OLAV VELTHUIS [*]
ABSTRACT. In his early work, Talcott Parsons severely criticized Old Institutional Economists like Thorstein Veblen and Clarence Ayres. Parsons' main objection was that institutional economics had a misconceived view on the scope of economics: institutions, being the embodiment of values, were the proper subject of sociology rather than economics. By arguing for a clear-cut division of labor between economics and sociology, Parsons legitimated the divide between the two disciplines that came into being in the years to follow. Recently however, the relationship between economic sociology and institutional economics has changed dramatically. New Economic Sociology (advocated by scholars like Mark Granovetter and Richard Swedberg) rejects the division of labor proposed by Parsons. By providing substitutes rather than just complements to economics, it tries to counter economic imperialism. This creates significant similarities between New Economic Sociology, Old Institutional Economics and the recent return of in stitutionalism in economic theory. However, the quest for a division of labor between economics and sociology remains unfinished.
DUE TO A NUMBER OF DEVELOPMENTS IN BOTH ECONOMICS and sociology, the relationship between the two disciplines has become an important issue in contemporary social science (cf. Baron and Hannan, 1994; Ingham, 1996). Under the heading of "economic imperialism," a growing number of subjects that traditionally belonged to the discipline of sociology, has been studied by economists in the last few decades (Hirschleifer, 1985). From the side of sociology, the rational choice perspective has likewise questioned the clear separation between economics and sociology in subject matter, theoretical assumptions, and methodology. 
From a "heterodox" position, the relationship between economics and sociology has been put on the agenda by New Economic Sociology and institutional economics. Both schools are highly critical of mainstream economics, and want to counter economic imperialism. They try to provide a substitute for economic theory by focusing on the institutional context and social embeddedness of economic action, But whereas the institutional economists can build on the work of Old Institutional Economists like Thorstein Veblen and Clarence Ayres, New Economic Sociology sharply distinguishes itself from its intellectual ancestors, and in particular from the economic sociology of Talcott Parsons.
In this article, economic sociology and its relationship with institutional economics will be investigated. The American sociologist Parsons is a useful starting point for this exploration for a number of reasons. In the first place, Parsons was trained in both institutional economics and in sociology. Secondly, he was most influential for the further development of economic sociology in the United States. Finally, Parsons became highly interested in the relationship between economics and sociology in his early work. In fact, his attempt to establish a sociological theory that was clearly distinguishable from economics, directly led him to formulate a thorough critique of institutional economics.
Parsons' main argument was that sociology, or, for that matter, the analysis of the institutions of economic life, should be a complement to rather than a substitute for mainstream economics. In the debate between neoclassical economists and institutional economists that was going on in the 1930s, he therefore sided with the former: Parsons basically sympathized with orthodox, marginalist economic theory of his day, and mostly with its view on the subject matter of economics. Following the definition of economics put forward by Lionel Robbins, Parsons argued that sociology should study the ultimate ends, or the value factor of social action, whereas economics should study the means. Therefore, Parsons fiercely opposed institutional economics which studied institutions as the embodiment of values. …