Capitalism as a System of Expectations: Toward a Sociological Microfoundation of Political Economy

Politics and Society

Volumn 41, Issue 3, 2013, Pages 323-350

  Beckert, Jens ^a  

^a MAX PLANCK INSTITUTE FOR THE STUDY OF SOCIETIES   (Germany)

Author keywords

capitalism; competition; consumption; economic dynamics; economic sociology; expectations; imaginaries; innovation; microfoundation; political economy

Indexed keywords

EID: 84876065639     PISSN: 00323292     EISSN: 15527514     Source Type: Journal    
DOI: 10.1177/0032329213493750     Document Type: Article

References (158)

1. Robert Boyer, La Théorie De La Régulation. Les Fondamentaux (Paris: La Découverte, 2004).
2. Peter Hall and David Soskice, Varieties of Capitalism (Oxford: Oxford University Press, 2001).
3. Kathleen Thelen and James Mahoney, eds., Explaining Institutional Change: Ambiguity, Agency, and Power (New York: Cambridge University Press, 2010).
4. Frank Dobbin, "The Sociological View of the Economy, " in F. Dobbin, ed., The New Economic Sociology. A Reader (Princeton: Princeton University Press, 2004), 1-46.
5. Neil Smelser and Richard Swedberg, eds., The Handbook of Economic Sociology, 2nd ed. (New York and Princeton: Russell Sage Foundation and Princeton University Press, 2005).
6. Mark Granovetter, "Economic Action and Social Structure: The Problem of Embeddedness, " American Journal of Sociology 91, no. 3 (1985): 481-510.
7. Wolfgang Streeck, "E Pluribus Unum? Varieties and Commonalities of Capitalism, " in M. Granovetter and R. Swedberg, eds., The Sociology of Economic Life (Boulder, CO: Westview, 2011), 419-55.
8. For this shift see also William Sewell, "The Temporalities of Capitalism, " Socio-Economic Review 6 (2008): 517-37.
9. Carlo Trigilia, "Why Do We Need a Closer Dialogue between Economic Sociology and Political Economy?" in Economic Sociology and Political Economy. First Max Planck Summer Conference on Economy and Society. Villa Vigoni, July 15-18 (Villa Vigoni, Italy: 2006).
10. Kathleen Thelen and Sven Steinmo, "Historical Institutionalism in Comparative Politics, " in K. Thelen and S. Steinmo, eds., Structuring Politics (Cambridge: Cambridge University Press, 1992), 1-32.
11. Hall and Soskice, Varieties of Capitalism.
12. Mark Blyth, "Constructing the International Economy, " in R. Abdelal, M. Blyth, and C. Parsons, eds., Constructing the International Economy (Ithaca, NY: Cornell University Press, 2010).
13. Stephen Nelson and Peter J. Katzenstein, "Uncertainty and Risk and the Crisis of 2008, " (Ithaca, NY: Cornell University, 2010).
14. Wolfgang Streeck and Kathleen Thelen, eds., Beyond Continuity (Oxford: University Press, 2005).
15. Thelen and Mahoney, eds., Explaining Institutional Change: Ambiguity, Agency, and Power.
16. Bohman, "Democratizing the Global Order, " 438.
17. Christoph Deutschmann, "Soziologie kapitalistischer Dynamik, " (Cologne: MPIfG Working Paper, 2009).
18. Walter W. Powell and Jeannette A. Colyvas, "Microfoundations of Institutional Theory, " in R. Greenwood, et al., eds., The Sage Handbook of Organizational Institutionalism (London: Sage, 2008), 276-99.
19. David Dequech, "The New Institutional Economics and the Behaviour under Uncertainty, " Journal of Economic Behavior and Organization 59 (2006): 109-31.
20. For a detailed discussion of the notion of fictional expectations see Beckert, "Imagined Futures. Fictional Expectations in the Economy, " Theory and Society (2013). DOI 10.1007/ s11186-013-9191-2.
21. Niklas Luhmann, "The Future Cannot Begin: Temporal Structures in Modern Society, " Social Research 43 (1976): 130-52.
22. Robert Lucas, "Expectations and the Neutrality of Money, " Journal of Economic Theory 4 (1972): 103-24.
23. John F. Muth, "Rational Expectations and the Theory of Price Movements, " Econometrica 29 (1961): 315-35.
24. John Maynard Keynes, The General Theory of Employment, Interest, and Money (London: MacMillan, 1964), 152.
25. Werner Güth and Hartmut Kliemt, "(Un)Eingeschränkt rational entscheiden in Geschäft und Moral, " in Berlin Brandenburgische Akademie der Wissenschaften, ed., Preis der Berlin-Brandenburgischen Akademie der Wissenschaften. Gestiftet von der Commerzbank Stiftung. Weyma Lübbe (Berlin: BBAW, 2010).
26. Herbert Simon, Models of Man (New York: Wiley, 1957).
27. Maurice Allais, "Le comportement de l'homme rationnel devant le risque: critique des postulats et axiomes de l'école Américaine, " Econometrica 21 (1953): 503-46.
28. C. F. Camerer, George Loewenstein, and Matthew Rabin, eds., Advances in Behavioral Economics. (Princeton: Princeton University Press, 2003).
29. James Buchanan and Victor Vanberg, "The Market as a Creative Process, " in D. Hausmann, ed., The Philosophy of Economics (Cambridge: Cambridge University Press, 2008), 379-98, 380f.
30. Paul DiMaggio, "Endogenizing 'Animal Spirits': Toward a Sociology of Collective Response to Uncertainty and Risk, " in M. F. Guillén, et al., eds., The New Economic Sociology. Developments in an Emerging Field (New York: Russell Sage, 2002), 79-100, 90.
31. The notion of "management of expectations" shall not imply that actors could instrumentally steer and thereby control the expectations of other market participants. While actors undoubtedly try to influence expectations, I do not claim that a top-down control of expectations is possible.
32. John Dewey, Human Nature and Conduct. An Introduction to Social Psychology. (New York: The Modern Library, 1957), 223.
33. Ann Mische, "Projects and Possibilities: Researching Futures in Action, " Sociological Forum 24 (2009): 694-704.
34. The reference here is Durkheim's theory of anomy: Émile Durkheim, The Division of Labour in Society (London: Macmillan, 1984).
35. Emile Durkheim, Suicide: A Study in Sociology (New York: The Free Press, 1997).
36. Jens Beckert, "The Social Order of Markets, " Theory and Society 38 (2009): 245-69.
37. Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1957).
38. Wolfgang Streeck, "How to Study Contemporary Capitalism, " Archives Européennes de Sociologie LIII, no. 1 (2012): 1-28.
39. This categorization is in principle open to further elements. Two possible candidates would be property rights, class and consumption. Theories of capitalism usually emphasize the crucial role of property rights for the development of capitalism: Randall Collins, "Weber's Last Theory of Capitalism, " American Sociological Review 45 (1980): 925-42.
40. Douglass North, Institutions, Institutional Change, and Economic Performance (Cambridge: Cambridge University Press, 1990).
41. Rudolf Richter and Eirik Grundvig Furubotn, Neue Institutionenökonomik, ed. Rudolf Richter, 3 ed., Neue Ökonomische Grundrisse (Tübingen: Mohr Siebeck, 2003).
42. Karl Marx, Soziologie Kapitalistischer Dynamik (1977). While I agree that property rights are important, I maintain that they take a derived place by being necessary conditions for the expansion of credit, innovation, competition, and commodification. Class is included as an important influence on the operation of the elements discussed here. The crucial development of the commodification of labor, forming the basis of class relations in capitalism, is included under the heading of commodification. Finally consumption is discussed under the more general heading of commodification.
43. The four elements are interdependent and only in combination do they produce the dynamic restlessness of the capitalist order. Competition motivates innovation but also commodification. Innovation depends on credit to secure the means to cover costs in the innovation process that will only later be recovered through the sales of the product. The extension of credit relations creates capital for investments, effectively fostering pressures for commodification.
44. By highlighting the four elements I am not aiming at a theory of the origins of capitalism and its different forms. My only claim is that the dynamics of capitalism operate through the four elements identified and that they have increased in scope in the course of modern capitalism's development.
45. Luhmann, "The Future Cannot Begin: Temporal Structures in Modern Society. "
46. William J. Baumol, The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism (Princeton: Princeton University Press, 2002).
47. Deutschmann, "Soziologie kapitalistischer Dynamik.
48. Joseph Schumpeter, Theorie der wirtschaftlichen Entwicklung (Berlin: Duncker & Humblot, 1912).
49. Creativity, as understood here, is not limited to the entrepreneur in Schumpeter's sense but rather seen as an integral part of all work processes. In capitalism, the creativity of the laborer comes under the control of owners of capital who buy labor power and thereby the potential for capital accumulation stemming from the creativity of the laborer. The dynamics of capitalism are therefore also linked to the class structure emerging from the commodification of labor.
50. Robert Solow, "Technical Change and the Aggregate Production Function, " Review of Economics and Statistics 39 (1957): 312-20.
51. Trigilia, "Why Do We Need a Closer Dialogue between Economic Sociology and Political Economy?"
52. Richard Bronk, The Romantic Economist. Imagination in Economics (Cambridge: Cambridge University Press, 2009), 201.
53. Inka Tappenbeck, Phantasie und Gesellschaft. Zur soziologischen Relevanz der Einbildungskraft (Würzburg: Königshausen und Neumann, 1999), 53.
54. David E. Nye, "Technological Prediction, " in M. Sturken, D. Thomas, and S. J. Ball-Rokeach, eds., Technological Visions (Philadelphia: Temple University Press, 2004), 159-85.
55. Smith, Democratic Innovations, 26-27.
56. Schumpeter, Theorie der wirtschaftlichen Entwicklung.
57. Smith, Democratic Innovations, 26-27.
58. Smith, Democratic Innovations, 26-27.
59. See also Jens Beckert, Beyond the Market. The Social Foundations of Economic Efficiency (Princeton: Princeton University Press, 2002).
60. Christoph Deutschmann, Kapitalistische Dynamik. Eine gesellschaftstheoretische Perspektive (Wiesbaden: VS Verlag für Sozialwissenschaften, 2008).
61. Luhmann, "The Future Cannot Begin: Temporal Structures in Modern Society. "
62. Bohman, "Democratizing the Global Order, " 438.
63. Harro van Lente and Arie Rip, "Expectations in Technological Developments: An Example of Prospective Structures to Be Filled in by Agency, " in C. Disco and B. van der Meulen, eds., Getting New Technologies Together. Studies in Making Sociotechnical Order (Berlin: de Gruyter, 1998), 203-29, 222.
64. Christoph Deutschmann, "Social Rise as a Factor of Capitalist Growth, " SASE Conference (Madrid, June 23-25, 2011: 2011), 4.
65. Robert Merton, Social Theory and Social Structure (Glencoe: The Free Press, 1957).
66. Bohman, "Democratizing the Global Order, " 438.
67. Alejandro Portes and Julia Sensenbrenner, "Embeddedness and Immigration: Notes on the Determinants of Economic Action, " American Journal of Sociology 98 (1993): 1320-50.
68. Trigilia, "Why Do We Need a Closer Dialogue between Economic Sociology and Political Economy?"
69. See Deutschmann, "Social Rise as a Factor of Capitalist Growth, " 4f.
70. Sophie Mützel, "Koordinierung von Märkten durch narrativen Wettbewerb, " in J. Beckert and C. Deutschmann, eds., Wirtschaftssoziologie (Köln: Kölner Zeitschrift für Soziologie und Sozialpsychologie, 2010).
71. Bohman, "Democratizing the Global Order, " 438.
72. Niall Ferguson, The Ascent of Money. A Financial History of the World (New York: Penguin, 2008), 31.
73. David Graeber, Debt:The First 5,000 Years (New York: Melvillehouse, 2011).
74. Schumpeter, Theorie der wirtschaftlichen Entwicklung, 95ff.
75. Credit allows entrepreneurs access to economic goods before they have a "normal claim" to them. "It temporarily substitutes, as it were, a fiction of this claim for the claim itself" (Schumpeter, Theorie der wirtschaftlichen Entwicklung, 107).
76. See also Bruce G. Carruthers and Arthur L. Stinchcombe, "The Social Structure of Liquidity: Flexibility, Markets and States, " Theory and Society 28 (1999): 353-82.
77. The difference between the two concepts I see as follows: Trust is demarcating a situation in which the other party may take the deliberate decision to damage me for his own benefit. Confidence is a situation in which I engage in incalculable risks that emerge from the openness of the future, which is unforeseeable for both parties. Fraud would be a breach of trust. The expectation-say that Goldman Sachs will stay in business-is an expression of confidence.
78. Smith, Democratic Innovations, 26-27.
79. Heiner Ganßmann, Doing Money (London: Routledge, 2011).
80. In a monetary system in which paper money is covered by a commodity-mostly gold-the promise is that the issuer will redeem the bill against a certain amount of the commodity. Effectively this was to make credible the promise of the issuer of paper money that he will not increase the money supply at a rate that will devalue the currency.
81. See also for the role of interpretation in the valuation of financial assets, Prato/Stark "Attention Structures and Valuation Models: Cognitive Networks among Securities Analysts, " (2012).
82. Smith, Democratic Innovations, 26-27.
83. Philip Mirowski, "Postmodernism and the Social Theory of Value, " Journal of Post Keynesian Economics 13, no. 4 (1991): 565-82, 581.
84. Geoffrey Ingham, The Nature of Money (Cambridge: Polity Press, 2004), 31.
85. Heiner Ganßmann, "Geld und die Rationalität wirtschaftlichen Handelns, " (2010), 14f.
86. Georg Simmel, The Philosophy of Money (London: Routledge, 1978), 179.
87. Bohman, "Democratizing the Global Order, " 438.
88. Lendol Calder, Financing the American Dream: A Cultural History of Consumer Credit (Princeton: Princeton University Press, 1999).
89. Since the functioning of institutions also depends on the "good will" of those regulated by the institutions, moral resources may be an indispensable factor in the possibility of capitalist dynamics.
90. Wolfgang Streeck, "Wirtschaft und Moral: Faceten eines unvermeidlichen Themas, " in W. Streeck and J. Beckert, eds., Moralische Voraussetzungen und Grenzen wirtschaftlichen Handelns, MPifG Working Paper 07/06 (Köln: Max-Planck-Institut für Gesellschaftsforschung, 2006), 17.
91. The willingness to give credit also depends, of course, on the interest rate. But it would be short-sighted to see the expansion of credit only as a function of the interest rate, as can be seen in economic crises when even interest rates close to zero do not lead to an increase in borrowing. Cf. Keynes, The General Theory of Employment, Interest, and Money.
92. Smith, Democratic Innovations, 26-27.
93. Martin Hellwig, "Discussion on International Contagion: What Is It and What Can Be Done against It?" Swiss Journal of Economics and Statistics 134, no. 4.2 (1998): 715-39, 718.
94. Keynes, The General Theory of Employment, Interest, and Money.
95. Erving Goffman, The Presentation of Self in Everyday Life (New York: Doubleday, 1959).
96. Jens Beckert, "Trust and the Performative Construction of Markets, " MPIfG Discussion Paper 05/8 (Köln: Max-Planck-Institut für Gesellschaftsforschung, 2005).
97. Michael Bacharach and Diego Gambetta, "Trust in Society, " in K. S. Cook, ed., Trust in Society, Trust (New York: Russel Sage, 2001), 148-84.
98. Smith, Democratic Innovations, 26-27.
99. Akos Rona-Tas and Stefanie Hiss, "Forecasting as Valuation: The Role of Ratings and Predictions in the Subprime Mortgage Crisis in the United States, " in J. Beckert and P. Aspers, eds., The Worth of Goods. Valuation and Pricing in the Economy (Oxford: Oxford University Press, 2011), 223-46.
100. Smith, Democratic Innovations, 26-27.
101. Michal Kalecki, "Political Aspects of Full Employment, " The Political Quarterly 14, no. 4 (1943): 322-30.
102. Fernand Braudel, Civilization and Capitalism, 15th-18th Century. (London: Fontana, 1985).
103. Polanyi, The Great Transformation.
104. Commodification can proliferate through geographic expansion when more regions and countries are included in the system of market exchanges (land grabbing). Expansion can take place, secondly, when products and services hitherto provided in noncommodified form come to be traded on markets. Third, the expansion of the realm of commodities takes place through newly developed products entering the market. Finally, commodification can unfold in the time dimension through futures markets (future grabbing). I am not claiming that commodification is a unidirectional and uncontested process. Indeed, many social conflicts are about the limits of commodification-for instance, in the case of private provision of water, but also organ transplants, prostitution, and illegal drugs. See Viviana Zelizer, The Social Meaning of Money: Pin Money, Paychecks, Poor Relief, and Other Currencies (New York: Basic Books, 1994). Nevertheless, it is fair to state that over the past 200 years we have observed an expansion of commodity relations at the expense of householding and reciprocity as forms of distribution of goods and services.
105. George Lennox Sharman Shackle, Epistemics & Economics: A Critique of Economic Doctrines (Cambridge: Cambridge University Press, 1972).
106. A striking example of this is provided in a recent paper by Zsuzsanna Vargha, "Realizing Dreams, Proving Thrift: How Product Demonstrations Qualify Financial Objects and Consumer Needs in Home Savings and Loans, " in J. Beckert and C. Musselin, eds., Constructing Quality. The Classification of Goods in the Economy (Oxford: Oxford University Press, 2013, 31-57) in which she shows how the value of home loan contracts in Hungary is constructed in the interaction between sales agent and customer.
107. Johannes Berger, "Warum arbeiten die Arbeiter? Neomarxistische und neodurkheimianische Erklärungen, " Zeitschrift für Soziologie 24, no. 6 (1995): 407-21.
108. Philipp Gerlach, "Der Wert der Arbeitskraft. Bewertungsinstrumente und Auswahlpraktiken im Arbeitsmarkt für Ingenieure in Frankreich und Deutschland" (University of Cologne, 2012) shows the social processes through which expectations about the productivity of a candidate are formed in the recruitment process.
109. Hirokazu Miyazaki, "The Temporalities of the Market, " American Anthropologist 105, no. 2 (2003): 255-65.
110. Mützel, "Koordinierung von Märkten durch narrativen Wettbewerb. "
111. Charles Smith, "Coping with Contingencies in Equity Option Markets: The 'Rationality' of Pricing, " in J. Beckert and P. Aspers, eds., The Worth of Goods (Oxford: Oxford University Press, 2011), 272-94, 277.
112. Berger, "Warum arbeiten die Arbeiter? Neomarxistische und neodurkheimianische Erklärungen. "
113. Jens Beckert and Patrik Aspers, eds., The Worth of Goods. Valuation and Pricing in the Economy (Oxford: Oxford University Press, 2011).
114. Lucien Karpik, Valuing the Unique. The Economics of Singularities (Princeton, NJ: Princeton University Press, 2010).
115. Smith, "Coping with Contingencies in Equity Option Markets: The 'Rationality' of Pricing.
116. David Stark, The Sense of Dissonance: Accounts of Worth in Economic Life (Princeton, NJ: Princeton University Press, 2009).
117. Bohman, "Democratizing the Global Order, " 438.
118. Jens Beckert, "The Transcending Power of Goods, " in J. Beckert and P. Aspers, eds., The Worth of Goods (Oxford: Oxford University Press, 2011), 106-28.
119. André Orléan, L'empire de la Valeur (Paris: Editions du Seuil, 2011).
120. To avoid a possible misunderstanding: This does not imply that imaginative value is purely individual. To the contrary, the preferences are rooted culturally and socially. However, the value does not necessarily emerge from calculated effects of positioning the owner in a certain position in social space.
121. Beckert, "The Transcending Power of Goods. "
122. Viviana Zelizer, Morals and Markets: The Development of Life Insurance in the United States (New York: Columbia University Press, 1979).
123. Thomas B. Lawrence and Nelson Phillips, "From Moby Dick to Free Willy: Macro-Cultural Discourse and Institutional Entrepreneurship in Emerging Institutional Fields, " Organization 11 (2004): 689-711.
124. Georg Simmel, "Die Mode, " in G. Simmel, ed., Philosophische Kultur (Leipzig: Alfred Kröner Verlag, 1919), 25-57.
125. Albert Hirschman, Shifting Involvements. Private Interest and Public Action (Princeton, NJ: Princeton University Press, 1982), 1.
126. Colin Campbell, The Romantic Ethic and the Spirit of Modern Consumerism (Oxford: Basil Blackwell, 1987).
127. Georg Simmel, Philosophy of Money, 3 ed. (London: Routledge, 2004), 66.
128. Sophie Dubuisson-Quellier, "From Qualities to Value-Demand Shaping and Market Control in Mass Consumption Markets, " in Jens Beckert and Christine Musselin, eds., Constructing Quality: The Classification of Goods in the Economy, 2013, 247-267.
129. Karpik, Valuing the Unique. The Economics of Singularities.
130. Charles Smith, Auctions, the Social Construction of Value (Berkeley: University of California Press, 1989), 56.
131. Michel Callon, Cécile Méadel, and Vololona Rabeharisoa, "The Economy of Qualities, " Economy and Society 31, no. 2 (2002): 194-217.
132. Adam Smith, The Wealth of Nations (Chicago: University of Chicago Press, 1976), 368.
133. Bohman, "Democratizing the Global Order, " 438.
134. Albert Hirschman, Rival Views of Market Society (New York: Viking Press, 1986).
135. Braudel, Civilization and Capitalism, 15th-18th Century.
136. Polanyi, The Great Transformation.
137. Max Weber, Economy and Society, 2 vols. (Berkeley: University of California Press, 1978), 635ff.
138. Harrison White, " Where Do Markets Come From?" American Journal of Sociology 87 (1981): 517-47.
139. According to White, competition is a process that takes place through the mutual observation of the strategies through which competing firms position their products in the market. Each product occupies a distinct niche and the positioning of any of them takes place through the attempt to find a not-yet-occupied niche in which the product finds demand but is differentiated from competing products. Hence markets are understood as stable relational role structures, and the reproduction of markets and the survival of the firms operating in them presuppose this structuring of markets.
140. Drew Fudenberg and Jean Tirole, Noncooperative Game Theory for Industrial Organization: An Introduction and Overview, vol. 1, Handbook of Industrial Organization (Amsterdam: Elsevier, 1989).
141. Jon Elster, ed., "Introduction, " in Rational Choice (New York: New York University Press, 1986), 1-33, 19.
142. Richard L. Schmalensee, "Industrial Economics: An Overview, " (Massachusetts, IL: Sloan School of Management Massachusetts Institute of Technology, 1988), 59.
143. Timur Ergen, "Konkurrenz und Diskurs. Interpretative Politik in der deutschen Energiewende, " (Köln: MPIfG, 2011).
144. Stark, The Sense of Dissonance: Accounts of Worth in Economic Life.
145. Stark, The Sense of Dissonance.
146. Smith, Democratic Innovations, 26-27.
147. Jens Beckert, "Agency, Entrepreneurs and Institutional Change: The Role of Strategic Choice and Institutionalized Practices in Organizations, " Organization Studies 20 (1999): 777-99.
148. Deutschmann, "Soziologie kapitalistischer Dynamik. "
149. Valery Yakubovich, Mark Granovetter, and Patrick McGuire, "Electric Charges: The Social Construction of Rate Systems, " Theory and Society 34 (2005): 579-612.
150. Smith, Democratic Innovations, 26-27.
151. Charles F. Sabel and Jonathan Zeitlin, World of Possibilities. Flexibility and Mass Production in Western Industrialization (Cambridge: Cambridge University Press, 1997), 15.
152. van Lente and Rip, "Expectations in Technological Developments: An Example of Prospective Structures to be Filled in by Agency. "
153. Nick Brown, Brian Rappert, and Andrew Webster, eds., Contested Futures. A Sociology of Prospective Techno-Science (Aldershot: Ashgate, 2000).
154. However, one can assume that fictional expectations themselves shape the future they predict in the direction of the prediction. This performative effect might with hindsight be seen as confirmation of the accuracy of a prediction, although the outcome is the result of the joint belief in the fictional expectation. Michel Callon, ed., The Laws of the Markets (Oxford: Blackwell Publishers, 1998).
155. Donald MacKenzie and Yuval Millo, "Constructing a Market, Performing Theory: The Historical Sociology of a Financial Derivatives Exchange, " American Journal of Sociology 109, no. 1 (2003): 107-45.
156. James Mahony, "Path Dependence in Historical Sociology, " Theory and Society 29 (2000): 507-48.
157. Bohman, "Democratizing the Global Order, " 438.
158. Keynes, The General Theory of Employment, Interest, and Money, 162f.