Economic Lives: How Culture Shapes the Economy

Index

PREFACE

What explains our everyday economic actions? How and why do we spend, misspend, save, invest, or gamble away our monies? Do women and men treat money differently? Why is it, for instance, that women are more likely to allocate the household’s money to children, as compared to men’s allocation of similar resources? What accounts for the fact that even among the most loving couples, partners often conceal or misrepresent their earnings or expenditures?

All of us regularly confront a whole range of such puzzling economic dilemmas. Many of them involve our most intimate ties: should we help our adult child with his or her finances, and if so, for how much and how long? How and for whom should we spend the tax rebate or income tax refund? When should we write our wills? How can we manage the care of an aging parent without losing our jobs? What do we owe our uninsured mother-in-law who needs expensive medical treatment? Does the sibling who cares for our parent have a greater right to that parent’s inheritance?

Our responses are not always consistent. Why, for instance, do people often react with disgust or discomfort at efforts to set a monetary value on human life, yet embrace life insurance and multiple other legal arrangements for compensating with cash the injury or loss of life? For less daunting quandaries, think of routine gift-giving dilemmas: when, for instance, are gifts of cash appropriate and when are they tacky? When does offering a gift certificate offend the recipient?

The search is on for superior explanations of these and many other features of our economic lives. Impatient with standard accounts of economic action as inexorably driven by calculating self-interest, in the past few decades scholars from a range of disciplines have proposed sparkling new understandings of economic activity. Turning away from abstract theories and plunging into the messiness of actual economic practices, sociologists, anthropologists, psychologists, and others are slowly but surely revolutionizing how we understand life’s commerce. From different perspectives, these scholars expose a rigid concept of homo economicus as a rusty, old-fashioned notion ready for retirement. Even some economists, while fully embracing rational choice models, have broadened their vision to provide often surprising and instructive explanations for the economics of everyday life.

The serious political implications of the challenge to standard economics became clear in 2008. The financial debacle that jolted the world painfully dramatized the need for new macroeconomic paradigms. The crisis not only upset economic institutions and practices but radically undermined prevalent understandings of how the economy works. The fantasy that real contemporary capitalist systems have perfectly free markets and that these can produce the best of all possible economic worlds crumbled along with the speculative, unregulated market policies and products it had spawned. Even the staunchest free-market advocate, Alan Greenspan, former chairman of the Federal Reserve, famously conceded in October 2008 before the House Committee on Oversight and Government Reform that he had found a flaw in his free-market ideology.

Indeed, in 2009, the newly elected Obama administration paid close attention to the strategic alternative insights of behavioral economists such as Richard Thaler. Thaler and Cass R. Sunstein’s best-selling Nudge (2008), along with George A. Akerlof and Robert Shiller’s equally influential Animal Spirits (2009), further expanded the public debunking of neoclassical orthodoxy. In July 2009, even the Economist’s cover proclaimed, Modern Economic Theory: Where It Went Wrong—and How the Crisis Is Changing It.

Farther away from the political and best-selling limelight, sociologists have been making their own crucial inroads into alternative visions of economic life. Note the difference. Inspired by Daniel Kahneman’s revolutionary behavioral paradigm, some economics-based rebels typically challenge standard notions of individual rationality by documenting people’s unpredictable and often irrational decisions. Sociologists move away from such psychological diagnoses, focusing instead on the cultural and structural grounding of individual economic preferences. While personal choice and incentives may explain a great deal of economic behavior, our relations to others become the centerpiece of sociological accounts.

Our economic actions, sociologists insist, remain mysterious or may even appear to be irrational until we understand that they exist within dense webs of meaningful relationships. When we spend, save, invest, give, loan, share, or donate, it matters who we are doing it with, for whom, when, and what the meaning of those transactions convey to others. Monies we spend or refuse to spend, for instance, often signal which relations matter to us. Economic action, therefore, does not revolve around just our own individual selves but our relational selves as well. One cannot predict behavior from individual preferences alone, because people are constantly negotiating those preferences in their interactions with others.

As a result, when we replace theories of individual rationality with theories of individual irrationality, we just introduce a different kind of problem. We need to probe further into those social relations that frequently help us decipher and explain seemingly irrational preferences. Instead of irrationality, we discover variable forms and definitions of what constitutes both rationality and self-interest. Such variation often hinges on the social interactions in which economic action involves us. What determines, for instance, the kind of social relations that people establish for different sorts of economic transactions, such as buying a used car or renting an apartment? Conversely, how do the kinds of social relations already existing among the parties to an economic action affect its character and outcome? When buying a house, what difference does it make if buyer and seller are kin, friends, or strangers connected by a real estate agent? In each case, how and what we define as rational action will vary significantly.

With a focus on such socially based questions and drawing from a range of theoretical frameworks, in the past thirty years or so sociologists have created a set of important alternative explanations of economic activity. Relying on an increasingly broad spectrum of methods, from sophisticated network analyses to rich ethnographic observation, economic sociologists offer revealing accounts of how economic organizations and activities actually work.

This book does not embark on a full survey of the academic specialty called economic sociology. But if you follow it from chapter to chapter, you will discover a shadow history of that field. As later sections of the book detail, when my scholarly career began, economic sociology was a very small field that divided its attention between broad sketches of the social contexts in which different sorts of economic systems developed and narrower analyses of constraints placed by social structure on such economic activities as finding jobs.

My own research in the cultural history of economic practices took place in an entirely different intellectual world from that of early economic sociology. But, as the book’s chapters document, gradually the field expanded its range as my own analyses gained from increasing interaction with those of other economic sociologists—at first mainly critical, but eventually collaborative. This volume gathers a set of papers that document my path for the past thirty years within the developing field of economic sociology. The essays represent my efforts to explore selected features of everyday economic behavior and thus propose a distinctive approach to thinking about our economic lives.

Any republication of papers drawn from the length and breadth of a scholarly lifetime makes two strong claims and one weak claim. The first strong assertion declares that the papers have retained a significant share of their original value despite the passage of time and the accumulation of other scholars’ work on the same subjects. The second contends that the ensemble of papers adds value to the simple sum of individual contributions. The third, weaker, claim concerns the reader’s convenience: having all the papers available in one compact volume will facilitate getting hold of publications that would otherwise take a substantial effort to track down. Simply producing this volume commits me to all three claims. I have tried to add extra value and convenience, however, by preparing brief background essays introducing the entire collection as well as its smaller clusters of essays.

Published over the course of thirty years of work on the social side of economic life, the articles in this book inevitably overlap to some extent. At least in my case, dogged pursuit of such questions as how people attach monetary values to goods that are not routinely available in commodity markets means that similar questions come up repeatedly, sometimes with identical answers from one iteration to the next. In compensation, the essays as a whole identify an evolution of theory, method, and materials for the explanation of economic processes, from an early concern to place them firmly within their cultural and historical settings to a more recent effort to describe and explain how people negotiate solutions to the knotty problem of reconciling economic activities with the demands and conflicts of delicate interpersonal relations. However well you think the book’s chapters attack these issues, at a minimum the volume as a whole shows why they are worth addressing and how they require close observation of small-scale economic life.

Of course, institutions and people helped me along the way. A John Simon Guggenheim Fellowship, a visiting appointment at the Russell Sage Foundation, and another visiting appointment at the Institute for Advanced Study gave me precious respite from teaching and administration. My service on the advisory committee of the Paris School of Economics has opened the organizational life of professional economics to me as never before, just as my collaboration with Avinash Dixit in organizing Princeton University’s workshops on economics and sociology has involved me in creating intellectual and personal links between the two communities. My unexpected election as first chair of the American Sociological Association’s Section on Economic Sociology in 2001 offered me an unprecedented opportunity to bring together previously disparate currents within the field. Less formally, expanding contacts with western European scholars (especially in Paris), have brought me into fruitful interchanges with kindred spirits across the Atlantic. More recently, I have begun similar conversations with researchers in Argentina and Brazil.

Over the years during which I wrote this volume’s essays, generous colleagues, friends, and family—too many to list—have earned my gratitude with advice, criticism, information, and encouragement. Sadly, some of those dear collaborators are no longer here, but their memory continues to inspire and guide me. Whole cohorts of talented Princeton graduate students have also given me the benefit of their insights, while my colleagues at Princeton have offered support and provided models of academic excellence.

As I prepared the new essays in this book, several friends and colleagues gifted me with their time and caring effort, helping me to clarify ideas and correct misconceptions. I am grateful to Nina Bandelj, Paul DiMaggio, Avinash Dixit, Alice Goffman, Alexandra Kalev, and Michael Katz. Martha Ertman, Mark Momjian, and Carol Sanger offered their expert advice on legal materials. Pierre Kremp provided valuable research assistance. I thank also Ronald Burt and an anonymous reviewer for their excellent suggestions on an earlier draft of the volume. The magical Chuck Tilly beamed his enthusiasm and support as I began this project. Sophia and Nathan Zelizer brightened the path.

Once again, Princeton University Press has been a marvelous home for my book. Beth Clevenger oversaw the project with great care, Victoria Hansard managed copyright requests, and Pamela Schnitter created the lovely cover design. Beth Gianfagna contributed once more her graceful editing of the text. For more than twenty years, it has been my good fortune to have Peter Dougherty, the press’s extraordinary director, as my editor and friend. Ever since he arrived there, Peter has been a crucial contributor to the dissemination and promotion of economic sociology.

Il Mulino has published an overlapping Italian language collection of my papers. I thank Carlo Trigilia and Roberta Sassatelli for proposing the translation of my work to Il Mulino.

Economic Lives

INTRODUCTION

The Lives behind Economic Lives

When I started my academic journey during the 1970s, I never imagined that I would arrive at the center of a field called economic sociology. This collection of papers from across that journey—so far!—traces the intersection of three initially separate paths: the development of one scholar’s theoretical and empirical concerns; the transformation of a once-marginal intellectual field into a flourishing enterprise; and the opening of new conversations between two established but long-alienated disciplines: economics and sociology. This triple perspective has a deep disadvantage and a strong advantage. On the negative side, it suggests a false claim that I accomplished the syntheses and new discoveries on my own. On the positive side, it provides a privileged observation post for inspection of how intellectual enterprises change through interaction among their discipline-bound participants.

Here’s another way of looking at the book. The pages you have before you trace an intellectual journey through the obscure borderlands of culture and the economy. Although the chapters draw mainly on evidence from the United States since about 1850, they address issues of concern to anyone anywhere who wants to clarify how shared understandings and interpersonal relations infuse and shape the ostensibly impersonal worlds of production, consumption, distribution, and asset transfers: When new forms of economic activity arise, how do ordinary people integrate them into their existing webs of meaning and solidarity? (For example, do people treat electronic currency differently from hard cash?) How do markets and interpersonal networks shape each other? (Is it true, as commonly believed, for example, that marketization drains personal relations of their strength, warmth, and meaning?) Once they are trying to describe and explain the economic lives of households or of children’s friendships, how must analysts modify standard economic models based on firms and production markets? (Should we assume, for example, that efficiency matters less to the viability of economic activity outside of firms and production markets?) Each chapter in the book addresses such questions by rejecting narrow economic reductionism but without fleeing to the opposite extreme—construction of a fantasy world consisting entirely of beliefs and sentiments.

This introduction contains three main sections: a review of my personal itinerary through the study of economic phenomena; a sketch of how the field of economic sociology took shape from the 1980s onward, including my place within it; and reflections on current relations between the disciplines of economics and sociology.

At the start of my long effort to make sense of intersections among economic activities, small-scale interpersonal relations, and shared culture, I supposed that the central challenge was to show how slowly moving and humanly motivated shifts in culture—in shared understandings and their representations in symbols and practices—generated changes in ordinary people’s treatments of social dilemmas such as the adoption of life insurance in the face of sacred prohibitions on the monetary evaluation of human life. That conception belonged part and parcel to a major current of historical sociology as practiced back then. We might call it the analysis of culture in social history. That approach offered a welcome alternative to the rational materialism that then constituted its chief rival within social history.

As with most beginners in a professional field, my graduate school mentors provided the platform from which my intellectual career began. Three sociologists and a historian stand out among the stellar figures who were teaching at Columbia University during the 1970s. Historical sociologist Sigmund Diamond (who had in fact received a Ph.D. in history), analyst of changes in American wealth and power, revealed a vision of historical evidence as a basis of sociological interpretation. Historically and theoretically ambitious Bernard Barber, whose specific work centered on the sociology of natural science but proliferated into general analyses of social structure, showed enormous sympathy for my fumbling efforts to make theoretical sense of historical evidence. Historian of medicine and the criminal system David Rothman integrated me into a group of fledgling scholars who were learning the delights and perils of social history. Although he stood at a greater distance from my particular work, the always wise Robert K. Merton repeatedly intervened to help me sharpen my arguments and connect them more firmly to relevant strands of social theory.

These early influences imposed a cost that only later became a benefit. I remember all too painfully an early interview for a job in a university sociology department during which my interrogators asked pointedly how my social historical research qualified as sociology at all. Fortunately, the boom in collaboration between American history and social science that was occurring during the 1970s in the work of such diverse scholars as Michael Katz and Herbert Gutman provided a partial justification for my own style of work. It also differentiated my efforts from the other great enterprise then under way in historical sociology: the comparative-historical study of large structures and big processes in the vein of Immanuel Wallerstein and Theda Skocpol. Thus, unexpectedly, my work found a temporary home within sociology.

Of course, later intellectual interchanges also shaped my thinking. From the late 1980s, work in new institutional settings expanded the range of my intellectual relations. A delightful year at the Russell Sage Foundation brought me into contact with a spirited, diverse group of specialists in various economic processes; among other things, it initiated a long-term dialogue with fellow Russell Sager Charles Tilly, who constantly urged me to expand my theoretical range. A move from Barnard College to Princeton University intensified my exchanges with Paul DiMaggio and Alejandro Portes, while adding more frequent conversations with Michael Katz at the nearby University of Pennsylvania. About the same time, Richard Swedberg and Neil Smelser helped me find my place in economic sociology by mapping me into their own influential systematizations of the field. At Princeton, a marvelous crop of graduate students likewise stimulated me to extend the range of my own thinking.

In retrospect, I now see that the cultural social history with which I began greatly underplayed two problems that eventually occupied the center of my work: how interpersonal negotiations actually transform both available culture and personal relations, and how negotiated interpersonal relations shape the accomplishment of concrete economic activity. Among other things, then, this book chronicles a transformation of my personal approach to the analysis of social processes.

Almost unconsciously, that shift of theoretical perspectives induced alterations in my methods and materials. My earlier work generally assembled and connected two bodies of evidence: observations of changes in widely shared conceptions of some social phenomenon—the value of human life, the character of money, and so on—and partly independent observations of changes in social practices, such as the creation of particularized monies matched to different sorts of social relations.

Increasingly, however, my methods and materials shifted toward two other foci: (1) examination of how people accomplished apparently similar economic work, such as provision of personal care and maintenance of households, in different social settings, and (2) close scrutiny of disputes that arise in the course of negotiating economic relations, notably including legal cases that simultaneously dramatize the issues of everyday social relations and clarify how different social milieus deal with similar dilemmas. As a result, the long-term inspiration of social history transmuted into a concern for locating contemporary economic processes within their social contexts.

Starting in the 1990s, my increased interest in the legal treatment of economic processes brought me into valuable conversations with legal scholars, especially with participants in the so-called New Chicago School critique of the prevailing law and economics approach, such as Dan Kahan, Lawrence Lessig, and Cass Sunstein. Gradually, the dialogue extended to feminist legal scholars involved in vigorously contesting standard approaches to commodification for, among other things, failing to acknowledge women’s unpaid economic contributions.

Rather than following the nuances and uncertainties of my intellectual itinerary, let me schematize by breaking my successive inquiries into big chunks. Over the roughly thirty years that these problems have preoccupied me, my work on them has fallen into six clusters: (1) valuation of human lives, (2) the social meaning of money, (3) intimate economies, (4) the economy of care, (5) circuits of commerce, and (6) critiques and syntheses.

I first approached the valuation of human lives with a historical analysis of how Americans came to accept life insurance as a prudent investment in the future rather than an obscene wager on human mortality; my book Morals and Markets (1979) summarized that analysis. I complemented this study with a similarly historical analysis of how Americans shifted from treating children as economic assets to considering them as priceless; the book Pricing the Priceless Child (1985) reported that line of work most extensively.

Second, my analysis of the social meaning of money centered on a similarly historical treatment of the ways that ordinary Americans responded to their government’s imposition of uniform legal tender by creating a wide variety of special monies that they used to mark off different activities and social relations from each other; The Social Meaning of Money (1994) reported that inquiry. These studies of valuation and money also produced some useful offshoots, notably synthetic essays on children’s economic lives and consumption by both adults and children.

My third field of interest, intimate economies, introduced a less historical but more synthetic survey of intersections between economic activity and intimate relations in four areas: households, erotically linked couples, the provision of personal care, and legal disputes arising from those relations. The Purchase of Intimacy (2005) proposes what I call a connected lives approach for investigating and explaining multiple forms of mingling between economic transactions and intimate ties. Although it did reach back occasionally to nineteenth-century practices and legal disputes, the book broke the mold of cultural social history that had shaped most of my previous work. The work on intimacy continues to have ramifications, in analyses of corporate ethical codes or the impact of intimacy on the performance of economic organizations, for example.

A fourth cluster of analyses stemming from the work on intimacy dealt with the economy of personal care—the provision of welfare-enhancing personal attention ranging from professional health services to household labor. This cluster took my research farther into the distinction between paid and unpaid forms of economic interaction.

I call the fifth cluster circuits of commerce, the exploration of how people create distinctive, bounded arrangements of social relations that sustain economic activity in ways that the standard terms of firms, hierarchies, and markets do not grasp, for example, in such arrangements as migrant remittances, rotating credit and savings associations, and local monies.

Finally, a sixth set of studies consists of more general essays, mostly critical, concerning the interplay of economic activity and social life, especially as pursued by economic sociologists in Europe and the United States; these analyses appear here together for the first time within the same book. This volume, then, offers samples of all six lines of work.

The remainder of this introduction reviews economic sociology’s development as seen from my perspective and provides a snapshot of current relations between the disciplines of economics and sociology.

ECONOMIC SOCIOLOGY

My grounding in the social-historical study of culture, interpersonal relations, and economic activity prepared for a peculiar encounter between my work and the distinctive subdiscipline called economic sociology. Unexpectedly, that encounter swept me into some of economic sociology’s central debates. My entry occurred through deep suspicion of three common modes of thought concerning economic processes. I eventually labeled those perspectives separate spheres, hostile worlds, and nothing-but. Separate-spheres doctrines posited two distinct arenas of social life, one oriented toward rational effectiveness, the other toward sentiment and solidarity. Left to itself, according to the doctrines, each sphere operated more or less harmoniously. But the hostile-worlds model predicted mutual contamination if the two spheres intersected closely: the penetration of rational calculation into the sphere of sentiment would disrupt solidarity, just as the penetration of sentiment into the sphere of rationality would disrupt efficiency.

As alternatives to these paired doctrines, other scholars proposed an array of nothing-but characterizations for socially informed economic activity: nothing but rationally organized markets, nothing but power, nothing but culture. My work on the valuation of lives and on monetary practices forced me to recognize the inadequacies of all these views. I therefore first discovered economic sociology with surprise and some dismay—not least because then almost no women numbered among economic sociology’s practitioners. Little did I then think that it would become the site of my work to come.

To be sure, the sociological study of economic processes has a long lineage. Karl Marx, Max Weber, and Emile Durkheim led the way. In the United States during the 1950s, Talcott Parsons and Neil Smelser set out to synthesize economic and sociological approaches, but their efforts failed to galvanize a new specialty. What is now called the new economic sociology took off in the 1980s. As the chapter Pasts and Futures of Economic Sociology points out, in its early stages, economic sociologists remained closely attached to mainstream economics. Specialists concentrated on two activities: extending economic analysis into areas economists ignored and identifying social contexts that facilitated or constrained economic action.

Most notably, the concept of embeddedness became economic sociology’s icon; in its simplest versions, embeddedness described the way that price setting, asset transfers, and other standard economic activities (presumed to operate internally according to the precepts of neoclassical economics) responded to their location within varied social settings. These insights launched a broad program of inquiry. But they also perpetuated the fallacies of nothing-but economic reductionism on one side and of separate spheres on the other. Nothing-but extension views promoted an understanding of all economic processes as conforming to the thin models of mainstream economics. In contrast, context theorists maintained the distinction between a world of social life and a distinct world of economic activity, instead of integrating them.

Gradually, however, criticism of these deficiencies accumulated. In the process, economic sociologists began formulating a variety of alternatives to extension and context approaches. In recent analyses, they have moved from straightforward network conceptions of interpersonal ties to an emphasis on the variable quality, intensity, meaning, and consequences of relational ties among economic actors. They have also moved away from the simple exportation of economic models to areas outside of firms and markets to a critical examination of the distinctive economic forms that arise in such settings as households, informal economies, consumption markets, the care economy, microcredits, migrant remittances, and gift transactions.

In Europe, economic sociology’s path differs from the U.S. trajectory for two main reasons. First, the economics to which Europeans are responding is quite different in emphasis, reflecting more of an institutional, historical, and comparative background than U.S. economics. Second, economic sociology connects more closely with reform and applied programs in Europe than it does in the United States. My work with the Economic Sociology section of the American Sociological Association has led me to recognize the tense but potentially very fruitful dialogue Americans are carrying on along the same line. Despite starting out as a specialist in the American economy, within the section of the ASA, I found myself increasingly connecting European and American work in this vein. (It helps that I grew up bilingual in Spanish and French.)

My extensive contacts with European sociologists and economists, especially in the Paris region, have revealed a world of scholarship in which many people are trying to make strong connections among moral theories of the economy, ideas of social change, and public policy. French economists and sociologists have moved toward the formulation of truly alternative, socially based description and explanation of economic activity. Denying any intrinsic division between sociology and economics, for example, in 2005 economist André Orléan issued a stirring call for what we can name alternative accounts of economic activity in general.

As I pointed out earlier, I did not start out as a self-defined economic sociologist. In a sense, I just backed into the field. For years I worked mainly on changes in American social life, with special attention to how economic processes affected it. My first three books dealt with the development of life insurance, the valuation of children, and people’s uses of money. I thought of myself as a historical sociologist, but not in the grand style of comparing empires, whole economies, and industrial revolutions. Then scholars who clearly belonged to economic sociology, such as Pierre Bourdieu, Harrison White, and Richard Swedberg, began using my work and treating it as a challenge to conventional economic thinking.

Surprised but pleased, I gladly joined debates about how economic processes work. By the time I published The Purchase of Intimacy in 2005, I was both teaching my own version of economic sociology and contributing regularly to symposia on the subject—especially when organizers wanted to show how economic analysts could treat culture and small-scale interpersonal relations effectively. The same effort found me integrating gender differences and relations into economic analysis far more extensively than other economic sociologists had previously done. My students then drew me farther into the study of economic organizations and transnational economic processes. That placed me in the middle of discussions about the proper pursuit of economic sociology.

Authors of books that are still in print can gain insight into their intellectual locations by consulting a dramatic feature presented on line by the bookseller Amazon.com. The Web site amaznode.com compiles Amazon’s own sales for a network-style visual presentation of what other books people who bought a given book also bought.¹ When last consulted, amaznode displayed the commercial connections of Pricing the Priceless Child (PTPC), The Social Meaning of Money (SMM), and The Purchase of Intimacy (POI). The network graph tells a story of its own. PTPC links to more recent economic sociology, but it connects most closely with books on the history of childhood and nineteenth-century American history. SMM locates closer to standard economic sociology, but it clusters especially with books (including mass-audience books) on markets, economic life at large, and connections between law and markets. POI, finally, lies in the very middle of current economic sociology but also—and more surprisingly—makes connection with work on network analysis. We could hardly ask for a more graphic depiction of the initially quite separate but eventually convergent development of my analyses and those of economic sociology in general.

ECONOMICS AND SOCIOLOGY

Despite the advances of economic sociology during recent decades, the intellectual relationship between the disciplines of economics and sociology remains enormously lopsided.² Economists intermittently draw on material assembled by sociologists (for example, concerning the economics of migration) to document their own discipline-based arguments. But nothing like the relatively free flow of ideas that currently runs between sociology and political science links economics to sociology. On their side, sociologists who study economic processes all too easily accept the problem-setting of standard economics rather than intervening in ways that place new analytical problems on the economics agenda.

Economic sociologists’ almost obsessive commitment to their one-sided dialogue with economists has mixed effects. On one side, it opens a channel of communication through which good, new ideas can flow fruitfully in both directions. Within my own university, I have helped organize colloquia from which both the economists and the sociologists have visibly benefited. On the negative side, let me signal one pernicious effect: a strong tendency to concentrate on the same economic sites—notably capitalist firms and production markets—that have largely captured mainstream economists’ attention. This weakness encourages economic sociologists to ignore households, informal economies, and trust networks (or relegate them to the economic periphery, treated as quasi-economies).³

Yet a halting dialogue between economics and sociology is developing. As it happens, the recent successes of behavioral economics, game theory, feminist economics, organizational economics, institutional economics, and household dynamics have all produced welcome openings for dialogue between the disciplines. Some economists have begun to look seriously at culture and social relations. Take just three prominent examples.

First is economist Robert Gibbons’s 2005 article, What Is Economic Sociology and Should Any Economists Care? Gibbons answers yes to his rhetorical question, reporting that his own interest began when I recognized that some sociologists were working with independent and dependent variables that were barely mentioned in the economics literature, but seemed potentially quite important. Gibbons calls for a Pareto-improving dialogue between the appropriate margins of economics and sociology.

Second, Luigi Guiso, Paola Sapienza, and Luigi Zingales in their 2006 paper also answer a resounding yes to their own query: Does Culture Affect Economic Outcomes? Although they do not cite economic sociologists (with the exception of rightly praising Paul DiMaggio’s work), they treat culture—by which they mean collective beliefs, identities, and preferences—seriously, not as outcome but as an independent causal factor. They conclude that importing cultural elements will make economic discourse richer, better able to capture the nuances of the real world, and ultimately more useful.

Finally, George A. Akerlof’s 2007 presidential address to the American Economic Association emphatically called for recognizing norms as the missing motivation in macroeconomics and outlined specific ways of incorporating those norms into economists’ analyses. While remaining faithful to economics’ focus on individual preferences and motivation, Akerlof broke crucial new grounds for dialogue between economists and sociologists (see also Akerlof and Kranton 2010).

However, if they want to have a serious impact on economics, economic sociologists cannot simply wait for bright-eyed economists to notice what they are doing. Economists pay serious attention when analysts make direct and cogent bids to revise existing economic analyses. Notice the great difference in impact by three bodies of relevant, innovative work that have grown up over the past twenty years: game theory, behavioral economics, and economic sociology itself. Game theory for all practical purposes has become an integral part of economic theory. Every economics student learns it. Game theory has made it perfectly legitimate to set up analyses of economic choice situations not as individual cognitive decision making but as a form of social interaction. It is a success story for a research framework that at one point was alien to neoclassical economics.

Behavioral economics, despite its remarkable success, still remains at a halfway point. It may well follow game theory, but there is still a question whether it will fundamentally modify mainline economic theory or remain a critical, dissident movement within economics. In a review of advances in behavioral economics, Wolfgang Pesendorfer (2006) notes that behavioral economics remains a discipline that is organized around the failures of standard economics. This symbiotic relationship with standard economics, he notes, works well as long as small changes to standard assumptions are made. Despite the Nobel Prize in economics shared by Vernon Smith and Daniel Kahneman, we have yet to see the microfoundations of standard economics transformed in the manner that behavioral economists claim they should be.

CONCLUSION

In my opinion, economics has paid a stiff price for its current scope and precision. It has, on the whole, located its central causes in the decisions of largely autonomous individuals who operate within constraints set by well-defined resources and institutions. Even game theory, after all, generally features individuals who make choices individually with no more than anticipation of how other parties will make their own autonomous choices. Such an approach has the virtue of parsimony. But it almost entirely neglects the incremental negotiation of shared understandings and interpersonal relations that lies at the center of alternative, more sociological, analyses of economic processes.

Sociologists, to be sure, pay the opposite price: a potpourri of theories and observations so various that a researcher can rarely be sure that a new finding actually fits with or contradicts previously accumulated understandings of the economic process at hand. It is even worse than that, because economic sociologists so regularly specialize in one structure or process at a time, some dealing with households, some with migration, some with firms, some with the exchange of particular commodities. As a consequence, intellectual accumulation proceeds slowly and uncertainly. Gradually, I have come to see my own work partly as a rescue operation: helping other students of economic processes recognize similar forms of interpersonal negotiation and cultural accumulation in a wide range of settings, whether or not they belong to the traditional subject matter of economics.

Yet I see hope. Economic sociology certainly has some of the same potential as game theory or behavioral economics, but it has remained far outside of economists’ main conversation. So far, it attracts only dissidents within economics. It is certainly not something that economics students routinely learn about. Economic sociologists face an interesting choice: plunge into the core models of economics in the wake of game theory and behavioral economics, or continue their current business in hope that friendly economists will do the importing for them.

The first choice means deploying the concepts, models, mathematics, and econometrics that have become economists’ stock in trade. As economist Dan Silverman (2006) points out about the thus far incomplete success of behavioral economics, it typically involves identifying processes that standard economic models must treat as anomalies, rewriting relevant economic models so they account for the anomalies, and establishing the empirical validity of the revised models. It may also mean reducing the dialogue with the rest of sociology. But the second option means remaining peripheral to the exciting current transformations of economics. Given my own limited knowledge of technical economics and my preference for direct observation of economic interactions, of course, I hope that some of each—both integration of economic sociology into economic theory and sociological inquiry into economic processes—will continue for the foreseeable future.

It will not be easy, if only because the exemplary cases of game theory and behavioral economics involve modification, but not elimination, of economic models’ deep individualism. It will take great theoretical, technical, and even rhetorical finesse to make interpersonal processes, including culture, genuine foci of economic analysis. How will sociologists rewrite economic models so that they incorporate the culturally drenched dynamics of organizations, households, institutions, and interpersonal ties?

Evidence that a rapprochement is possible in principle, however, comes from a fourth innovative field: the new institutional economics. Researchers in this field have absorbed the findings from behavioral economics about the departure of actual behavior from traditional economic rationality and selfishness, and used the framework of game theory with varying degrees of formality. Starting with Douglass North’s distinction between the rules of the game and the play of the game, through Oliver Williamson’s analysis of opportunism based on Thomas Schelling’s concept of credibility, to the formal models of constitutions developed by Daron Acemoglu and James Robinson, this work has elucidated how institutions influence the form and outcome of economic transactions, most notably property and contracts. This has profoundly changed and enriched our understanding of firms, industries, and markets, as well as the historical processes of economic growth and development. Institutional economists have plenty in common with institutional and economic sociologists: awareness of organizational processes, concerns about contract enforcement, openness to culture, and more. Although I hope we can continue the dialogue about small-scale economic processes and micro- foundations, we also have an opportunity for an innovative economics- sociology alliance on the large scale.

By no means does the book before you synthesize contemporary thinking in economics and economic sociology. Far from it: the book’s chapters trace an itinerary into and through economic sociology with only side glances at parallel developments within economics. But they do, I think, raise issues about which economists could benefit from studying more extensively. Most centrally, the book examines how connected people incorporate available culture and interpersonal relations into their daily negotiation of economic activity. In doing so, all of us incessantly reshape the economy at the small scale and the large. That is why I have called this book Economic Lives.

NOTES

1. I thank Kieran Healy for alerting me to the site (http://amaznode.fladdict.net) and making a presentation based on it in his paper The Performativity of Networks, at the American Sociological Association annual meetings, August 2007.

2. The following two sections are drawn from Interview: Viviana Zelizer Answers Ten Questions about Economic Sociology, European Economic Sociology Newsletter 8 ( July 2007): 41–45.

3. To be sure, there are exceptions on both sides, as a number of economists and economic sociologists have contributed important work to those areas.

REFERENCES

Akerlof, George A. 2007. The Missing Motivation in Macroeconomics. American Economic Review 97 (March): 5–36.

———, and Rachel Kranton. 2010. Identity Economics: How Our Identities Shape Our Work, Wages, and Well-Being. Princeton, N.J.: Princeton University Press.

Gibbons, Robert. 2005. What Is Economic Sociology and Should Any Economists Care? Journal of Economic Perspectives 19 (Winter): 3–7.

Guiso, Luigi, Paola Sapienza, and Luigi Zingales. 2006. Does Culture Affect Economic Outcomes? Journal of Economic Perspectives 20 (Spring): 23–48.

Orléan, André. 2005. La sociologie économique et la question de l’unité des sciences sociales. L’Année sociologique 55:279–305.

Pesendorfer, Wolfgang. 2006. Behavioral Economics Comes of Age: A Review Essay in Behavioral Economics. Journal of Economic Literature 44 (September): 712–21.

Silverman, Dan. 2006. Review of The Law and Economics of Irrational Behavior, edited by Francesco Parisi and Vernon L. Smith. Journal of Economic Literature 44:728–31.

PART ONE

Valuation of Human Lives

Pricing life raises daunting questions: How can we establish monetary equivalents for human existence? Should we? Are all lives worth the same, or are some more valuable than others? Who decides? Is giving money to compensate for death proper recognition of a serious loss, or is it a morally corrupting practice? Is accepting payment evidence of a recipient’s greediness or a legitimate way to seek justice? Who is entitled to receive money for the death of others? Which others?

After the terrorist attacks of September 11, 2001, Kenneth Feinberg, appointed by Congress as special master of the Victim Compensation Fund, faced such troublesome issues. As he recounts in his book, What Is Life Worth?, I realized what a huge responsibility I confronted, putting price tags on lost loved ones’ lives. . . . It was not just about the money, about providing bereaved families with a cash lifeline. It was about compensating for a catastrophic emotional loss—trying to fill the hole in a family’s life with money (2005, xxi, xxiii). Yet he managed to successfully apportion almost $7 billion to settle 2,900 claims for death and 4,400 claims for personal injury. It was an arduous process. Feinberg repeatedly faced deep hostility from outraged survivors offended by what they perceived as pitifully inadequate awards. At the same time, indignant critics accused him of cheapening human life with his crass economic ledgers.

A few 9/11 survivors opted out of the fund. Michelle and Clifton Cottom, for instance, sued the airlines instead. Their eleven-year-old daughter Asia died on American Airlines flight 77 when hijackers crashed the plane into the Pentagon. She was heading to Los Angeles on a school trip. Because Feinberg’s compensation scheme used lost economic value as its main standard, survivors of victims with low or no earning potential received significantly less compensation than high earners. Michelle Cottom sued the airlines because she found the victim compensation calculations unfair and offensive. As she put it in a New York Times interview, To me, it just smelled of dishonesty. How do you justify, O.K., an 11-year-old is worth $2, but because you’re the pilot of the plane, that’s worth $2 million? (Hartocollis 2007).

Other tragedies brought their own dilemmas on pricing life and death. The Iraq War, for example, raised the issue of compensation for the death of U.S. service members but also for Iraqi civilians killed. In 2005, partly as a result of embarrassing comparisons to the much higher 9/11 awards, the so-called death gratuity for survivors of military personnel killed in combat operations was increased from $12,000 to $100,000. Although a welcome relief for most families, some women, as one Navy widow put it, feel like they were paid off for their husband’s life (Foderaro 2008).

Compensating for Iraqi civilian casualties created its own complexities. Legal scholar John Fabian Witt suggests that American-style damages payments are fast becoming one of the ways the twenty-first-century U.S. military attempts to win the hearts and minds of civilians in war zones (Witt 2008, 1456). Besides damages paid through the Foreign Claims Act, the United States offers condolence or solatia payments to Iraqis killed or injured by U.S. armed forces. According to Department of Defense estimates, between 2003 and 2006, the United States distributed about $30 million in such payments to Iraqi as well as Afghan civilians. Individual awards, however, remain paltry. After an American missile killed his brother, sister, wife, and six children, Said Abbas Ahmed received $6,000 compensation. According to a New York Times report, he complained, This war of yours costs billions . . . are we not worth more than a few thousand? (Gettleman 2004).

What is striking about all these cases is that the solutions typically rely on some formula built on economic value: so much money to compensate for a given death. Yet they all repeatedly raise questions of justice and fairness. Is the compensation fair? For whom? What defines fairness? Who defines it? Pricing lives thus sets up a problem for economic analysis. No straightforward price-setting market exists for valuation of human life—and therefore for the loss of life—the way a price-setting market values gold or other commodities. No magical calculator yields a neat ranking of human lives.

We find three frequent responses to the dilemmas posed by pricing life: cost-benefit accounting, a moral justice ledger, and separate-spheres/hostile-worlds purism. Cost-benefit analysts provide efficient calculations gauging life’s value by its past and future economic potential. Here life is treated as another commodity. Feinberg’s compensation awards, for instance, used lost economic value as their main standard, not only computing the victim’s likely future earnings but also estimating the market price of lost services. In the same way, government agencies routinely assign monetary values to human lives that may be saved by a particular piece of legislation. For that purpose, agencies calculate the value of a statistical life based on people’s willingness to pay in order to avoid specific risks.

Impatient with the emotional neutrality of cost-benefit estimates, moral justice advocates add outrage to the ledger. In cases of wrongful death they not only seek compensation from the perpetrators but also demand retribution. As Charles Tilly eloquently explains in his Credit and Blame, justice-seekers "become indignant if authorities assign too light a penalty, or say that no one was to blame. They ask for justice in something like the old lex talionis: an eye for an eye, a tooth for a tooth, tit for tat" (2008, 94). That’s why juries frequently award enormous settlements for the loss of life, including compensation for survivors’ pain and suffering.

In sharp contrast, separate-spheres/hostile-worlds critics decry any economic valuation of life as an unseemly profanation of the sacred. In this view, life is priceless; it should therefore be kept apart from any market calculation. Otherwise, the logic of the market will inevitably swallow up and soil life’s preciousness. Such concern places survivors who claim compensation for the death of loved ones in a morally uncomfortable spot. Indeed, in the case of 9/11 payments, critics often accused victims’ families of distasteful greed. Most outrageously, in 2007 conservative author Ann Coulter sparked a controversy when she described a group of 9/11 widows who backed the Democratic Party as the millionaire witches of East Brunswick enjoying their newfound celebrity, adding: I’ve never seen people enjoying their husbands’ deaths so much. Chastising these women turned into millionaires by compensation funds, Coulter blamed them for reveling in their status as celebrities and stalked by grief-arazzis (Coulter 2007, 112).¹ Because they accepted money from their husbands’ death, Coulter accused the widows of being mercenary.

The essays in this section go beyond these standard responses to pricing life. While all three approaches introduce crucial considerations, they ultimately fall short of explaining what exactly is going on. Treating the valuation of life as an ordinary market transaction will not do: it denies the specific meanings of that transaction and occults the process by which people arrive at appropriate compensation. Seeking moral justice is certainly a vital element in some forms of economic calculations of life’s worth, but it surely does not exhaust the process. Segregating life from market contamination fails as well. In fact, in less extreme cases than terrorist attacks and contentious wars, people are constantly attaching economic value to human lives and making strong claims based on those values—most notably when they take out a life insurance policy, but also in cases of medical malpractice, wrongful death settlements, or compensation for on-the-job injuries.

I came to the study of pricing life indirectly. Having moved from Buenos Aires to the United States in a series of adventures with unanticipated consequences, I became fascinated with three related questions: (1) How do people manage uncertainties? (2) How is it that so much human action ends up producing effects different from those that people intended? (3) How do people nevertheless seem to live relatively orderly lives? As I struggled to find a way to turn these questions into a doctoral dissertation, my father, an Argentine lawyer and book lover, sent me a copy of a small 1924 French legal treatise, L’aléas dans le contrat, a fascinating philosophical discussion of gambling and insurance contracts as rational mechanisms to deal with fortuitous events.

That’s how I started reading about life insurance and soon discovered that beneath its dull veneer, insurance raised fascinating questions about the valuation of life and death. Why did Americans at first resist this formidable economic institution? How did the industry go from a stigmatized gamble on human life to a widely praised arrangement to secure a family’s future? What did the case of life insurance reveal about the construction of new markets, especially those trading in sacred products? More generally, how do shared meanings and social relations inform people’s economic activities?

I published my first article on life insurance in a 1978 issue of the American Journal of Sociology. Based on extensive analysis of historical documents, I show how the industry, initially shunned as a sacrilegious enterprise, was later adopted as a new form of contemporary death ritual. Pricing life became part of an American’s good death. Insurance thus provided a revealing test case of how morals and markets mingle in practice.

Although the article as well as the subsequent dissertation and book were well received, at least one major sociologist expressed concern about my excursion into economic territory. In a friendly letter he sent me in March 1979 (a couple of months before his death), Talcott Parsons, whom I had met during a year he spent at Rutgers University, worried about my article’s argument concerning the greater legitimacy of economic definitions of death. That notion could, in Parsons’s view, be confused with those promulgated by economic ideologists such as Gary Becker, against which he was on a warpath. I like your approach so much, Parsons wrote, I would hate to have it identified with the kind of position these people are putting forward (personal communication).

The next two chapters extend the analysis of how economic value gets constructed by tackling the valuation of children’s lives. An obscure footnote in a 1900 insurance history book provided the catalyst for The Price and Value of Children. The note referred to a little-known controversy surrounding the sale of low-cost children’s insurance at the turn of the century. Between 1870 and 1930, as child labor laws removed most children from the labor market, the economic valuation of young lives turned into a problematic and sensitive task. If children were economically worthless but emotionally priceless, how could insurance companies determine the economic loss created by a child’s death? What explains the fact that they did so with remarkable success? How could poor parents justify taking a policy on their child’s life?

The article documents how the child insurance market was shaped by the changing economic and sentimental valuation of children. Child policies did not sell as an opportunistic contrivance for cashing in on a child’s death but at first as a way of providing the sacred child with a proper burial, and later as a prudent investment in his or her future education. Intrigued by the paradoxes involved in the economic valuation of children, I expanded my analysis into a book, Pricing the Priceless Child, published in 1985.

From Baby Farms to Baby M is a further extension of these issues. It examines the impact of children’s changing economic and sentimental value on turn-of-the-twentieth-century baby markets, including profound transformations in the sale and exchange value of priceless children in foster care and adoption. Why is it that today’s infertile parents eagerly offer thousands of dollars to obtain a baby, but in the late nineteenth century unwanted babies found no buyers? The essay then traces the late-twentieth-century emergence of a controversial surrogacy market.

The Priceless Child Revisited closes this section with a view of what is happening to children in our own times. It examines children’s current economic value with a different slant. While the earlier study focused on the emergence of new cultural conceptions defining children’s productive activities, here I lay out a framework for understanding two other persistent questions: (1) When and why does thinking about children’s productive activities make us uncomfortable? (2) In what ways do children generate immediate economic value but also contribute to their own financial, human, social, and cultural capital as well as that of their families and communities? Drawing mostly from household carework and immigrant enterprises, the chapter focuses on children’s economic practices.

In different ways, the papers in this section provide an account of the valuation of human life as a historically contingent, socially organized, deeply meaningful process. They trace the particular kinds of cultural work involved in organizing markets that deal in sacred products. People certainly worry about the pricing of life and whether economic considerations violate moral precepts. That is why widows at first rejected life insurance benefits as unseemly blood money and why turn-of-the-century parents insuring their children were often suspected of mercenary intent. So, too, must surrogate mothers protect themselves against accusations of reprehensible greediness for renting out their bodies. As we will see later, similar concerns arise in other markets for human goods, such as blood, organs, or eggs. At the same time, these essays contest what I call boundless market models that assume the inevitable commodification of any good introduced into the market. Instead, what results is the emergence of multiple markets, differentially shaped by shared understandings and varying social relations.

NOTES

1. See also "Plugging New Book in Latest Solo Today Appearance, Coulter Attacked Liberals, 9-11 Widows," Media Matters for America, http://mediamatters.org/research/200606060006 (accessed June 7, 2009).

REFERENCES

Coulter, Ann. 2007. Godless: The Church of Liberalism. New York: Three Rivers Press. Feinberg, Kenneth R. 2005. What Is Life Worth? New York: Public Affairs.

Foderaro, Lisa W. 2008. Military Kin Struggle with Loss and a Windfall. New York Times, March 22.

Gettleman, Jeffrey. 2004. For Iraqis in Harm’s Way, $5,000 and ‘I’m Sorry.’ New York Times, March 17.

Hartocollis, Anemona. 2007. Little-Noticed 9/11 Lawsuits Will Go to Trial. New York Times, September 24.

Tilly, Charles. 2008. Credit and Blame. Princeton, N.J.: Princeton University Press.

Witt, John Fabian. 2008. Form and Substance in the Law of Counterinsurgency Damages. Loyola Law Review 41:1455–81.

1

Human Values and the Market

The Case of Life Insurance and Death in

Nineteenth-Century America

For Durkheim and Simmel, one of the most significant alterations in the moral values of modern society has been the sacralization of the human being, his emergence as the holy of holies (Wallwork 1972, 145; Simmel 1900). In his Philosophie des Geldes (1900), Simmel traces the transition from a belief system that condoned the monetary evaluation of life to the Judeo-Christian conception of the absolute value of man, a conception that sets life above financial considerations. The early utilitarian criterion was reflected in social arrangements, such as slavery, marriage by purchase, and the wergeld or blood money. The rise of individualism was the determining factor in the transition. The tendency of money to strive after ever-growing indifference and mere quantitative significance coincides with the ever-growing differentiation of men . . . and thus money becomes less and less adequate to personal values (Altmann 1903, 58).¹ For Simmel, money the equalizer became money the profaner. Considered sub specie pecuniae, the uniqueness and dignity of human life vanished.

Only small fragments of Simmel’s penetrating analysis of personal and monetary values have been translated, and, with a few exceptions, this work has been ignored in the sociological literature.² There has been much generalizing about the cash nexus but, strangely, very little work on the area. The problem of establishing monetary equivalences for such things as death, life, human organs, and generally ritualized items or behavior considered sacred and, therefore, beyond the pale of monetary definition is as intriguing as it is understudied. Perhaps the absorption of many social scientists with market models and the notion of economic man led them and others to disregard certain complexities in the interaction between the market and human values.³ Market exchange, although perfectly compatible with the modern values of efficiency and equality, conflicts with human values that defy its impersonal, rational, and economizing influence. Titmuss’s imaginative cross-national comparison of voluntary and commercial systems of providing human blood for transfusions stands as a lone effort to consider this conflict in depth. His study suggests that commercial systems of distributing blood are not only less efficient than voluntary blood donation but also, and more important, morally unacceptable and dangerous to the social order. Transform blood into a commercial commodity, argues Titmuss, and soon it will become morally acceptable for a myriad of other human activities and relationships also to exchange for dollars and pounds (1971, 198).⁴ Dissatisfied with the consequences of market exchange, Titmuss is persuaded that only reciprocal or gift forms of exchange are suitable for certain items or activities: among others, blood transfusions, organ transplants, foster care, and participation in medical experimentation. His resistance to the laws of the marketplace is not unique. In his early writings, Marx was already concerned with the dehumanizing impact of money. In The Economic and Philosophic Manuscripts, Marx deplored the fact that in bourgeois society human life is easily reduced to a mere salable commodity; he pointed to prostitution and the sale of persons that flourished in his time as ultimate examples of this degrading process (1964, 151).⁵ Similarly, Blau, despite his predominantly market model of social behavior, states that by supplying goods that moral standards define as invaluable for a price in the market, individuals prostitute themselves and destroy the central value of what they have to offer (1967, 63). Using love and salvation as examples, Blau suggests that pricing intangible spiritual benefits inevitably leaves some unwholesome by-product; not love but prostitution, not spiritual blessing but simony.⁶ The marketing of human organs presents a similar dilemma. Significantly, while organ donations have become more common, organ sales are still rare.⁷ Parsons, Fox, and Lidz note that regardless of how scientific the setting in which this transaction occurs may be, or how secularized the beliefs of those who take part in it, deep religious elements . . . are at least latently present in the transplant situation (1973, 46). Likewise, even after