Rethinking Markets

I’ve been thinking about this for a while, wrote about it in an in-process manuscript, and I’m just trying to work out the argument out loud for a bit. Bear with me, it’ll probably be a few posts.

Limitations on how we think about markets and culture. This is two parts a limitation of our theoretical tools, and one part a limitation that stems from doing sociology from the kinds of markets we are studying. From a theoretical point of view, we remain in something of a false dichotomous bind, between those kinds of markets that have a culture, and those kinds of markets that are culture. The paradigm of embeddedness – and with over 2500 citations, I’m not going to jump into that argument, but instead I think fairly assume for the moment that embeddedness=structural embeddedness=networks – suggests that economic activities are influenced by the fact that they occur in repeated rather than one-off interactions. More broadly, the embeddedness framework implies a split between the economic activity, something purely economic, and the culture/structures/networks that have effects on that economic activity. In effect embeddedness argues for more sociological independent variables for economic dependent variables.

This is not the radical critique of someone like Harrison White, who wants to shift the whole discussion from actors and ties to analyses of ties and structures of ties themselves. But the movement in that direction has not been taken up by economic sociology but by the network people in the proto-socio-physics camp. Duncan Watts in sociology leading to its apotheosis in the Reality Mining of the MIT Media Lab. A post for another day.

On the other side of this dichotomy are those who argue that markets are culture. That is, markets are themselves cultural phenomena. This is close to, but not identical to Viviana Zelizer’s critique, that markets are subsumed by culture. I think she’s right for many cultural anthropologists, but the contemporary economic sociology research points to something a little different (and I claim myself to be more a part of this camp than the first). Here, the aim is to understand the determinants of markets – so, what is a commodity, agency, exchange, interests. Markets become the dependent variables, and a rather wide range of other kinds of variables become the explanations for markets. These include institutions, law, conventions, formulae, theory. Callon and the performativity crowd potentially fits on this side of the divide.

This divide maps onto a distinction made by Ann Swidler with regard to culture (and thanks to KH for pointing this out to me, though he’s not responsible for my argument here) – that the kind of markets that are analyzed come into play when taking one position or the other. When markets are settled, we are likely to look at culture as it affects them; when markets are unsettled, we are likely to analyze the determinants of them. Many studies of manufacturing jobs are now about cultural effects on labor and performance outcomes, not about the making of labor (this was certainly the main gist of Marx and industrial sociology, but as we have split organizational and industrial sociology from economic sociology it has dropped out as such). In capital markets, there is a wide split between those looking for sociological effects on finance – and I might include behavioral finance on the settled/’markets-have-culture’ side of the argument – and those looking for the creation of calculative agencies. And while I’ve placed various markets along this axis, even the same market can slide along this axis as it moves in time from settled to unsettled. So we look at network effects on volatility for options markets (Baker 1984; markets have culture, settled market), but the role of formulae in the making of the options market (MacKenzie and Millo 2003; markets are culture, unsettled market). The origins of the CBOT in the 19th century are about the making of futures; the contemporary work is about effects of regulation on market exchange.

I want to argue that this limits what we research and how we go about researching it. I’d like to suggest that are culture/have culture, and are settled/are unsettled ought to be an orthogonal rather than a two-dimensional axis.