The New Economic Sociology of Prices: An Analysis Inspired by the Austrian School of Economics

Abstract

In the reference work of the new economic sociology, the handbook edited by Smelser and Swedberg, economic sociology is defined as: application of the frames of reference, variables, and explanatory models of sociology to that complex of activities concerned with the production, distribution, exchange, and consumption of scarce goods and serviced (1997: 3). According to this definition, the study of market prices which are exchange rates--certainly falls within the scope of this discipline. And indeed, the economic sociology literature does include some investigations of prices, even though as Swedberg (2003: 129) notes they are small in number. The present article begins with an introductory presentation that places the sociology of price in the more general context of the new sociology of markets. There are various approaches in the new economic sociology of prices, but the focus is here on the or approach, with a review of four of its most important case studies (Baker 1984; Uzzi and Lancaster 2004; Podolny 1993; Benjamin and Podolny 1999). These studies are subsequently analyzed from the point of view of the Austrian School of Economics, which offers an interesting perspective, firstly, on their theoretical aspect: Does sociology have specific theories of prices that differ from the law of supply and demand and the other models traditionally used in economic analysis? Secondly, such an approach also sheds light on the empirical basis of these studies. The sociologists in question draw on empirical inquiries, which lead them to focus on the actual characteristics of particular markets. In doing so, however, are they not ignoring some more general and basic characteristics of the price system connected with the interaction between markets? I Sociology, from Markets to Prices The sociology of prices is a part of a much larger undertaking that has taken place since the 1970s in economic sociology, and more specifically in the sociology of markets. This of the sociology of markets, as Swedberg calls it (1997: 267), took place mainly through new applications of the concept of embeddedness, through the use of the technique of network analysis, and through the development of a approach. Polanyi (1944) made use of the concept of embeddedness in order to differentiate economic relations in traditional societies and in capitalist economies. He argued that in traditional societies the economic relations regulating the allocation and circulation of goods are embedded in social relations characterized by rules of reciprocity and of redistribution. But with the advent of capitalist societies, a great transformation occurred whereby economic relations came to be emancipated--disembedded--from social relations. Granovetter showed, against Polanyi, that the concept of embeddedness was still very useful and relevant for the analysis of economic relations in developed market economies. In his classic study on the job market, for instance, he uses a network analysis in order to show the importance of social relations--with family, friends, and acquaintances--in finding a job (Granovetter 1974). The approach analyzes markets as concrete social structures, i.e., as sets of actors related to each other in specific and observable ways. lt does not use cultural or psychological variables, and rejects the economic scheme of supply and demand, considered as too abstract and unrealistic. In a well-known paper, White (1981) describes a typical production market as a tangible clique constructed by the producers themselves while they are watching what each other is doing. Burt (1983) shows that the profits of a firm are higher when it benefits from a structural autonomy vis-a-vis its competitors, suppliers, and customers (i.e., when its competitors are few in number and when its suppliers and customers are numerous and small in size). The new economic sociology of prices is a typical development in this rebirth of the sociology of markets. …