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Introduction 11. 12 Smelser/Swedberg
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Introduction 11
tors, competition rather implies parallel efforts, a circumstance in which society can benefit from the actions of both the actors. Instead of destroying your opponent, as in a conflict, in competition you try to do what your competitor does—but better.
Philosophy of Money (1900), Simmel's second major sociological work, has always enjoyed a mixed reputation. Durkheim disapproved of it for its mix of genres, and according to Weber economists detested Simmel's way of dealing with economic topics (e. g., Frisby 1978; Durkheim ([1902] 1980; Weber 1972). Simmel does mix philosophical reflections with sociological observations in an idiosyncratic manner, but Philosophy of Money has nonetheless much to give if it is read in its own frame. Simmel's main point is that money and modernity belong together; in today's society there does not exist one exclusive set of dominant values but rather a sense that everything is relative (cf. Poggi 1993). Simmel's work also contains a myriad of insightful sociological reflections on the connections of money with authority, emotions, trust, and other phenomena. The value of money, Simmel observed, typically extends only as far as the authority that guarantees it (" the economic circle"; [1907] 1978, 179ff. ). Money is also surrounded by various " economically important sentiments, " such as " hope and fear, desire and anxiety" ([1907] 1978, 171). And without trust, Simmel argues, society could simply not exist; and " in the same way, money transactions would collapse without trust" (179). In relation to money, trust consists of two elements. First, because something has happened before—for example, that people accept a certain type of money—it is likely to be repeated. Another part of trust, which has no basis in experience and which can be seen as a non- rational belief, Simmel calls " quasi-religious faith, " noting that it is present not only in money but also in credit.
After the Classics
Despite its foundation in the classics, economic sociology declined after 1920 and would not return to full vigor before the 1980s. Exactly why this happened is still not clear. One reason is probably that neither Weber nor Simmel had any disciples. Durkheim did, however, and the study of Marcel Mauss, The Gift (1925), should be singled out. It rests on the argument that a gift typically implies an obligation to reciprocate and should not be mistaken for a one-way act of generosity. The Gift also contains a number of interesting observa-
12 Smelser/Swedberg
tions on credit, the concept of interest, and the emergence of homo economicus. Evenually, however, Durkheimian economic sociology declined.
Despite the slowing in economic sociology' during the years 1920-80, there were several noteworthy developments, especially the theoretical works of Joseph Schumpeter, Karl Polanyi, and Talcott Parsons (for contributions by other sociologists during this period, sec Swedberg 1987, 42-62). All three produced their most important works while in the United States, but had roots in European social thought.
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Joseph Schumpeter
We preface our notes on Schumpeter (1883- 1950), an economist, by noting some contributions by economists more generally to economic sociology. One example is Alfred Marshall (1842- 1924), whose analyses of such topics as industries, markets, and preference formation often are profoundly sociological in nature (Marshall [1920] 1961, 1919; cf. Aspers 1999). Vilfredo Pareto (1848-1923) is famous for his sociological analyses of rentiers versus speculators, business cycles, and much more (Pareto [1916] 1963; cf. Aspers 2001a). The work of Thorstein Veblen (1857- 1929) sometimes appeared in sociological journals, and his analyses include such topics as consumer behavior (" conspicuous consumption" ), why industrialization in England slowed down (" the penalty of taking the lead" ), and the shortcomings of neoclassical economics (Veblen [1899] 1973, [1915] 1966, [1919] 1990; cf. Tillman 1992). Final mention should also be made of Werner Sombart (1863-1941), who wrote on the history of capitalism, on " the economic temper of our time, " and on the need for a " verstehende economics" (1902-27, 1930, 1935).
The contributions of Schumpeter are especially noteworthy (see, e. g., Swedberg 1991b). His life spanned two periods in modern economics—the period around the turn of the century, when modern economics was born, and the period of a few decades later when it was mathematized and secured its place as " mainstream. " Schumpeter similarly spanned two distinct periods in sociology— from Max Weber in the first decade of the 20th century through Talcott Parsons in the 1930s and 1940s. Schumpeter is also unique among economists for trying to create a place for economic sociology next to economic theory. In this last effort Schumpeter was clearly inspired by Weber and, like the latter, referred to this type of broad economics as Sozialokonomik, or " social economics. " Schum-
peter defines economic sociology as the study o: institutions, within which economic behavior take- place (e. g., 1954, 21).
Schumpeter produced three studies in sociology. The first is an article on social classes that is of interest because of his distinction between economists' and sociologists' use of the concept of class. While for the former, he argues, class is a formal category, for the latter it refers to a living reality. The second study is an article about the nature of imperialism that can be compared to the equivalent theories of Hobson, Lenin, and others. Schumpeter's basic idea is that imperialism is pre- capitalistic and deeply irrational and emotional in nature—-essentially an expression for warrior nations of their need to constantly conquer new areas or fall back and lose their power. The third study is perhaps the most interesting one from the viewpoint of contemporary economic sociology, " The Crisis of the Tax State" (1918). Schumpeter characterizes this article as a study in " fiscal sociology" (Finfnzsoziologie); its main thesis is that the finances of a state represent a privileged position from which to approach the behavior of the state. As a motto Schumpeter cites the famous line of Rudolf Goldscheid: " The budget is the skeleton of the state stripped of all misleading ideology (Schumpeter [1918] 1991, 100).
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Schumpeter did not regard Capitalism, Socialism, and Democracy (1942) as a work in sociology, but its main thesis is nonetheless sociological in nature: the motor of capitalism is intact but its institutional structure is weak and damaged, making it likely that socialism will soon replace it. On this point Schumpeter was evidently wrong. His analysis of the forces that are undermining capitalism may seem idiosyncratic at times. Nonetheless. Schumpeter should be given credit for suggesting that the behavior of intellectuals, the structure of the modern family, and so on, do affect capitalism. Of special importance are his insights about economic change or, as Schumpeter phrased it with his usual stylistic flair, " creative destruction. "
Entrepreneurship is at the heart of Schumpeter's treatment of economic change (1912, chap. 2; 1934, chap. 2; 2003). He himself saw his theory of entrepreneurship as falling in economic theory, more precisely as an attempt to create a new and more dynamic type of economic theory. Nonetheless, many of his ideas on entrepreneurship are sociological in nature. His central idea—that entrepreneurship consists of an attempt to put together a new combination of already existing elements— can be read sociologically, as can his idea that the
main enemy of the entrepreneur is the people who resist innovations.
Karl Polanyi
Trained in law, Polanyi (1886-1964) later taught himself Austrian economics as well as economic history and economic anthropology. Though he was interdisciplinary in approach, his main specialty was economic history, with an emphasis on nineteenth-century England and preindustrial economies.
Polani’s most famous work is The Great Transformation (1944), conceived and written during World War II (e. g., Block 2001, 2003). Its main thesis is that a revolutionary attempt was made in nineteenyh-century England to introduce a totally new, market-centered type of society. No outside authority was needed; everything was automatically to be decided by the market (" the self-regulating market”). In the 1840s and 1850s a series of laws was introduced to turn this project into reality, turning land and labor into common commodities. Even the value of money was taken away from the political authorities and handed over to the market. According to Polanyi, this type of proceeding could only lead to a catastrophe. When the negative effects of the market reforms became obvious in the second half of the nineteenth century, Polanyi continues, countermeasures were set in to rectify them (" the double movement" ). These measures, however, only further unbalanced society; and developments such as fascism in the twentieth century were the ultimate results of the illfated attempt in mid-nineteenth-century England to turn everything over to the market.
Polanyi also cast his analysis in terms of interests and argued that in all societies, before the nineteenth century, the general interests of groups and societies (" social interests" ) had been more important than the money interest of the individual (“economic interest" ). " An all too narrow conception of interest, " Polanyi emphasizes, " must in effect lead to a warped vision of social and political history, and no purely monetary definition of interest can leave room for that vital need for social protection” ([1944] 1957, 154).
The theoretical part of The Great Transformation is centered around Polanyi's concepts of " embeddedness” and " principles of behavior" (later changed to " forms of integration" ). The fullest elaboration of this line of work is to be found in Trade and Market in the Early Empires (Polanyi, Arensberg; and Pearson [1957] 1971), and especially in Polanyi’s essay " The Economy as Institut-
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