4    Smelser/Swedberg. The Concept of Economic Action

4      Smelser/Swedberg

2. Sociology lacks one dominant tradition. Vari­ous sociological approaches and schools differ from and compete with one another, and this cir­cumstance has affected economic sociology. For example, Weber was skeptical about the notion of a social " system, " whether applied to economy or society, while Parsons viewed society as a system and economy as one of its subsystems. Further­more, even if all economic sociologists might ac­cept the definition of economic sociology we have offered, they focus on different kinds of economic behavior. Some do so following Arrow's hint (1990, 140) that sociologists and economists ask different questions—about consumption, for ex­ample. Others, including what is called new eco­nomic sociology (see Granovetter 1990 for a pro­grammatic statement), argue that sociology should concentrate directly on core economic institutions and problems.

These caveats recorded, a comparison between the central features of mainstream economics and economic sociology will clarify the specific nature of the sociological perspective. The following dif­ferences are most salient.

The Concept of the Actor

To put the matter baldly, the analytic starting point of economics is the individual; the analytic starting points of economic sociology are typically groups, institutions, and society. In microeconom­ics, the individualistic approach finds its origins in early British utilitarianism and political economy. This orientation was elucidated systematically by the Austrian economist Carl Menger and given the label methodological individualism by Schumpeter (1908, 90; for a history of methodological indi­vidualism, see Udehn 2001). By contrast, in dis­cussing the individual, the sociologist often focus­es on the actor as a socially constructed entity, as ^uactor-in-interaction, " or " actor-in-society. " Often, moreover, sociologists take the group and the social-structural levels as phenomena sui generis, without reference to the individual actor.

Methodological individualism need not be logi­cally incompatible with a sociological approach. In his theoretical chapter introductory to Economy and Society, Weber constructed his whole sociolo­gy on the basis of individual actions. But these ac­tions are of interest to the sociologist only insofar as they are social actions or " take account of the behavior of other individuals and thereby are oriented in their course" (Weber [1922] 1978, 4). This formulation underscores a second difference between microeconomics and economic sociology:

the former generally assumes that actors are not connected to one another; the latter assumes that actors are linked with and influence one another. We argue below that this difference has implications for how economics function.

The Concept of Economic Action

In microeconomics the actor is assumed to havea given and stable set of preferences and to choose that alternative line of action which maximizes. In economic theory, this way of acting constitutes economically rational action. Sociology, by contrast, encompasses several possible types of economic action. To illustrate from Weber again, economic action can be either rational, traditional, or affectual (Weber [1922] 1978, 24-26, 63-68). Except for residual mention of “habits” and “rules of thumb”, economists give no place to traditional economic action (which, arguably, constitutes its most common form; see, however, Akerlof 1984; Schlicht 1998).

Another difference between microeconomics and economic sociology in this context concerns the scope of rational action. The economist traditionally identifies rational action with the efficient use of scarce resources. The sociologist’s view is, once again, broader. Weber referred to the conventional maximization of utility, under conditions of scarcity, as formal rationality. In addition, however, he identified substantive rationality, which refers to allocation within the guidelines of other principles, such as communal loyalties or sacred values. A further difference lies in the fact that economists regard rationality as an assumption, whereas most sociologists regard it as a pariable  (see Stinchcombe 1986, 5-6). For one thing actions of some individuals or groups may be more rational than others (cf, Akerlof 1990). Along the same lines, sociologists tend to regard rationality as a phenomenon to be explained, not assumed, Weber dedicated much of this economic sociology to specifying the social conditions under which formal rationality is possible, and Parsons ([1940] 1954) argued that economic rationality was a system of norms–not a psychological universal–associated with specific developmental processes in the West.

Another difference emerges in the status of meaning in economic action, Economists tend to regard the meaning of economic action as derivable from the relation between given tastes, on the one hand, and the prices and quantities of goods and services, on the other. Weber's’ conceptualization has a different flavor: “the definition of economic