Social Structure in Economic Theory

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Social structure is a core concept in most social sciences, but it has never quite had this status in economics. Much economic theory, especially the orthodox variety, keeps away from structural methods and makes little or no reference to social structure: the word structure is used only rarely and casually, so that its sense remains unclear. This puts economics out of step with other academic disciplines, which are more amenable to structural ideas, and broaches the issue of whether social structure has been unduly neglected in economic theory.

Orthodox economists, committed to methodological individualism, have been wary of social structure, lest it would undermine their individualistic stance and promote a "non-economic," sociological outlook. Neoclassical economics begins with rational agents who have fixed preferences defined from the outset. Social structures either are absent or have a subordinate place as market imperfections that must be explained through individual behavior. Any structure bringing people together to form a larger whole will contradict the atomism of neoclassical thought. Heterodox economists, by contrast, have no such commitment to individualistic methods and should be comfortable with social structure. It does indeed feature in heterodox economics, but it often stays implicit and has less prominence than one might expect.

Modern concepts of structure are based on relationships among parts of a whole: for structural analysis to be relevant, the parts must be internally related such that they are necessary to the whole and each part could not exist without the others (Sayer 1992, chapter 3). If the parts have no interdependence and only external relationships, then the whole is at most an aggregate (perhaps not even that), and structural analysis ceases to be relevant. The hallmark of a structural method is its reliance on internal relations among parts making up a whole. Structural theory can sometimes turn into holism and give the whole precedence over the parts, yet the original aim of structural ideas--as against holistic ones--was to ensure that the whole could always be transformed, or else the whole-part relationship would be redundant. A structural method, if handled properly, should never congeal into structural wholes that overshadow their component parts.

The word structure has acquired unhelpful connotations from the analogy with physical structures. Comparison with a building suggests something hard, permanent, and complete, as if it were built from solid materials and to a predetermined plan. Social structure would then enter economics as a rigid constraint that restricted human behavior. The static analogy is misleading and offers at best a partial view of structure. In its earliest English language uses, structure was a noun of process which referred to the act of building, not the end product; only later has structure become static (Williams 1983). Even when seen as a state rather than a process, structure still has a capacity for change.

This paper argues that economics might gain from a richer, more fluid treatment of social structure, as proposed in recent social theory. After considering the structural content of heterodox economics, the paper examines how current approaches might be developed to yield new structural concepts capable of accommodating economic diversity and change. An enhanced definition of social structure could provide a structural foundation for economics without denying human agency or historical evolution.

Social Structure in Heterodox Economics

Most heterodox economics--notably institutionalism, Post Keynesianism, and the Marxian/classical tradition--has shown awareness that economic behavior is embedded in social structure. This may be expressed indirectly, but it underlies the theoretical arguments being made and the rejection of methodological individualism; structural methods are at the heart of a heterodox approach.

The agreement that economics should have a structural aspect has not, however, brought a uniform definition of social structure, and the concept remains somewhat vague. Ambiguities about social structure affect all social sciences, not just economics, and do not necessarily imply careless theorizing--the varied meanings are symptoms of the subject's complexity as much as the theorists' failures. The diversity of structural theories at least demonstrates that heterodox economists are escaping any stale theoretical orthodoxy and producing new accounts of their object of study. More lucid terminology would still be welcome, though, as long as it did not foster oversimplified methods.

Particular problems arise over the link between people and social structures. Is a social structure made up of people, or does it comprise roles and positions distinct from the people who occupy them? The first alternative is a more humanistic view focused on personal relations and collective agency; the second is a more structural view keeping structure and agency apart. The two views are different but compatible: if roles are to influence behavior, then people must fill them, and so social structure can never be cut off from the individual members of society.

Among the many uses of the term social structure, the commonest stress roles and positions rather than people. In sociology, the conventional meaning of structure revolves around a society's systemic properties, as determined by formal institutions and normalized behavior. Textbook definitions of social structure incline toward the role-based view that distinguishes structural positions from the people who occupy them. This stems largely from the structural-functionalism of Talcott Parsons and his followers, which depicted societies as complex multilayered systems with their own functional prerequisites. Parsons himself did not clearly distinguish structures from people, and his theory can be interpreted variously, but his fondness for systemic arguments (especially in his later work) led to a systemic notion of social structure (1951). A role-based, structural approach has come to characterize sociological analysis in the same way that individualism characterizes neoclassical economics.

The systemic, Parsonian version of social structure is rare in economic theory, since economists have usually heeded the economics/sociology dichotomy and few have drawn their ideas from sociology. A role-based definition of social structure is, however, discernible in strands of heterodox economics that ground themselves in social theory. The critical realist research program, for example, situates economics within a more general, non-reductive theoretical framework for all social science (Lawson 1997; Jackson 1995). Following the usual sociological practice, critical realism has defined social structure as relations among roles and positions, although it is careful to leave space for human agency as well. The interdependence of distinct structure and agency concepts can guard against reductive social theory.

Other heterodox approaches, such as institutionalism, have made less use of role-based social structure. The work of Thorstein Veblen and John R. Commons deals extensively with structured and socialized behavior but allows for different types and levels of structured activity: there is no prior notion of structure. Veblen, for instance, located the regularities of economic behavior at the individual level through the concept of habit, in other words, the tendency to engage in previously adopted or acquired forms of action. When distributed among a population, habits will become formalized as institutions that involve codifiable procedures (Hodgson 1988, chapter 6). Social behavior takes on a layered quality, embracing the individual and the social, the personal and the impersonal, and the formal and the informal. A similar view pervades the work of Commons, who argued that collective behavior is governed by various levels of working rules, including laws, social conventions, and the customary practices in a specific workplace (Rutherford 1983). Layered accounts of behavior are widespread in the old institutional economics, but their stratified nature often remains unspoken.

A useful classification, in line with much institutionalism, divides behavioral regularities into three types: habits, routines, and institutions (Hodgson 1994). Habits are personal and individual--they are unique to specific people and not social structures as such, though they help to stabilize social structure. Routines are personal and social--they pertain to a specific group and will be part of larger social structures without having an official, legalized form. Institutions are impersonal and social--they are not tied to a specific group and may be codified through published rules and general social roles. This threefold classification implies that social structures should cover both the personal and impersonal elements in behavioral regularities.

Institutionalism acknowledges social wholes and is broadly structural, but it does not subscribe to a unified concept of social structure. Institutions and social structures are seen as existing on various levels. Walter Neale (1987), for instance, identified three aspects of an institution: personal relations, social rules and principles, and the ideas and beliefs that justify social practices. …