Path Dependence and Capital Theory: Sociology of the Post-communist Economic Transformation

East European Politics & Societies

Volumn 12, Issue 1, 1997, Pages 107-131

  Róna Tas, Ákos ^a  

^a NONE

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EID: 84993748490     PISSN: 08883254     EISSN: None     Source Type: Journal    
DOI: 10.1177/0888325498012001005     Document Type: Review

References (54)

1. Institutions have a somewhat different meaning in sociology than in economics. In economics, institutions are “the rules of the game,” exogenous constraints to which rational actors must adapt. Sociologists, on the other hand, emphasize the internalized aspects of institutions: values and cognitive frames. (See Anthony Oberschall and Eric M. Leifer, “Efficiency and Social Institutions: Uses and Misuses of Economic Reasoning in Sociology,” Annual Review of Sociology 12 (1986): 233-53; and W. Walter Powell and Paul J. DiMaggio, eds., The New Institutionalism in Organizational Analysis (Chicago: University of Chicago Press, 1991). Institutions shape people's preferences and desires as much as they constrain what they can do. Sociologists point out that institutional rules must be understood as such by the players. In economics, institutions are coordinated by the market, which by this definition is an institution itself. In sociology, the links between institutions can be grasped through the concept of social structure. Economists take a functionalist view of institutions whereby institutions exist in order to solve rational action problems. Some of the classic institutional formulations in economics are given by Ronald H. Coase, “The Nature of the Firm,” Economica 4:4 (1937): 386-405; Armen A. Alchian, “Some Economics of Property Rights,” Il Politico 30:4 (1965): 816-29; Oliver E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications. A Study in the Economics of Internal Organization (New York: Free Press, 1975); Douglass C. North, Structure and Change in Economic History (New York: Norton, 1981) and; Alexander James Field, “The Problem with Neoclassical Institutional Economics: A Critique with Special Reference to the North/Thomas Model of Pre-1500 Europe,” Explorations in Economic History, 18 (1981), 174-98. For sociologists, institutions are as much the source as the solution of rational action problems. Their approach to institutions is causal rather than functional.
2. See, for example, Janos Kornai, The Socialist System: The Political Economy of State Socialism (Princeton: Princeton University Press, 1992); Douglass C. North, “Institutions, Ideology, and Economic Performance,” Cato Journal, 11:3 (1992): 477-96; Arthur T. Denzau and Douglass C. North, “Shared Mental Models: Ideologies and Institutions,” Kyklos 47:1 (1994):3-31; Mark Casson, The Economics of Business Culture: Game Theory, Transaction Costs, and Economic Performance (Oxford: Clarendon Press, 1991); Kazimierz Z. Poznanski, “An Interpretation of Communist Decay: The Role of Evolutionary Mechanisms,” Communist and Post-Communist Studies 26:1 (1993): 3-24; and Roman Frydman and Andrzej Rapaczynski, Privatization in Eastern Europe: Is the State Withering Away? (Budapest: Central European University Press, 1995).
3. Victor Nee, “A Theory of Market Transition: From Redistribution to Markets in State Socialism,” American Sociological Review 54 (1989): 663-81; Victor Nee, “Social Inequalities in Reforming State Socialism: Between Redistribution and Markets in China,” American Sociological Review 56 (1991): 267-82; and Victor Nee, “The Emergence of a Market Society: Changing Mechanisms of Stratification in China,” American Journal of Sociology 101 (1996): 908-50.
4. Karl Polanyi, “The Economy as Instituted Process,” in Karl Polanyi et. al., eds., Trade and Market in Early Empires (New York: Free Press, 1957); and Janos Kornai, “Bureaucratic and Market Coordination,” Osteuropa Wirtschaft 29 (1984): 306-19.
5. Later, Nee himself described various hybrid forms of organizations in China without modifying his market-transition theory. See Victor Nee, “Organizational Dynamics of Market Transition: Hybrid Forms, Property Rights, and Mixed Economy in China,” Administrative Science Quarterly 37 (1992): 1-27.
6. Similar claims were advanced earlier by Ivan Szelényi and Robert Manchin, “Social Policy Under State Socialism,” in G⊘sta Esping-Anderson, Lee Rainwater, and Martin Rein, eds., Stagnation and Renewal in Social Policy (White Plains, N.Y.: M. E. Sharpe, 1987).
7. Akos Róna-Tas, “The First Shall Be Last? Entrepreneurship and Communist Cadres in the Transition from Socialism,” American Journal of Sociology 100 (1994): 40-69; William L. Parish and Ethan Michaelson, “Politics and Markets: Dual Transformations,” American Journal of Sociology 101 (1996): 1042-59; and Andrew G. Walder, “Markets and Inequality in Transitional Economies: Toward Testable Theories,” American Journal of Sociology 101 (1996): 1060-73.
8. Jean C. Oi, State and Peasant in Contemporary China: The Political Economy of Village Government (Berkeley: University of California Press, 1989); Petr Matějů and Nelson Lim, “Who Has Gotten Ahead After the Fall of Communism?” Czech Sociological Review 3:2 (1995): 117-36; Jiři Večernik, “Incomes in Central Europe: Distributions, Patterns and Perceptions” (Mimeo, Institute of Sociology, Czech Academy of Sciences, 1995); and Henryk Domahski and Barbara Heyns, “Toward a Theory of the State in Market Transition: From Bargaining to Markets in Post-Communism,” Archives Europeennes de SocioloQie 34 (1995): 317-51.
9. Yu Xie and Emily Hannum, in “Regional Variation in Earnings Inequality in Reform Era Urban China,” American Journal of Sociology 101 (1996): 950-92, develop this point with analytic elegance.
10. See, for instance, Peter M. Blau and Danching Ruan, “Inequality of Opportunity in Urban China and America,” in Arne L. Kalleberg, eds., Research in Social Stratification and Mobility, vol. 9 (Greenwich: JAI Press, 1990); and Max Haller, Tamás Kolosi, and Péter Robert, “Social Mobility in Austria, Czechoslovakia, and Hungary,” in Max Haller, ed., Class Structure in Europe: New Findings from East-West Comparisons of Social Structure and Mobility (Armonk, N.Y.: M. E. Sharpe, 1990).
11. Jadwiga Staniszkis, The Dynamics of the Breakthrough in Eastern Europe: The Polish Experience (Berkeley: University of California Press, 1991), and Endre Sik, “From the Multicoloured to the Black and White Economy: The Hungarian Second Economy and the Transformation,” International Journal of Urban and Regional Research 18:1 (1994): 46-70, discuss some further implications of the segmentation of emerging post-communist markets.
12. Akos Róna-Tas, “The First Shall Be Last?"; Akos Róna-Tas, The Great Surprise of the Small Transformation: The Demise of Communism and the Rise of the Private Sector in Hungary (Ann Arbor: University of Michigan Press, 1997).
13. Ivan Szelényi and Eric Kostello, “The Market Transition Debate: Toward a Synthesis?” American Journal of Sociology 101 (1996): 1082-96.
14. György Lengyel and Dobrinka Kostova, “The New Economic Elites: Similarities and Differences,” in György Lengyel, ed., The Transformation of East-European Economic Elites: Hungary, Yugoslavia and Bulgaria, Research Report 4 (Budapest School of Economics, 1996); Ivan Szelényi and Szonja Szelényi, “Circulation or Reproduction of Elites During the Post-Communist Transformation of Eastern Europe: Introduction,” Theory and Society 24:5 (1995): 615-38; Eric Hanley, Natasha Yershova, and Richard Anderson, “Russia-Old Wine in a New Bottle-The Circulation and Reproduction of Russian Elites,” Theory and Society, 24:5 (1995): 639-68; József Böröcz and Ákos Róna-Tas, “Small Leap Forward: Emergence of New Economic Elites,” Theory and Society 24:5 (1995): 751-81; Olga V. Kryshtanovskaia, “Transformation of the Old Nomenklatura into a New Russian Elite,” Sociological Research (November-December 1995): 6-26; and Murray Yanowitch, ed., “Old and New Elites,” Special Issue of Sociological Research (May-June, 1995).
15. Gerhart E. Lenski, “Status Crystallization: A Non-Vertical Dimension of Social Status,” American Sociological Review 19 (1954): 405-13; Tamás Kolosi, “Status and Stratification,” in Rudolf Andorka and Tamas Kolosi, eds., Stratification and Inequality (Budapest: Institute for Social Sciences, 1984); and Pavel Machonin and Milan Tuček, “A Historical Comparison of Social Structure in the Czech Republic in the Years 1984 and 1993,” Czech Sociological Review 2 (1994): 149-72.
16. Peter M. Blau and Otis D. Duncan, The American Occupational Structure (New York: Wiley, 1967).
17. It also implies that they can be exchanged, that there is some measure of value, and that there is amortization and the possibility of rent. On this last point, see Age S⊘rensen, “The Structural Basis of Social Inequality,” American Journal of Sociology 101 (1996): 1333-365.
18. James S. Coleman, Foundations of Social Theory (Cambridge: Belknap Press of Harvard University Press, 1990).
19. Pierre Bourdieu, “The Forms of Capital,” in J. G. Richardson, ed., Handbook of Theory and Research for the Sociology of Education (New York: Greenwood Press, 1985); H. K. Anheier, J. Gerhards, and F. P. Romo, “Forms of Capital and Social Structure in Cultural Fields: Examining Bourdieu's Social Topography,” American Journal of Sociology 100 (1995): 859-903; and Ivan Szelényi, “The Rise of Managerialism: The ‘New Class’ After the Fall of Communism” (Collegium Budapest, Discussion Papers No. 16, 1995).
20. Pierre Bourdieu, “The Forms of Capital.”
21. Jadwiga Staniszkis, The Dynamics of the Breakthrough in Eastern Europe: The Polish Experience.
22. In the Hungarian context, see David Stark, “Privatization in Hungary: From Plan to Market or from Plan to Clan,” East European Politics and Societies 4: 3 (1990): 351-92.
23. See also Akos Róna-Tas, The Great Surprise of the Small Transformation.
24. József Böröcz, “Simulating the Great Transformation: Property Change Under Prolonged Informality in Hungary,” Archives Européennes de Sociologie 34 (1993): 81-106.
25. Agnes Czakó and Endre Sik, “Managers’ Reciprocal Transactions,” in György Lengyel, ed., Education, Mobility and Network of Leaders in a Planned Economy (Budapest: Karl Marx University, 1987).
26. David Stark and László Bruszt, Postsocialist Pathways: Transforming Politics and Property in East Central Europe (Cambridge: Cambridge University Press, 1997).
27. See also David Stark, “Recombinant Property in East European Capitalism,” American Journal of Sociology 101 (1996): 993-1027.
28. Ivan Szelényi, “The Rise of Managerialism: The ‘New Class’ After the Fall of Communism.”
29. György Konrád and Ivan Szelényi, The Intellectuals on the Road to Class Power (Brighton, England, Harvester Press, 1979).
30. Erzsébet Szalai, Úteldgázás. Hatalom ésé rtelmtség az á llamszocializmus után (Fork in the Road: Power and Intellectuals After State Socialism) (Budapest: Pesti Szalon, 1994).
31. Michael Burawoy and Pavel Krotov, “The Soviet Transition from Socialism to Capitalism,” American Sociological Review 57: 1 (1992): 16-38.
32. Here sociology finds common ground with evolutionary economists Richard R. Nelson and Sidney G. Winter, An Evolutionary Theory of Economic Change (Cambridge: Harvard University Press, 1982); Richard R. Nelson, “Recent Evolutionary Theorizing About Economic Change,” Journal of Economic Literature, 33:1 (1995): 48-90; Peter Murrell, “Evolutionary and Radical Approaches to Economic Reform,” in Kazimierz Z. Poznański, ed., Stabilization and Privatization in Roland: An Economic Evaluation of the Shock Therapy Program (Boston: Kluwer, 1993); Kazimierz Z. Poznahski, ed., The Evolutionary Transition to Capitalism (Boulder: West-view Press, 1995); and Kazimierz Z. Poznahski, Poland's Protracted Transition (Cambridge: Cambridge University Press, 1997).
33. There is a growing body of literature on path dependence in economics. See, for instance, Paul A. David, “Clio and the economics of QWERTY,” American Economic Review, Proceedings 75 (1985): 332-37; Michael L. Katz and Carl Shapiro, “Network Externalities, Competition, and Compatibility,” American Economic Review 75 (1985): 424-40; and Alfons Balmann et al., “Path-Dependence Without Increasing Returns to Scale and Network Externalities,” Journal of Economic Behavior and Organization 29 (1996): 159-72. S. J. Liebowitz and Stephen E. Mar-golis, “Path Dependence, Lock-In, and History,” Journal of haw, Economics and Organization 11:1 (1995): 205-26, takes a more skeptical view of the importance of path dependence in the economy.
34. The term circular causation was coined by Gunnar Myrdal, Economic Theory and Underdeveloped Regions (London: Duckworth, 1957).
35. Dahrendorf was one of the first social scientists to observe the problem that post-communist changes in interrelated areas happen at different paces. Ralf Dahrendorf, Reflections on the Revolution in Europe (Random House: New York, 1990).
36. W. Brian Arthur, “Positive Feedbacks in the Economy,” Scientific American 262: 2 (1990): 92-99; Paul Krugman, “History vs. Expectations,” Quarterly Journal of Economics 106:2 (1991): 651-67; and Paul Krugman, Development, Geography and Economic Thought (Cambridge, Mass.: MIT Press, 1995).
37. The classic exposition of embeddedness is Karl Polanyi, “The Economy as Instituted Process.” See also Mark Granovetter, “Economic Action and Social Structure: The Problem of Embeddedness,” American Journal of Sociology 91 (1985): 481-510.
38. Jadwiga Staniszkis, The Dynamics of the Breakthrough in Eastern Europe: The Polish Experience, 231-34.
39. Valerie Bunce and Maria Csanády, “Uncertainty in the Transition,” East European Politics and Societies 7: 2 (1993): 240-75.
40. Claus Offe, “Designing Institutions for East European Transition,” in Jerzy Hausner, Bob Jessop and Klaus Nielsen, eds., Strategic Choice and Path Dependency in Post-Socialism: Institutional Dynamics in the Transformation Process (Brookfield, Va.: Edward El ear, 1995).
41. See Douglass C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990): and Oliver E. Williamson. Markets and Hierarchies.
42. Akos Róna-Tas, The Great Surprise of the Small Transformation.
43. The cognitive process of learning itself can contain self-reinforcing cycles. One such model is presented by W. Brain Arthur, “Path-Dependence, Self-Reinforcement, and Human Learning,” in W. Brian Arthur, Increasing Returns and Path Dependence in the Economy (Ann Arbor: University of Michigan Press, 1990).
44. Douglass C. North, Institutions, Institutional Change and Economic Performance.
45. David Stark and Laszlo Bruszt, Postsocialist Pathways: Transforming Politics and Property in East Central Europe.
46. Ivan Szelényi, “The Rise of Managerialism: The ‘New Class’ After the Fall of Communism.”
47. For instance, in state-socialist economies plagued by shortages a wider range of goods were accepted as substitutes than in well-functioning market economies. See Janos Kornai, Economics of Shortage (Amsterdam: North-Holland, 1980). Fungibility, to a large extent, depends on institutions.
48. Viviana Zelizer, “Making Multiple Monies,” in Richard Swedberg, eds., Explorations in Economic Sociology (New York: Russell Sage, 1993).
49. Michael Polanyi, Personal Knowledge: Towards a Post-Critical Philosophy (Chicago, University of Chicago Press, 1962); Peter Murrell, “What is Shock Therapy? What Did It Do in Poland and Russia?” Post-Soviet Affairs 9:2 (1993): 111-40; and Peter Murrell, “Evolutionary and Radical Approaches to Economic Reform.”
50. Roman Frydman and Andrzej Rapaczynski, Privatization in Eastern Europe: Is the State Withering Away?
51. Mancur Olson, The Logic of Collective Action (Cambridge: Harvard University Press, 1965). In certain situations, incentives can be structured in such a way that the collective-action problem can be overcome in building networks. See, for instance, James E. Rauch, “Does History Matter Only When It Matters a Little? The Case of City-Industry Location,” Quarterly Journal of Economics 108:3 (1993): 843-67. These solutions, however, assume centralized control of entry into the network.
52. One of the reasons for the strength of weak ties is that there are no obligations that come with those relationships. See Mark Granovetter, “The Strength of Weak Ties,” American Journal of Sociology 78 (1973): 1360-380.
53. Ronald Burt, Structural Holes (Cambridge: Harvard University Press, 1992).
54. James Duesenberry, “Comment on ‘An Economic Analysis of Fertility,'” in Demographic and Economic Change in Developed Countries, edited by Universities-National Bureau Committee for Economic Research (Princeton: Princeton University Press, 1960). Quoted in Mark Granovet-ter, “Economic Action and Social Structure: The Problem of Embeddedness.”