What do we need to know in the field of economic sociology? What are the main issues in the field?

2.  What do we actually know? What are the major findings of economic sociology? What confidence can we have in these findings?

3. What remains to be known? Do the findings of economic sociology have any genuine bearing on what we need to know in the field? What are the major unknowns in theory and empirical research?

The Program of This Book

We shall examine these questions from a number of different angles:

1.  From the standpoint of the history of thought. In part, the history of economic thought is a procession of major figures who have made advances in discerning the workings of the economic system. In developing their economic ideas, however, these thinkers have made certain assertions about the noneconomic aspects of life. Sometimes these assertions play a significant role in their economic theories. In chapter I we shall examine some of the noneconomic assumptions of Adam Smith, Karl Marx, John May-nard Keynes, and others. We shall also glance at the history of sociological thought, represented by figures such as Emile Durkheim and Max Weber, who inquired specifically into the relations among the economic and non-economic features of society. Finally, to locate the viable issues in modern economic sociology, we shall examine a few recent trends in anthropology, economics, and sociology.

2.  From a theoretical standpoint. In chapter 2 we shall inspect economics and sociology as disciplines. We shall ask what kinds of scientific problem are posed in each field, what kinds of concept are used in each to attack these problems, and what kinds of explanation are generated in each. Then we shall be in a position to give a formal account of the distinctive character of economic sociology, and to set it off from related lines of inquiry.

3.  From a systemic standpoint. Having examined economic sociology from the historical and methodological angles, we shall turn to the substance of the field in chapter 3. Initially we shall consider the economy as one of many structures in society; then we shall ask how it is related to other structures—the cultural (for example, values and ideologies), the political, and the like.

4.  From the standpoint of economic processes. If we concern ourselves only with major social structures and their relations, we remain at a very general level. To get a closer view of the relations between economic and noneconomic variables, we shall study the central economic processes in chapter 4. We shall examine the production of goods and services, then distribution and exchange, and finally consumption.

5.  From the standpoint of economic and social change. It is one thing to examine the findings of economic sociology with reference to production, distribution, and consumption within given economic and social structures, as if these structures were not changing. It is quite another to study the relations among economic and social variables when the major structures in society are changing. We shall devote chapter 5 to the relations between economic and social change, emphasizing the experiences of the new nations of the world.

1

HISTORICAL DEVELOPMENTS IN ECONOMIC SOCIOLOGY

In the past two centuries many eminent thinkers have sought to cope with the major issues of economic sociology. To focus our attention on these issues, we shall consider the history of economic thought, then the history of sociological thought, and finally some recent developments in several social-science disciplines.

So rich is the history of economic thought, even in the past two hundred years, that a full coverage would require volumes. With only a few pages available, we shall simplify our task in three ways. First, we shall consider only a few major thinkers. Second, we shall ignore the major economic significance of their thought and concentrate on the noneconomic byways. Third, among these byways, we shall restrict ourselves mainly to one dimension—the political. This restriction is not altogether unrealistic, for economics was called political economy through much of the nineteenth century and still retains a preoccupation with policy issues.

Mercantilism: The State’s Economy 

The concept of mercantilism refers to a heterogeneous body of ideas that dominated European economic thought during the seven-teenth and eighteenth centuries. These ideas do not form a coherent economic theory, but a conglomeration of value judgments, policy recommendations, and assertions about the nature of economic life. The heterogeneity of mercantilism traces in part to the diversity of persons who espoused it—philosophers, heads of state, legislators, merchants, and pamphleteers From this array, we may extract a few central themes.

The first concerns the mercantilists’ view of wealth. The wealth of a country was held to be equal to the amount of money possessed by that country. Moreover, mercantilists identified money with the precious metals, gold and silver. Since they conceived the total stock of wealth in the world as more or less stationary, they felt that whatever one country gained in wealth, another country lost. (This contrasts with the view of modern economists that foreign trade often benefits both countries, even though one may run a deficit for a time.) Hence the mercantilists stressed either accumulating precious metals outright or maintaining a balance of exports over imports so that precious metals would flow to the home country.

The second theme concerns the mercantilists’ view of power and its relation to wealth. One way to increase national power, many felt, was to increase national wealth. As Taylor observed,

In [the mercantilist epoch] . . . the main over-all purpose of each country’s government, in its efforts to stimulate and direct or guide the country’s commerce and handicraft industries, was to foster growth of national wealth mainly for the sake of national diplomatic and military power and security. The main concern of each nation’s policy was for growth of the relative wealth-and-power of the nation-state as such and as compared with rival, foreign nation-states . . .¹

Mercantilists assumed that wealth works in the service of power, and that the objectives of increasing wealth and increasing power are in essential harmony, indeed almost indistinguishable from one another.

With respect to practical policy as well, mercantilists saw an intimate association between power and wealth. The state is the locus of power. To stimulate economic growth and the increase of wealth, the state should use this power to regulate industry and trade. It should give political and economic support—by establishing state monopolies, for instance—to industries that manufacture goods for export; it should restrict imports by taxation or prohibition; it should colonize in order both to acquire supplies of gold and silver and to secure raw materials to be worked up for export.² By increasing its wealth, the state was also increasing its power.

From the standpoint of the status of economic and political variables, the mercantilists had an undifferentiated theory. By increasing wealth a state increases its power; moreover, it uses its power to increase wealth. If properly controlled, the economic and political systems cannot work at cross-purposes; they are complementary to one another.

Adam Smith: The Weakening of the State’s Economic Control

Adam Smith (1723-1790) was the foremost critic of the mercantilist doctrines. From the multi-sided polemic contained in his famous Wealth of Nations,³ we may extract the following attacks on and reformulations of the basic themes of mercantilism.

With respect to wealth, Smith rejected the mercantilists’ emphasis on money or treasure. The wealth of a nation, he argued, is found in its productive base, or its power to produce the necessaries, comforts and conveniences of life. Money is a medium of exchange that facilitates the allocation of these goods. The level of production depends in turn on the division of labor. The more highly specialized is labor, the more productive it is. The level of specialization of labor depends in its turn on the size of the markets for the products of labor and on the availability of capital.

Consistent with this emphasis, Smith denied the importance of accumulating a treasure of precious metals. Rather, to increase wealth it is necessary to develop the widest possible markets for distributing products. This reasoning lies behind his argument for maximum international trade to be attained by freeing it from tariffs and other restrictions.

Smith also revised the mercantilists’ ideas regarding the relations between wealth and power. While not denying that a nation’s power depends in part on its wealth, he attacked the notion that the best way to increase wealth is through direct political action. Governments should not establish monopolies, fix tariffs, or show favoritism to certain industries. They should instead allow the power to make economic decisions to reside in the hands of the economic agents themselves. In terms of power, the famous doctrine of laissez faire meant that the state should not regulate but should give business and commercial agents the power to regulate themselves. Strictly speaking, laissez faire called for a reallocation of power in society, not simply an absence of power.

Such decentralization does not, however, solve all the political problems of a society. What guarantees that individual economic agents will not misuse their power, gain control of the market, and fix prices? Smith handled this problem by two devices:

1.  He built into his theory an assumption that is a core element of the notion of the perfectly competitive market—the assumption that no individual firm has (or should have) the power to influence price or total output of an industry. No economic agent can at the same time be a political agent. Smith realized that in practice businessmen and others deliberately regulate prices and output; persons in the same trade seldom meet together, he said, but the conversation ends in a conspiracy against the public. But he felt these agreements were unnatural and illegitimate. If the economy were free, businessmen would devote their capital to the most productive enterprises, and the shares of income would find their natural level in the market. The economy would regulate itself.

2.  He assumed that some general political constraints are necessary to prevent businessmen from pursuing their self-interest in an unbridled way. For instance, the state should provide laws to guarantee that sales and contracts are honored; the state should not grant favors to special groups in the economy. Thus even under laissez-faire assumptions, the state is not completely passive. It provides a moral, legal, and institutional setting that encourages business in general but not particular business enterprises.

Karl Marx: The State as Captive of the Bourgeoisie

The thought of Marx (1818-1884) is extremely complex, in part because he attempted to synthesize so many lines of intellectual influence that converged on him. Here we can give only the barest sketch of his view of economics and society, with special reference to his assertions about political forces.

According to Marx, every society, whatever its stage of historical development, rests on an economic foundation. Marx called this the mode of production of commodities. The mode of production in turn has two components. The first is the forces of production, or the physical and technological arrangement of economic activity. The second is the social relations of production, or the indispensable human attachments that people must form with one another in carrying on this economic activity.

But society is composed of more than its economic structure. Resting on it is what Marx called the superstructure, or that complex of legal, political, religious, aesthetic, and other institutions.

The totality of [the] relations of production constitutes the economic structure of society—the real foundation, on which legal and political superstructures arise. . . . The mode of production . . . determines the general character of the social, political, and spiritual processes of life.⁴

This determination might work out in the following way: The most fundamental set of social relations that emerge from the process of production is a class structure, or the division of society into a ruling wealthy class and an exploited poor class. Under the capitalist mode of production—Marx analyzed capitalism in greatest detail—the two classes are the bourgeoisie and the proletarians. The bourgeoisie own the means of production, direct the productive process, and reap the profits from it; the proletarians are wage-workers who provide the actual labor but who do not receive full rewards for it. Given these relations of production, we would expect the state, the church, the community—in short, the superstructure—to operate in the service of the bourgeoisie and help keep the workers subordinated. For instance, politicians and the police would repress worker discontent, and religious leaders would preach ideologies to the masses to convince them either that they are not oppressed or that they will find salvation in a future life.

Let us now examine the relations between economic and political forces. Marx assumed that the capitalist has access to power because of his position in the economic structure; he owns the means of production, and he buys the laborers’ services. The worker, on the other hand, has only his labor to sell and only wages received in return. Because of his position of superiority, the capitalist is able to exploit the worker by lengthening the work day, forcing his wife and children to work, speeding up machinery, and displacing the worker by installing more productive machinery. The capitalist’s power is buttressed, furthermore, by political authorities who pass laws detrimental to the workers and put down any attempts to protest. Under these circumstances, the political forces in society work in the service of the economic forces.

Marx maintained, however, that such a relationship between economic and political forces is not an enduring one. In fact, each type of economic system contains what he called the seeds of its own destruction. Under capitalism, for instance, the bourgeoisie, driven by competition to maintain or increase their profits, gradually drive the workers into greater misery and desperation. These conditions are exaggerated by the occurrence of increasingly severe economic crises. How do the workers respond? At first they remain isolated, in competition with one another, and disorganized; they are capable of only scattered forays against the means of production (for example, machine-breaking) and misguided attacks against the remnants of the feudal order. As workers are gathered into greater proximity to one another in factories, and as the march of industry obliterates the differences among them, they become more mobilizable into collective action groups, such as trade unions. They are now able to force their own recognition and to attain some legislative victories, such as laws limiting the length of the working day. And finally, at the height of their maturity, they form into a revolutionary party, which rises to destroy the capitalist system and usher in a socialist one.

Marx had a complex view of the relations between economic and political forces. In the vital phases of the development of an economic system, the political arrangements consolidate the economic ones; in the degenerative phases, the economic and political forces come into conflict, and this conflict leads ultimately to the destruction of the political and then the economic system. At any given time the exact functional relations between the economic and political forces depend on the stage of development of the society in question.

Adam Smith Revised: The Study of Imperfect Competition

In reviewing Adam Smith’s assumptions about power, we noted that he established a model of the perfectly competitive market—the market in which no individual firm