GETTING HISTORY INTO THE EQUATION
Thoughts on Social Capital and on
Social Science
General Background
• Systemic failures
– Agency – third world development
– Deregulation – transition in Eastern Europe
– Oversight – global financial crisis
• Focus on institutions
– New institutionalism, coherent theory
– Not a “school” as such
– No definition of “institutions”
History Matters
• Neoclassical economics
– Forward looking instrumental rationality
– History the carrier of institutions
– Institutions matter – and history does not?
• Role of economic man
– Veblen and chess computers
– Anathema to sociology
– Core conflict
Dealing with Specificity
• Seeming contradiction
– All countries and peoples are the same
– All countries and peoples are unique
• Which story to tell?
– Economic man, background noise
– When is uniqueness relevant?
– Must theory be adjusted?
• Russia a “normal” country
– Clouds the issue
Correlations over Time
• Inglehart et al.
– Quality of economic performance
– Orthodox, Catholic and Protestant traditions
• LaPorta et al.
– Quality of government
– Common, civil, socialist law
• Core problem
– Correlations looking for explanations
– Not all relations are causal relations
Demonstrating Causality
• Pathways of institutional reproduction
– Rational choice vs. culture
• EU Catholics and Protestants
– Pope was corrupt 500 years ago?
– Hierarchical religion, corrupt politics
• Meiji restoration in Japan
– Tokugawa, enemy within, xenophobia
– Meiji, enemy without, close ranks
Turning to Economics
• Deductive modeling
– Queen of social science (Comte)
– Sociology, fiction and nonsense
• The transaction is a cultural thing
– Habits, customs, beliefs, expectations
– Legal, moral and social norms
– Trust, values, guile
• Price of success
– An ahistoric science
– Hirschman, hands tied, not decode
Not Always the Case
• Kuhn, scientific revolutions
– Winning paradigm, rewrite history
– Neoclassical economics
• German historicism
• Inductive approach
• Political economy an historical science
• American institutionalism
• Influenced by historicism
• Orthodoxy in 1930s
• New institutional economics
• Broadly dismissive
• Nothing to be learned
The Scottish Enlightenment
• Core of the liberal tradition
– Invisible hand, inherited
– Kant, Mandeville
• Role of norms
– Smith, Hume, Ferguson
– Ethics, Arrow, Buchanan, North
• Role of intervention
– Visible hand
– Mandeville, Robbins …
The Free Market
• Social science neglects the market as such
– Economics takes it for given
– Sociology abandoned it to economics
• New economic sociology
– Granovetter, embeddedness
– Polanyi contradicted himself
– Definitions plentiful and vague
• New institutionalism
– Coherent approach?
Problems with Deductive Modeling
• Powerful track record
– Nobel Prize in economics
– “Economics imperialism”
• Predictive power
– Restrictive assumptions
• Great Experiments
– Tocqueville, systemic change, dislocations
– Rules suspended (Przeworski)
– “Natural experiments” and “great laboratory”
Methodology
• Marginal revolution
– Methodological individualism
– Trivially true (Elster)
– Capstone of economics (Arrow)
• Methodological holism
– Rejection of economic man
– Embeddedness a replacement?
– Richness of detail vs. power of prediction
Back to History
• Arguments abound that history matters
– Historical economics (Kindleberger, Snooks)
– Historical institutionalism (Pierson, Thelen)
– Historical sociology (Mahoney)
• Challenges to methodological individualism
– The whole greater than sum of the parts
– Collective memories and norms
– Public to private culture and norms
Social Capital
• Shorthand for the missing link
– Instrumental rationality
– Embedded norms
• Policy implications
– Limits to agency
– Handle evolution
• Overall
– Need a theory of norms, human action