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   Course Title    Economic Sociology
Lecturer    Zhelyu Vladimirov
Institution    Sofia University "St. Kliment Ohridski"
Country    Bulgaria

1. Introduction

The course on Economic Sociology is designed for second-year students at the Faculty of Economics and Business Administration at Sofia University "St. Kliment Ohridski." The experience gained from its teaching up till now shows that the students are very interested in its contents. This is mainly due to the fact that during their first two years at the university, our students must enroll predominantly at mathematical courses. The interest they demonstrate in the course shows that they need the wider perspective of the neo-classical economics and the economic sociology could offer them such approaches. However, for the time being the course is offered as an elective of 30 academic hours of lectures without seminars. If needed, it could easily be expanded.

Since its inception, the dialogue between economic sociology and economists has a key significance. The dialogue has intensified in the recent years. On the one hand, economists start to acknowledge the importance of the institutions at micro and macro levels. On the other hand, sociologists analyze the non-economic grounds of institutions and stress their impact on economy’s organization and evolution. Economic sociology today goes through a new revival in the form of the so-called New Economic Sociology. In its development, it is closely linked with such trends as the theory of rational choice, the theory of public choice and the New institutional economics. Sometimes one finds it difficult to differentiate among these approaches, especially when analyzing specific social-economic phenomena. Because the actual social reality is indivisible, both disciplines should acknowledge the complexity of interrelationships between social and economic phenomena.

2. Course objectives

The main academic goals of the course are as follows:

  • The students should understand the limited nature of the marginal approach to the studying of economic phenomena, especially when considering massive social-economic changes.

  • They should master a different (sociological) perspective when analyzing the economic phenomena, which is adequately expressed by the opposition "dirty hands" vs. "clean models" (Hirsh, Michaels, & Friedman, 1996).
  • The course aims at developing a methodological attitude to the understanding of economic phenomena not as separate but as closely interrelated with the other societal structures (legal, political, cultural).
  • The course should eventually improve students’ skills for a more complex analysis of the theoretical and practical problems that are linked to the economic development and social-economic transformations.

Reaching these objectives seems important for the students (especially the economics and management ones) in Eastern European countries because their economies have been transforming to get attuned to the market and in this sense, they are strongly dependent on both general economic and non-economic forces and factors.

At the end of the course, students are expected to be able to:

  • understand both the strengths and the limitations of the classical and neo-classical economic approach;
  • use the wider sociological perspective when attempting to explain economic phenomena;
  • apply different economic sociological approaches in academic essays and research projects;
  • assess not only the economic but also the other (social, political) grounds of the economic decisions, which the different economic actors (e.g. the state government, firms, etc.) make.

3. Course details

The course has three interrelated parts. The first one is introductory; the second one presents the historical reconstruction of economic sociology’s development (main authors and themes) and the third one concentrates on the modern state of this discipline. The second part follows the logic of economic sociology’s historical development and the third one is oriented to the various problems. In the spirit of "the end of transitology" there are no special themes covering the Eastern European countries. The aim is these countries’ transformation to be considered not as something unique but in line with well-established interpretations and approaches.

Part 1. Introduction

1. What is economic sociology? Subject, methods, links with the other disciplines. Wide and narrow understanding of economy. The concept of institutions. Juxtaposition of the classical economic and sociological perspectives.

The aim of this lecture is to communicate the individual nature of economic sociology. While economics looks for an answer to the question, "How do people act economically and what are the consequences of these actions?" economic sociology seeks to answer the question, "Why do people act like that?" (Schumpeter). When studying real-life problems both economists and sociologists should keep in mind the two types of variables (economic and non-economic). The non-economic variables are the society-specific institutions, which influence the economic behavior of its members. These institutions are the subject of economic sociology. However, it looks for the reverse causal links: what is the impact of economic structures on social and political institutions? According to M. Weber, "social-economic science" studies the interdependence of economic and social phenomena. Economic sociology is related both to economics and to economic history and anthropology. However, these disciplines are differentiated by universally accepted differences in the subject, methodology and the level of generalization.

Basic Readings: Trigilia, C. (2002) Introduction: What is Economic Sociology. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing., pp. 1-7

Additional readings: Hirsh, P., Michaels, S., Friedman, R. (1987) "Dirty Hands" versus "Clean Models." Is Sociology in Danger of Being Seduced by Economics? Theory and Society, 16, pp. 317-336

2. Scientific status of economic sociology. Methodological "individualism" and methodological holism. Positivism and interpretative pluralism. Science and values.

This lecture aims at displaying the distinct nature of social sciences and specifically of economic sociology. Unlike natural sciences, it is impossible to establish general causal relationships of the kind "If A, it always follows B" in social sciences. This is because the circumstances are rather complex and the actions of the actors are normatively oriented. As a rule, economic science disregards the concrete circumstances and looks for ideal situations for the rational choice and uses mainly analytic-deductive models. Economic sociology presents a more complex picture of economic actors whose motivation is not limited to utilitarian orientations (benefits). That is why the generalizations in economic sociology are limited to specific socio-historic context. This position favors an inductive approach. Instead of laws, economic sociology develops models. The models are an ideal reconstruction of specific situations and serve their interpretation (M. Weber’s "ideal type"). They are based on the so-called "methodological individualism." On the contrary, "methodological holism" is influenced by positivism; i.e. it aims at applying natural sciences’ methodology in the domain of social sciences. It stresses the conditions, which determine motivation. Good research studies avoid both extreme of narrow empiricism and abstract theorizing.

Researcher’s values play an important role because economic sociology studies motivation, normative orientation and the meaning of social action. They influence the choice of research object and the model of interpretation. From this point of view, interpretative pluralism is inevitable. However, if the value-ridden choice of research object, hypotheses, model of results’ interpretation are explicitly defined, this enables their critical discussion and makes them part of scientific research. Social science helps elucidating the value choices and the conditions for their realization and thus assists for changing the goals themselves.

Basic Readings: Trigilia, C. (2002) Introduction: What is Economic Sociology. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp.7-13

Additional Readings:
(1984) Weber, M. Basic sociological concepts. Sociological Problems], 2: 88-101
Weber, M. Profession and Vocation of the Scientist. In Scientist and Politician: 39-66. 
(1999) Berger, P.
Invitation to Sociology

Part 2: Historic Reconstruction of Economic Sociology’s Development (Main Authors and Themes)

3. Economic sociology in the teachings of Adam Smith, T. Malthus, D. Ricardo, K. Marx and the neo-classics.

3.1. This lecture aims to communicate the contribution of some classical economists to the development of economic sociology. A. Smith advanced a model of the "economy – society" relationship, which laid the foundation of the development of both economic science and economic sociology. This is due to the awareness of the important role of institutions for economic development. Although A. Smith is rather famous as the founder of the "laissez-faire" politics, he actually thought that the market should be constrained by clear institutional rules. Economic development requires adequate institutions, which should stimulate the accumulation of capital and its investment. This requires the elimination of institutional impediments to capital and labor mobility and hence the criticisms of A. Smith to state protectionism and mercantilism.

3.2. Social problems and mostly the poverty, which accompanied industrial revolution in Great Britain, were underlying the gloomy scenario of T. Malthus and the pessimism of D. Ricardo. Both of them embrace the narrower economic view of economic actors as calculators of their best interests. Their behavior is deductively reconstructed – not from the specific norms and meaning but from the social position they have. Economic analysis will gradually concentrate on a limited number of variables and will break off with the institutional framework of economic activity.

3.3. K. Marx reversed the relationship between social-economic and cultural factors of development and postulated the determining role of the first ones. His goal was the discovery of the general laws of historic development and the specific laws of capitalist society. He focused on the social limitations (exploitation of labor, unemployment and a tendency to decreasing rate of return) that were inherent in capitalist development. He developed the theory of working class turning from "a class in itself" to "a class for itself" through the corresponding education, culture and political commitment. He espoused the view of the inevitable polarization between the major classes and the proletarian revolution. Marx’s critics believe that he overestimated the class conflict at the expense of the class compromise.

3.4. The neo-classical economics views as central the issue of efficient distribution of resources for certain purposes. Thus, economics becomes a science of economic choice. A goal is postulated and hence necessity of postulating conditions – perfect competition and economic equilibrium. The isolated individual becomes the unit of analysis and the individual has stable preferences in connection to consumption and labor. Karl Menger explains that not taking institutions into consideration is necessary for the development of models, which would enable us to predict the behavior of market agents. In this way economics becomes a positive science, which is highly dependent on mathematics like the natural sciences. However, meeting these conditions, it faces a substantial gap between its analytical validity (mathematically rigorous) and empirical applicability.

Basic readings: Trigilia, C. (2002) Introduction: From Classical Economics to Economic Sociology. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 17-35

Additional reading: 
(1983) Smith, A. An Inquiry into the Nature and Causes of the Wealth of Nations
Ricardo, D. On the Principles of Political economy and Taxation
(1977) Marx, K., Engels, F. Selected Works, Vol. 7
Malthus, T. An Essay on the Principles of Population

Marshall, A. Principles of Economics

4. Economic sociology in Germany: G. Simmel, W. Sombart, M. Weber

4.1. This lecture aims at disclosing the intellectual prerequisites of economic sociology’s inception in Germany in the end of 19th century and the essence of its neo-positivist methodology. In Philosophy of Money (1907), G. Simmel’s aim is to uncover the genesis and characteristics of the modern society and the consequences for the everyday lives of people. According to him, society is not a system (organism) but a network of institutions, which are born by the interactions among humans and start influencing their behavior. These are "pure forms" or models of institutional behavior. Money is one of these institutions. On the one hand, it helps individual freedom to increase nut on the other hand; it turns into an objective in and out itself. "Calculation" becomes the substance of modern times, quality values become quantitative (they are calculated in money), the previous forms of solidarity are torn apart. The stronger isolation and the more difficult definition of collective goals are the reverse side of the greater freedom. In this sense, according to Simmel, socialism is mainly reaction to the lost traditional solidarity.

4.2. In Modern Capitalism (1902), W. Sombart aims at purposefully constricting an economic sociology that is closely linked with history. He distinguishes economic systems by economic mentality, economic organization and technology. The combination of these indicators helps him identify economic systems and reconstruct the modern capitalist society. For example, the "spirit of capitalism" is a compound of the spirit of the entrepreneur and the rationalism of the bourgeoisie. Entrepreneurs are capitalist development’s engines and they are separate groups (heretics, foreigners, Jews), that do not have other opportunities for social growth. Institutional conditions for the establishment of capitalism are linked to the activities of the state: stimulating technological development for the needs of the army, conquering new markets, measures for defending domestic entrepreneurs, creation of general conditions for trade like roads and other means of transportation, rationalization of the legal and banking systems, of labor, firms’ organization, etc. Finally, producers gain control over consumption through fads and fashions that determine the taste of consumers.

4.3. According to Weber, West Europe’s development is different from the other civilizations in certain material, cultural and institutional conditions. Wars, colonization, transport development, precious metals supply and favorable geographical conditions are among the first ones. The second group encompasses the new economic Protestant ethics, while the institutional one includes the specific nature of the Western town, the rational state, law and science. Weber believes capitalism is a product of the constant rational enterprise, rational accounting, rational technology and rational law plus the rational Protestant spirit, the rational way of life and the rational economic ethics. He views the future of capitalism in the transition from a liberal to a more strongly regulated capitalism. The paradox of rationality as a major principle of the new society is that the growing bureaucracy would dim out the mass democracy, i.e. would become a threat to human freedom. This could lead to the end of the modern capitalism in the form of state socialism or political capitalism. The problem of capitalism’s preservation depends on the balance between state interference and the autonomy of society and the market.

Basic readings: Trigilia, C. (2002) The Origins and Developments of Capitalism: Simmel and Sombart; Capitalism and Western Civilization: Max Weber. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing., pp.36-75

Additional readings: Simmel, G. (1907). The Philosophy of Money. 2nd ed. Routledge & Kegan, Boston; Sombart, W. (1929) "Capitalism". In Encyclopedia of the Social Sciences. Macmillan, New York; Weber, M. The Protestant Ethic and the Spirit of Capitalism

5. Social consequences of capitalism: E. Durkheim and T. Veblen

5.1. The purpose of this lecture is to explicate the common grounds of the sociological institutionalism of Durkheim and the economic institutionalism of Veblen. According to Durkheim, the motives for human behavior are to be found in the collective consciousness (or institutions). These institutions, e.g. division of labor, property, contract etc., are not a result of contractual relations but arise in special (revolutionary) moments of social development. For example, the division of labor is caused by the social pressure on individuals to specialize and is not their intentional product (as economists believe).

Durkheim develops the concept of anomic division of labor, which is not accompanied by adequate institutions and in this way it becomes the source of economic crises and social conflicts. In this type of labor division assigning labor tasks to the individual is compulsory and it is not a result of personal choice. Besides, the actual inequality of the negotiating parties (hidden behind the seemingly free market exchange) twists the correct and just compensation for the labor. The market would function better if there are efficient mechanisms for assigning the different roles according to the abilities and the compensations according to „social merit." This could be achieved through the activities of non-economic institutions like professional corporations, the family, the school, etc. Durkheim’s theory of labor division is a non-economic criticism of liberal capitalism.

5.2. T. Veblen criticizes the static nature of traditional economics (which focuses on balance rather than on development). According to him, the individual’s behavior could not be explained outside the influence of societal traditions, customs and habits, i.e. institutions. Human behavior is governed by some general drives like "mastery", curiosity, etc. but it is up to institutions to determine their actualization.

The delayed adaptation of institutions in the modern society inevitably leads to development’s higher social price. Having in mind production, new technologies, machinery and manufacturing allow for economy of scale. However, the people who manage the investments are interested mainly in financial profits and this fact prejudices production and employment. Crises, cyclical depressions and unemployment are indices of the blocking of efficient production. According to Veblen, products’ raised prices because of increased costs for distribution and advertising amount to wasting resources. On the side of consumption, the overdue institutional adaptation is obvious in the behavior of the so-called "empty class" that is characterized by a "ostentatious consumption."

Basic reading: Trigilia, C. (2002) The Social Consequences of Capitalism: Durkheim and Veblen. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp.76-95.

Additional readings: Durkheim, E. The Division of Labor in Society. In Mihailovska, E. Emil Durkheim. Selected Works

Veblen, T. The Theory of Leisure Class: An Economic Study of the Evolution of Institutions

6. The "Great Depression" and the decline of liberal capitalism: K. Polanyi and J. Shumpeter

6.1. The lecture aims at explicating the link between the decline of liberal capitalism and the traditional economic sociology. According to Polanyi, there are different forms of economic behavior’s regulation (reciprocity, re-distribution and market) and different "economic systems" (in the primitive, the ancient and the modern society). These differ by the dominant roles and institutions that determine the corresponding motivation for economic behavior. In contrast to A. Smith, he believes that the emergence of market is not an evolutionary process but is forced politically and administratively. For example, the labor market in Great Britain in the 18th century was subjected to numerous regulations from the state. It was only in 19th century that labor, land and money became a commodity. However, reducing labor to commodity has serious consequences for workers’ living conditions. Society’s self-defense against the market is expressed in the struggle for social and labor legislation.

In the end of 19th century, liberal capitalism was transformed into economic imperialism, which is characterized by national economies’ closing in themselves and political nationalism. Polanyi does not agree with F. Hayek who believes the collapse of liberal capitalism leads to disappearance of freedom. He distinguishes two types of freedom: of exploitation and disproportionately big profits (which might disappear) and of conscience, press, labor choice (which could stay).

6.2. In economic science, J. Shumpeter distinguishes "economic theory", "economic history," and "economic sociology," which represent different perspectives to economic phenomena. Economic development is a result of the arrival of "new combinations" and the introduction of these combinations is due to the entrepreneurs. Shumpeter’s entrepreneur has qualitatively different attributes in comparison with the entrepreneur in the neo-classical economics (where they efficiently distribute the resources in a situation of perfect competition). These are mainly people of innovations; they do not belong to a specific class but to a special personality type. Their behavior frequently seems far away from the rational choice’s imperatives.

Under monopolistic capitalism, the combination of new factors becomes an institutionalized process in the big firms. According to Shumpeter the decline of liberal capitalism is not caused by economic factors but is due to social and socio-cultural ones. Liberal capitalism’s failure is characterized by the weakening of the enterprising spirit and of bourgeois family. The utilitarian spirit is ascending: less children, a narrower planning horizon, less saving, disappearance of the former bourgeois ideals. The "anti-capitalist" state politics is manifested in a policy of re-distribution, development of labor legislation, application of various forms of state planning. All this leads to eroding the basis of capitalist civilization, which he regards as "civilization of inequality and family riches." The decline of the traditional sociology of capitalism also is witnessed in this historical context.

Basic reading: Trigilia, C. (2002). The Great Depression and the Decline of Liberal Capitalism: Polanyi and Shumpeter. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 96-116.

Additional readings: Polanyi, K. (1985). The Great Transformation. Boston: Beacon Press; (1982). Schumpeter, J. The Theory of Economic Development

7. Written exam on parts 1 and 2.

Part 3. Current research issues and problems

The stable economic development after the World War II is due mainly to the state regulation of market. Keynesian economists embark on macro-economic research studies and the economic sociology takes an interest into the problems of the developing countries.

8. Theories of underdeveloped regions’ modernization

The aim of this lecture is to demonstrate the shifting of economic sociology’s focus to the cultural and institutional factors in the developing countries. As a result, the theory of modernization is developed but it actually consists of different approaches.

The structural functionalism approach stresses some cultural orientations and traditional norms of economic behavior as an obstacle to development. The focus is on importance of structural changes that are necessary for development: the family ceases to be a basic production unit and its place is taken by the firm; a new social stratification appears and is based on other, non-traditional criteria; social mobility increases; traditional religion’s prestige lessens. This is the bedrock of constructing indexes of economic development by such indicators like degree of urbanization, literacy, and political participation. However, these changes give birth to social and political conflicts by those who are losing their leading role. While these processes last several centuries in the Western countries, in the developing ones they overlap and must be solved simultaneously. This is the kind of problems the transforming Eastern European countries are facing today.

The modern personality approach centers on such issues as: How do parents teach their kids? Do they have achievement needs, do they want to be innovative, or their parents teach them the traditional attitudes of uncritically accepting the power. D. Lerner (1958) stresses the role of the secondary socialization and D. McClelland emphases the importance of the primary socialization for the development of individuals with high achievement motivation. A. Inkeles and D. Smith recommend the institutions that form the "modern personality" (education, industry, mass media, towns) to be strengthened.

Based on economic, social and political factors, W. Rostow (1960) advances the idea about five stages of economic development. He considers the positive influence of developed countries for creating a "cultural shock" in the developing ones through occupation or intense contacts. This creates a "reactive nationalism" in the developing countries, which is directed to modernization. The modern technologies and the loans from the developed states help their development. The increase of population in the Third World is one of the disadvantageous factors for modernization because this causes problems with food supply and unemployment. Industrialization is perceived as leading to institutional convergence between developed and developing countries.

Basic reading: Trigilia, C. (2002) Modernization and Development of Backward Areas. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 147-155.

Additional readings: Inkeles, A. & Smith, D. (1974). Becoming Modern. London: Heinemann.

9. Criticisms against the theories of modernization

This lecture aims at explicating some of the shortcomings of the first theories of modernization. According to the historical sociology, their optimistic view is based on the idea of the linear character of development. The so-called "selective modernization" is also possible, i.e. modernization only of some elements (bureaucracy, consumption, mass media) and not of production structure and political institutions. Few authors write about "failures" and "blocking" of development (Eisenstadt, 1973). In this case, the subjects who introduce the change are of key importance (Gershenkron, 1962, 1968; Bendix, 1964, 1978; Moore, 1966).

The theory of "contingent development" starts from the assumption that the relations of the developing countries with the external environment are not always favorable for their development (Cardoso & Faletto, 1967). According to Wallerstein’s (1974) theory of "world economic system" the integration of developing countries in the world market leads to underdevelopment. There are three contributing factors: (1) dependent position on the world market because of "unequal exchange" of raw materials for expensive industrial commodities; (2) direct penetration of foreign investors in the raw materials and agrarian sectors and gaining profits in favor of the "central countries;" (3) increasing developing countries’ dependence on international loans. The main cause for the inadequate development is the lack of enterprising local bourgeoisie.

The New political economy studies the difficulties of modernization in Africa and the successes of some newly industrialized countries in Asia. They are evident in the role of the state and the foreign geo-political conditions. The capacity of the state is preconditioned by the existence of political leadership that is aiming at country’s development, efficient bureaucracy and structures, negotiation skills of state officials for contracting with foreign and domestic parties. The influence of external conditions goes through the lens of this domestic context. The idea is that economic development is usually linked with efficient but at the same time authoritarian state structures.

The civilization approach is theoretically based on M. Weber’s methodology and is empirically grounded on Japan’s experience (Hamilton, 1994). Japan is distinguished by its way of organizing firms in a network (weak firms in strong networks, which are different from the Western experience) and by the nature of legal, personal, family and community ties. The individual in the newly industrialized countries does not have full autonomy because their obligations to the family, kin, and community. This underlies both political legitimacy of power and the way firms and labor are organized. Thus, in the case of Japan, traditional elements do not interfere with economic development but aid it. This specific feature is the cause for the differences in civilizations and these authors do not subscribe to the view of the institutional convergence of the newly industrialized countries and the developed ones.

Basic reading: Trigilia, C. (2002) Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 145-165.

Additional readings: So, A. (1993). Social Change and Development. Modernization, Dependency, and World-System Theory. Newbury Park, CA: Sage.

10. The rise and decline of Keynesian "Welfare state"

The aim of this lecture is to re-introduce the discussion of the interrelationship between Keynesian type of "welfare state" and the economic development after the World War II. J. M. Keynes (1883–1946) provided the sound theoretical basis for the state politics of interference in the market. He rejects the classical liberal model because of the fundamental role of the uncertainty and unpredictability. This is the reason why profits not always transform into investments and hence there could be no employment. As an economic agent, the state could make the first move to bettering the expectations of entrepreneurs through the regulation of credit, decreasing of interests and increasing public expenditures. The latter are transformed into income of population, which stimulates consumption.

The period after the World War II is characterized by rapid economic restoration. In the 60s, the "modern capitalism" is more regulated, which leads to weaker and smaller recessions, quick growth, massive increases of welfare and social security (Shonfield, 1965). The state regulates the market through social, taxation and economic policy and the firms are able to take advantage of scientific accomplishments and to realize economies of scale from the mass production. All this is a process of "historical trade-off" among labor, capital, and the state. A. Marshal (1964) explains the success of "welfare state" with the struggle of the lower classes for the acknowledgment of not only of civil and political liberties but also of social rights as basic ones.

In the 70s, in all developed countries there are new social and economic tensions such as unemployment and industrial conflicts resulting from the high inflation and the slowed-down economic growth. The reasons for this are to be found in the specific nature of Keynesian social state. Since social safeguards have become a critical resource for the legitimizing power, politicians now could hardly cut social programs and thus better public budget. Other factors also contribute to the high inflation rates and the slowed-down growth (saturation of mass products market, competition in the face of the newly developed countries, shock increase of crude oil prices, braking down of the system of fixed exchange rates).

Basic reading: Trigilia, C. (2002) The Rise and Decline of the Keynesian Welfare State; The Legacy of the Classics and the New Boundaries between Economics and Sociology. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 119-146, 166-177.

Additional readings: Keynes, J. M. The General Theory of Employment, Interest and Money

11. The crisis of Fordism and the emergence of flexible production models

The lecture presents the crisis of the traditional model of production organization and the emergence of new flexible production models. In the Ford-Taylor model, the firms are vertically integrated; they unite different production stages and forms of distribution. In this way they gain stronger control over the market. They are characterized by mass production of standard goods; they are based on new technologies and inventions and use the economy of scale. They use semi-qualified labor on conveyer, there is sharp distinction between conception and performance, the management plays the central role. The crisis of Keynesian welfare state, the saturation of mass products market, the diversification in products’ demand, the competition in the face of the newly developed countries and some other factors undermine the Fordian model. These are the reasons firms in the developed countries are forced to become more flexible, to lend variety to their products and to augment the quality.

The Italian example in respect to the new model of flexible specialization is very indicative. Small firms are spread both in traditional sectors (textile, clothes, ceramics, furniture) and in modern ones (instruments, electronics, computers). When the sector specialization and integration among the firms is vast, one speaks of "industrial domains." These domains are characterized by decentralized production, high levels of cooperation among suppliers, so-called "industrial atmosphere" and active participation of the local political institutions in supplying social services (infrastructure, technical education and training, information about markets and prices, and export support). The incidence of informal economy is other side of the flexible production but it represents a different research subject.

The experience of Germany and Japan shows that due to the unstable and fragmented markets big firms are also orienting themselves to flexible production in the form of neo-Fordism. The basis of the new model of flexible production is not only technological but is connected to the network organization model, which brakes off with the vertical hierarchy. The very "industrial domains" could be defined as a network of small and medium-sized enterprises while the big firms are transforming into "networking firms." Networks function as self-education systems and thus quickly respond to the changing market. However, having changed in this way, firms become more dependent on the external environment and hence, on the dominant cultural and institutional factors.

Basic reading: Trigilia, C. (2002) The Crisis of Fordism and New Economic Sociology. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 197-212; Bagnasco, A. (1990). The Informal Economy. In Martinelli, A., Smelser, N. Economy and Society: Overview in Economic Sociology. London: Sage, pp. 157-174.

12. The market and the state in the developed countries (pluralism and neo-corporatism)

The lecture depicts the two major models of the developed market economies today: (1) countries with neo-corporatism and contracting, and (2) countries with pluralism and pressure from group interests. The first group consists of few but widely representative associations of interests. Here, the big unions of business and labor interact more closely with the government to negotiate the economic and social policy. Numerous small associations that are created for achieving specific purposes (in a certain sector) characterize the second group of nations. Here, the role of political parties, fractions and individual politicians is greater (lobbying). There are several types of neo-corporate structures: (1) neo-corporatism with strong labor organizations (Scandinavian countries, Austria) together with long-lasting socialist governments; (2) neo-corporatism with weak labor organizations where the trade unions manage to achieve coordination of their activities (United Kingdom).

There is a third group of developed countries, where the market is governed by "decrees." Planning methods through the use of credit, taxation and export maintenance are used. The governments retain close relations with the big national enterprises (through a Planning Council in France; Ministry of trade and industry in Japan). Unlike neo-corporatism, "governing through decrees" intervenes directly into economy and not so much into re-distribution. It has its own ideological dimension (legitimizing state intervention under circumstances of weak liberal tradition).

As a whole, the idea of neo-corporate tendency in all developed countries as a general transformation of capitalism is not substantiated. Real economies are never based on one principle of regulation only (Salvati, 1982). The combination of various principles gives us the systems of regulation, which are similar to the economic systems.

Basic reading: Trigilia, C. (2002) Pluralism and Neo-Corporatism. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 177-196.

Additional readings: Berger, J. (1990). Market and State in Advanced Capitalist Societies. In Martinelli, A., & Smelser, N. Economy and Society: Overview in Economic Sociology. London: Sage, pp. 103–132.

12. The market and the state in the centrally planned state and transitional economies

This lecture is directed to explicating the features of the centrally planned state economies of the former socialist countries. There are different forms of these economies. The first one is the so-called "military communism" in Russia in the period from 1917 to 1921. The period of the New Economic Policy after that represents a classical monetary form: partially convertible currency is introduced, the role of commercial banks and capital markets is restored, private property ownership is legalized, measures for attracting foreign capital are taken. In 1929, the New Economic Policy is substituted with the classical Stalinist type of economy. Its features are total state control over economy, accelerated industrialization, five-year plans (characterized by natural indexes), passive role of money, immense bureaucracy and political pressure over enterprises. The fulfillment and over-fulfillment of the plan dominate the whole social and cultural life. The result is an unbalanced growth of heavy industry at the expense of services and consumption of population.

Another model is the so called "workers self-management" in Yugoslavia after 1950. It is characterized by certain decentralization of enterprises' management and a limited market orientation. It was only Hungary, which introduced after 1969 the so-called "parametric system" of regulation. It consisted of a combination of natural and financial indexes for stimulating enterprises’ efficiency. The goal was to stimulate market behavior on a micro-level. As a whole, however, it was just a weakened version of the Stalinist system. Since 1980, China implements a policy of market economy transition while preserving the dominance of the only one party in the country – the Communist one.

All efforts to reform the "real socialism" were unsuccessful and this was one of the reasons for the historical downfall of this economic system. Relations between the market and the state in transitional economies are the subject of numerous research studies since 1989.

Basic readings: Kozminski, A. (1990). Market and State in Centrally Planned economies. In Martinelli, A., & Smelser, N. Economy and Society: Overview in Economic Sociology. London: Sage, pp. 133–156.

14. The impact of globalization on national economic models

After the control over the inflation in the 70s and the 80s, the attention of the developed countries turned to firms’ ability to compete against import and to export. Firms’ competitiveness or "the ability to innovate" became the main dependent variable that was determined by numerous factors. These include finances, corporate management, management’s role for regulating labor relations, education and re-training, the availability of maintaining services for the firms, etc. In his book Capitalism against Capitalism (1993), M. Albert lists the major differences between the "coordinated" and the "uncoordinated" market economies in respect to their competitiveness.

The 90s were characterized by a new dynamics of the Anglo-Saxon model (creation of jobs, industrial restructuring, etc.), which gives rise to some doubts in the stability and reproduction of the coordinated market economy. For example, American economy manifested some strengths in respect to high technologies due to some specific factors. However, the same context is not very favorable to the innovations in mass production, which had been better developing in the coordinated market economies. The real drop of wages and the increase of income inequalities balance the dynamics of the Anglo-Saxon model. The Anglo-Saxon model is better adapted to the limitations of globalization, which progressively erodes the coordinated capitalism. Still, S. Berger and R. Dore (1996) warn against overestimating globalization effects. In the big developed countries, about 90% of production are for domestic consumption and 90% of consumption is satisfied by domestic production. However, it is widely acknowledged that globalization will have a series of destabilizing effects over organized market economies that are more dependent than non-market institutions. Since it is impossible to resist to markets’ globalization new forms of national and above-national regulations are needed.

Basic reading: Trigilia, C. (2002) Globalization and the Diversity of Capitalism. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 237-255.

Additional readings: Gereffi, G. (1990). International economics and domestic policies. In Martinelli, A., & Smelser, N. Economy and Society: Overview in Economic Sociology. London: Sage, pp. 231–258.

15. Economic and sociological neo-institutionalism

The aim of this lecture is to demonstrate the common grounds between economic and sociological neo-institutionalism. The new institutionalism is based on the concept of "transaction costs," which attempts to answer the question, Why some transactions are carried out on the market while others are integrated in the firm? The variable "transaction costs" is acknowledged as a result of uncertainty and insufficient information. The diversity of economic organizations is explained as a result of the efforts to increase transactions’ efficiency. The view of the contractual foundation of institutions (Williamson, 1975, 1985) is advanced.

The New economic sociology encompasses different approaches, the common theme among them being a theory of action, which is socially oriented and not always utilitarian. The structural approach emphasizes the role of personal relationships in the structures or networks, which allow for information dissemination and behavior control. Social networks could restrain opportunistic or illegal behavior but could also favor it as in criminal economy or the use of inside information.

Coleman (1990) defines social capital as a network of social relations that the individual or collective actor could depend on at certain times. They furnish resources like information, trust (e.g. for credits, etc.). The stress here in on social networks while in the writings of R. Putnam (1993) and F. Fukuyama (1995) it is on shared culture. Putnam and Fukuyama are inclined to equate social capital with a type of cooperative culture, which depends on historical heritage (path dependence). However, it is difficult to define under what circumstances social capital influences favorably local development and does not develop for example connections of political patronage, clienteles, and corruption. On the other hand, sociological neo-institutionalism is based on the assumption not only of social but also of economic behavior’s cultural, cognitive and political embeddedness (Powell & DiMagio, 1991). The differences among the various approaches in the New economic sociology are weaker in the actual research practice.

Basic reading: Trigilia, C. (2002) Economic and Sociological Neo-Institutionalism. In Economic Sociology. State, Market, and Society in Modern Capitalism. Blackwell Publishing, pp. 218-233.

Additional readings: Chavdarova, T. Economy and Sociology. American Economic Sociology after 1970].

4. Reading List



Lecturer – Vladimirov


What is economic sociology? Subject, methods, connections with other disciplines. Wide and narrow understanding of economy. The concept of institutions. Comparison of classical economic and sociological perspectives.


Scientific status of economic sociology. Methodological "individualism" and methodological holism. Positivism and interpretative pluralism. Science and values.


Economic sociology in the teachings of Adam Smith, T. Malthus, D. Ricardo, K. Marx and the neo-classics.


Economic sociology in Germany: G. Simmel, W. Sombart, M. Weber


Social consequences of capitalism: E. Durkheim and T. Veblen


The "Great Depression" and the decline of liberal capitalism: K. Polanyi and J. Shumpeter


Written exam on parts 1 and 2


Theories of underdeveloped regions’ modernization


Criticisms against the theories of modernization


Upsurge and decline of Keynesian "Welfare state"


The crisis of Fordism and the emergence of flexible production models


The market and the state in the developed countries (pluralism and neo-corporatism)


The market and the state in the centrally planned state and transitional economies


Globalization and the national economic models


Economic and sociological neo-institutionalism


Essay on Part 3



5. Teaching Methodology

The main instructional method is the lecture and it is combined with numerous case studies of up-to-date research studies and discussions. At the end of each lecture, the limits of the studied approaches when applied to studying contemporary economic phenomena are outlined.


6. Assessment

The overall evaluation of students is composed of two exams. The first one is a written exam on the classical heritage of economic sociology (40% of the final grade) and the second one is a written essay (60% of the final grade). The essay should be an attempt at applying the economic sociology’s approaches to the explanation of contemporary economic problems, transforming economies included. The assessment criteria are deep understanding of economic sociology’s methodology and skills for its application to specific cases (research, analysis, assessment).

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