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Contents
Inoduction: The embeddedness of economic markets in conomis ihel Calon Calon
he proliferation proliferation of social currencies
58
Viviana A. Zelizer
Markets as cultures: an ethnographic approach itchel
Y
69
Abolaja
ciency, culture, and politics: the transformation of Japanese management in 19461966 Bai Gao
Recombinant Recombinant property in East European European capitalism capitalism
86 1 16
avid Stark
he making of an industry: electricity in the United States
1 47
ark Granovetter and an d Patrick Patrick McGuire
he margins of accounting
1 74
eter Miller
. Another discipline for the market economy: marketing as a performative performative knowledge knowled ge and know-how for capitalism
1 94
Franck Cochoy
he unlikey encounter between ecoomics and a market: he case of the cement industry industry
222
Herv Dumez Dume z and A lain Jeunemaftre Jeunemaftre
ssay on framing and overowing: economic evisited by sociology·
-
Calon
Notes on contributors ndex
' 0 -
j\.
-·�/
244 270 273
B
Introduction: the embeddedness of economic markets in economics
\
\ Michel Caon
Even a the market eem triumphant everywhere and it law pro greively and ineluctably impoe themelve worldwide, we cannot fail to be truck by the lating topicality of the following well known quotation from D. North t i a peculiar fact that the literature on economic . . contain o little dicuion of the central intitution that underlie neo claical economicthe market orth, 1977) ow can thi urpriing hortcoming be explained? ow can thi elfproclaimed failure of economic theory be accounted for? By ditinguihing the thing from the concept which refe to it, the marketplace from the market, the Englih language ugget a po ible anwer. the market denote the abtract mechanim nt ther and a
occur. Th dtnctn , moreover, cae a 41 general oppoition, which the Englih language, once again, ha the merit of conveying accurately that between economic and between economy, between theoretical and practical activity in hort economic a a dicipline and economy a a thing. If eco
nomic theory know o little about the marketplace, i it not imply becaue in triving to abtract and generalize it ha ended up becoming detached from it obect? Thu, the weakne of market theory may well be explained by it lack of interet in the market place. To reedy thi hortcoming, economic would need only to return to it obect, the economy, from which it never hould have trayed in the rt place. The matter, however, i not o imple. The danger of abtraction and unrealim which i uppoed to threaten every academic dici plineand which time and again ha been expoed and tigmatized,
© The Editoria Board o The ocioogca Review Pubished b Bacwe Pubishers
Michel Calln
•
notably by economic sociologyis certainly real; it is the formulation of this danger that is suspect It takes at face value a conception of science which the anthropology of science and techniques (AST has undermined over the past few years. Saying that economics has failed by neglecting to develop a theory of real markets and their multiple modes of functioning amounts to admitting that there does exist a thingthe economywhich a scienceconomicshas taken as its object of analysis. The point of view that I have adopted in this in troduction and which the book strives to defend is radically dierent. It consists in ma ntaining that economics in the broad sense of the term per orms shapes and ormat s th e economy rath er th an ob serving how it functions (Latour 1987) (Calon 1994). In order fully to assess the contribution of economics to the constitution of the economy we would need to write a history which has yet to be invented What we do have are separate stories of eco nomic thought presented according to a purely disciplinarian logic on the one hand and of economic activities carefully separated from economics on the other on the one hand a history of ideas showing the progressive development of the theory and its concepts (reconstituting for example the genealogy of the market concept and on the other a social history of the economy (which relates for example the evolution of the dierent forms of market organiza tion. That a degree of interdependence exists between these two his tories is hardly questionable even if this has not been systematically studied That is why it would be fascinating to construct a social is tory of economics which would show how abstract notions such as that of supply and demand or those of interconnected markets (la Walras (Walras { 1926} 1 954)), imperfect competition (as proposed by Chamberlin (Chamberlin 1933 or incentives have been formulated in constant relation to practical questions which in turn they help reformulate (Dumez 1985). Karl Polanyi brilliantly demon strates in The Great Transformation that this type of history is both possible and lled with lessons His book is often used to criticise the myth of the selfregulating market But it is also and above all one of the rare attempts to link up economics and economy with a con vincing analysis of the role of economic theories such as that of Ricardo in the establishment of a labour market The aim of the present book is to contribute to the analysis and understanding of the subtle relationships between economics and the economy; not within an historical perspective although some chapters do include historical material but within a deliberately anthropological one To give a broad outline of this perspective the 2
Introduction
most convenient starting point is the g eneral denition of he market proposed by Robert Guesnerie in his attempt explicitly to raise the question of relations between the market and the market place (Guesnerie, 1996). According to Guesnerie, a market is a co ordination device in which: a) the agents pursue their own interests and to this end perform economic calculations which can be seen as an operation of optimization and/or maximization; b the agents generally have divergent interests, which lead them to engage in c transactions which resolve the conict by dening a price Consequently, to use .M� -!Jt : words, a market opposes buyers and sellers, and the prices which solve this conict are the input but also, in a sense, the outcome of the agents' economic calculation.' This denition has the advantage of stressing the essential: a market implies a peculiar anthrpology, one which assumes a calculative ag ent or more precisely what we mig ht call "calcula• -' 1,. tive an org anization, so that one has to talk of an organized market (and of the possible multiplicity of forms of organization in order to take into account the variety of calculative agencies and of their distribution the market is a process in which calculative agencies one i another, without resorting to iolence, an i acceptable compromise in the and/or a price.6 Hence the importance of the historical dimension which helps us to understand he construction of markets and the competitive arrangements in which they are stabilized for a tie and in a place.
1
.
•
·
The point that needs to be borne in mind is that the agents enter and leave the exchange like strangers Once the transaction has been concluded the agents are quits: they extract themselves from anonymity only momentarily slipping· back into it immediately aerwards This sudden metamorphosis is not selfevident it is highly pardoxical. As Mitchel Abolaa points out in his contribu tion it is not easy to make this relationship of strangeness compati ble with the unvoidable fact that the agents are in touch with each other during the transaction. The threefold characterization of the market proposed by Guesnerie leads us to the formulation of our rst question: what is a calculative agency?
Inrodcon
chl Calon
Wa cacuaie agencie are n Under which condition i calculativene poible? Under what condition do calculative agent emerge? In order to write and conclude calculated contractthat i to ay to go into the content of good and their pricethe agent need to have information on the poible tate of the world. More pecically for calculative agent to be able to make deciion they need at leat to be able to i etablih a lit o the poible tate of the world each tate of the world being dened by a certain lit of actor and good and by a certain ditribution of thee good amongt the actor; ii rank thee tate of the world which give a content and an obect to the agent preference; iii identify and dcribe the action which allow for the production of each of the poible tate of the world An eential point in thi general denition need to be noted. For an agent to be able to calculateie to rankher deciion he mut at leat be able to draw up a lit of action that he can under take and decribe the eect of thee action on the world in which he i ituated. Thi preuppoe the exitence in organized form of all the relevant information on the dierent tate of the wold and on the conequence of all conceivable coure of action and the acce of all thi information to the agent. Thu he will not only be able to get an idea of poible goal and rank them but alo mobi lize the reource required to attain them Before going on in the following ection to addre the condi tion under which deciion are calculable we need to dicu two claical point of view that of cognitive pychology and that of cultural inuence. Cognitive pychology preume that individual economic agent are capable of mental calculation Now thi hypothei i far too demanding. One can not attribute to the agent the capacity of mental calculation. Thi ha been hown with regard to cientit who ince Locke and throughout the hitory of claical economic have erved a model. Cognitive anthropology ha however bril liantly conrmed it and extended it to all ordinary agent d Andrade 1995). Calculatingwe hal limit ourelve here to thi pointi a complex collective practice which involve far more than th< capacitie granted to agent by epitemologit and certain economit The material reality of calculation involving gure writing medium and incriptionand I hall return to thi
(
pointare deciive in performing calculation From the fact that calculation are made in the quailaboratorie of calcuative agen cie the word agent place too much weight on the individual we hould not infer that there are calculative being no matter how well or poorly informed they may be. 9 From collective performance we cannot induce individual mental competence. 0 he other explanation ymmetrical in relation to the rt one conit of looking at cultural frame for the origin of the agent calculative competence. Raher than potulating that the ability to calculate i an intrinic property of homo sapns, it i the culturally or ocially contructed dimenion of thi competence which i emphaized. Irrepective of the mediation through which thi inu ce i uppoed to be exercied it i aerted that in all cae cer tain ocial tructure or cultural form favour calculation and elh interet while other induce agent to be altruitic diintereted generou and even to give freely The ociocultural context func tion a an inunction ometime ilent but alway eective to ur vive to exit thou halt calculate! DiMaggio ha yntheized thi approach very well in addreing the quetion of the role of culure in the contitution of market ocietie. Culture he explain i fre quently called upon to explain the appearance of rational actor the atom of the maket economy becaue agent in their behav iour and calculative capacitie dier from one ociety to the next Some peron concept thoe entaling much agency and individu ality arguably render peron better equipped to operate in market context than other Thi dierence of equipmentthe word i well choeni frequently invoked notably in tudie of developing countrie or of ocalled tranitional economie. If the agent reit calculative rationality and hence the market it i becaue they are embedded in the ocial or cultural frame which turn them away om it DiMaggio 1994). Bai Gao in hi contribution draw upon the Japanee cae to how that thi culturali §h ]ic cla exlai hy omoctie k e er c e QL 9IY<:Le_ weak that it fail to account for an even ipm that the hi fro r. I f Japan it i not a quetion of explaining why uddenly economic gent tarted calculating but of why they changed their way of doing o The tranformation which gripped the Japanee economy t the end of the Second World War conited eentially of the earance of new criteria for evaluating economic eciency and otability which favoured cooperation and the long term What 5
Inrodcon
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Gao proves is the impossibility o placing the origins o this little shi, o this substitution o one type o calculation or another, in culture Since culture cannot explain this minor evolution, it is even less apt to account or a major transormation such as the one makes uncalculative agencies calculative n order to become calculative, aencies do indeed need to be equipped But this equipment is neither all in the brains o human beings nor all in their sociocultural rames or their institutions at is it then? How on earth does one become calculative, since competence is neither in human nature nor in institutions? In search of possible sources of calculaiveness
How can we clariy and then characterize this equipment which is so easily overlooked and yet without which no calculation is possible? One strategy consists i considering situations o extreme uncertainty, those in which the limits o the solutions proposed by cognitive psychology and culturalism are most obvious How does an atomized agent manage to start calculating when the inormation she needs to calculate is inexistent or contradictory, or when there are no institutional guidelines which are suciently stable and legitimate both to allow or shared expectations and to make an unknown uture manageable? Modern economic theory has devoted signicant eorts to explaining the possibility o calculation in situations o radical uncertainty or even ignorance As a start, shall recall the main solutions put orward (EymardDuvernay, 1996 shall then point out their limitsowing to the closeness o these solutions to the cognitive psychological paradigmand introduce social network analysis This, in turn will lead me, aer several reormulations, to the soughtaer solution Market coordination encounters problems when uncertainties on the states o the world on the nature o the actions which can be undertaken and on the expected consequences o these actions, increase Problems are at their worst when the uncertainties leave room or pure and simple ignorance Now, such situations are the rule and not the exception This is even more obvious with the uncertainties generated by technosciences The general question is thus the ollowing: how can agents calculate when no stable inormation or shared prediction on the uture exists? n order to maintain the possibility o coordination, economists
have proposed several solutions whichthey assure usare, or ought to be, applied in concrete market situations The most orthodox solution is that o contingent contracts Contingent contracts are revisable contracts their renegotiation is planned, thus taking into account the occurrence o events specied beorehand (Hart and Moore, 1988 The greater the uncertainties, the more dicult it is to implement this solution t implies, to a certain extent, that the agents spend their time renegotiating their contracts, that is to say, interacting and exchanging inormation as it is produced n this case market coordination as such disappears, leaving room or uninterrupted social interaction involving many dierent agents These agents, no matter how much they wish to do so, are no longer able to become strangers they are entangled shall revert to this notion a little urther Another solution is that o a ocal point n this case we presume that the agents share common knowledge or have the same points o reerence which guarantee the coordination The nature o these reerences known to each agent is highly variable t may pertain to a shared culture, rules, procedures, routines or conventions which guarantee the adjustments and predictability o behaviour Socioeconomics has studied in detail these intermediate realities to explain the coordination o market action But it is easy to show that these dierent solutions suer rom the same limits ether we talk about a common culture or o shared rules or conventions, we encounter the same stumbling block: a rule, convention or cultural device does not govern behaviour completely since it entails irreducible argins o interpretation These margins o interpretation can be remove only during interaction, negotiation or discussion All these solutions have the common eature o providing autonomousoverautonomousand isolatedoverisolated agents with the social relations which, by opening them up to their environment, enable them to coordinate their action with those o other agents y not take this dependence o their environment as starting point? coi ali t qstion o coordiatstaiortyi admit meeality that eateos " with ic\ le? An understanding o this ultimate basis is the purpose o the notion o a social network or, more broadly, the notion o embeddedness as nitially or l d later by Granovetter gecalculate their decisions, irrespective o the degree o
Introdcton
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uncertainty concerning the uture, it is because they are entangled in a web o relations and connections they do not have to open up to the world ecause they contain their world Agents are actorworlds (alon, 1986a
At this point it is use ul to recall Granovetter's solution, or it has been the source o many misinterpretations preventng us rom seeing its originaity and its true limits as well as, more generally, those o social network analysis (Granovetter, 1985) The soution lies in his defnition o the notion o a network Granovetter frst does away with the classical opposition between
homo
beyond their o-
He convincingly shows
asseted dierences, the two conceptions both assume the existence
o individual agents with perectly stabilized competencies The the-
sis o oversocialization, like that o undersocialization, rests on a common hypothesis: that o the existence o a person closed in on himsela homo clas s, to use Elias' expression This hypothesis precludes any solution to the problem o coordination in a situa
tion o radical uncertainty For Granovetter the only possible solution is that provided b the network; not a network connecting
entities which are already there, but a network which congures
ontoogies. The agents, hei sis · nyae an do,
all depend the mopholog olati ich th are involved
in this This crucial point warrants carifcation is (th; lished identity an estab nts with s es J a < to reerences) t say endowed with a set o r amethe orm what would be a rigid social structure constituting
work in which individual actions are situated It is on this point that
embeddedness in a network o social relations, as defned by Granovetter, is dierent rom embeddedness according to Polanyi
The latter assumes the existence o an institutional rame constitut-
ng the context in which economic activities take place. 14 Jn-th _Q r anoYtt� r, he agents_ tiies, soial netor
in short
ineess _nd
_
ti sition and their being, re ariable outcosic-
tua wi J- m and _ cYUcs fl tinsbet hesg€nts .
(Caon, 986b, (Smith, 1994 This means that the agent is neither immersed in the network nor ramed by it in other words, Both agent and network are, in a sense two sides o the same · in Either one enters the network through the agents and one is immediately tempted to characterize them by the shape o their
elationships or one ocuses on the network itsel, in which case one ses the associations o its constitutive agents to describe it The best way to explain the radical nature o this approachwhich mounts to replacing the two traditionaly separate notions o agent nd network by the single one o agentnetworkis through exames drawn rom the now substantial literature on the subject The equivaence between agency and orm o network was clearly xplained in one o Granovetters seminal articles: The strength o the weak ties (Granovetter, 973 The capacity o an agent to ake autonomous choices, tat is to say, to make decisions which do not merely all in ine with the decisions made by other agents, is ot inscribed in her nature it coincides with the morphology o her elationships Wen she nds hersel at the intrsection o two netorks which scarcely, i at al, overap, the range o available options aords her with a large margin o manuvre She is even ndowed with the possibility o considering action in terms o alter ative choices and her aculty or arbitration is enhanced I, howver, the relations are redundant, the agent is deprived o all ability to make choices This example shows that it is possible to characterze the dierent types o agency through the distribution o relationshis Studies by Burt on structural holes uphold and generalizes this thesis In a network, a structura hole corresponds to the points, and hence the agents whose contacts are not reated to one another urt shows that structural holes are associated with agencies capa be o strategic combinations and manipulation ollowing the same approach, he suggests that entrepreneurial action is linked to certain relational congurations When you take the opportunity to be the tertius you are an entrepreneur in the literal sense o the word person who generates prot rom being between others (Burt, 993 We could thus review the dierent types o conguration and ow that each o them corresponds to a particular type o agency, that is to say, a particular mode o action However, to make the oint, it would be simplest to consider the elemenary unit o the etwork: the triangular relationship The bilateral relationship so strongly emphasized by interactionism, teaches us nothing about e social dimension Simmel said so ong ago: relations between A nd B are not enough to explain their actions and identities These become intelligible only when embedded in the indirect and some tmes invisible relations bearig on them One need simply add a third party, C and adopt its point o view, or the reationship between A nd B to become analysabe and comprehensible Burt describes three possibe strategies or C that o the mdator where
chl Calon
in case o conict between A and B C acts as an intermediary and helps them to negotiate that o r adn where C takes advantage o conict between A and B whose orces balance out and, nally, that o the dpo dd pr mpr) where C creates conict to preclude coalition and align the interests o A and B with his own As we can see, without bringing C into the picture, whatever happens between A and B remains incomprehensible (Hatchuel, 1995 nversely, the possibilities or action o C remain unintelligible i we ail to take into account both A and B This elementary algebra o social relations, starting with the triad, becomes increasingly complex as other relations are added to it The logic remains, however: it identies the action with a sort o positional calculation This similarity between network and action, rooted in the threeparty game, knows no bounds Granovetter shows, or example, by comparing two Philippine towns, that there is a correlation between the degree o personalization o credit and the size and density o the social networks Baker, in a bold analysis o nancial uture markets, shows that the very status o moneywhy, or example, a nancial asset should be considered as closest to moneyin industrialized societies where numerous currencies prolierate, depends on the positions o the holders o these assets in their network (Baker, 1984 David Stark (this monograph provides a cogent illustration o this point: talking o ownership rights in the absolute and thus o possibilities or agents to engage in certain courses o action, without taking into account the ties binding them, makes little sense To understand what property rights consist o in a con crete socioeconomic context, in other words, to reconstitute the set o rights and obligations incumbent on each agent, there is no alternative but to analyse relationships This swingwing ontology o the agency, which changes with the changing shapes o the network, is sared by socalled evolutionary economics simply because in an organicist ontology relations between entities are internal rather than external and the essential characteristics o any element are seen as outcomes o relations with other entities (Hodgson 1994 We would be hard pressed to nd a better deniton o agentnetwork What be ework analysis Answer: a rom that g, en .. exme uncertainty They do not ha to open up to eir or get inormation, or to negotiate and coordinate their decisions so as to lay the oundations o a possible order They are open and con
Inrodcon
nected it is rom these connections that they derive their ability to calculate.
hory .is p l;c< ' homo .
Qf
. hether the situation is uncertain or not, the only thing that or homo aperu, and which he takes into account, is the network o direct and indirect reltions surrounding him This calculative logic is clearly expressed in the triangular games mentioned above, where the elementary action consists o a calculation o alliances and con icts rrespective o whether the states o the world and the causal links between decisions and their eects are known or not, the
·
.
.
,
.
agency ollows its combinatorial logic, that o connection and dis-
connection, which is entirely relational
This solution seems neat t eliminates the insurmountable problem posed by homo cla who in situations o uncertainty has no alternativ but to open up in order to reestablish the coordination s it not, however, a bit too easy Beore answering this question it would be relevant here briey to mention and discuss the usual critiques exposing the reductionist nature o social network analysis iMaggio, or example, very subtly points out that it is hardly convincing to deduce the strategy o an agent rom her position in a network o relations (DiMaggio, 1994 Between a poston and an action, is it not necessary, he asks, to interpose values, preerences and projects in short, evrything which denes the agency and avoids reducing action to structural determinations s it not excessive, he adds, to consider that an agent in a structural hole has no objectives and projects other than constantly building up more nonredundant relationships with the aim o increasing her capacity or control This criticism, which reintroduces the dualism o structures and agency, or positions and dispositions, is by no means groundess Many social network analysts lay themselves open to it by introducing the notion o social capital Burt, or example, considers that an agents relationships with other agents, whether direct or indirect, are all comparable to a social capital which she mobilizes or the purpose o developing her on relational strategies This ocial capital is greater when the gent nds hersel in a very obvios position o a structural hole Each relationship, owing to its onredundancy, provides her with inormation and opportunities r specic action This concept, pervasive in sociology (Coleman, 988 (Bourdieu, 1979 thoroughly undermines the strength o ocial network analysis By dissociating agency and network, it widens the gap between agency and structure The agent, simply
.
Introduction
Michel Calon
exclusion, that s to say, the exainaton of the notion of fraing, erits our further attenton. Framing as a process of disenanglement
To explain the absence of calculation, Bourdieu reduces fraing to its tie diension A calculates her action when she includes in her decison the ost probable subsequent decisions of the other agents: , C etc. Ether s countergit is antcipated, placed n the frae, and A calculates; or, and this is the virtue of tie, it is ignored, placed outside the frae, and the acton switches over to disinterestedness. In this section I shall broaden this denition of ng by stressing ts ultidiensionnality ·
I shall show that
atbe \ Y hescal .i te . gns u d,g o •
.
?t : . In short, a clear and precis� boun�ary
be drawn between the relations whch the agents wll take mto
and which will serve n ther calculations and those which
will be thrown out of the calculation as such T� Lh, as Bourdeu descibes it, A>"s0< i.�R· The frae is eptywhich is another way of sayng that no fraing has taken placeand the agent nds hself faced with his decision alone. He consequently switches to pure generosity for all possibilties of calculation, which iplies that at least two ters relate to each other, are eliinated. However, to explan this extree case we need to consder the question of fraing echaniss in all their generality. How can we account for the fact that the openness of the homo apertus of social networks can be ade variable, so that it passes throgh·all the fors of agency fro the ost purely noncalculative to the ost purely calculative? How is the deliiting, or fraing, of relationships at a point in the network achieved? This is the question to which we will now turn. Econoic theory has already addressed this question very specically through the noton of externality which allows the introduction of the ore general question of disentangleent (Calon, hi contribution). Econoists invented the notion of externality to denote all the connections, relations and eects whch agents do not take into account in their calculations when entering into a arket transaction If, for exaple, a cheical plant pollutes the river into which it
16
© The Editorial Board
fThe Sociological Review 1998
charges its toxic waste, it produces a negative externality The erests of sheren, bathers and other users are hared and in er to pursue their activity they will have to ake investents for ich they will receive no copensation. The factory calculates its isons without taking into account the eects on the sheren's vities. Externalities are not necessarily negative, they ay also positive. Take the case of a pharaceutical copany which nts to develop a new drug To protect itself t les a patent. owever, in so doing, it dvulges inforation which becoes availe to copetitors and can be used by the to develop their own earch and developent. · Ga m e.,thory
� · cause .e n.fhpossbl r1cogs : But it very qt !emet, .onJsness , . · ·
.
•
-·'
. the. . '•. f eful f Q:sn ·' ing a ark\ This is where the joint notions of
fraing and over wing t in, which I shall coe back to shortly. Social network analysis as prooted by Granovetter reinds us t any entity is caught up in a network of relations, in a ow of erediaries whch circulate, connect, link and reconstitute identi (Calon, 1991). What the notion of externality shows, in the negae s all the work that has to be done, all the investents that have be ade in order to ake relations visible and calculable in the ork This consists of fraing the actors and their relations. Fming is an operation used to dene agents (an individual person a group of persons) who are clearly distinct and dissociated fro another It also allows for the denition of objects, goods and chandse which are perfectly identiable and can be separated not fro other goods, but also fro the actors nvolved, for exaple eir conception, production, circulation or use. It is owing to this ing that the arket can exist and that distint agents and distinct ds can be brought into play. Without this fraing the states of world can not be described and listed and, consequently, the cts of the derent conceivable actions can not be anticipated. What economists say when they study externalities is precisely this work of cleansing, of disconnection, in short, of framing, s ever over and that in reality it is impossible to take it to a conion. There are always relations which defy framing. It is for e relations which remain outside the frame that economists ve the The latter denotes everything which l1e
lC�<rL
But one needs to go further than that. ' I he Editorial Board of The Sociological Review 998
17
chl Calon
possible he eergence o calculaive agencies. One o he bes sud ies I know is ha o MarieFrance Garcia on he ransoraion o he able srawberry arke in he Sologne region o France (Garcia 1986). This ransoraion ocurred in he early 1 980s and resuled in he consiuion o a arke wih characerisics corre sponding o hose described in poliical econoy anuals: exisence o a perecly qualied produc exisence o a clearly consiued supply and deand organiaion o ransacions allowing or he esablishen o an equilibriu price.
•• •
Garcia analysed all he invesens required o produce he raes allowing or he consrucion o his arke Firs aerial invesens were needed Uncoordinaed ransacions beween pro ducers and inerediaries engaged in inerpersonal relaionships were henceorh held in a warehouse buil or his purpose The pro ducers ook heir produc here daily, packed in baskes, and exhib
ied i in baches in he warehouse Each bach had a corresponding
daa shee which was iediaely given o he aucioneer. The lae1 enered he daa ino his copuer and copiled a caalogue which was handed ou o he buyers Producers and shippers hen wen ino he aucion roo which was designed in such a way ha buyers and sellers could no see one anoher bu neverheless had a clear view o he aucioneer and he elecronic board on which prices were displayed. The display o he srawberries in he hall and he caalogue enabled all paries concerned o have precise knowledge of the supply in terms of both quality and quantity. Moreover, the
ac ha he dieren baches were displayed side by side high lighed dierences in qualiy and quaniy beween producers The laer could copare heir own producion wih ha o heir co peirs, soehing which had no been possible orerly when col lecions were ade locally. As Garcia noes: '�d be . c1ghL!PJ l"nd •.
·
�7ll o hese dieren eleens and devices conribued o he raing o ransacions by allowing or he rejecion o neworks o relaions, and hus by consrucing a n arena in which each eniy was disconneced ro he ohers. This arena creaed a space o cal culabiliy: he echnique o degressive bidding, he display o rans actions on the electronic board, the relative qualication of batches
o srawberries on heir daa slips, and knowledge o he naional arke all ade he ransacions calculable. As his exaple clearly
20
Inrodcon
hows 1 s ins e a< ¥es (aerial: he ware ou he baches displayed side by side erological: he eer and procedural: degressive bidding) which give his or her acions
! � l T ng so oen overlooked and wihou
hich no overowing could be conained us be added hose he porance o which econic heory has consanlyand righly osressed The rs in line are hs which dene he gh o use cerain asses o derive an incoe ro he and o sell or ranser he deniively o a hird pary he exisene o s "w,b\!g eis sinh@d al. For agencies o exis here have o be procedures o aribuion o acions and o heir eecs. O course in he esablish en and evoluion o hese propery righs he sae and he legal yse have an irreplaceable role. 0 The exisence o one or several currencies also aciliaes he eergence o calculaive agencies The os decisive conribuion o oney is no however where one would expec i o be. To be sure s ain conribuion was o provide a uni o accoun wihou hich no calculaion would be possible. However he essenial is sewhere Money is required above alleven i his poin is oen overlookedo delii he circle o acions beween which equiva ce can be orulaed. I akes coensurable ha which was o so beore. The case o negaive exernaliies or exaple he ecs o polluion produced by a cheical plan clearly illusraes is poin. Once idenied and acknowledged overowing i i is o raed and hus inernalized has o be easured (Calon his olue). This easuring involves he esablishen o a erology chored in echnoscienic insruens which enables he agens oncerned o esablish quaniaive correspondences beween a se (eg he discharge o dioxin) and an injury (eg a probabiliy o cancer). This correlaion beween a risk o deah and he aciviy o a acory esablished by eans o laboraory experiens and deiological research creaes a link beween wo disinc series evens. Bu i his relaionship (beween a discharge and deahs) coes calculable by he agens i is no enough erely o prove t exisence i has o be expressed in he sae unis. This is where oey coes in. I provides he currency he sandard he co o language which enables us o reduce heerogeneiy o co c an equivalence and o creae a ranslaion beween a ew
21
chl Calon
Intou
olecules of a cheical subsance and huan lives. Money coes in las in a process of quaicaion and producion of gures easureens and correlaions of all kinds. I is he nal piece he keysone in a erological syse ha is already in place and of which i erely guaranees he uniy ad coherence Alone i can do nohing cobined wih all he easureens preceding i i facili aes a calculaion which akes coensurable ha which was no so before gras of dioxin and a huan life. Thanks o i he agens can easure he invesens required o reduce he risk of deah below a cerain hreshold. Money esablishes an uliae equiva lence beween he value of a huan life and ha of invesen in polluion abaeen Furherore wha Garcia suggess and wha we shall be looking a in he following secion is ha beyond he aerial procedural legal and oneary eleens which faciliae he fraing and con srucion of he space of calculabiliy here is a capial ye rarely enioed eleen: econoic heory iself. In he consrucion of he srawberry arke a young counsellor of he Regional Chaber of Agriculure played a cenral par. Rearkably his acions were largely inspired by his universiy ran ing in econoics and his knowledge of neoclassical heory. The projec which he anaged o launch hrough allianes and skill can be sued up in a single senence: he consrucion of a real arke on he pure odel of perfec copeiion proposed in eco noics handbooks. As Garcia says i is no coincidence ha he econoic pracices of he srawberry producers of Sologne corre spond o hose in econoic heory. This econoic heory served as a frae of reference o insiue each eleen of he arke presen aio on he arke of baches which accoun for only a sall por ion of he supply classicaion of srawberries in ers of crieria which are independen of he ideniy of heir producers uniy of ie and place which akes he arke perfecly ransparen and nally he freedo of wholesalers and producers alike who are no obliged o buy or sell) This case provides an ousanding exaple in ha i enables us o follow he birh of an organized arke. Above all i is he pures and os perfec exaple of arke organizaion. The conclusion ha can be drawn fro i is exreely siple ye fundaenal: hoo cn ds xs s a isiy he
doe . des£ !1 B[�}JIl!� ?�g le
.
reas ; ae s . raw be gs lace. f course i
.
© Th Edtorl Bord of Th ooogl Rvw
obilizes aerial and erological invesens propery r and oney bu we should no forge he essenial conribuion conoics in he perforing of he econoy. he embeddedness of economy in economics
The groundwork is now coplee for a presenaion of he core arguen of his volue he role of econoics as a discipline in he broad sense of he er n he foraing of calculaive agen cies. In a sense his arguen akes up and pursues he asserion of ax Weber for who accouning ehods were he key prerequi sies of odern capialis Weber {199}, 978 Weber {193}, 981 To show he capaciy of econoics in he perforing or ha I call perforaion) of he econoy we have o sar beween he wo wih he se of calculaing ools wihou which calculaive agency would no be possible. I is on his poin ha he chaper b eer Miller provides a decisive conribuion. Calculaiveness couldn exis wihou calculaing ools Conse qenly and in order o undersand how hey work full signicance as o be resored o ha huble disclaied and isundersood pracice accouning and he ools i elaboraes Tha noions such as cos and pro depend direcly on accouning ools is obvious b no of prie iporance here. The os ineresing eleen is o be found in he relaionship beween wha is o be easured and e ools used o easure i. The laer do no erely record a real y independen of heselves hey conribue powerfully o shap ng siply by easuring i he realiy ha hey easure Tha is ha Miller shows by analysing he role of accouning ools in he roducion of zones of calculabiliy in he fraing of decisions. In his deonsraion Miller considers he evoluion and rans oraion in ie of hese ools and heir relaed pracices. His rs observaion concerns he collecive naure of his process which is arried ou by a hos of professionals f all kinds including he ccounans heselves bu also businessen professional associa ons and even he foreos econoiss. During he pas decades s collecive work has grown o such an exen ha a real perfor ance easure indusry has developed Meyer 1994 I is by llowing he dynaics of he cncepion reconcepion and diu on of hese ools ha we are able o discover wha akes he owerful and indispensable for inernalizing overowing Miller ows for eaple how accouning ools progressively frae ie he Edtorl Bord o Th oolog Rvw 1
Mchel Cal
procedures ad icorporaed copeecies, coribues o he discipliig, o behaviour ad decisios. Miller clearly showsad his surpassig o Foucaul warras ephasisha his discipliig is i o way echaical, irreversible or irrevocable. I evolves ad rasors isel sice he ools, hose solid pois i he syse, are heselves plasic, ope, recogurable ad, oreover, cosaly recogured. As raig ad calculaig ools hey have he propery, hough rasorig heselves, o varyig he odaliies o raig ad calculaio. They are exchagers which sabilize cerai procedures bu siulaeously help he o evolve. To explai boh he eecs o discipliig ad he cosa recogurig o hese eecs, here is o eed o ivolve ages who dey he iplacable logic o isiuioal devices d arragees Tools are a he hear o his dyaic ad are resposible or oraig he calculaig agecies Due o heir plasiciy ad heir posiio as ediaors hey siulaeously allow his oraig o be recogured. Sark his coribuio) akes aoher sep orward by likig his accouig syse o ors o jusiyig acio We are all bookkeepers ad soryellers We keep accou ad we give accou, we ca all be called o accou or our acio. No oly do accouig ools coribue very largely o he peroraio o calculaive agecies ad odes o calculaio, while allowig he cosa recogurig o hese agecies, hey also coribue direcly o he shapig o a discourse hrough which hese agecies accou or heir acio. A pro rae easures he esul o he acio calculaed by a aager ad whe i is redeed i iduces rasoraios o aager behaviour i also provides he sae aager wih jusicaio or his acio visvis he shaeholders. Markeig, he hisory o which is recoued by Frack Cochoy i his coribuio, has coribued powerully o he seig up ad deploye o he raig devices o calculaive agecies. Take or exaple he cocep o a arkeig ix As we kow, his cocep subsiues a quadruple realiye udaeal 4Psor a produc cosidered as a idivisible eiy a produc is a Price i is he objec o a Prooio, i is a Place where i is available ad, lasl, i is he arge o a Produc sraegy. The produc is hereore a ulidiesioal realiy, a eaglee o properies ha he arkeig ix diseagles. The ool hus aciliies a ore deailed aalysis o buyig decisios, as well as he preereces which hey express or reveal. The seller, isead o selig or a rough calculaio, has a isrue which eables hi, by varyig each o he our diesios, o disiguish i deail all he relaios ivolved 6
ad o calculae each oe idepedely. The ra g l proves o be grealy ehaced, as i is by he use o •lH mobilized by arkeig aagee The laer akes 11l o cosruc subpopulaios o cosuers ad o lik he ai characerisics o producs. Ad, haks o ecooe aalyical work is hus aplied, which helps o ideiy ad ore coplex ad diereiaed causal liks Whe h cep o social arkeg is iroduced, a ew sep i icreas he power o raig is ake. Markeig ools becoe capa absorbig he acors ad decsos wch orerly deed hose o h opro secor or eve, i cerai cases, he so proes ovees heselves By ehacig he iveor o rea ios ad ees o be ake io accou, arkeig ools proo calculaios which cosaly ivlve ore ad ore elees ad relaios The orulaio o hese isrues which subsaally icrease he abiliy o producers ad sellers o rae ad ieralize co suers ad heir preereces, helps o disrup eve radg prac ices. Like accouig ools, arkeig ools peror he ecooy. Cochoy describes he ireless work doe by e oudig ahers o markeig ad how hey paiully recorded ad he raspored, oraed ad copiled he cocealed kowedge o praciioers e also describes how his kowledge, oce oralized ad geerl zed, has bee reured o hese sae praciioers hrough eachig. Markeig as a se o ools ad pracices ake ro praciioers ad recogured by acadeic arkeig specialiss, ell, er uerous rasoraios ad geeralzaios, o he head o he praciioers. This is how he progressive sadardizaio o arkeig people ad he siulaeous cosiuio o he dsciplie o arkeig ca be explaied. The sae ovee also sablishes pracices, paricularly aerial oes, which have a mpac o he cosuers heseles The cosuer who, o calcu ae her preereces, disiguishes he our diere diesios ehid he uiy o a produc price, posiio, ec), is he cose ece o he arkeig ix raher ha he cause. Siilarly, socal arkeg, by exedig he spaces o calculabiliy, coribues owerully o he eergece o calculaive agecies where hey are eas expeced, ie i hose areas where pro had ill he bee pro bied. Is i o excessive o reer o ecooic heory whe discussg e ole o accouig ools or arkeig aagee i he perora o o calculaive agecies? Obviously o These isrues are
Michel Calon
Introduction
mediatos between economics and economy Not only ae they \
)
responsible for the crossrelations between the two but, like any
'ediator, they activ el promote the construction and constitution of each of them (on mediation see: Hennion, 1993). Without media-
tors like accounting tools and marketing management it would be impossible to distinguish between economics and an economy, just as it would be impossible to explain thei_r interdependency Moreover, the history of accounting tools features some of the greatest economists They launch into battle dialoguing with practitioners, debating on the best way to determine and measure costs
and at other times to dene the calculative agenta radical innovationas a 'decisionmaking agent But accounting and marketing do not content themselv es merely with prov iding economics and
economists with access to the economy. They feed back to econom ics for, as Miller and Cochoy note, through all their collecting, comparing, genealising and integrating, these humble practitioners, simultaneously involed in several worlds and institutions, end up
compiling an entire body of knowledge Although hybrid, this
knowledge is both original and v ery general. It is thus able to inu
ence existing academic disciplines by mixing and cobining them. By following this complicated history, we witness the birth and
development of a homo economicus whose characteristics evolv e and become increasingly complex. S/he inhabits two worlds simultane-
ously: that of economics (incding, amongst others, disciplines and practices like accounting or marketing) with its manuals, and hat of the economy with its organizationstwo worlds which are stake-
holdes in one and the same adventue Among those mediatos which bind economics to economy while constituting each as an independent entity, law, togethe with accounting metology and maketing management, is well situated Of couse it povides a poweful tool fo faming, o moe pecisly fo enacting, calculative agencies23 but what we wish to emphasize hee is that it is an essential link, an ieplaceable coupling device between theoetical wok and economic pactices, fo it oganizes eal expeiments The contibution by Hev Dumez and Alain Jeunemate povides convincing evidence I shows that we can diectly tanspose onto socia science in geneal and economics in paticula the main esults of the anthopology of science and tecniques (AST) which has hitheto been concentated pimaily on the natual and life sciences. The cement industy is to competiion theoy what the dosophila is to genetic theoy a model which, owing to its cystalclea simplicity, enables economists to ask some 28
©The Edtoral Board of The Soiologial Review
·
amental questions and to evaluate the dieent possible solu s As a tue laboaoy the cement industy has, ove seveal des, povided the mateial fo testing a whole seies of aguts on the eects of cetain foms of picing (such as the basing t system) o oganization (such as vetical integation). On each ese points heated contovesies have developed, involving emi t economists, pofessional syndicates, public administations (FTC) and businessmen in complicated alliances The bypoducts tese contovesies have been numeous and divese, fo instance standing academic aticles (eg, by M. Clakwho was oved in te debate on accounting techniques and on the notion okable competition), administative egulations and picing tems Some concepts in the contovesy, such as that of maket sue, when put to the test wee shown to lack obustness and e apidly ejected because unable to mobilize allies and satisfac proof Remakably, thoughout this histoy eal expeiments e oganized: hypotheses have been put fowad, measuesin all ses of the wodhave been taken, and esults have been evalu As in all expeiments, the tempoal dimension which leaves canisms the time to settle, has been essential But hese expei ts have the pecuiaity of taking place on a lage scale, involving eous actos while not beng conned to a laboatoy o ·ach cente. The numeous chaacteistics of this expeimental nclude the following: s AST came to admit for the natural sciences, there is no reason o magine an end to these debates and controversies; no theory r concept can provide a nal solution, simply because economic ctivities constantly spawn new problems, creating new oveowg. The frames which are conceiv ed and enforced (for example e basing price system) to enable agent to calculate, are overowed by new trnsport techniques which require new reection d new solutions to restore calculability.
peimentation cosely links economics as a discipline and the onomy as a thing It woud thus be meaningess to distinguish tween an existing eality (economy) and the analytical disouse explaining it Social science is no moe outside the eality studies than ae the natual and life sciences. Like natual scice, it actively paticipates in shaping the thing it descibes. The ment industy povides a stiking example. The agents engaged the secto ae not the only ones to play a ole in its evolution bove all, thei stategies ae not of thei own making since these pend lagely on the wok of economists and civil sevants who
l 1\
chel Calon
inervene direcly in he debes nd he coice o procedures nd regulions The ceen rke is ore like n unnished build ing n eel work sie which keeps chnging nd o which he plns nd consrucion obilie uliude o cors pricip ing in he developen by ril nd error o nlyicl ools o rules o he ge o ors o orgniion nd pricing principles would be wrong o disinguish in his overll consrucionhe prcice o is own heory nd he heory o is own prcice beween he hing nd he heory o he hing. This cn be sued up in he ollowing noeworhy phrse econoy is ebedded no in sociey bu in econoics provided one incorpo res wihin econoics ll he knowledge nd prcices so oen denigred h ke up or exple ccouning or rkeing Go illusres his vey well wih he ous Jpnese odel which he shows owes ore o Schupeer hn o hypo heicl nionl rdiion whose uheniciy is consnly re evlued by he cors. We see why we hve o be wry o he cchll h socioeconoics likes o use s rllying cry: he rke is socilly consruced. Wh is under consrucio is precisely his heerogeneous colleive populed by clculing gencies. Sociey is no sring poin resource or re i is long wih he rke h eporry oucoe o process in which socil sciencesconoics in his csere he ske holdr he knowledge poduced by hese experiens he eleens o econoic heory oruled by he dieren progoniss re no he rui o eors o bsrc nd heorie by speciliss in he cl o heir cbines They re collecive chieveens in which nonspeciliss businessen civil servns ec) ply n essenil roe Thus he socil eld in which econoic heory is produced resebles he hybrid orus Clon reers o in his chper hybrid orus in which nonexpers cively pricipe in debes ess nd eps inerpreionin shor in experi enion nd collecive lrning
This perorion o he clculive genciesie o he econoy by econoicsis lrgely crried ou hough he inevenion o proessionl econoiss The sudy o he sregies developed by his proession is hus indispensble or n undersnding o he vriey o ediions hough which his gignic enerprise o oring kes plce. Unorunely very ew sudies exis on he subjec. 30
ntroducton
ssic sudy by McCloskey on he rheoric o econoics is
Vert eless worh enioning lhough is deniion o rheoric
so cssicl h i is obviously liied McCloskey 1985 U ) As he sociology o science hs shown we cnno dech
l'fni s
c is ors nd eecs ro he conrversies heoreic or in which he progoniss re engged. Duez nd .hcma illusre his poin so wel. For n econois convinc H ollegue during conerence orgnized by scienic ssoci s Pyrrhic vicory i he cn no convince n FTC ission or cour. Rheoric dened s he r o building es o esblish vourble blnce o power wheher in sci or poliics cnno be reduced o n excess o heizion I erlizing bsrcion inended o errorize he opponen. eics hs never errorized nyone bu hose who hve le seves be errorized by i On he oher hnd he inniely orc clssicl nd siple rheoric o Feer in his sruggle gins sing price syse is oridbly eecive. He denounces his ens by ccusing he o being bough o by he ceen pros nd hereore o blindly deending heir ineress. he Mc ie he presens hisel s ere heoris' ou only o dc he generl ineres: y ineres in his or ny oher subjec s kind is iply he se s ny iien would hve'. There is ed or equions or bsrc conceps o reduce he opponen ence one need onl nipule ineress prooe collusion becoe he spokesperson o he generl will. Wh good ·uc rheoric i is h becoes ully eningul nd signicn when ched o he debes nd conroversies in which corsin his cse he econoiss wih heir rguens nd errguens heir heories nd counerheoriesre o he consrucion o rils o srengh which enble cerin
ens nd ools nd hus cerin wys o ring clculive Jc o riuphnd consequenly econoics o peror he oy he disseinion o sudens rined in econoics is o m ipornce. These cors becoe he prners nd ineredi s enbling econoic heory o dilogue wih prciioners nd o shpe he Fligsein ephsizes or expe he role o er econoics sudens in business Fligsein 1990) ). ore generlly he srengh o econoics derives rgely ro eerogeneiy nd he c h i is consnly he scene o con nd inel debe. There is probbly no single heoreicl en deended by ny econois which hs no been severely 31
n, ialization, n and emater ematerializatio abstraction degree o abstractio its degree whateer it Mney, Mney, wha calccirculation is calcand that its circulation cirulats and act that it cirulats mere act by the mere those o its traces: those leaes traces: transactions, le engage in transactions, agencies engage lated by agenci passe, the the poin throgh which it passe attachments the successie successie attachments moe only to moe moment, onl lande at a gien mome hands it lande whose hands agents in whose note, metal bank note, objecta bank material objecta When the money is a material on again. When positions occdierent positions se traces traces merg e with the die shellthese coin coin or shellthe osihandposihan to handp rom han circulates rom pied by the object itsel as it circu by bullets sed by tracer bullets like tracer trajectory a little li describe a trajectory which descri tio tions which are traces y, these thes e c money, mone s plastic plasti en it is i ing When Wh n training train liers in i soliers so
attached lie a wake to the can I orm o \ records, and so on Finally, whe t l1 ced to transa transa operations directly between two buk nts, these traces recore on long listingsinsri i I n the silicon chi which proide the ientities o the berls nd issers next to the amonts inoled. Money has no v it is a trail, wake, a isible, materializable, traceable jecory. his means that money, as an operator o vne, cannot be dissociated rom its trajectory or at least rom t of in other words, rom its spaces o circlation. the trajeto w not legible, money wold lose its quality as money otal io wol settle in since, being able to ientiy neither issers no iers, agencies wold be unable to o acconts, make transers ite prots an losses, an so on t is precisely becase money not exist as a crrency without the inscriptions telling s who se it and when, that makes entanglement not only possible bt even probable. armarking denotes all the practices throgh whih agents particlarize these inscriptions, by xing trajectories, assigning moements, an simltaneosly embeing money in a specic space o circulation, ie, by attaching it to certain issers an bene ciaries n its most simple orm earmarking consists o oerloading bank notes which in themseles are alreay satrate with nscriptions escribing their ocial attachments, with new, priate, messages. his practice, the object o interesting analyses is acilitated by the act that the bank note is an excellent meim r the exercise o rewriting Zelizer goes beyond these known practices an shows the ariety, mltiplicity an, in act, niersality o these strategies o reinscription or earmarking which characterize trajectories an priatize money. For open lists o positionswhich means that money is attache to none o them since it can occpy them all earmarking substitutes close, bonded lists which orce it to pass throgh certain points. Earmarking is eploy as mch in the omestic sphere, with siler coins which a granmother gis to her granchildren to pt in their piggybanks in memory o her as in systems o mass istribtion, with ochers, delity or creit cars and other sch eices. Zelizers conclsion is altogether logical when she exposes the misinterpretation poplarized by Marx an Simmel. at she shows withot iculty is that avance societies prolierate earmarking and ierentiation o the extent that it (money) does become more prominent in social lie, people will segregate, ierentiate, label, decorate, and particlarize it to meet
34
© The dal Bad The Sclca Revew 1
ain nction i to roide ialence Does is i y, o be whic enables it to circlate without being set anywr indenitely substitutable, not make disentanglement easier? Disentangling a serice relation, the realization o which requently requires the eectie copresence o the spplier an the consmer, is obiosly a brainteaser he interpersonal links, the attachment, are so to speak inscribed in the serice relation, so that the raming is ostly, necessitating ery specic eqipment. On the other hand raming money, that is to say isentangling it, seems to reqire little eort since money is by construction already ramed: col, circulating, constantly changing hands going rom accont to account. Yet or a long time anthropologists hae tried to show that this is not so. Money, contrary to widespread belie, is constantly dierted an thus reentangle For example, French money in New Caleonia may be treated in exactly the same way as the shells se in ital exchange (Bensa an Freyss, 1994) or the monetary ebts between bikers can be seen as the basis o highly complex personal relations (Portet, 1994) n the nineteenth century in the Landes in France, the arious crrencies in circulation were so similar that the crasman who produce his own coins was not really consiere in the illage to be a orger (raimond, 1994) Currencies are continally being reinented at a local, priate leel. Bt the tre demonstration o the impossible disentanglement o money is en by Zelizer who raises the only question that conts can one gie a in money? Or pt another way: can one organize oerowing and mltiply ties with money, that epitome o raming and orcing ot? he answer is yes, and Zelizer mltiplies the examples showing the generality and niersality o this reply At the center o the constantly renewed, neer ailing resistance o money to disentanglement, lies a crcial practice: that o earmarking his capital concept proides s with the key to unerstanding entanglement.
© he Edtal Ba rd fhe Sclcal Rev ew 1
35
Inoducion
Michel Clon
deeded by Clo ts book rmg requres te moblzto o ettes, wle ter rreduble utoomy s soure o ew ew overowg.
Te de tt tere exst orders o relty, sol spes orgzed ordg to ommesurble d tgost logs, s musgly llustrted by Mupsst sort story lled Le condmn mor (de Mupsst, 1987) Hvg seteed m to det, te M stte, possessg eter exeutoer or gullote, tured to te Fre stte to subotrt te exeuto However, te Mo utortes srk bk t te pre Sxtee tousd rs or rsl O o, d deded ot to exeute te setee but rter to ommute t to le mprsomet But te ost o ostrutg te prso d mtg te prsoer g seemed exorbtt. Te stte ereore oered te prsoer reedom o te odto e be exled. Te prsoer, guessg te stregt o s psto, reused reused So t ws deded to oer oer te prsoer ret o sx udred rs to go d lve brod He epted Se e prtys terests were served te ompromse, ll ws well tt eded well. Mupsst sowed, troug te bsurd d te om l, tt te order o te ourts ot rely o mrket lulto. He tus tpted Wlzer tess d, deed, o ll tose wo mt tt te sol lk ot be redued to te mrket, tt soety s mde o speres or sttutos, d tt e oe serves s bsto gst te expso o te oters. However rmg te sort story my be, t omes up gst te sme dulty s te explto proposed by Wlzer Wlzer How te exstee o te seprted res o olultblty be expled Te ypotess o
depedet speres or tt o omptble logs (DMgg 94) leves te questo o te emergee d ormttg o o lultve or lultve gees utoued Ts s ressurg t expls otg d eds up, moreover, usg oer wt sttutol brrers re strog eoug to ot te ores o rket w, ltoug elosed ts ow spere, s supposed to st ts purest orm Wot te Mo stte (ollowed by my ters) s by oosg te mrket otrt s te most oveet soluto s oer dsppers we we gree tt te opposg ores re reted te sme movemet d tt tey re dssemted, t ll rmg retes overowg, d tt ll dsetglemet rovdes te opportuty or ew etglemet. To uderstd te deretto tere s o eed to expl t by te speres or logs mutully lmt ts expso Deretto s spwed by sgle reurrg proess Smmel, s ow wy, sw tt rreduble mbvlee umerble tmes (ompetto) eves wt usully oly love do te dvto o te ermost wses o o te oter, eve beore e msel beomes wre o tem, 908} 1955) 1955) Smmel, Smmel, {1 908} Te tropologl soluto proposed, w s te dvtge o beg extremely smple, lso llows us esly to out or observto repeted so oe tere s o Gret Dvde betwee soetes populted by lultve gees d soetes w te gets do ot lulte Eve Deleuze d Guttr were o te rog trk wt ter oept o deterrtorlzto, tt extr ordry ulty bestowed o ptlsm or brekg ll tes d dog soldrty (Deleuze d Guttr, 1972). Solled trdtol soetes re popultedsometmes eve overpopulted wt lultve gees Toms etre book ossts o log d detled demostrto o te mpossblty, Meles soetes, o seprtg g eoomy d mrket eoom se te two re etgled rgt to te ert o te Kul. Strter, wt er lyss o solled ompesto mesms glder soetes New Gue, rees extly te sme olusos te glders sped ter tme lultg d estblsg equvlees (Strter, ortomg) Ts expls ter mzg ulty or uderstdg te teme o bodversty d or tkg prt solst debtes o telletul Property Rgts We olletg rre spees New Gue, multtols eouter peoples wo re more used t tey re to rmg, lultg d plyg o te orml bstrto o property rgts Tese re oeved, d
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© he Editoial Board of he he ocoogcal evew 1
resoeess of te res pproprteess evlute te pproprt elps us to evlute Zelz Zelzer elps eerlzto mpossble g eerlz demostrte te mpossble g usully usully employed employed to demostrte t; the marke m arket; which resists resists the society which traditionall society not traditiona market.! It is not of the market.! exteso of te extes te te bsto to te w serve s bsto vlues w t s ot vlues et of reltos reltos of trust developmet eessy developm ot te e lulto lulto;; t s ot mrket Te of te mr mrket w sets te lmts of te mrket t te ert of te fudmetll Ay frmg more fudmet smpler d more bot smpler mes mes re bot protglemet prodsetglemet proeduree of dse d y proedur produes overowg, d w movemet w te sme movemet oe d t ttmets It s oe ew tt dues ew g tem resrbg prolferte, wle resrb gees to prolferte, lultve gees uses lultve of calcalspacesof that these spaces ility The The fact that lability noncalculab into spaces spaces of noncalcu mpervous zed mperv re org zed olulbltyre ulblty ulblty d of olulblty Walzer, d by Michael Michael Walzer, y propose proposed ophy al philos p hilosoph the politic p olitical spheres spheres as in the y is not The econom economy 1983) The (Walzer, 1983) ry nor nor evident evident (Walzer, necessary is neithe neitherr necessa uverses. oter uverses. oted by oter expso s oted wose expso uverse uverse wose
© The Edtoral Board of Te ocologcal Revew 1
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Inru
Michl Calon
Strther stresses this poit ot i the trditiol perspetive o Rom lw (whih implies tht thig is physilly shred betwee its dieret owers) but rom viewpoit o ommo lw whih ssoites i bstrt wy thig with budle o rights tht esily be distributed betwee severl gets mkig esier sophistited lultios As or solled moder soieties they re edowed with s my olultive geies s lultive oes This iextrible mixture be oud where we lest expet it: t th very hert o il istitutios. Abol shows us trders obsessed by etworkig multiplyig etglemets to put themselves i positio to lulte Moreover i our moder soieties tehosiees dd their peulir pity or mplitio to the geerl movemet i whih etglemet rises rom disetglemet As Cllo rells i his hpter tehosiees multiply uexpeted oetios d overowig osttly mkig the work o rermig more eessry more diult more expesive d more uerti ike Sisyphus i his utile ttempt to push boulder to the top o hill they otiuusly d themselves bk t squre oe Fie d tehosiee orm llie to ope the wy to the ores o etglemet The dvtge o this thropology o etglemet is tht it rees us rom the irrittig d sterile distitios betwee stte d mrket or betwee globl eoomy d tiol eoomies How reltios betwee these two etities the stte d the mrket politis d eoomis be desribed? Blok suggests the distitio betwee two prdigms (Blok 1994) the rst oe the stte d the mrket re osidered to be two lytilly seprble relities pled t the two eds o otiuum A prtiulr orm o eoomy be deed s mixed mbitio o two pure types This prdig hs to lrge extet proved to lk relism both historilly d theoretilly The stte does ot itervee i the mrket; ordig to the seod prdigm it prtiiptes d its role is lwys essetili the ostitutio o the eoomy A wy o showig this is to provide list obviously prtil d purely iditive o these ostituet tivities rules goverig the use o produtive ssets legl rmeworks goverig reurrig reltios suh s those betwee employers d employees mes o pymet mgig the boudry ith the rest o the world t is esy to veriy tht eh o these tivities otributes diretly to the rmig o lultive geies They do ot orgize the tios d eoomi behviours whih redy exist outside o stte
tio; they ormt these tios Could we sy tht the we e idepedetly o the weiro? O ourse ot Similrly we ot sy o orgized mrket tivity tht it exists without th stte The true questio oerig the stte is this how d with wht methods d eiey does it otribute to the perormtio o lultive geies d the orgiztio o their reltios? This simple questio shows the existee o wide rge o possible o tributios rge whih is s wide s tht o orms o mrket orgiztio Beore rushig or deitive lssitios it seems wiser d more ruitul to mke detiled idividul se studies o observble ogurtios (Dobbi 1994) The reostrutio i Est Europe outries d Chi ostitute rom this poit o view vluble lbortories d experimets rom whih Strk drws some olusios. Tht the term trsitiol eoomy ould be used i their se shows the weight o the old prdigm d the extet to whih mrket mehisms re misuderstood eve mog eoomists There is othig o trsitio i the developmets observed or i their diversity whih mrk extreme otrst betwee outries suh s Pold Hugry Bulgri or Chi (Nee 996). eh se reogurtios reombtios nd rerrgemets r t ply d mix mteril peulir to the history o eh outry these rrrgemets the stte ote plys ru il prt d the dymis i ple impt i tur o its ow posi tio d otributio to the eoomy Strk lerly shows tht these reombitios hve the eet o remodellig the lultive geies d their reltios Bsed o study o the proess o edistributio o property rights d its etworkig eets d er detiled sttistil lysis he esily shows tht the resultig ype o orgiztio whih he ptly lls reombit poperty is built o threeold proess o blrrig blurrig o publi d privte blurrig o rms boudries d blurrig o the boudedess o legitimtio priiples The mixed Hugri eoomy tht o he seod hl o the 1990s whih reombies d blurs ertily s limited liesp This is trsitory eoomy mixed like y eoomy buot trsitiol oe t orrespods to stge o igulr trjetory; it ws shped by rmigs relted to stte tio i prtiulr whih produe uique situtio i whih osses re soilized d prots privtized Tht the stte ostitutes rther th itervees i the eoomy eds us to reltivize the thesis o globliztio whih is moreover ubjet o heted debte mog eoomists Fligstei shows oiigly tht this worldwide extesio o the mrket my simply be
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Inroucin
Michel alon
terpreted s te growg domto o orm o orgzed mrket, tt o te Uted Sttes, over oter orms o orgzto (Flgste, 996) Te orgzed Amer mrket vours te oept tt te oly people wo ve te rgt to spet te tv tes o rm re te sreolders, d te oly preoupto o rms must be to mxmze te sreoldervlue. Tt ts orm o domto s oly prtl d s osttly opposed, s dret result o wt s just bee sd o te osttuet role o te stte eoom le. Te peome o pt depedey relled by Strk re so strog tt tere s o reso or te Sttes o te omted eoomes to lg temselves wt te role o te Amer stte te Amer eoomy. But oter trs expl te exstee o lmts to y domto o y orm o orgzo, wtever my be Te lyss o te Jpese eoomy by o sows ts. A prtulr orm o orgzed mrket (w obvously ludes te publ poles otrbutg to ts osttuto), ltoug wellsuted to solvg ert problems d supportg ert orms o lulted to, my prove to be prtulrly eetve we te rumstes ge. Te Amer modl s eet we stutos re ustble, owg otbly to te sopst to o l teques d te quk sortterm lultos tey llow. But we te sge (sope) o ge rses d te tos to be udertke ve more logterm perspetve, oter types o mrket d oter lultg tools my be requred.
rkets most dsttve eture, vz, dkerg (Weber, { 922} 978 quoted Swedberg, 994).
Te orgzed mrket ot be redued to mere ystem o trde d trsto. t s lso, bove ll, proess w gets wo desg d produe goods eter to ompetto to pture demd w tey elp to (re)dee. Mx Weber s ertly mog tose wo s grsped ts go st dmeso o te mrket most ully A mrket my be sd to exst werever tere s ompetto eve oly ulterl, or opportutes o exge mog plurlty o potetl prtes. Ter pysl ssemblge oe ple, s te lol mrket squre, te r (te log dste mrket) or te exge (te merts mrket), oly osttutes te most ostt kd o mrket ormto t s, owever, oly ts pysl ssemblge w llows te ull emergee o te
Ts deto s reeted our teory o te ormttg o lltve gees, d te sge grted by t to mterl d metrologl equpmet t s, moreover, te mert o rellg t te mrket s p re w gets eter to ompeto wt oe oter to seure postos o moopoly d domto. Ts trdto w te mrket s ompettve proess d deve s obvously bee developed by te eoAustr ool s llustrted te work o utors su s Cmberl, Sumpeter d Glbrt. et me ot be msuderstood. t s ot oug to tlk o mperet ompetto to do juste to ts dmeso o te mrket. We ve to gos Cmberl, mog oters, dred toso r s to gree to osder tt oe o te wepos o ompetto, t ts m wepo, s presely or eoom get to reuse dsetglemettt proess w rees tors d produes gees ree o ommtmetsso tt t , by orst, produe etglemet Ay selrespetg eoom get eweves g durg te gt te rmework udoe by te mret durg te dy Cmberl put t mrvellously s deto o mperet ompetto t s to be reogzed tt te wole s ot sgle rket, but etwork o relted mrkets, oe or e seller Cmberl, 9, p.69) Sumpeter repets te sme lesso we e dees te etrepreeur perspetve smlr to tt o sol etworkss te oe wo uexpetedly oets two terto urelted popultos o gets o te oe d te egeers or reserers wo work o te des d reto o e goods d, o te oter, te ustomers d osumers wo express demd relted to tese goods. Ts ebles us to surpss Webers dtos, wtout rejetg em. Te mrket s ot twostep proess wt ompetto se ollowed by exge pse Te type o represtto uts te reto proess o produts d demd or tese prodts pretess, proess w we kow volves web o lose oetos betwee desgers, produers, dstrbutors d osumers. Preprg te l trsto, tt s to sy, pturg ustomer d eggg r exge rom w e prty eves s strger volvesd ts s obvously oe o te prdoxes tt s to be oted log proess o etworkg t s to te uderstdg o ts outertutve mesm (
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Kj
Compeiion
© The drl Brd The lg Revew 1
The Edr Brd The gl Revew
4
rder prepre he mrke reliship i is s ry rele e d ssie) h Prik MGuire d Mrk Grveers hper prvides pwerul ribui. Their im is llw he erly evlui he eleriiy idusry. Eh dei si whih he sruure he edglig mrke will deped he e he gds ered d he mdliies mpeii re ll lysed simply i erms eis d ewrkig. Wheher i ers he hie bewee erl sis d isled sysems bewee AC d DC r bewee 5 d 60 yles he sme lgi is lwys prese h exisig ewrks i whih he idusry s d whih i ur i rerrges. The ges wh m ge upy key psiis drw he budries mpeii elimie mpeirs sele ehlgies d hus pure he demd We wiess he rei wh ANT (ArNewrk Thery) lled siehil ewrk whih by di exlu si mged rgize highly reguled mpeii llwig ew ges derive susible prs. his srugglei whih he sruure he idusry he rms mpeii d he eh lgies were shped simuleuslyyhig ges whe i mes sregheig ies rei pressil ssiis erl me he rde press ledership upil r pressil lubs rpre welre d emplyee lubs lbbyig he publi uhriies d eveANT prepred us r hishe siu lleive lbrry whih impses ehil sdrds r he prdui lmps. We shw mre lerly h he very ure mpeii is rrey mpeii. Oe reer here he wr Bur (he subsive rihess mpei lies i is imperei) d he suble lysis rms ihe sregies by Whie (Whie 1981, 1988). Deig impere mpeii by m prig i mdel pere mpeii (s r exmple i e lssil hery) is lly jusible whe we view emis s devie ieded perrm he emy h is sy esblish lulive geies dehed rm e her. Hwever his psi i is misledig whe ur im is sru hrplgy he mrkes. Wh MGuire d Grveer shw i he se eleriiy lhugh here is res believe i he geerl iy he seme is h pere r impere mpeii deed s siui i whih se rms prdue he sme r reled prdus emerge ly i highly sruured idusry The mre r less impere mpeii previlig i rgized mrkes is lemer i lglsig press. Cmpeii wheher pere r impere is srig pi bu ishig
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© e Editoria Bard o e ocioogical Reiew 1998
pon. exis d relly des exisd h is what JnKl U NO
luble. Hwever, i urs ly whe he bud th ea•
l pis, hve bee seleed d sbilized, ie i world tha I dy hig hly sruured d shped. Nwd hs is whtrt MGuire d Grveer re s imprhis sruui is tho
ut step in a long process dominated from the beginning to th
y rivlry bewee lulive geies. w re he dymis his rivlry be desribed? Why i lulive geies ble impse he eves is d is h her lulive geies hve ke i u i kig heir deisi? Oe swer is h he pwer d mdliies luli re eqlly disribued mg ll he geies ere is res why he merlgil isrumes d equipme ille eh e shuld be ideil. The lulive pwer gey depeds h is lulig ls. These re hr rized bve ll by he umber d vriey relis d ges ih hey re ble ke i u. We shwed his r uig ls d mrkeig mgeme l whih breks w he uiy he prdu whih iegres he preerees verse subppulis sumers d whih kes i u e quliy he servie prvided he vlume sks d he ges pii i vur r gis priulr rversil hlgy is mre likely esul i suessul is. The mre gey is ble mplie d brde he ewrk iies d relis be ke i u he greer is is piy ree symmeries bewee isel d her geies. mpeii bewee lulive geies used heir biliy hve heir deisis regized d eped (r exmple pr se give prdu give mrke segme) is lrgely deer ied by he respeive quliies he lulig devies. The rbbily gi is he side he gey wih he grees wers luli h is sy whse ls eble i per rm mke visible d ke i u he grees umber relis d eiies. The sruggle bewee w geies is herere rrely qul i is emiise he mh bewee Ksprv d he BM Deeper lue. Clulive geies egge i pwer sruggles whih re me red y he ls wih whih hey re equipped. eri ses ese pwer srugges my led siui depedey. The s bvius rm his depedey rrespds he prsi g e lulive gey by her whih impses ( pr ) s luli ls d rules d sequely res he hs ) Te Editorial Board o The ocoogcal Reiew 1 998
4
Inrodcion
Michel Calon
gey to egge ts ow ulto. t s lmost s Ksprovd ts s ot r rom wt ppeedd to strt lultg s moves ot by plyg lke Ksprov but by mg g msel te omputer's posto, tt s to sy, by borrowg rom t ts lgortms d lulto rules. Te gme would e o loger be betwee Ksprov, utoomous d depedet gey, plyer s ow rgt ormultg s ow strteges, d te omputer, lso depedet d utoomous get. t would be gme w Ksprov ws trsormed to ppedx mere br o te omputer, s te ltter d delegted te exe uto o prt o ts ow lulto to te ormer. Eggg oe's oppoets gme by eterg to s lultg power mes eptg depedey. Ts type o stuto s requet eoomy. mposg te rules o te gme, tt s to sy, te rules used to lulte desos, by mposg te tools w tese rules re orported, s te strtg pot o reltosps o domto w llow ert lultg gees to dede o te loto d dstrbuto o · surpluses. Tt s ow te predome o some orms o orgztoor exmple te Amer orms expled. Te exteso o ert orm o orgzed mrket, exteso w esures te domto o gets wo lulte ordg to te prevlg rules o tt prtulr mrket, lwys orrespods to te mposto o ert lultg tools.
Marke laws
As we re te ed o ts log detour t s tme to retur to te orgl questo. By rddg ourselves o te umbersome dstto betwee eooms (s dsple) d te eoomy (s tg) d sowg te role o te ormer te ormttg o mrkets, we d our selves ree rom postvst or, worse stll, ostrutvst oepto o lw. Mrket lws re eter te ture o ums d soeteswtg or te setst, lke pre rmg, to wke d revel temor re tey ostrutos or rtets veted by sol sees eort to mprovse smple rmeworks or explg opque d omplex relty. Tey out or regu lrtes progressvely eored by te jot movemet o te eoomy d eooms, movemet tt we ve ttempted to desrbe ts troduto. Tese regulrtes perorm bevours
ereore ve te obdury o te rel yet tur tey re perd by tese bevours d tereore ve te otgey o et. ese regulrtes, relted to te stblzto o prtur orms gzto o mrket reltos, rem mted tme d e t s tereore wrog to tlk o lws or, worse stll, o te lw e mrket. Tere exst oly temporry, gg ws ssoted w spe rkets. e exmples o te ugr d Jpese eoomes pery llustrte ts pot. E o tese eoomes s prtur ol d otgetyet peretly explbleorm o mrket zto Tere s o oter wy o desrbg te ugr omy t tt proposed by Strk Prlel to te deetrlzed gzto o ssets . . . te etrlzed mgemet o bl Ts rrgemet spes etwork o ssets d lbltes s w s etwork o lultg gees w develop edgg eges. Tese strteges tur otrbute to te emergee o rtes w, by llowg lultos d wt eoomsts d ll expettos, led to ter ow reoremet. Not oly ese regulrtes lol d geuely ugr, wt s more, geerl uderlyg or mt lwor exmple, presumed optz bevour o gets, weter ugr or Pers out or t. Ts s beuse te bevour o te gets d ter ltos re so embedded te lol relty tt te mere trso o l tools mported wtout y oter proess leds gt to eoom d potl ollpse Go orms ts e o oudg, uderlyg lw w, ts e smplty, d expl te dversty o orms d orgztos. Tere exsts rstruture w s lst resort mgt expl te sol e te osmos o te Jpese rpelgo, te spe o dedes, te lws goverg te eoomy ve ged om ely No smple expltod t s o ts pot tt te ostrto revolves out or ts peomeo. Te ket lws o te rst perod, lws w temselves were lol storl, t p be osdered s te drvg ores d te ge, wtout owever explg te otet o ts ge Te eoom gets o te rst perod lulted ter sos, but so dog tey dd ot egeder te mrket o te od perod We see ere te sge o te tess o vrty o orms o lulto d lultve gees. t s ot g to ve lultve gees to expl gve evoluto reso s smple ulto ot tke to out ll te
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Mihl Calon
reations and actions since it exists only when framed, that is to say, closed o to overowing which it tolerates and which acts obscurely, so contributing to the emergence of an unexpected rea ity. We cannot explain one form of market by another; however, what we do explain without anthropology is how e shift from a certain formatting of calculative agencies to another. This point of view is at one with the od and sound intuition of anthropology supported by Sahlins among others (Sahlins, 1 976) and recaled in this respect by Aolaa: rationaity is always situ ated and the anthropologist strives to explore decisionmaking in natura settings. It is also akin to the cassical anaysis of Polanyi and his classication of economic institutions (reciprocity, redistribution, market). But beyond these (too) general classications and petitio principii, the anthropology that we have proposed has the immense advantage of opening the eld to empirical studies in order to reconstruct the diversity of formatting. The recognition of the existence of local and transitory regulari ties is not unreated to one of the mechanisms carfuly studied by economic theory: that of lockin and path dependency (David, 1984). Lockin denotes all the mechanisms through which the evolution of a market or an institution becomes more and more irre versible. The choices and decisions made during the rst period play a part in limiting the range of possible choices and decisions during the second period. Progressively the range of possible options narrows down, closes and locks, so that the agents have no alternative but to renew the choices made earlier. They are prisoners, trapped in networks from which they have neiter the resources nor the desire to escape; they are submerged in the ery structures they helped to set up. The role of technology in the construction of these interdependancies, these cases of lockin, is capita. The simple deci sion to invest in a given technology sets o a dynamic of learning and accumulation which rapidly leads to unequal development. The chosen technology becomes inreasingly attractive and protable, not by virtue of its intrinsic qualities, but because substantial invest ments have been devoted to its improvement. This theory of lockin has been the subject of an abundant literature, aimed in particular at accounting for the permanenly open possibility of lockout. The notion of lockin is rich but ambiguous; ambiguous because it takes as a reference the model of the exibility of decisions and the openness of choices and scope of action. Lockin is a deteriorated form of the market yet, as we have already mentioned, from an anthropological point of view the opposite is true. Organization of 48
Introduton
he market and the openness of choices vary inversely. McGuire and Granvetter show that the opening of options, particulary techn cal, is maximal at the outset when the market does not yet exist or ather, is at its zero degree of organization. This opening, an out come of the nonexistence of the market, is situated not at the evel of the agents but at the leve of a virtual collective. Some agents opt for decentralized systems, others continue to ght for gas and yet others are keen on direct current, but each one sticks to his own course. To reconstitute the options as alternative ones, we need to magine a social planner gathering all the relevant information and embarking on opportunity calculations. We thus get a glimpse of one of the possible reasons to justify planned economies: they are the only ones to make concurrent decisions comparable and acu able, at least on paper, when the options are still open It is only when certain options have been eiminated and that the range of options has been drastically reduced, that the market is nally orgaized (rms are similarly structured, occupational categories are standardized and extraorganizational structures are created to anage competition and articulate common goals), and that indiidual agents can caculate the comparative merits of the options hich remain ope. Lockin is not a deteriorated form of the ar et, it is its compulsory companion, a necessary symptom of it. However, the lock�in in question and the interdependancies it mplies should not be likened to the abstract lockin of North which educes it to the mere institutional rigidication of initial game rues (North, 1990) or even to the more material lockin of David who ook into account the role of technology. It is deployed and unfds n heterogeneous arrangements (which are solid because hetergeeous) where one nd, knit togetherMcGuire and Granovetter rovide their quasiexhaustive inventorynot only technology but lso forms of organization and goveance, relations between rms nd public authorities, both loca and national, associations nd cubs, research centres, bribes, accommodating journalists, an so on. It is thus under the condition of a double revrsa that the notion of lockin manifests its richness. Firstly lockin is not the progresely deteriorated form of perfect exibility; it is, on the contrry, he condition of a manageable exibility which, if it exists, can nly e limited. Secondly lockin consists of a hetereogeneous arrageent which frames the calculative agencies against a backgrond o visibe interdependancies. It is thus as varied and multiple as the 'orms of market organization. 49
·
Michel Calon
Oe rgized d ee lkedi, te rket bemes lulble by te gets Oe te wrk strdizti (t lest prtil) lultig tls is well its wy, e gey is i psiti t ly t lulte er deisi but ls, by struti, t ilude, t lest prtilly, i er lultis te lultis te ter geies. Tis itegrti, wi is te mteril side wt we ll tiipti, is r esier we, durig te press mrket rgizti, lultive gey mges t impse diretly er isrumets d mde lulti (ere, te tiipti is peretly rtil beuse e gey mkes te sme lultis d l lws te sme predures). tis se te lulted deisis pr due te tiipted eets, side rm pprtuisti beviur, wi is ter wy syig tt te mrket sidered beys erti lws wi my be rmulted i mtemtil lguge. mtemtil emis be relisti uder erti ditis, it is t beuse um beviur is turlly mtemtizble; it is beuse te lultive geies re tere t itrdue iterrelted lultis i deisis d i te rmulti tis 33 For an anhropology of markes Wit tis tery te rmttig lultie gets we ls vid ter diulty, tt te impssible ie betwee te deuiti d te elebrti te mrket. Tis ers sil siees t te igest deg ree. We ve see te psitive d perrmtive rle emis d its tributi t rg izig mrkets. Silg y is implited s well te diti it vids tw pitlls. Te rst rrespds t strtegy eriig te e mi tery te g et. Emi silg y s rrely bee ble t resist tis temptti. Udersrig te mplexity emi peme, mplexity wi emi tery wit its ld d disirted view f homo economicus t d justie, silgy strives t give tis bstrt get bit mre sulte lie d wrmt e lksby mbilizig tis su s tse f vlue, ulture, rules r pssis. Prt dremed it, emi silgy mkes it. Yet, s we sug gested, emi gets d t eed be eried. If tey mge t beme rier it is beuse, te trry, tey were led, redued d frmed prtiulrly by emis! Wt we expet frm silgy is t mre mplex homo economicus but te mpreesi f s simpliity d
pverty
Introduction
Te sed pitll r te silgy mrkets is tt deui i, wi is t urelted t te previus e. et us eed urkeims wrig Plitil emy . . . is bstrt d dedutive siee wi is upied t s mu wit bservig relity s wit strutig mre r less durble idel beuse te m (si) tt te e mists tlk but, tis systemti egist, is little but rtiil m res. Te m tt we kw, te rel m, is s mu mre mplex, e belgs t time d utry, e lives smewere, e s mily, religius it, d plitil ides (Durkeim, {1988} 1970 quted i Smelser d Swedberg, 1994). e uel tis deuiti is gi te kwledgemet te pverised d bstrt rter homo economicus tt beig res, severed ll ties But tis kwledgemet des t ed Durkeim t prpse eriig emi tery Te silst deues tis redutiism i rder t disquliy emi ery d prpse replig it by ter tery, silgy l m, e tke i budle liks wi stitute is sily d ee is umity. T prprse Glile ig is judges e uld retrt eppure calcolano! (d yet tey lulte!). Tis trtegy is terere mre viig t tt erimet. t reully vid te ly questi wrt psig w te ergee d rmttig lultive geies be explied? eter we se t ee te emi tery te get t deue it, i bt ses we rmulte te sme ritique mo economicus is pure ti. Tis itrduti s well s te tire bk i t, miti te trry. Yes, homo economicus - lly des exist. O urse, e exists i te rm my speies d is liege is multiple d rmied. But i e exists e is bvi sly t be ud i turl sttetis expressi s little eig. He is rmtted, rmed d equipped wit prsteses i elp im i is lultis d wi re, r te mst prt, dued by emis. Suddely ew ris pe up t tr lgy. t is t mtter givig sul bk t deumized et, r rejetig te very ide is existee Te bjetive y be t explre te diversity lultive geies rms d tributis, d ee rgized mrkets. Te mrket is ger tt ld, implble d impersl mster wi impses t lws d predures wile extedig tem ever urter. t is ysided, diversied, evlvig devie wi te sil siees s s te trs temselves tribute t regure.
I
Introdction
Michel Calon
Figsein, N, 996) Mrkes s Poiics A PoliiclCuur Approch o Mrke · Insiuions Amercan Socologcal Revew 6I Augus 1996): 656-673 Fligsein, N, forhcoming) Markes Polcs and Globalzaon Uppsl Universiy · ofUppsl Press Fox R nd Swzey, 992) Sare Pars Organ Replaemen n Amercan Socey · Oxford Oxford Universiy Press Grci, M,l986) consrucion socile dun mrc prfi e mrc u cd rn de FoninesenSoogne Aces dea Recherche en Scence Socalesno 65; 2-13 Grnoveer, M, 1973) The Srengh of Wek Ties Amercan Joual oj Socology 1360-1380 Grnoveer M The Sreng of Wek Ties Amercan Joual o Socology 1 973): 360-1380 Guesnerie, R 1996) Lconome de march. Dominos, Pris Flrion Hr nd Moore, , 1988) Incomplee Conrcs nd Renegoiion Economerca uly 1988 pp 755785 Hchuel, A, 995) es mrchs prescripeurs In LInscrpon socale march, ed A cob e H Vrin Pris Hrmn Hennion A 1993) La passon muscale Pris Mii Hodgson, GM, 994) The Reu of Insiuion Economics In The Handbook · o Economc Socology ed Nei Smelser nd Ricrd Swedberg Princeon Princeon Universiy Press Hoyle 1995) Sndrdizion cross NonSndrd Domins The Cse Orgn Procuremens, STH Vo, no 4 Huchins, E, 1995) Cognon n he Wld. MIT Press, Cmbridge Universiy Mss Krpik, , 1995) Les avocas Enre lEa le publc e le march. Pris Gllimrd forhcoming Cmbridge Universiy Press) our, B 987) Scence n Acon How o Folow Scenss and Engneers hrough Socey. Cmbridge Mss Hrvrd Universiy Press w, , 1984) Organzng Modey, Oxford Blckwell ebron 1997) e dngion du pouvoir le cmp des conomises rnis u milieu des nnes 996 Aces de a recherche en scences socales 1 9: 3-26 viSruss, C 1960) Inroducion luvre de Mrcel Muss In Socologe e Anhropologe, ed Mrcel Muss, Pris PU Mrsl, A [920 1961) On Mrkes In Prncle of Economcs ed Marshal 323-330 1 ondon McMilln nd Co Mupssn, Guy de 1987) Le condamn mor Cones e Nouvelles Plide ome I Pris Gllimrd Muss, M, [1925 1969) The G: Forms and Funcons o Exchange n Archac Socees ondon Cohen nd Wes McCoskey, DN, 1985) The Rheorc o Economcs Mdison Wisconsin Universiy of Wisconsin Press McCloskey DN, 1990) Youre So Smar: The Narrae ofEconomc Experse Cicgo Universiy of Cicgo Press Meyer, M, 994) Mesuring performnce in Economc Orgnizions In The Handbook oEconomc Socology ed Nei J Smelser nd R Swedberg Princeon Princeon Universiy Press Mugnini , 1 994) Messges sur billes e bnue monnie coe mode dchnge e de communicion Terrns 23: 63-80 Nee 1996) Symposium on Mrke Trnsiion Amercan Joual of Socology JOI 908-1096
, DC, 1990) Insuons Insuonal Change and Economc Perormance mbridge Cmbridge Universiy Press , DC, 977) Mrkes nd oher Aocion Sysems in Hisory The henge of Kr Ponyi Joual oEuropean Economc Hsory 6 70376 nyi, K, [1957] 1971) The Economy s Insiued Process In Trade and Marke n he Early Empres Economc n Hsory and Theory , ed Kr Ponyi, Conrd rens berg, nd Hrry Person Cicgo enry Regnery Co er, M 1995) us n Numbers Princeon Princeon Universiy Press e, , 1994) rgen de moo Crer une ricesse ou cceper pnurie erran 23 15-22 binson , 974] 1979) Mrkes In Colleced Economc Papers ed on obinson 146- 67 5 Oxford Blckwe lins M 976) Culure and Prccal Reason Cicgo Universiy of Cicgo ress me G, 908 955) Concs and he Web ofGroup Alaons New York The Free Press eser, N nd R Swedberg, 1994) The Sociologicl Perspecive In The andbooks of Economcs Socology, ed Nei Smelser nd Richrd Swedberg 3-26 Princeon Princeon Universiy Press ih, C, 1994) ucions From Wlrs o he Re World In Exploraons n onomc Socology ed Ricrd Swedberg 176-192 New York Russel Sge oundion r, S nd Griesemer, 1989) Insiuion Ecology, Trnslions nd oundry Obecs Ameurs nd Professions in Berkeleys Museum of erebre Zooogy, 90739 Socal Sudes oScence I9 387-430 re M forhcoming) W is inelecul popey er? In w ed) Acor Nework Theory and Afer Universiy of Keele wberg, R, 1994) Mrkes s Socil Srucure In The Handbook ofEconomc Socology ed Nei Smeser nd Richd Swedberg 255-282 Princeon rinceon Universiy Press ez, , 1987) Capalsm and Arhmec Chicgo Chicgo Universiy Press oms, N, 1991) Enangled Objecs Exchange Maeral Culure and Colonalsm n he Pacc Cmbridge, Mss Hrvrd Universiy Press imond, B, 1994) fusse monnie u villge es ndes ux XVIIme e XIXme sices Terran 23 27-44 rs, , [1926 1954) Elemens o Pure Economcs. 4h ed Homewood Ill ichrd D Irwin lzer, M, 1983) Spheres o Jusce: A Defense o Plualsm and Equaly New York Bsic Books ber, M, [922] 978) Economy and Socey An Oulne oInerpreve Socology Guene Roh Clus Wiich ed, Tnsed by phrim Fiscoe a Bekeley Universiy of Ciforni Press eber, M, [923] 1981) General Eonomc Hsory New Bunsick, N Trnscion Books ie, H, 98) Where do Mrkes Come From? Amercan oual oSoco logy 8 57-547 ie, H 1988) Vrieies of Mrkes In Socal Srucures a Nework Approach ed B Welmn nd SD Berkowi Cmbridge Cmbridge Universiy Press iimson 993) Clculiveness, Trus nd Economic Orgnizion Journal fLaw and Economcs XXXVI Apri 453-486
56
he dtora Board of Te Socoogca Reew 1
7
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a
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© The ditoria Board o The Socioogica Ree 1
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$
Viviana Zelier
This, I laim, is ho money orks in order to make sense of thei omlex and often haoti soial ties, eole onstantly innovat and dierentiate urrenies, bringing dierent meanings to various exhanges. To make my argument on the eararking monies, I examine hanges in the ubli and rivate uses of in the United States beteen the 1870s and 930s, fousing on areas of soial life hih might seem most vulnerable to the dollar rationalization domesti transations the bestoing of gits, and harity Here of all laes e should nd the standardizing eets state money Yet instead of homogeneity e disover a rih omlex soial eonomy. Money a home
Let us onsider domesti transfers. At the turn of the entury money onerns inreasingly ermeated the Amerian household As the onsumer eonomy multilied the number and attrativeness of goods hile at the same time the disretionary inome o Amerian households rose, the roer alloation and disosition family inome beame an urgent and ontested matter. Within their homes, families orked hard at earmarking thei monies They bought the aount ledgers and budget books reo mended by exerts to register their exenses arefully, or els invented all sorts of strategies to dierentiate the households le monies. Take for instane Mrs. M's system as she told it Woman's Home Companion in the early 1920s I olleted little ans, all the same size, and asted on them the folloin ords, in big letters groeries, arfare, gas, laundry, rent tithe savings, misellaneous ( ) e seak of those ans no, as the ery an, arfare an, et. (Bradley, 1923, .7) Other families jars, hina ithers, enveloes, or boxes to distinguish their onies hysially, hile some stashed the monies in stokings or mattresses and oorboards. In a arallel ay, immigrants marked a ortion of their hardearned ages for transmission relatives bak in their home villages Or else families relied on a variety of outside institutions to kee and dierentiate their monies, from regular or ostal banks, shool banks, to insurane omanies, mutual aid budget lubs, buildings and loans assoiations, ar bonds, and installment ayments In many ases, this as not just of homogeneous aital but dierentiated savings, most 60
The proleration ofsocial currencies
ally in the ase of the summer vaation money or Christmas oney deosited in the oular Christmas lubs or vaation lubs, whih served as olletive iggy banks'. Observers ontended that organized budgeting ould neatly ationalize household nanes. But the domesti earmarking of onies as hardly a smooth aounting roess There as too uh at stake in ho the money as divided, for hat, and by whom. As families inreasingly deended on the ash ages ought in by te husband, it beame more urgent and omlex to egotiate husbands ives' and hildren's laims to that money To what extent did the husband's age beome a olletive ossession? One his money entered the household ho had the right to ontrol t? Should husbands hand over all their salary to their ives, or ho uh ould they kee for themselves? Ho muh money should a wife reeive and for hih exenses? Was that money a gift from her usband or as a ife enitled to a artiular share of the inome? hat about hildren should they be given their on money to end or as it their duty to earn it through household hores? o should hildren send their money? This ne tightened ometition for the family inome', as obert Lynd (1932, 90) desribed it, romted a general revision eonomi transfers ithin households, a searh for aroriate omesti urrenies for ives, husbands and hildren But it as the ouseifes money hih beame the most aradoxial, ontested, d unertain urrenyreisely beause relations beteen ives d other household members ere in transition and at issue. As e tasks of shoing for household needs exanded, omen took er most of them. Yet this inreased nanial role ame ithout a lary and most often ithout even a xed and deendable inome. deed, tuoftheentury ives, even those married to ealthy en, often found themselves ithout a dollar of their on. orse still, omen had lost most laims to the eonomi resoures the family. Whie the labour ontributions of olonial ives ere ognized, the 19thentury domestiation of houseives laed ried omen outside the rodutive eonomy (eg, see Folbre, ). No matter ho hard they orked or ho muh their families eded on their labours, omens houseork as denedand uedas a task of aet but hardly of material imort Thus hen ame to the household's eonomi elfare, it as the husband's gework not the ifes houseork that mattered. His money ame hers only as his gi, not as her eaed share of the inome. gly, her money even had a seial voabulary that set it aart 61
y
emloyng a seres of ngenous ehnques for dsngushng r renes from eah oher. Imlly hey faed hree ssues Wha ere hey dsngushng? On ha grounds ere hey dsngus ng? Ho dd hey make he dsnons? Wha ere hey dsngushng? Basally hey dsngushed sg nanly deren soks and os o f money soks n he form f searae funds nos from dren soures of nome ouos o deren knds of exendure. On ha grounds ere hey dsn ushng soks and os? Basally hey dsngushed meanng fully deren soal relaons relaons o varous rovders of nome relaons hn households relaons o varous reens of aymens or beneares of hose aymens. Ho dd hey mae · he dsnons? hey searaed sos and os n o deren · ays by metho of aocaion and by obect of expenditure Mehods nluded soal rounes hn households ha gave df feren famly members he oer o oer reeve sore oneal ransfer or exend household funds hle objes of exendure esablshed he range of aeable uses for domes funds
o tho o aocaion, n he herarhally O y hsbands gave ves ar of her nome r ad lass ves reeved an rregular dole or more rarely a ru loane from her husbands for housekeeng exense dng household goods and lohng. Worknglass ves on oher hand ere gven her husbands' ayheks and ere ed o admnser and dsrbue he famly money he n of money ves reeved as no eermned by he e y or even he quany of her domes onrbuons bu by alen belefs of ha as a roer amoun herefore a larger yhek for he husband need no ranslae no a rse n he sekeeng alloane On he bass of gender eonoms mgh I a smly nrease a husband's ersonal money. egally domes money as a husband's roery. Even f a an managed o save some money from her housekeeng enses he la ulmaely onsdered ha money as her husband's ery. For nsane n 1914 hen Charles Mongomery sued hs e Emma for he $618.12 she had saved from household exenses rng her 25 years of marrage Juse Blakman of Brooklyn's reme Cour ruled for he husband argung ha no maer ho eful and ruden has been he fe f he money ( . . .) belonged l he husband s sll hs roery' (New York Time De. 16 14 .22). hus a fe's hannels o addonal ash ere lmed a varey of ersuason ehnques asng ajolng donrgh ggng or even rang sexual blakmal If hese ehnques led here as also a reerore of underground nanal srae es rangng fom home oke kng o addng blls. Changes n gender relaons nuened he mehod of alloaon marred omen's money. As omen's onsumer role exanded a e begnnng of he 20h enury he radonal dole' or askng ehod beame no only neen bu also narorae n reasngly egalara marrages. Ye moneary omensaon of a ousefe's domes labour as an unaeable alernave. Lae 9h and early 20henury eangs saues hh rs graned omen rghs o her on labour also oened u he legal ossbl y of ages or houseork. Dd omen's rgh o hr eangs lude money eaed from housekeeng? Some femnss ere say g yes bu he ours resonded h an emha no he la arded ves' a rgh o nome from her ersonal laour' for rd ares bu no for household labour erformed for souse or amly. Cours Reva Segel (1994A 281) ells us n a ahbreakng oun of legal ressane o monezng domes ok ere un
62
< Te dioial Boad o e Soioogal Reiew 99
ash aloane n money y b money' sendng oney oe money o dol Women's sraagems o exra some ash from her unfor omng husbands fed jokes and vaudevlle rounes. Bu he dome sal roblem urned serous forng a dul and onrovers reevaluaon of omen's household money as ell as of her earn nome o beer undersand ha as a ssue e need o dsn gush among hree ossble ays of organzng moneary ransfer of any knd; as omensaon (dre exhange) as enlemen ( rgh o a share) and as gf (one erson's volunary besoal o anoher). Eah mles a deren ualy of soal relaons amon he ares Wh omensaon he ares are nvolved n an equa exhange of values hle money as an enlemen suggess le mae lams o oer and auonomy by he reen Money as g denoes nmay bu also he ossbly of subordnaon an arbrarness. For a long me omen and advoaes of omen rghs resled over hh as suosed o be omen's roer share of he famly nome. Unl reenly hese dsnons had araed lle aenon from hsorans and eonomss of he fam ly. Largely due o he redomnan model of ha Amarya Sen (1 983) alls he gluedogeher famly' quesons abou ho money s dvded among famly members are seldom even asked. Famly members hus sruggled o redene he relevan soal relaons, reang dsnve urrenes fo ha purpose an
© Te doal Bord o e Soioogial Reew 199
':
63
The prol pro leratio ofsocial fsoc ial currnci cu rrnci
Viviana A. Zelizer
receive schoarship money and other income (For information on recent eectronic eectronic banking innovati innovations, ons, see Mayer, 1 99 7. ) Indeed, with the explosion o f personal compters compters people's capacity to create and segregate new currencies is expanding even faster than any standardization of international money From the viw point of users, however, the major distinctions still concern the cate gory of social relation involved with the payment and its meaning; for exampe, the distinction between remittances of currencies ·by migrants to their relatives relatives back home and their payment of a home mortgage to a bank. If my anaysis is correct, peope and organizations wil take advantage advantage of the new forms no t to mak e all monetary transactions uniform uniform but to innovate earmarking strategies. S ignicantly, a ntly, even the bils of Europe's projected European Currency Unit (ECU), carefuly designed to avoid nationa bias'they bias' they wil feature no peope or words, only images of nonexistent, anonymous bridges and monumentswil still retain a smal space for each country to print print its own national national symbol symbol (Andrews, (Andrews, 1 996 :3 56 ) The vision of a fully commoditized society is no more tha a mirage Money has not become the free, neutral, and dangerous destroyer of social relations. As the world becomes more complex, some things do of course standardie and gobaie, but as ongdistance connections proliferate, for individuas everywhere life and its choices become more, rather than ess intricate. As the case of domestic money ilustrates, earmarking currencies is one of the ways in which people make sense of their complicated socia ties, bringing dierent meanings to their varied exchanges That is why we can expect new forms of earmarking to mutiply with social change o the extent that money does become more prominent in socia ife, people wil segregate, dierentiate, label, decorate, and particularie particularie it to meet their compex social needs
Notes
1 This is a revised version of The Creation of Domestic Currencies, American Economic Review Papers and Proceedings 84 (May 1994) 138-142 For more extensive documentation concerning the multipe uses of money, see my The Social Meaning of Money (Basic Books, 1994); Payments and Socia Ties', (1996); and How Do We Know Whether a Monetary Transaction is a Gi, an Entitement, or Compensation? (1998). For some recent treatments of the relationship between money and social processes see: Boch, 1994; Dodd, 1994; Guyer, 1995; Helleiner, 1996; Mizruchi and Stearns, 1994; Radin, 1996; Shel, 1995; Thirt and Leyshon,
economy, Lunberg and Pollak 996; 1994; Wuthnow, 1994 On the domestic economy, Schwartz, 1994; Singh, 1996, 1998 For reated work on categorica distinction and symbolic boundaries see Bourdieu, 1984; Zerubavel 1991; Lamont, 1992 Tily, 1998. 2 For a provocative critical overvew of the persistent an wiespread egal resis tance to monetary compensation of wives' domestic abur, see Sibaugh, 1996 See also Wiliams Wiliams (1994) on how courts commodication anxiety aects current divorce divorce settlements.
References Andrews E.L., (1996), Europeans Report Breakthough in onetary Union Eort', The New York Times, December 14 35-36. Bloch, M. (ed), (1994), Les usages e !argent', Terrain 23. Bourdieu, P, (1 984), Distinction, Distinction, Cambridge: Harvard University Press. Braley A, (1923), Fifty Famly Budgets', New York: Womn's Home Companion. Dodd, N, (194), The Sociology ofMoney, New York: Continuum Economc Needs of Farm Women', (1915) Report o. 106 Washington: Govement Printing Oce. Guyer, J. ed.), (1995), Money Matters, Portsmouth, NH: Heinemann. Folbre, N (1991), The Unproductive Housewife: Her Evlution in Nineteenth Century Economic Thought', Signs, Spring, 1 6, pp. 463-48 Heeiner, E, (1996), Money And The Nation-State in North America' Unpubished paper, Department of Political Science, York York niversity, Canad a. · Lamont, Lamont, M., ( 1 992) 992) Money Money Mols and Manners, Chicag: University of Chicago Press Lave, J, (1988), Cognition In Practice, New York: Cambridge niversity Press. Lundberg, S and Poak, R.A., (1996), Bargaining and Distribution in Marriage',
Joual ofEconomic Per Persspectives 10 1 39-1 39 -1 58 58 Lynd, RS., (1932), Family Members as Consumers, Annals of the American Academy of Politica and Socia Science, 160, pp. 86-93 Mayer, M, (1997), The Bankers: The Next Generation, New ork: Truman Talley Books/Dutton. Mizruchi, M.S. and Brewster Stearns, L, (1994), Money, Banking, and Financia Markets' In N. Smelser and R Swedberg (eds), The andbook andbook of of Economic Sociology 313-341. Princeton, NJ Princeton University Press and New York: Russe Sage Foundation Radin, M.., (1996), Contested Commodities, Cambridge: Haard University Press Schwartz, P, (1 994) Peer Marria Marriage, ge, New York: Free Press Sen, A., (1983), Economics and the Family, Asian Development Review I, pp. 14-26 Shell, M, (1995), Art & Money, Chicago: University of Chicago Press. Sibaugh, K., (1996), Turning Labour Into Love: Housewrk And The Law, 9 1
Northweste University Law Review 1. Siegel, R.B., (1994), The Modernization of Marital Status Law Adjuicating Wives' Rights to Eaings 1860-1930, 82 Georgetown Law Joua/2127 Siegel, R.B , 1994B), Home as Work: Work: The First Wman's Rights Claims Concerning Wives Househod Labour, 1 850 1880 103 Yle le Law Joua/ oua/ 107 3 Singh, S, (1996), The Use of Electronic Money in the Home, Poicy Research Paper
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No 41 Meborne Cenre for Ineionl Reserh on Commniion nd Informion Tehnologies Singh S 1998) Marrage money Sdne Alen nwin
&
Wo Kurt H Wo Simmel, edited by Kurt ociology of George Simm ([1908]] 19 50), The Sociol Simmel, Simmel, G., ([1908
Glenoe I Free Press Simme G [1900] 198) he Phlosophy Phlosophy o Money Trns Tom Boomore nd D Frisb. ondon Roledge Kegn P Sein G. 936) Mone Saturday venng Pos 3 208 p. 88 Thri N nd eshon A 994) phnom se? The derdiionliion of mone he ineionl nnil ssem nd inernion nnil enes Poltcal Geography 15 l) 299-32
Markets as cutures an ethnographc approach
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Pr;ss. lifornia Pr;ss. California sit of Ca y: Univer Universit Berkeley: uality Berkele Inequali rble Ineq 1998), Durbl Tilly, Tilly, C., ( 1998), y 82 Amony Theory of Amon yond a New Theory Dead? Beyond Coverrture Dead? illiams, J, (1 994), 'Is Cove Williams,
Georgetown Law Joual 222 Whnow R. 994) God and Mammon Mammon n Amerca New York Free Press. Zelier 1994) he Socal Meanng oMoney New York Bsi Books Zelier 996) Pmens nd Soi Ties Socologcal Forum 1:481-495 Zeier 1998) How Do We Know Wheher Moner Trnsion is Gi n Enilemen or Compension? In Avner BenNer nd Bermn eds) conomcs con omcs Values and Organzaton Organzato n New York Cmbridge niversi Press Zerbve E. 1991) he Fne Lne New York: Free Press.
Mitchel Abolafa he miroeonomis textbook that I used as an undergraduate dened a market as a grou of rms or individuals that are in touh ith eah other in order to buy or sell some good' (Manseld 1972). The book ent on to exlain the abstrat magi of the riing mehanism under onditions of erfet erfet and imerfet imerfet ometition. Looking bak its the in touh ith eah other' that athes my eye. Although my textbook as enyloedi on the fores of suly and demand it as rather vague in its desrition of the roess roess of o f eonomi exhange exhange But hen he n eole are in touh ith eah other' they are soially embedded in a netork o imor imor ant soial relations and ulturally embedded in a meaning system of norms rules and ognitive srits. The transation is not a simle dyadi exhange. Its outome is a reetion of the soial and ul tural as ell as eonomi fores shaing it. hese fores determine ho may transat ith hom ho bids and oers ill be o ordinated hen and here they may transat transat ho the ommodity is dened and a variety of other onditions of transation that aet buyers and sellers In this hater I ill fous on markets as ultures. 1 he hrase mar kets as ultures' is meant to denote den ote that as loci of reeated reeated interation/ interatio n/ transation markets exhibit their on distint set of mutual under standings. These understandings are both enabling and restraining ie market artiiants use them both to ursue their interests and to limi the range of alternatives available to eah other. hese under standings emerge in interation but beome institutionalized . As suh they tend toard ersistene an beome resoures in market artii ants aaity to at. Nevertheless market ulture is not xed It is beause market ulture must be ontinually rerodued through exhange relations that it is vulnerable to hange. We ill examine some of the fores reiitating hange in market ulture. © he Editorial Board of The Sociologial Review 99 . Published by Blakwell Blakwell Plishers,
Mtchel
The markets as ultures aroah fouses on three areas of researh onstitutive rules and roles, loal ationality, and the dynamis of ower and hange. I wil exlore eah of these in the next three setions of the hater. In a fourth setion I wil disuss methodologia issues involved in studying markets as utures using an ethnograhi aroah. Throughout the hater I will use examles from my own ethnograhi studies in the stok, bond, and futures futures markets markets on Wall Street Street see Abolaa, 1 996a). 996a) . Constitutive rules and roles
The greatest advantage in oneiving markets as utures is that it enables one to overome the atomized view of markets in whih masses of individuals engage in fritionless transation. It allows the analyst to exlore the onsequene of reeated transation, ie, the onstrution of institutionalized relationshis and systems of meaning. Through reeated reeated interation market artiiants develo exetations about aroriate behaviour and srits for the erfor mane of roles. It is through these rules and roes that artiiants onstitute the market. no t reated at the moment of interation, In this view markets are not nor are existing rules and oles the only ones that ould have have deve oed in eient markets. Rather, these onstitutive rues and roles are rodued by the reeated interation of owerful interests om eting for for ontrol. The market i a reetion of this ongoing ome tition. Shis in the balane of ower within a market determine who may design or redesign the rules and roe relationshis. Going further, this ometition is shaed by the oitial, eonomi and regulatory environments of the market. Thus, although market artiiants may al be selfinterested rational maximizers, they enat diering market ultures deending on internal and external ressures. Consttute ules
The ultural anayst of markets will nd that market makers, those ators who buy and sel in a market on a ontinuous and frequent basis, are guided by numerous informal and formal rules. Many of these rules are egulate rues designed to govern the ursuit of sefinterest. For examle, on the trding oor of the New York 70
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Stok Exhange NYSE) I found that traders oerate under the rule of ageny ie, that the ustomers order aways get exeuted before the market makers at any given rie. It is a straightfor ward resrition involving monitoring and santions. It is a rule that is stritly enfored beause inentive to violate is high In fat, this enforement was externally imosed by the Seurities and Exhange Commission in the 1960s beause of widesread earier violations. On the other hand, the NYSE traders frequenty taked about rie integrity. This is a consttute rule that says that rie must be determined by oen ometition in whih all bids and oers are exosed to the market. This rule exains how a market should be onstruted Its onsequene is that market makers maintain maintain a sys tem in whih al bids and oers in a artiuar stok are sent to a entralized sot where they an be mathed The traders assum tion that this is the only aroriate a) way to onstitute a mar ket is reeted in the folowing quotes from market makes on the oor. Fair riing riing is exosing al bids and oers to the market. The method of rie disovery, whih is what we do for a iving, has re ated a rie that has more integrity than those ries reated any where else in the world. Another said, The vaue that the Stok Exhage brings is to have al the fairness of exeution, where al the orders are ometing with eah other. The best rie The nor mative, roud, and righteous tone is unmistakable. You have an atual twolegged buyer meeting an atual twoegged legitimate seller. And that has to be fair by the nature of the beast Traders are oen indignant that this onstitutive rule is not shared by traders in ometing overtheounter markets markets Athough many onstitutive rues, ike the rue of rie integrity, are based on norms and vaues about what is aroriate, there is a seond, more tait kind of onstitutive onstitutive rule that is based on institu tionalized srits that are taken for for granted. Traders on the oor o or of the New York Stok Exhange take for granted that a trading ours on the oor o or,, that a bids b ids and oers not at the urrent rie rie will be laed laed in the book, boo k, and that transations go on the tae as soon soo n as humanly ossible. These rules are art of the orthodoxy of the Exhange ommunity. New reruits learn them by imitating what is already ommon ratie. These are the srits by whih the market is rerodued on a daily basis. To members of the uture, these assumtions are beyond question. There is little fear of rue vioation beause everyone agrees that this is how the market is made
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The Editoria Board of The Sociologica Review 99
7
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Contitutie ole
In addition to the ruls that onstitute the market, the ultural analyst ill nd that market makers have onstruted rih soial identities that have ome to dene the behaviour and interation of role inumbents. Rather than the alulative unit ato desribed by eonomists, e see an astute artiiant suing a toolkit of strategies that is ulturally available in the market. These strategies are learned by reruits for suessful role erformane As ne reruits are soialized by veterans, the srits begin to dene hat is valued and to have a takenforgranted harater. Like olie, hysiians, and gangsters marketmakers emloy these identity tools to redue unertainty and risk in their environment and to maximize survival. In my researh in the bond market beteen 1987 and 1989, I studied traders at four of the ten largest investment banks on Wall Street Very early in my eldork I as struk by the reeated use among traders of the ords entrereneur' and entrereneurial' to desribe themselves. My rst reation as that I as standing in a room ith to or three hundred traders and salesmen emloyed by a large ublily traded ororation. In hat sense ere these eole entrereneurs? Over the ensuing eeks I ame to understand that entrereneur' as an idetity through hih they onstituted their role erformane It dened ho traders related to eah other in their transations and ho they thought of themselves The identit onsists of strategies that are a ariature of the sirit of aitalism desribed by Weber. These strategies inlude selfreliane, emotional ontrol risk taking heightened materialism and oor tunism. Traders are very lear that they are exeted to be selfreliant. It's a very entrereneurial business. No one is going to hel you make money. They're too busy heling themselves' Traders sit in a room full of other traders transating ith the market through the telehone and omuter netorks Said another trader I don't really feel like I an rely on anybody here. That' the way thi bui ne i You've got to rely on yourself.' Suh statements dene both ators and ation. They desribe an imersonal environment in hih trust and ooeration are nearly absent. This is in noted ontrast to traders at the Ne York Stok Exhange here traders transat fae to fae and talk about trust and building relationshis ith ustomers. A seond omonent of the bond trader's toolkit is emotional ontrol The bond traders' ideal is the trader ho is disilined, 72
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oolheaded, and foused Traders engage in a ontinuous stream of fateful deisions involving millions of dollars. They haraterize their ork as exiting risky and stressful There's denitely a high degree of exitement The ae is very fast. The stakes are high' The ulturally aroved resonse to these onditions is an unaable demeanour As one exlained, I have a rst rule of survival not to beome too ersonally involved in the market Otherise you an get aught u in ghting this thing and you an't in.' Suh exressions of emotional distane are made to onrm the trader's on sense of ontrol as ell as reet it to homever may be athing. Riskseeking is a thid major omonent of the trader identity The riskseeking identity is a omlex one to manage. At the same time that traders see themselves as disilined and oolheaded they see themselves as game for ation It suggests that marketmaking ombines elements of both nerve and fear You've got to kee your osition balaned You've got to be in a situation so that no one trade an take you out You've got to be viable to lay tomorro.' Market makers in dierent industries are bound to enat dierent levels of riskseeking In the traders' identity, risk seeking is hat Goman 1 967) alled a ratial gamble'. A fourth omonent in the identity is the strategi use of guile. Traders referred to this kind of behaviour as aggressive' It on notes ation in hih the trader uses his advantage to deeiv e a trading artner. My informants told stories about laying o bonds' on ustomers and shoing a bid in the street' hen you had no intention of buying at that rie These and other strateies ere srits learned by the role inumbents that rerodued the kind of oortunisti bond markets that ere revalent in the 1980s The urose of these strategies is the ursuit of unabashed materi alism as a status indiator. Bond traders are very lear about hat onstitutes a skilled role erformane. Money i eeything in thi buine Whatever money you make is hat you're orth' nlike high teh markets here market makers tie their identity to innova tion or servie industries, su as restaurants, here it is tied to us tomer satisfation, bond traders santify heightened materialism. Money, and hat it an be used to aquire rovide an identity that revails over harisma hysial attrativeness, or soiability as the arbiter of suess and oer on the bond trading oor But it is not the money itself that is imortant, rather it is the status and aroval it brings among eers that is at the heart of the identity As a result, he unfettered ursuit of ealth is deemed aroriate and srules hih might deter market makers in other industries are unneessary 73
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Constitutive rules and roles ill vary rom market to market There ill be dierent rules or aution markets, holesale markets, and retail markets. The roles o brokers and dealers, buyers and sell ers ill dier. We exet that in some markets artiiants ill be more selreliant, in others more ooerative Some ill be highly oortunisti others more trusting. Using the markets as ultures aroah, the analyst disovers the dierent rules and roles by hih artiiants onstrut their market and the onditions under lying these dierenes. Local raionali
Eonomists and in artiular nanial eonomists, treat rationality as a ultural universal. As suh it is exlained as art o human nature. The marketsasultures ersetive treats rationality as a ommunitybased, ontextdeendent ultural orm Rationality on the trading oor is dierent rom the rationality o attle dealers or auto dealers. A ultural aroah endeavours to identiy ontext sei ognitive limits and soially onstruted loal orms o rationality The ethnograher exlores the market artiiants' on strution o the deision making roess and the individual as ell as soial means o establishing value in te marketlae. Market makers in nanial markets might seem to t the eono mists ideal tye o deisionmaker, using an extraordinarily rih o o inormation in the unbridled ursuit o gain Bond, stok, and utures traders ome loser than exeted to the selinterested, eretly inormed rational maximizer ortrayed in the nane liter ature on market makers nevertheless they are ognitive and soial beings and as a result imeret inormation roessors ho are susetible to habit ustom, and the institutionalized myths o trad ing Observation and intervies reveal that market makers in stok, bond, and utures markets onstrut loal orms o rationality out o the resoures and onditions in hih they are embedded. Even in the highly rationalized orld o nanial markets, onditions o unertainty, ambiguity, and institutionalization eliit adatations. Loal rationality in a market ulture an be understood by exloring the deision tools used by the market makers. Deision tools are the srits reated by deision makers or oing ith the unertainty and ambiguity in their environment see Abolaa 996b, or a more detailed disussion). These tools beome institu tionalized so that they are available to all artiiants in a artiu 74
© The Eitoial Boar of The Soioogial Review 998
lar market ontext Individuals learn to deend on tese tls hen aed ith market deisions o onseqene. In y sty o bond traders, deision tools ere maniest as habits or ritalied ustoms that are taitly but ontinuously invked throught te trading day. The most imortant deision tools in the bond aet involve stylized versions o vigilance and intuitiveudgment Vigilane involves the ability to searh and assiilate a broad range o inormation that one exets may be useul in deision mak ing. In bond trading vigilane onsists o several relate elements sorting netorking and establishing value. The rst ste in vigilane is oting The volume o inormation available is s ehelming that a subsidiary industry has gron u to suly ination and analysis o market trends to traders. Every trader mst st through both the numbers and their multile interretations. aers oten avour a artiular brand or ashion in interretation ad beome hartists, undamentalists or olloers o some ther interreta tion Most develo a routinized sorting roedure t ver their avoured soures o inormation. This roedure is eated daily rior to the start o trading and ontinues throughot th e ay. One inormation has been gathered and sorted, traes emloy a netwoking routine to see ho others are ereiving te sae or di erent inomation They ae in ontat ith a net brokers traders saleseole, eonomists, and inormants in gove ent agen ies. Traders are generally aare that it is not the retess o te interretation that ounts but rather the degree to hi thers ill read the same inormation the same ay. Etablihig ue is the nal ste in the srit or vigilane. It is the loal term aking an estimate o here a bond ought to be in terms o rie. As Smith 1989) notes, in this kind ohighly liquid market reet tansations are among the most imortant soures o inormatin establish ing value. There are also norms and myths about aiate rie movement over time and the inuene o movement in e instru ment on another that shae roess o establishing vale The srits or vigilane reet the analyti inlinatis market makers. Sorting netorking and establishing vale ae ommon strategies hih eah market maker an desribe i se detail beause o their habitual reetition In ratie these tls orient the traders toard eah other reating ometing sared inter retations o here the market has been and here it is ging. On the basis o their understanding o these interretatis, idivdual traders deide hen and ho to transat in the market. etimes this leads to herdlike behaviour or a ontrarian reatin to the 75
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herd but more oen the data are equivoal and the interpretations preditive ability unertain. As a result analyti routines do not omplete the repertoire of deision tools used by market makers. As my subjets ere quik to tell me (trading) is not a siene its an art. No presription exists. Rather it is learned usually during a lengthy apprentieship. As another subjet said Traders annot put into ords hat theyve done . . They have a knak. That knak is inuiive udgmen. The marketmaker develops an abstrat sense of ho the market reats under various onditions These abstrations or images are developed through athing others transat by trans ating and by reliane on market folklore. Intuitive judgment is most likely to be found under onditions of high unertainty In the end indiators reports and netorking annot predit the diretion of pries ith ertainty. Final deisions are ultimately based on intuitive judgment about a partiular trans ation The environment in hih marketmakers operate is both unertain and ambiguous. The unertainty omes from both the ognitive limits of the individual and the time onstraints set by the o of transations in the market. The o of information about the market annot be fully assimilated Reruits learn that they must develop the knak or fail. Although researhers unless they are partiipants may never fully understand intuitive judgment they an map marketmakers images and the onditions shaping them In this ay the ra of market making an be made less mys terious The eonomists assumption of rational maximizing an be replaed by the empirial desription of loal rationality. Deision tools are moulded from the ontext in hih the mar ketmakers ork. Dierent forms of vigilane and intuitive judg ment as ell as dierent deision tools are too be expeted in other markets. The manner in hih dierent industries organize infor mation even hat they deem to be useful information is highly variable The age of an industry its tehnology the eduation level of its marketmakers and its degree of ompetitiveness all help to shape the deision tools it uses Computerization and globalizatin are important fores for hange here but beause marketmaking is a raft histori methods of establishing value are likely to persist. Dynamics of power and change
Constitutive rules and loal rationalities are reated by market makers and in turn ome to shape their behaviour. In the proess stable and orderly markets are enated. But rules roles and even
Makes as ulues
rationalities are not immutable. Existing market ulture reets the eorts of poerful market ators to shape and ontrol their envi ronment even as it is shaping and ontrolling them. These eorts do not go unopposed. Groups ithin the market based on suh fa tors as market segment region or the buy or sell side of the market ompete for the ability to dene the ulture Those groups ith the most poer ill have the gratest inuene in reonguring of rules roles and rationalities. The probability that any groups strategi hange eort ill sueed is strongly inuened by the ation or ination of ontrol agents in the environment suh as industry orga nizations and government regulatory agenies. The dynamis of poer and hange in market ultures our in the ontext of institutional pressures. At the loest level is the indi vidual trader As e have seen although individual traders are dri ven by selfinterest they are also ulturally embedded in a system of rules and roles that is the produt of their interation The toolkit from hih these rules and roles are dran denes the range of ulturally santioned behaviours in the market. Competition and on it amongst groups in the market may reate pressure for hange in rules and roles. Just above this level is the kind of informal and formal selfregulation imposed by embership in the markets reputational netorks and its industry and trade groups. In many markets partiipants hae organized to interat regularly over standards lobbying and other olletive goods. Finally governments have a role in ulture hange As e an see in the events surrounding the tobao industry in the last years of the 20th entury government an have a strong inuene on hanges in the rules roles and loal rationalities of a market. But none of these levels of institutional pressure an be perfetly preditive of hen and ho ulture ill hange. Marketmakers are likely to resist outside eorts and the market poer of the resistor ill be an important determinant of the suess of the resistane. Cultural hange may result from internal poer dynamis or as an adaptation to environmental hange One type of ulture hange involves the redenition of opportunism those gray areas at the boundaries of aeptable behaviour. My researh in stok bond and futures markets suggest that these markets go through yles of opportunism periods hen the denition of ho muh guile ill be tolerated rises and falls. The yles are tied to hanging eonomi and politial onditions but these hanges are not perfetly predi tive. At times poerful oalitions have suessfully resisted ulture hange despite strong environmental pressures.
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A rather dramati examle of ulture hange omes from the market makers at the Ne York Stok Exhange. We ill divide our story into to eriods re and osthange. The rehange eriod runs from the 1930s to the 1960s. During this eriod seialists ie marketmakers on the oor of the Ne York Stok Exhange ontinued the oor ulture that had existed rior to the rash of 1929. Even aer the establishment of the Seurities and Exhange Commission SEC) in 934 seialists still frequently traded ahead of their us tomers and used the information available to them for ersonal advantage. When the hair of the SEC William Douglas delared that seialists ould no longer be both brokers and dealers the Exhange threatened to lose and the SEC baked o. Seialists enjoyed unhallenged oer on the oor from the 1 930s to the 1950s and the ulture reeted their unimeded selfinterest. The osthange eriod begins ith a major market deline The deline in 962 as not as substantial as the rash of 1 929 but the ontroversy over seialists' oer as rekindled The SEC found that seialists had not erformed their marketstabilizing funtion. As a result exliit rules for seialists ere develoed. Over the ourse of the 1960s and 970s the seialists oer at the Exhange eroded as institutional investors ame to dominate trading. As seialists lost their oer at the transational level they ere no longer able to ght rules and regulation. Seurities rms and the institutional investors ho ere their ustomers demanded better servie from the market makers By the early 1990s hen I s on the oor the market ulture had dramatially shied to rule rever ene and ustomer servie. Ehnography in marke seings Gaining access
Ethnograhi researh on the rodution and rerodution of mar ket ulture is inherently diult In most setors of advaned ai talist eonomies marketmaking is the rovine of ororate elites. They make the highly onsequential buy and sell deisions that determine the suess of their organizations They generally have oer and status that derive from their osition in these organiza tions. Like other elites they are insulated from observation and ro tetive of their time. The researher must often ass through several levels of gatekeeers to gain aess and may be rebued at
Markets as cultues
any level Marketmakers an let you in or kee you out and one you're in you an still be asked to leave at any time. It is easy to see hy elites are rarely the target of ethnograhy. Most ethnograhy is done among the oor the oerless the deviant and in the less develoed soieties. My three studies in stok bond and futures markets reet three dierent modes of aess and the three dierent tyes of data that these mode of aess yield. My initial interest in and aess to the futures market as through a hildhood friend ho haened to be a layer at the Commodity Futures Trading Commission in Washington. As a result this study as initially limited to the analysis of legal douments from ourt and regulatory roeedings and intervies ith the regulators and defense layers involved in the ases The thousands of ages of douments oened u a orld of desritive information about the arane business of futures trading. I soon learned that regulatory ageny libraries and ourt lings ere treasure troves of untaed doumentary evidene on the behaviour of eonomi ators When I aroahed the futures exhanges at hih the events in these ases had transired hoing for aess to the oor I as rebued. At this oint in 979 futures markets ere hyersensitive from negative ubliity and nel enhaned regulation Several years later aer I began ublishing in the area of futures markets one of the exhanges beame more hositable I as given aess to te oor and intervies ere arranged ith a broad ross setion of traders. Aess for my study of bond markets roved signiantly easier. In 983 I moved to the business shool at Cornell University. By 1987 the bond market as the fastest groing market on Wall Street and masters of business administration MBA) students ere lamouring to get jobs at the investment banks here bonds ere traded. I as able to use ontats ith my urrent and former students to gain entrane to bond trading oors at four major banks. In eah ase a anaging diretor aroved my rojet ater a short intervie Only one rm refused me aess although they ket alling for a oy of my ndings. At eah bank the undrstanding as that I ould arrange 1 5 to 20 intervies ith traders of my on hoie. The traders ould of ourse deline to artiiate. he traders ere hosen in onsultation ith my former students based on riteria of age tenure years trading and area of seialization. Intervies ere generally done on the trading oor after hours and during slo eriods in the trading day. Less formal onversations ontinued in restaurants and bars
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It as only at the Ne York Stk Exhange that I gained the kind of unlimited aess for hih ethnograhers yearn and that extended observation requires. The initial ontat s rovided by an alumni that I met at a business shool oktail arty. He as introdued as a seialist (marketmaker) at the Ne York Stok Exhange. After learning about my revious researh, he graiously invited me to the oor of NYSE. Aer a morning on the oor ith him and his sta, he introdued me to the man ho ould beoe my key informant and suorter. This man believed that the ulture of the oor as hanging and anted someone to doument it He had been at the Exhange for over 20 years, served on many gover nane ommittees, and as able to introdue me to a rosssetion of the oor ommunity. I as his guest on the oor for several months, observing from his ost, until a trader ho served on the Board of Trustees beame aare of my resene, objeted to it, and brought it to the attention of the Board. They voted to allo me to stay roviding a ermanent oor ass and a large oe in the eo nomi researh deartment on the seventeenth oor. I as in or as one anthroologist desribed it, the natives had built me a hut. With this degree of aess my eldnotes soon sulanted intervies as the major soure of data.
For me the key to suess in gaining aess to marketmakers has
been in making and aggressively using onnetions. Marketmakers
anted to kno that I as redible and trustorthy. They needed
assurane that I asn't there to steal rorietary information or to rite a sensationalisti aount that ould reet oorly on them,
their ouation, or their market. My university aliation as no t sufient. A ersonal onnetion as needed to oen the door. M y MBA students, alumni and a ersonal friend served this funtion. Informants oen questioned me about these onnetions on rst meeting and made referene to them thereafter. I as oen desribed as being a friend or rofessor of X'. My list of revious
ontats signalled that I as onneted. At NYSE everyone kne ho my key informant as and it as his redibility that took me a
long ay until the Exhange aroved my resene. Establishing rapport
Although the researher may have gained aess, a suessful ro jet is not assured. As mentioned above, marketmakers ossess a ealth of information that they deem rorietary. They and their
Markets as cultures
organizations have sent onsiderable resoures to gather market data, formulate a strategy, and imlement it. They are likely to be highly rotetive of that information and somehat susiious of your motives. The researher must onvine the marketmaker that his or her motives are innoent (sienti rather than ommerial or mukraking), that the rojet is imortant enough to be orth their time, and ultimately that the researher is aable of getting it rigt. The quality of the ethnograhy is ontingent on the extent to hih raort is established. I found that eole on the trading oor generally kne about me before I met them. I disovered that my rosetive informant usu ally kne my institutional aliation, ho my onnetion as, and the theme of my study. It as extremely imortant then that the theme of the study, as they understood it, as something they found interesting and orthy of their time. In resenting the study I alays looked for a broad frame that ould be onsidered useful or imortant. Within that frame I as able to ursue a ide variety of questions. Sine marketmakers feel grossly misunderstood, it as not that hard to onvine them a serious study as a good thing. More diult as getting them to trust that I ould get it right A signiant number of my informants initially exressed doubt that I ould. I've seen too many journalists ome don here looking for a story and getting it all rong. Aounts in the ress frequently mis interret their job and its funtions. A oular book ritten in the 70s, Wal Street Jungle as remised on a misinterretation of their funtion and its onsequenes for the market. My resonse to this as both diret and indiret. I told them that I lanned to make reeated visits to the oor over several years and to intervie idely. I also shoed through my questions that I had taken the time to learn tehnial asets of their ork and that I as familiar ith urrent issues in their ouational ommunity. I ent to great lengths to give a onvining erformane that ould build trust. I began by taking a ourse to beome a futures trader. At the end of the ourse I took a national exm and reeived ertiation. I also sat in on ourses in nane from my olleagues, soured the nanial ress every morning for stories abou he mar ket I as studying, and sent time ith key informants o the oor At the beginning of eah study I started by orking ith a small grou of marketmakers that generally inluded my students and their friends until I beame ondent and onversant enough to go out on my on. This autious aroah also had the benet of introduing me to behavioural and linguisti norms in a relatively
Mitchel
bolaa
safe enironment. It also made me a more elome gure on the trading oor and imroed the quality of the data I gathered etting goo ata
In the roess of gaining aess and establishing raort ith busi ness eites the researher feels autious and at a ertain disadantage. Eites an refuse or reoke aess Moreoer marketmakers tyially hae greater oer ealth and restige than soial siene researhers. They are used to deferene. But one th researher begins to gather data that imbalane begins to adust I found that marketmakers had tremendous rba faility and ere used to ontrolling the denition of the situation they ere in Yet laying the sientist gies one interretie oer My informants ere quite sensitie to this While it made a smal ortion of my informants initially defensie most easily assumed the role of a researh sub et. They shoed real onern that their on erformane as use ful to me and interies oen ent ell oer the time e had sheduled to talk Aer an initial armu eriod the more that I direted the interie and ursued questions I ared about the more resonsie my informants beame. Neertheless the ethnograhi interie is a subtle form of strategi interation The marketmakers in my study often had a eldeeloed ersetie on the soiology and syhoogy of the trading oor As an ethnograher I endeaoured to ast the broadest ossibe net searhing for detailed desritions of eeryday life To l this net I asked marketmakers to desribe their day to desribe their areer to tell stories about key inidents and to exlain a ide ariety of soial institutions assoiated ith trading I aloed them to tak about their et issues but I oen had to diret them bak to the issues that ere emerging in my data. The marketmakers ommuniated a ombination of behaiours emo tions oinions and ideologies all of them data to be analysed. Perhas the hardest thing about gathering data in this setting for me as suberting my ritia stane. In a my researh I start ith a ritia stane questioning the norms roedures strutures and aues of my subets These are things a student of markets should neer take for granted But the marketmakers themsees are susi ious of suh a stane. They ant you to share their assumtion that their orld is as it should or must be They ant you to beliee in the imortane and rationality of hat they do from the start and not to question it A ritial stane oud resent me as an out 82
Markets as cultures
sider not to be trusted. This uts the researher in a diult osi tion. I deided that my stane ould be that I as oen to anything. That as hard to do beause some of the things I heard from bond traders ere shoking But I learned to kee a disassionate straight fae shaking y head and taking it in The subtle threat here is the temtation to go natie ie to buy into their interretation of the orld or simy to oin that orld 1 It's ery easy to get aught u in their interretation of their ord beause its a oerfu one The eonomi ideoogy that dominates Wa Street is a ear and omrehensie system for understanding eerything from indiidual behaiour to th goernments role in the market. Eerything that haens on a daiy basis is sie through this ideology It may be easy to maintain your ethnograhi distane hn your subets are illiterate imoerished or stigmatized If the belief system is one that is art of your on soiety it is harder. But here your method rotets you. In the eld you are oen to reording anything but at home ith the data the ritial faility must return. Al the norms roedures and alues of marketmakers beome uturally embed ded soial institutions to be understood Getting the natie ie of market ulture an be a daunting hallenge. Gaining aess may require onnetions to someone at the site athough ersistene may substitute for onnetions in some ases. Establishing raort alls for a resentation of sef that is knoledgeable and trustorthy from the natie's ieoint and a roet rationale that is deemed both legitimate and nonthreatening Finally getting good data requires a subte baane of deferene and being diretie The oer and ealth of marketmakers reates unique haenges for the ethnograher but the alue of gathering data that reet the market makers' understanding of their orld makes it orth the eort Conclusion
hat then are the adantages and disadantage of the marketsas ultures aroah? First by treating markets as ultures e dont take rationaity for granted. It is beause most neolassial eonomi studies treat rationality as undierentiated that e need to exlore deisionmaking in natura settings The kind of deision tools disussed here and the biases and heuristis identied by Kahneman and Tersky (982) and their oleagues are bst disoered by indutie researh. Seond the marketsasultures aroah does 83
Mitche
boaa
not fall into the funtionalist fallay, ommon to ageny theory and transation osts theory that market rules and roles are reetions of the eieny demands of the market Rather these are soial arrangements that reet oer, status and historial ontingeny (ath deendene) in the market This aroah allos us to see ho market ulture is soially onstruted A third advantage of this aroah is that its fous on the subjetive exeriene of market makers as they enat their rules and roles dras attention to the fat that these rules and roles are not stati nformants reveal institutional history When augmented by arhival material the ethnograher may exlore the dynamis involved in ultural hange Even ith these strengths the marketsasultures aroah has one lear disadvantage It requires ethnorahi eldork As disussed above, aess is oen diult gaining informants trust takes time Good data sets are unieldy and ostly to analyse Nevertheless the marketsasultures aroah hallenges the takenforgranted understanding of hat goes on in markets that is so muh a art of Western ulture It oers emirial aess to the diversity of eonomi behaviour and its fores us to examine our assumtions about existing arrangements Notes Erlier sociologicl work focused on nncil mrkes s neworks Bker 1 984 Mrkes s Poliics Fligsein 1996 nd nncil mrkes s coiive srucures Smi 1981 2 See Grnoveer 1985 for discussion of e fricionless imgery in economc inking 3 See Sco 1 995 for discussion of e disincion beween regulive nd cogn ive consiuive rules My use of e erm diers from Scos in e mec nism of complince in consiuive rule sis no us cogniive bu my lso be normive 4 Te book is record of ll bids nd oers ve come o e oor bu ve no ye been mced 5 Te pe is rel ime record of ll rnscion on e oor I mkes mrke informion public o e world 6 Criss re rders wo mp e price ucuios of e mrke nd predic fuure movemens bsed on e ps 7 Fundmenliss bse eir rding on informion bou rm nd is mrke posiion 8 ckll 1988 nd Toms 1993 discuss e frusrion expense nd los ime involved in gining ccess o business elies 9 If is ospiliy ws men o be coopive ey cerinly never mde ny demnds Nevereless I ws wre of e re nd mde n exr eor no o pull my punces
84
Market a cuture
0 prospecive I did receive one job oer during my yer of reserc Wen I declined my employer sked me wy I old im I ws going o wrie doc orl disserion He sked if I would ge pid for I old im ow muc my ssisnsip ws wor He responded Mybe I misjudged you
References Abol MM 1996 Makng Maks Oppounsm and Rsan on Wal Cmbridge Hrvrd Universiy Press Abol M 1996b Hyperrionl Gming Joual of Conmpoay Ehnogaphy, Vol 25 No 2 pp 226-250 uly Bker 1984 Te Socil Srucure of Nionl Securiies Mrke Amcan Joual ofSocology Vol 89 pp 775-81 1 Fligsein N 1996 Mrkes s Poliics A Poliicl-Culurl Approc o Mrke Insiuions Amcan Socologcal Rvw Vol 6 1 pp 656-673 Gomn E 1 967 Inacon Rual, Grden Ciy New York Ancor Grnoveer m 1985 Economic Acion nd Socil Srucure Te Problem of Embeddedness Amcan Joual ofSocology, Vol 91 pp 481-510 ckll R 1988 Moal Mazs, New York Oxford Unversiy Press Knemn D Slovic nd Tversky A 1982 Judgmn Und Uncany Huscs and Bass, Cmbridge Cmbridge Universiy Press Mnseld E 1972 Pncpls ofMcoconomcs New York Noron Sco R 1995 Insuons and Oganzaons Tousnd Oks Cli Sge Publicions Smi C 1981 Th Mnd of h Mak, Toow New ersey Rowmn nd ileeld Smi C 1989 Aucons Th Socal Consucon of Valu Berkeley Universiy of Clifoi Press Toms R 1993 Inerviewing Imporn People in Big Compnies Jounal of Conmpoay Ehnogaphy Vol 22 No 1 pp 0-96
Eciency cultue and politic
Efciency, culture, and politics: the transformation o Japanese management in 1946-66
Bai Gao
stitution. First describe the transformation of Jaanese man gement n the years from 946 to 1966. Then emloy each of ese three ersectves llustratng ho each of them can enrch our understandng of the transformaton of ecoomic governance nally critique and discuss the exlanatory oer of each er ectve and secify its limits. he ransormaion o Japanese managemen
n this chater assess the relative ecacy of each of these er sectives n exlainng the transformation of Jaanese management during 9461966 Rather than rejectng any artcular ersectve exlore the valdty and lmit of each ersective. I argue that the search for eciency oen serves to discredit the resent governance mechanisms and initates change but t contributes more to rovid ing stimulus for change than shang the outcome of this change. argue that the transformation of economic governance s deter mined more by ho economic actors erceive hat s rational ho they dene their nterest and the olitical rocess in hch they reach agreement on ho to dstribute economic elfare in the ne
Jaanese management n ths chater refers to the ractices of fetime emloyment a senioritybased age system and comany ased labour unions. Lifetime emloyment means that an ndvid ual once emloyed can ork for the same rm until retirement The seniortybased age system refers to the ractice of determin ng an emloyee's status and age n the rm accordng to hs years of servce and hs age. This ractice sulements lfetme emloy ent Many studies have ointed out that the term lifetime eloy ent needs further claricaton. First it is ractsed mainly in big rms not in all rms only about onethrd of the Jaanese labour force s covered by ths ractce. Second lfetme emloyment does not mean emloyment untl death or even untl the end of ones likely articiation n the labour force in ths system emloyees retire from the rm at age 55. Third ths ractice alies rmarly to male fulltme ermanent emloyees ncluding managers hte collar ersonnel and highly skilled bluecollar orkers but not to all emloyees n the rm (Brinton 992 Cole 1972 Lincoln and McBride 987) The rimary concern of this study is nether hether or ho Jaanese management diers ro its Western coun terarts nor to hat extent Jaanese management can be character ized by the ractice of lfetime emloyment a seniortybased age system and comanybased labour unons but ho these ractces dened ithin the scoe established by revious studies ere inst tutionalized and hat factors contrbuted to ths rocess Although the origins o f Jaanese management can be traced back to early this century hen the develoment of heavy ndustres necessitated the retention of hghlyskilled orkers by rms the system as not dely insttutonalized until the 960s Jaanese anagement as rst attrned during World War . As art of the ar mobilizaton the state tightly controlled the relatonshi beteen management and labour Aer the Chna War broke out n 1937 oth layos and strkes ere rohibited all orkers began to
© Th Edioia Boad of Th Soologal Rviw 998. Publishd by Blakwll Publish 08 Cowly Road Oxfod OX4 UK ad 350 Ma Stt Mad MA 024 8 USA.
© Th Editora Boad of Th Soologal Rvw 998
What determines the outcome of insttutional transformaton of economic governance? Socal scientists have posited three distinctve perspectves The economc perspective emphasizes eciency. It argues that propertyright structures are very mportant n promot ing eciency. While some economists recognize that the market does not always work and rms have to solve the problems of cooperation, tey limit ther dscussion within the scope of transaction cost (North, 1 990; Wlliamson, 19 85) The cultural perspectve asserts either the regulatory eect of culture on the economy, trac-
ing economc governance to an inherted attern of behavour and
value systems, or the consttutve eect of culture on the economy, demonstratng how derent environments shape the strategy of economic actors (DiMaggio, 1994; Zelizer, 1988) The politcal perspective focuses on power and domination One version of this perspective highlghts the joint forces of interests in consttuting the foundaton of economic nsttutions. It asserts that economic nstitutons play an mportant role n balancng the competng nterests
for economc elfare (Hirschman 970 Olson 1982 and Sabel 1994).
87
Efcency, culture and politcs
receive a xed annual increase n salary, and they were al organzed nto company-based labour unons (Gao, 1 997). In the eary postwar period (19461949), the occupation author ity regarded the support and labour unons as an eectve measue for elmnating the soca foundation of Japanese miitarsm. The increasng strength of labour unons in national politics and the dssolution of zaibatsu consderably weakened the power of Japanese managers. Aer the end of wartme thought contro, Marxsm revived and became the eadng ideology of labour move ments; class strugge was the most approprate concept for inter preting Japanese abour relatons in those days (Masamura, 1985) As the Unted States changed ts policy toward Japan in the ate 1 940s, the power reations between managers and workers changed dramaticay: rms returned to the oensve, whie abour unions had to take a defensve postion (uch, 1949). In 1948 the Japan Federaton of Empoyers Associations announced tha in order to reduce producton costs, Japanese rms had to conduct large-scae · ayos The Federaton demanded that the governent hep Japanese rms to re-estabsh management's power (Nikeren, 1948). This confrontatona strategy toward abour taken by Japanese rms and supported by state poicy in the 19491955 period represented a U-turn n the potcal struggle for power between the two sides and abour reations were characterzed by constant confrontatons. In the mid 1950s, progressive busness leaders who formed the Japan Comittee of Economic Development nitiated the produc tivity movement with the support of the state, aimed at incuding labour unons n their programme of promotng exports. In order to pursue comparatve advantage n producton technoogy, some bg rms made a hstorca tradeo. They started giving up allocative ecency, as measured n short-term cost-benet anayss, which had been their primay concern in the 1950s. In exchange hey wanted labour's co-operaton n technologca nnovaton and qua ty conto; to do this, they were required by the labour unions to provde job securty and to increase saaries. Ths soution to the abour conicts, however, was not wdey accepted by both sides untl the 1960s In 1960, manageent and labour were nvoved in a major confontation at the nationa evel (Gao, 1 997). In th e 1 960s the attitudes of management and labour toward each other changed dramaticay. A document issued at the nationa meetng of the Japan Federation of Empoyers Assocatons in 1 963 argued that: 88
© he Edtoial Bod o he Sociooicl Review 1998
in the past 1 8 years of the postwar era, manageent and
. s abour have expeenced together how much turmoi the cas . 1 a pot , the abour � confrontation between management and ·
·
·
.
struggle, and the prejudice toward labour unions coud bng
to
labou eatons and socia ode . . In ode to pusue the mission of promotng stabiity and socia welfare, we ust re examine franky the mistakes we have made . . . We shoud co opeate with each othe to pusue peace between manageen e and labou the prospety of the , and the deveopment 0 th ea the nationa economy in ode to meet the demands of (Nikeiren, [1 963] 1 966a:461). . employment ' the sen. iorityAs a result the practces o f ' eIy mst1tubased wage and the rm-based abour unon became W'd . d onalzed in bg companes, and Japanese labour relatOn� ente;: er an era of corporats. Ths system attracted global atte�tO a . the apanese compaes eectve · 1y cope d Wl'th two oil cses . the ns tensw 1 970s. Given more than a decade's conficts and eiod 1945-1 960, why dd Japanese anages and wo e�s chan ge rom confrontaton to co-operatn.? Wat was the dvg orce behnd the institutonal transformation of Japanese anageen t?
;
·
Below, I test the valdity of three competing theorie s.
The economic explanations .
North The economc perspectve emphaszes ecency. Douglass . sc� to s state (198 :24) ponts out that a major role played by the w n to C co-opera n and ify the fundamental rules of compettio . ts ren the 1zg · · wll provide a structure of property nghts for maxm . ster fo to order accruing to the ruer, to reduce transactOn costs m . to crease ta maxmum output of the socety and , th . ·
·
·
e revenues accrung to the state. Although the conomic perspectv
· t f°rm of govgeneray assumes that the market is the most efcen enance t aso hods that when the maket as to antain ode, ' nonmarket governance structures may deve1op. Neverthele ss, as Wamson (1985 1 990) asserts, corporate hierarchies emerge to co. ordate economc transactOns when th e costs 0f such exchanges · ' h through the market are perceived by econoc actors as to o hg co In othe wods when economc actos can no longe e centy ;i ss, they l summate tra;sactons through existng echan develop other more efcient, governance mechass He. acno edges the d esity of govenance mechanism s but beeves th at
�
e Editorl oard of The Socioogic
89
Eciency culture nd politics
B G
they are derived for romoting eieny and reduing transation ost Aording to the eonomi ersetive the struture of eo nomi governane is a alulated exression of eonomially ratio nal ersons ursuing rot. The eonomi ersetive in studies on Jaanese management fouses on the xeieny hih is haraterized by eort and the ursuit of rationality and individuals determination of ho muh of eah to give to their job. It also holds that the Jaanese emloy ment system is driven by internal labour markets in hih emloy ees ae eruited ith lifetime ommitment reeive onthejob training and omete ith one another for romotion into higher ositions hih sharly ontrasts to the external labour markets in the Western ountries here emloyees ofen rsue romotions by hanging the omany they ork for The nternal labour market it is argued indues ommitment by inreasing emlyees hanes for tenure and romotion (Hatvany and Puik 1981 ) skills that emloyees lea are omanysei and annot be realized at full value outside the omany (Koike 1984) the seniority benets and the lak of alternative emloyment oortunities at omarable age levels for orkers ith revious exeriene as ell as the insuieny of ubli elfare ombine to make an emloyee both unilling and unable to move (Hatvany and Puik 98 Tahibanaki 1 984)the artiulated and unique hilosohies held by Jaanese rms foster team sirit and ooeration hih reonile the rms objetives of ursuing rots and of eretuating the rm as a grou even the intensive soialization funtions to immerse emloyees in the rm (Hatvany and Puik 198 1) . The searh for eieny under strutural hanges as ertainly the driving fore that triggered the transformation of Jaanese man agement in the late 1 940s aer the Jaanese eonom reengaged in the international ometition. During the ar the Jaanese eonomy had been sustained by hea materials and labour and by huge ative markets in its olonies and ouied areas inluding China Manhuria Korea Taian and the Southeast Asian ountries. After defeat Jaanese rms no longer had aess to these ountries. Also Jaan as virtu ally roibited from international trade until 1948. As a result Jaans osition as measured by the amount of exorts delined from h in the orld in 1934 to thirtythird in 1947. Ifthe average level of Jaanese exorts beteen 1930 and 1934 as 100 it as only 8.8 in 1946 11.7 in 1947 and 16.2 in 1948 Tsusan Daijin Kanb Chsaka, 195493) The lo quality of Jaanese roduts 90
© Te Edtorial Board o f Te Socoogcal Revie 199 8
as a major roblem to Jaanese rms. Jaanese roduts had been ell knon for lo rie but oor quality. Among 634 laims eeived by MITI from foreign onsumers beteen the nd of World War II and Aril 1 950 327 onerned the oor quality of roduts and 366 of these ame from the United States Jaans largest trad ing artner (Gao 1997 179). The oeration of the Jaanese eonomy during 19461949 relied on to stilts the naning of Jaanese rms as heavily subsi dized by the government hih adoted an easy money oliy hile the budget of the Jaanese government deended to a onsid erable degree on nanial aid from the United States. During that eriod 40 er ent of the aital of Jaanese rms as rovided by the government (Arisaa 1960) Meanhile the Jaanese govern ment reeived about $5 million annually from the U.S. govement (Eonomi Planning Ageny 1991). In order to alloate the limited domesti resoures eetively so as to survive the eonomi hard times and initiate the ostar reonstrution the Jaanese govern ment launhed the riority rodution rogram in 1946. At that time oliy makers believed that the market ould not be able by itself to ahieve an equilibrium beteen suly and demand thus the state had to intervene (Arisaa 1976281) This managed eon omy as similar in many esets to a lanned eonomy, in hih the funtion of the market in resoure alloation as largely relaed by the state. In the riority rodution rogram the state ontrolled the distribution of rodution materials and roduts for daily life aording to quotas that it set u these quotas favoured several strategi industries inluding oal iron and steel and fertil izers (Gao 1 994 1997). State oli foused on the suly eetive ness of the eonomy at the maro level rather than on the rodution eieny of individual rms at the miro level (kita 1949). In this managed eonomy the oeration of rms as sus ained by a huge amount of government loans through the Reonstrution Finane Bank (Arisaa 19606566). Against this bakground the hange in the US oliy toard Jaan and the imlementation of the Doge lan in the late 1940s as the most imortant strutural fator that fored the Jaanese to ae the issue of eieny. Beause the Communists ere to take over China the U.S. government in 1948 hanged its oliy toard aan from ensuring that Jaan ill not again beome a menae to the United States or to the eae and seurity of the orld (SWNCC150/3 [1945 1982) to sustaining Jaan as a self uient demoray strong enough and stable enough to suort e Editorial Board of Te Socological Review 19 98
91
Eieny ulture andpoliti
Bai Gao
to onentrate all its resoures on the eonom (Keidanre 1953; Yoshida 1957; also see Gao 1997; Pyle 1992; Samuels 1994). In this sense the Korean War resented Jaanese omanies ith a great oortunity to make rots ithout genuine ometition in the international market. Nevertheless this situation did not last lng. When the ar ended ensuring a share of Jaanese roduts in the international market one again beame a major issue. Faing ometition from eveloing ountries lo rie alone ould not hel muh and ithout labours ooeration quality ontrol ro grammes ould not be ell suorted. The other strutural reason is that the strategy of hea labour oliy and donsizing aused strong reations from labour unions in the early 1950s. The olletive struggle hih involved labour unions artiiation in both single and multile industries beame
a popular form of labour strategy (Ota, 1953). Stopping layos and reducing the intensication of work were the two maj goals of labour movements at the time In August 1 953 the Association of Labour Unions (the national organization of Japanese labour unions) adopted the slogan 'ghting against the layo of evn one person, the wage reduction of even one cent, and the intensication of ork by even one iee.' To rotet labour's interests, the Assoiation asserted that Jaanese orkers should organize · indus try-based and regionally based collective strikes to ght the capital ists (Takajima, 1 953) In its outlie of action, opposition to low ages ad layos as the most imortant issue. Aording to statistics, job security was the major reason for labour disputes in the rst half of the 19 50s and the massive layos even resulted in
violene.
Aer the mid 1 950s, some Jaanese managers began to romote harmony, aiming to regulate the behaviours of manager and ork ers by traditional values This socalled cultural eect, however, was not naturally inherited from Jaan's ast; it as stimulated by ross national learning and as romoted for strategi reasons In 1 95 3 a
grou of Jaanese managers ho ere the ore members of the Jaan Committee of Eonomi Develoment (Nihon Keizai
Dykai) visited West Germany. They disovered that Germa · management deended heavily on the onet of a blood tie beteen managers and orkers hih ame from the idea of rae or nationality' . This blood tie' not only made German managers and orkers o-oerate voluntarily for the sake of the nation during the ostar reonstrution; it also made the Germa orker�
believe that their living standard ould not be imroved ithout an
inrease in rodutivity and made the German managers strongly areiate the ative artiiation of German labour unions in the reonstrution of the late 1940sthe most diult eriod in mod ern German history. Kshi Khei one of these Jaanese managers asserted that this blood tie beteen management and labour ould be a medium of ontinuous ommuniation hih ould onstitute the foundation of healthy labour relations in Jaan (see Nihon Seisansei Honbu 1985 .3032). Soon after his tri to West Germany Khei founded the Headquarters of Produtivity and ut his belief into ratie. As Granovetter (1985486) oints out ulture is not a oneforall inuene but an ongoing roess on tinuously onstruted and reonstruted during interation. It not only shaes its members but also is shaed by them in art for their on strategi reasons. Although these Jaanese managers intended to rely uon the reg ulatory eet of ulture on the eonomy to inde labours o oeration this strategy did not generate enough suort from the labour unions beause ithout addressing the issues of unemloy ment and lo salaries (the to issues that onerned orkers most deely) a ultural delaration of harmony did not aeal to the Jaanese labour unions. Providing more eonomi benets to labour hoever as in onit ith the leading eonomy theory at the time that stressed the alloative eieny. Thus the question of hether these Jaanese managers ould nd legitimay for their ul tural ersetive beame ritial for the further develoment of the Jaanese management system. The onstitutive eet of ulture on the eonomy measured by the institutionalized beliefs of ho the eonomy orks and ho eieny is romoted layed a very imortant role in shaing the diretion of further transformation of Jaanese management. The diusion of Joseh Shumeters theory of innovation hanged not only the Jaanese denition of omarative advantage in inter ational ometition but also the managers eretion of their selfinterests. This ne theory omletely disredited the strategy of hea labour oliy and donsizig demonstrating an alternative ay of romoting ometitiveness. Shumeter has been inuential in Jaan sine the rear eriod nd he layed an imortant role in shaing the develoment of aans nonMarxist eonomis. He trained several Jaanese stu ents at both Bonn University in Germany and Harvard University the United States ho beame rominent eonomists in ostar an. One of these students as I disuss later in this aer is 97
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Ecienc ctre ndpoitic
and enhane the omettveness of the rm (Nihon Seisansei Honbu 19853940) Inuened by Shumeter's idea of innovation many Jaanese rms shied their strategy regarding labour from onfrontation to ooeration. With the hel of the US and Jaanese governments the Headquarters of Produtivity as established It gathered rere sentatives from management labour unions state bureauraies and aademia to seek better labour relations The Headquarters of Produtivity sent delegations overseas invited many exerts to Jaan to give letures onduted studies and investigations on ma n agement issues an disseminated tehnologies regarding rodu tion marketing and ersonnel management through training and onsulting The Headquarters systematially introdued the latest develoments in managerial siene from the West eseially the United States (Nihon Seisansei Honbu 1985) Organized labour hoever gave a divided resonse to the all for ooeration from management. The General Counil of Trade nions (Shy) refused to ooerate ith management as it regarded the roosal as ne ay for management to exerise its ontrol; the General Federation of Labour (Sdmei) in ontrast deided to gain its interests by making a onditional romise to o oerate (see Sdmei [1955 1966 Shy 1955 1966). Through the 190s the majority of both management and labour still remained very setial about eah other and the transformation of Jaanese management as not aomlished until the 1960s aer a major onfrontation at the national level. Cultural eets indeed layed an imortant role in identifying the ne diretion of develoment and they hanged the frameork by hih Jaanese managers ereived hat as rational and hat as in their interest. Hoever they annot exlain hy these ne ideas still faed strong resistane from both management and labour The poliical explanaion
The olitial ersetive emhasizes interest oer and ontrol It argues that ators in key institutions realize onsiderable gains from the maintenane of those institutions' (DiMaggio 1992; Fligstein 1992) and goaloriented lites intervene at eah ritial oint in the institutional evolution in order to dene their interest in the ne governane mehanisms (Brint and Karabel 199 DiMaggio 1992; Galaskieiz 1992) Draing on the Weberian 100
© The Edioi Bord o he Sooogi Review 18
tradition Hamilton and Biggard (198875) argue that all organiza tions no matter hat their urose or historial setting (although related to both) have an internal attern of ommand and omli ane'. Organizations only exist insofar as there is a robability that ertain ersons ill at in suh a ay as to arry out the order gov erning the organization Lindberg Cambell and Hollingsorth (1 991 1 0) argue that if the arrangement of governane mehanisms systematially restrits the ator's ontrol over the terms of exhange under hih he attemts to obtain resoures and informa tion they may ress for governane transformation Perro (1981 1986) further argues that rms are rotable not merely beause they are eient but beause they are suessful instruments of domination Another stream of researh stresses the nature of a rodutive institution as an equilibrium of olitial fores. Dierent from the vie tat emasizes the imortane of a dominant ator in the governane arrangement this vie highlights the orrelation beteen fair distribution of eonomi elfare and eieny and rodutivity Aording to this vie ontrol and domination are only meas of organization The goal of a business organization is to romote and sustain ometitiveness. To ahieve this goal man agement must establish an inentive struture for labour to ooer ate. When the voie in this ase the demand for a fair distribution of eonomi elfare is not taken seriously Albert Hirshman (1970) maintains that ators may hoose to exit' and refuse to engage in ooeration. This ill make business enterrises vulnera ble in market ometition. Charles Sable (1994137) argues that the entral dilemma of eonomi groth is to ahieve a balane beteen learningaquiring the knoledge to make things valued in the markets' and monitoringthe determination by the trans ating arties that the gains from learning be distributed aording to the standards agreed to beteen them as interreted by eah'. When orgnizations enomass a substantial ortion of the soi eties of hih they are a art Manur Olson (1982) oints out they have more inentive to make the soiety more roserous Aording to this version the olitial struggle among eonomi ators for a fair distribution of eonomi elfare oen results in the transformation of eonomi governane The olitial ersetive illustrates ell the dynamis behind the institutionalization of Jaanese management. DiMaggio (198813) oints out that Institutionalization is a rodut of the olitial eorts of ators to aomlish their ends and . . . the suess of an
Eciency culture and politics
Bai Gao
institutionalization rojet and the form that the resulting institu tion takes deend on the relative oer of the ators ho suort, oose, or otherise strive to inuene. Faing a roosal from management for the rodutivity movement, the labour unions' major onern as the negative imat of this movement on emloyment and on ages. Marxists argued that even if siene and tehnology ould transend lass struggle, they ould have to be alied in a aitalist soiety utomation itself may rovide some benets and hainess; its aitalist aliation, hoever, ill ause many negative eets and muh unhainess to human soiety (Kanbayashi, 95853). Automation, they believed, ould not only exert an even greater threat to orkers job seurity, hih already as a major onern beause of the ressure of overoulation in the 950s, it ould also ause a age derease for male orkers beause it ould simlify the orking roess so that rms ould ?eend more heavily on female and young orkers (Arisaa, 956; Okhi 957). Besides, tehnologial innovation through automa tion ould further inrease the orkload, reaing more alienation among orkers. As a hole, said the Marxists, tehologial innovation ould only strengthen the oer of aital and eaken the oer of labour in the lass struggle (orie, 955; Kanbayashi, 958). To establish an agreed attern of monitoring, eonomist Nakayama Ihir, then vieresident of the Headquarters of Produtivity, roosed the famous three riniles for the rodu tivity movement. First, the ultimate urose of romoting rodu tivity as to inrease emloyment. Government and business must make every eort at reventing unemloyment. Seond, manage ment must onsult ith labour on ho to romote rodutivity aording to atual onditions at eah rm. Third, the benets re ated by the romotion of rodutivity must be distributed fairly beteen the rm and labour (Nakayama, [956 972). In aor dane ith these three riniles, some Jaanese omanies began to address the issue of fair distribution of eonomi elfare by mak ing eorts of maintaining job seurity Ne tehnologies ere intro dued during the rodutivity movement, rimarily in the frontier industries, so as not to ause largesale layos. Even hen the redution of the labour fore beame inevitable in a sunset industry, many rms transferred orkers to other elds rather than letting them go. Aording to a survey onduted at the end of the 950s, among the 9 er ent of 409 rms that made tehnologial innova tions, only to rms atually laid o orkers; 7 er ent of these 02
rms avoided layos through job transfers (Nihon Seisansei Honbu, 960). The agreed attern of monitoring, hoever, ame only aer ators kne the limits of their olitial strength and the imortane of omromise. Although the rodutivity movement began to address the issue of fair distribution of eonomi elfare, the major ity of both management and labour still remained highly setial toard eah other's intentions, inuened by the memories of on frontations in the reent ast. In suh an atmoshere, both sides lashed on the issue of ho to retain orkers in the sunset indus tries. In resonse to the strutural hange from oalbased to oil based energy, the Mitsui Comany intended to lay o 6,000 orkers at the Miike oal mine. This as the rst ste in a series of large sale lays, estimated at 0 ,000 inustryide. This initiative as baked by the government and business leaders. Labour unions shoed strong resistane, hoever, and engaged in violent onits ith the olie in 960. The strike lasted for 3 3 days. The roess of transformation of Jaanese management in 946966 indiates that only hen a balane of oer among ators as ahieved, did the ne institution begin to be stabi lized. Although the Mitsui onfrontation ended ith labours fail ure, it ford the state, management, and laour union to reexamine the onfrontational strategy they had adoted. In the ast, the state had adoted a robusiness oliy, treating labour disutes as an issue of ubli seurity. It had heled the rivate omanies to strengthen their oer in labour relations; made the establishment of ne labour unions more diult; outlaed strikes against layos; and ithdre the labour unions right to negotiate (Sanbetsu Kaigi, 949).In 95 the Jaanese gove ment even onduted the red urge, arresting many leaders of labour unions. After the Miike strike, hoever, the Liberal emorati Party began to ereive labour relation as an issue of soial oliy. It hanged from a robusiness labour oliy to a referene for stable labour relations. In 963 the hairman of the ational Organizational Committee of the LDP argued that the arty should take a neutral osition on the issues onerning labour relations and reresent the interest of the nation y medi ating ometing interests (Rekishigaku Kenkykai, 990 34; Gao, 997). Management also reognized the huge ost of a onfrontational trategy. When the Minister of Labour negotiated the resolution with the resident of Mitsui, all the major business leaders ho
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ere invited to be resent shoed their onern about labour rela tions Besides in 963 demand outerformed suly in the Jaanese labour market for the rst time in history. Beginning at that time the shortage of labour beame a major roblem to Jaanese rms; starting salaries for young orkers inreased at an annual average of more than 1 3 er ent in the early 960s in omarison ith less than 5 er ent in 1 9541 958 In suh irumstanes the introdu tion of lifetime emloyment and the senioritybased age system in large Jaanese rms as no longer simly a ay to balane eo nomi elfare beteen the rm and labour but also a neessary strategy for reserving a skilled labour fore. In the meantime labour unions also realized that nationallevel and industrylevel onfrontations ould not eetively rotet their interests and deided to artiiate fully in the rodutivity movement Even the Communist Party and the Soialist Party began to shift their lat forms in national olitis from revolution' to strutural reform' ithin the frameork of aitalist institutions (Gao 1997). In 1963 the deuty diretor of the Jaan Federation of Emloyers Assoiations soe at the national meeting about life time emloyment and the senioritybased age. He argued that there ere only to ays to bring about eae beteen manage ment and labour. One as a longterm stable age oliy; the other as ontinuous ommuniation beteen management and labour ithin the rm. He also ointed out that We have had the ratie of lifetime emloyment in Jaan and the senioritybased age hih suorts it . They ere born and nurtured in the Jaanese ulture This is an advantage. We should make good use of this Jaanese tradition. aan's lifetime emloyment is omletely oo site to the shortterm ontrats ratied in Euroe and North Ameria Seaking of Jaanese management e must devise a Jaanese style of age system and emloyment system' (Nikeiren [963 966b462) In the 960s the raties of lifetime emloy ment the senioritybased age and the rmbased labour union ere idely institutionalized at least among big omanies in the rodutivity movement. Starting at the end of the 1940s ith e ieny oriented donsizing and hea labour oliy this movement exeriened several tists and eventually ahieved a distintive at tern of eonomi goverane The rodutivity movement had the oer to enetrate the daily oeration of the rm and to indue mass artiiation in innovation. The major reason for this suess aording to a MITI oial is that the introdution of lifetime emloyment and senioritybased age demonstrated a great vision 04
Ecency cultue n pltcs
it onerned not only the interests of the rm but also the interests oflabour (see Nihon Seisansei Honbu 985 124). It is lear that this olitial ersetive is oerful in exlaining the mehanism in hih the onfrontational labour relations ere eventuall settled in ostar Jaan Nevertheless it also has its lim its. The olitial ersetive alone an hardly exlain hy eonomi ators deid to break the existing agreedattern of monitoring It also has diulties in exlaining hy eonomi ators agreed in any artiular ay on the attern of monitoring and hat kind of sym boli instruments eonomi ators used in onstruting a ne order for themselves. Discussion
This study shos that eieny measured by lo rodution ost as indeed the rimary onern at the end of the 1940s and the beginning of the 1950s and Jaanese rms indeed intended to ro mote eieny by hea labour oliy and donsizig This is very imortant to our understanding of the ressure of strutural hanges on the existing governan struture and the soure of the dynamis of hange. Promoting eieny by layos and lo salaries as later regarded as the major barrier to the goal of build ing omarative advantage in rodution tehnology. Moreover Jaanese rms made a historial tradeo they shied from alloa tive eieny to xefieny by giving u shortterm rots in exhange for labour's ooeration in tehnologial innovation Here eieny though a dierent tye still mattered. The eo nomi ersetive hoever annot exlain hy Jaanese rms deided to shi their fous in managerial ratie from alloative eieny to xeieny. In this sense the eonomi ersetive ontributes more to revealing the stimulus of hange rather than interreting the artiular attern of outome in the transformation of eonomi governane The regulatory vie of the ultural ersetive is suorted by this study to some extent The indigenous value of harmony indeed layed an imortant role in reorienting the diretion of Jaanese anagers in the mid 950s It also served to sustain the emergene of ororatism in the 1960s After Jaanese management as institu tionalized it ontributed ven more greatly to institutional rero dution Nevertheless this vie in studies of Jaanese management often assumes imliitly that the eonomi ators in Jaanese soiety 0
Bai Gao
internalize indigenous values unonsiously and obey the norms of institutional settings voluntarily In other ords, Jaanese ulture shaes Jaanese behaviour in eonomi ativities mehanially by insinuating itself into the minds and bodies of individual Jaaese. As a result, eonomi ators are overhelmed by soietal fores and have n engine of ation (Coleman 1988, 1990; Granovetter, 1985; Wrong, 1 960). But urrent Jaanese management did not aquire its resent attern until the 1960s and the institutionalization of this system as full of interrutive, nonlinear hanges (Gao, 997; Garon, 1986; Gordon, 985; Masamura, 1985). Indigenous value matters only hen eonomi ators assert it strategially. The regula tory vie of ulture in studies of Jaanese management has largely failed to exlain under hat onditions and through hat roesses orientations toard harmony and ooeration ere eventually institutionalized in Jaanese rms. In the existing literature on Jaanese management, both the eo nomi ersetive and the regulatory vie of the ultural erse tive tend to disregard the timesae ontingeny o eonomi institution. As a result, theory is not historiized, and history, ar tiularly its "timeonditionedness and temoral ontingenies, is not theorized' (Isaa and Grin, 989875) As Berger and Lumann (965455) oint out, institutions alays have a his tory, of hih they are roduts. It is imossible to understand an institution adequately ithout an understandng of the historial roess in hih it as rodue'. In this study, I found the onstitutive vie of the ltural erse tive on the eonomy and the olitial ersetive that highlights the onurrene of olitial interests illuminating beause tey allo us to investigate the historial ontingenies that shaed the outome of the transformation of eonomi goveane In this historial roess, the onstitutive vie of the ultural ersetive emhasizes the intelletual environment, lining the alternatives of ne atterns of eonomi goveane to the availability of sei eonomi ideas. It also shos that both eonomi las and ultural traditions are never xed. They ae the hanging outome of a manysided roess in hih the identities, interests, modalities of alulation are onstantly redened and renegotiated In this sense, unless eonom ators believe that eieny or harmony serve their strategi uroses, neither fator an inuene the attern of the transformation of eonomi institutions This vie is oerful in exlaining hy Jaanese rms shied their fous from alloative eieny to xeieny and hanged their strategy toard labour from onfrontation to ooeration 106
Efciency culure and poliics
The olitial ersetive that highlights oer and domination is ndeed suggestive hen e analyze the roess of transformation of aanese management in te 1950s. Labour unions fought hard to stablish their oer in the rm in the 940s hile management ade a omeba in reinstalling their ontrol over rdution in the 1950s. What haened in the 1960s, hoever, indiates that this oer vie of the oitial ersetive may have aught only one side of the story Jaanese management as institutionalized by the onurrene of olitial fores under hih ators reahed an agreed attern of monitoring. Both lifetime emloyment and the senioritybased age are business ustoms, not legal ontrats (Cole, 172). They are hat North (1990) alls selfimosed odes of ondut' in Jaanese rms, enfored by the otential retaliation of labour Their nature as an institution is to set rules for behaviour by roviding dierent inentives to eah arty. Not until aer the Miie strie of 1960 in hih both management and labour reognized the limits on the strength of their olitial oer, did most arge Jaanese rms introdue the system of lifetime emloyment and the senioritybased age as a ay of delivering eonomi e fare to orers Only then did most of the Jaanese labor unions begin to ooerate fully ith management in an eort to romote rodution tehnology This study demonstrates that eah of the three leading ersetives in studies of the institutional transformation of eonomi gov ernane has ertain merits and they are omlementary to eah other. The eonomi ersetive hels us understand the imortane of strutural hanges in the eonomy as the driving fore in initiating institutional transformation. The olitial ersetive teahes us that an institutional tansformation is a olitial roess and its aomlishment is sustained by a mehanism hih balanes the ometing interests among the major layers. The ultural ersetive shos us the strategies adoted by eonomi ators in the institutional transformation are never redetermined and are strongly inuened by their intelletual environments. References Abeggen C 1958) The Japanese Facory Gencoe The Free Pess Aoki, M, 1984), Shrehoders NonUnnmiy on Invesmen Fnncng: Bnks vs Individ Invesos In The conomc Analyss ofhe Japanese Frm eded by Mshko Aoki Amsedm Esevie Scence Pbishers B, pp93224
Bai Gao Arisawa, H, (1956), Nihon shihonshugi o koy' (The Japanese Capitalism and Employment) Sekai Jauary:23-34. Arisawa, H., (1957), Keizai kakudai wa koy mondai o kaiketsu shiuru ka (It is Possible o Solve he Probem of Empoyment by Economic Expansion) Sekai 13 5 (March):34-44. Arisawa, H., (1960), Gendai nihon sangy kza (Lures on Mode Japanese Indusry). Tokyo: Iwanami Shoen, Vol. 8. Arisawa, H. (ed.), (1976), Shwa keizaishi (The History of the Shwa Economy). Toyo Nihon Keizai Shinbunsha. Arisawa, H. and Hide, I., (1966), Shiry sengo njunenshi (Literature on Tweny Years Postwar Hisoy). Tky: Nihon Hyronsha, Vo. 2. Berger, L and Luckmann, T, (1966), The Social Construction of Reality. New York: Anchor Books. Blaine, M, (1993), Proabiiy and Competiiveness: Lessons from Japanese and American Firms in he 1980s Caloia Management Review Fall:48-74. Bock, F (1990), PostindustrialPossibilities, Berkeey: Universiy of Cali foia Press. Bock, F, (1994) The Roes of he Sate in he Economy. In The Handbook of Economic Sociology edited by Nei Smeser and Richard Swedberg. Princeton: Princeton Universiy Press, pp.69 -7 0 Brint, S. and Karabel, , (199), Insitutional Origins and Transformaions The Case of American Community Coeges'. In The New Institutionalism in Organizational Analysis, edited by Paul J Diaggio and Walter W Powell. Chicago The Universiy of Chicago Press, pp337-360. Brinon, M, (1992), Women and the Economic Miracle: Gender and Work in Postwar Japan Berkeey Univeriy of Caifoia Press. Buter, S., nigh, R, Guttman, M. and Wiiams, ., (1994) Sining Deepe in e Drowning Pool, U S News and World Report May 165657. Campbel, J.L., Hollingsworth, R and Lindberg, LN (eds), (990), Goveance of the American Economy. Cambridge Cambridge Universiy Press, pp.3 19- 35 5 Cohen, J.B, (949), Japan's Economy in War and Reconstruction Minneapolis: University of Minnesoa Press. Coe, RE., (972), Permanent Empoyment in Japan Facts and Fanasies. Industrial and Labor Relations Review 26:65-630. Coleman, , (988), Social Capia in the Creaion of Human Capital, American Joual ofSociology 94:95-120 Coleman, J, (990), Foundation of Social Theory Cambridge Harvard Universty Press. Diaggio, P., (988), Interest and Agency in Insiuional Theory' In Institutional Patterns and Organizations edied by Lynn G. Zucker Cambridge: Balligner Publishing Company, pp321 DiMaggio, , ( 994), Cuure and Economy' In Nei J Smelser and Richard Swedberg, eds, The Handbook of Economic Sociology Princeton Princeon Universiy Press, pp27-57 DiMaggio, P.J and Powell WW (199), Inroducion In The New Institutionalism in Organizational Ana lysis, edited by Paul J DiMaggio and Waer W Powel Chicago The Universiy of Chicago Press, pp l- 38 Dobbin, F (993), The Socia Construction of he Great Depression Theory and Society 22:-56. Dore, R, (1973), British Fact ory Japanese Factory The Origins ofNational Diversity in Industrial Relations Berkeey: Universiy of California Press
Efciency, culture and politics Dore, R, ( 987), Taking Japan Seriously London: The Ahlone Press Dore, R., (992 [1983] ), Goodwill and he Spirit of Market Capialism. In The Sociology ofEconomic Le Boulder Wesview Press ppl 59- 80 Economic Planning Agency, (990) The Japanese Economy 19555. Ekonomisuto (1950), ihon eichingin to kokusai hikaku (Japans Low Wage and Internaional Comparison). June 21332 Ekonomisuto (1955 ) Seisansei und no eik o kyryoku (The Resisance and Co operaion in Produciviy Movemens)' Juy 950-52 Ekonomisuto (1 994a), Hado na oy chsei no kansei mo (A Possibiity of Tough Adjustment in Employment)' May 9:54-55 Ekonomisuto (994b), Zuhy de miru seizgy no dka (An Illusration of he Deindusrializaion of Manufacturing Industries)'. July 5:32-34 Ekonomisuto (1 994c), Genzai no nihon kara wa dasshusu suru igaini michi wa nai (There is no Aternative bu Escaping from Japan) Augus 2:38-44 Engardio, P., Barnathan, and Gasgal W (1993), sia's Weah. Business Week November 29 00-10 8 Figstein, N., (199), The Srucural Transformaion of American Indusry An Insiutiona Account of he Causes of Diversicaion in he Larges Firms 919979 In The New Institutionalsm in Organiational Analysis edited y Pau J DiMaggio and Waer W Powe Chicago The Universiy of Chicago Press, pp31336. Friedland, R and Aford, R.R., (1991), Bringing Sociey Back In Symbols Pracices and Insiutiona Conradicions In The New Institutionalism in Organizational Analysis edited by Pau DiMaggio and Waler W Powel Chicago: The Universiy of Chicago Press pp232263 Fridman, D., (1988), The Misunderstood Mirale Ihaca Corne Universiy Press Fuoda K, (1953), Grika s o ikani aakau ka (How o Figh wih Raionaizaion)' Shakaishugi 27 (Sepember)2-5 Gaiko Forum, (994) Kuroji endaka kdka keiza no saizensen kara (From he Economic Fronier: Trade Surpus, the Appreciaion of Yen and Deindusriaiza ion June l 8-27 Gaaskiewiz J (99), Making Corporate Actors Accounable Insiuion Buiding in MinneapoisSt. Pau. In The New Institutionalism in Organizational Anasis edited by Pau J DiMaggio and Waer W Powel Chicago The Universiy of Chicago Press pp29330 Gao B, (997), Economic Ideology and Japanese Industrial Polcy Developmentalism from 1931 to 1965. New York Cambridge Universiy Press Garon S., (1987), The State and Labor in Modern Japan Berkeey: Universiy of Caifornia Press Gordon, A (1985), The Evolution of Labor Relations in Japan Heavy Industry 183-19 Cambridge: Counci on Eas Asian Sudies Harvard University Got, Y (1956), Kijusu kakushin to wa nani zo ya (What is Technologica Innovaion?. Ekonomisuto Besusasu (separae voume) Auumn:9-24 Granoveer, M, (1985), Economic Acion and Social Srucure The Problem of Embeddedness' American Joual ofSociology 9481510 Gross, N. and Rebeo K, ( 993), Tsunami of Gizmos' Businss Week September 27: 5657 Gudeman, S, (1986) Eonomics as Culture Models and Metapors of Livelihood. London Routledge & Kegan Pau achiyo M (1994), Nihon ni mitomerareru araana koy ikai no sshutsu (The
Bai Gao
Efciency culture an politics
Ceaion o New Eployen Oppouniies eanded by Japan' konomisuto Juy 12:64-6 7. Ha A (199 The Political Power o conomic Ideas: Keynesianism Across Nations Princeon: Princeon nivesiy Pess Hailon G. and Biggar N (9 Marke Culure and Auoriy: A Copaaive Anaysis o Manageen and Oganizaion in e Fa Eas American Joual oSociology pp. 52-94. Havany N and Puckik V. (19 n Inegaed Manageen Syse: Lessons ro e Japanese Experience' Academy oManagement Review 6(3:469-40. Hiscan AO. (970 xit Voice and oyalty Cabridge: Harvad nivesiy Press. Holyoke L (993 Wa? Everyday Bagains? Tis can be Japan'. Business Week Sepeber 6:41. Holyoke L (994 Pss! Wanna Buy A sed Seel Plan?' Business Week Augus 22:4 Horie M (955 Sensansei k und ian (Criicis on e Moveen o Prooing Poduciviy' Ch Kron Ocober:144-155 Iai (1993 Nion sangy saikciku siron (On e Reconsrucion o Japanese Indusries' konomisuto Novebe 6:4049. Isaac L and Gin L isoricis in TieSeies Analyses o Hisora Pocess' American Sociological Review 54(6:7390 Jonson C (1 92 MIT and the Japanese Miracle Sanord: Sanod nivesiy Press. aiyo (1994 Nioneki koy kank no erio o deerio (Te Mei and eei o e Japanese Epoyen Cuso' Rdjip June:20-23. anbayasi T (195 ijusu kakusin no yka (Te Evauaion o Tecnologica Innovaion' nomisuto Januay 25 5054. eidanen J ( 953 Sinokuju no igi o keizai kyyoku no ks ni suie (On e Signicance o New Special Procureens and e Proposal o Econoic Cooperaion' Keiai Reng eizai (ed (956 Keiai hakusho: nihon keizai no seich to kindaika (Te Econoic Wie Paper: Japan's Econoic Gow and Modenizaion Tokyo: Siseid inzey . (1991 Industrial Harmony in Mode Japan the Invention o a Trdition London: Rouledge oike (94 Skill Foraion Syses in e S and Japan: A Coparaive Sudy'. P.47-75 in The conomic Analysis o the Japanese Firm, edied by Masaiko Aoki Aseda: Esevier Science Publisers B oia A ( 994 akaku daikys jidai" no bakuaki (Te Beginning o an Ea o Inensive Copeiion' Chu Kron Sepeber:52-65 ono M. (994 yokunen ade seizgy no sisan asusuku wa suzuku (Te Coninuance o e Reducion in e Capial o Manuacuing Indusies' konomisuto May 24:3-4 rasne S (94 ppoaces o e Sae: Aernaive Concepions and Hisoica ynaics Comparative Politics Jauary:223-246 uaoo (1994 Seisansei s de ia nani ga okieiuka (Wa is Happening ae e Pooion o Produciviy' konomisuto July 12:60-6 3 uokawa T. and Gosaku S (1970 Nihon seisansei honbu so no jittai to yakuwari (Te Headquaer o Produciviy: is Eniy and Funcion Tokyo: Aoi Soen. uwaaa (994 Gubaruka ga uu sigy no kyi (Te Tea o nepoyen Caused by Globalizaion' konomisuto July 2:5459.
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azonick (99 Business Organiation and the Myth o the Market Place Cabidge: Cabridge niversiy Press ibensein H. (94 Te Japanese anageen Syse: An XEciencyGae Teory Analysis' In The conomic Analysis o the Japanese Firm, edied by Masaiko Aoki Aseda: Esevie Science Pblises B pp33 1-3 57 incoln JR and McBide ery (197 Japanese Indusria Organizaion in Copaaive Pespecive' Annual Review o Sociology 2932 indbeg L.N and Capbell L. (99 Te Sae and e Organizaion o Econoic Aciviy' In Jon L Capbel Roges Holingswo and Leon N. Lindberg eds Goveance o the American conomy Cabidge: Cabridge niversiy Press pp.356-90 andel M J and Gross N. ( 993 Fo Japanese Copanies A oube Way . Business Week Noveber 5 : 54. asaura (95 Sengoshi (Poswar Hisory Tokyo: Tsukua Sob. asaura . ( 99 Csen okuu (Te oean Specia Pocueen' In ncyclopedia oPostwar Japan 194-1990 Tokyo: Sansen p6 1 eyer and Rowan B ( 1977 Insiuionaized Oganizaions: Fora Srucure as My and Cereony'. American Joual oSociology 3: 340-363 iyao T ( 994 Sinsangy aibron wa aborosi (Te WaiandSee Aiude Towards New Indusries is an Ilusion' Bungei Shunju May:64173 urakai (97 Te Japanese Model o Poiica Econoy' In The Political conomy o Japan Vol 1 The Domestic Transormation, edied by ozo aaura and asukici asuba Sanord: Sanord niversiy Press akano T (993 aisa ga abunaku naeba jinin seii wa zen da (I e Copany Ges ino Trouble e Epoyen Adusen is Ineviable' Shkan Ty Keiai Api 2412 . akayaa (949 Nion keizai no kao (Te Look o Japanese Econoy'. Hyron eceber:3-6 akayaa (959 Cingin nibai o eis (oubling e saay' Yomiuri Shibun Jan3 akayaa I. (1 972 Sensansei no iron o issai (Te Teory o Poduciviy and Realiy' In eansei kj shiriu (Seies on e Pooion o Produciviy Tokyo: Seisansei Honbu pp33 - 344 e R ( 19 93 Wel I's a Sar: Japan Talks eeguaion a Las and Moe Canges ay be Coing'. Business Week Sepebe 13:4-49 e R and Gross (993 Japan: How Bad?' Business Week ecebe 3:56-59 e R ann and Glasgall (993 How Bady wil en Sock Hur?' Business Week Augus 30: 52-53 ion SH (955] 1966 Nion seisansei onbu seisurisu kyokuiso (Te Purpose o Esabising e Japan Headquaes o Poduciviy'. In koci azuo ed Shiry: sengo nnen shi Tokyo Nion Hyronsa p305 ion S.H (960 Kutsu kakushin to nihon keiai (Tecnological Innovaion and e Japanese Econoy ion SH. ([1960] 966 Srisu gsnen sengen'. In koci azuo ed Shiry sengo nnen shi Tokyo: Nion Hyonsa p305 ion SH (95 Sensansei und 0 nen shi (A Tiry ea Hisory o e Moveen o Produciviy Tokyo: Nion Seisansei Honbu ikeien (1 94] 9 66 eieken kaku ni kan suu ikenso (A Saeen Regarding e Proecion o e Manageen Auoriy' In koci azuo ed Shiry sengo nnen sh i Tokyo: Nion Hyonsa pp02104
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Ecincy cultur and politics
Bai Gao Nkeren ( 949] 966) Kgy grka n kansuru kenka (Our Poson on he Raonalzaon of Enerprses)'. In Shy sengo nnen sh keza (maeras on he Tweny ear Hsory of he Poswar Japan he Economy) eded by Arsawa Hrom and Inaba Hdez Tokyo Nhon Hyronsha p.305. Nkeren (966 [963]a) Kongo no rsh kanke o keesha no kenka (Labour Reaon From Now on and he Managers Perspecve). In Shy sengo nnen sh: d (Maerals on he Tweny ear Hsory of he Poswar Japan Labour) eded by kch Kazuo. Tokyo Nhon Hyronsha p.46 Nkeren (966 [963b) Maeda senmu r rd jse hkoku nhonek rmu kanr o sodaey" (The Depuy Drecor Maeda's Keynoe Repor Les Foser Japan's Labour Managemen). In Shy: sengo nnen sh (Maeras on he Tweny ear Hsory of he Poswar Japan) eded by kch Kazuo. Tokyo Nhon Hyronsha pp.46-46 2. Norh D.C (98) Sucue and Change n conomc Hsoy New ork Noron Company. Norh D.C. (990) Insuons Insuonal Change and conomc Peomance Cambrdge Cambrdge Unversy Press ka S. (949) Kawase reo see go (Aer Fxng he Exchange Rae)'. Asah Hyon Aprl64-69. kch K . ( 95) Gjusu kakushn o rd kaky (Technologcal Innovao and he Workng Cass)' Seka 36(March)86-92. Okumura T. and Dore T. (993) Nhon no hjn shug" wa hokorob hajmea (Has Japans Corporae Capasm Sared Breakng Down). konomsuo May 2528-33. Oson M. (982) The Rse and Declne o Naons conomc Gowh Saaon and Socal Rgdes New Haven ae Unversy Pess a K. (953) Grka s o kan kakaau ka (How o Fgh he Bae of Raonalzaon). Shakashug 2(Sep.)25. Ouch ( 98 ) Theoy Redng Mass AddsonWesley Ouch (984} The Mom Socey Readng Mass AddsonWesley. uch H. (949) Dojj ran wa ane o moarasu ka (Does he Dodge Lne Brng Abou Saby) Hyon June2-3. Perrow C. (98) Markes Herarches and Hegemony'. In Andrew Van de Ven and Wllam Joyce eds Pespecves on Oganzaon Desgn and Behavo New ork Wey pp.3-386 Powel B. (993a) Japan Inc R.I.' Newsweek December 348-50. Powell B. (993b) Losng Ther Lead. Newsweek December 3 5 -54. Powel B. and Takayama H (993) The End of he Mracle Era Newsweek Augus 3046 Pye KB. (992} The Japanese Queson Washngon DC AEI Press. Rekshgaku K. Nhon Dodash nyo Sesaku no Tenkan o Kowa (The Conemporary Hsory of Japan The Transon of Occupaon Polcy and he Concuson of Peace Treay) 9 90 3 Rdp (994) Wa ga kun no chngn sedo no kongo no kk (The Fuure Drecon of he Japanese Wage Sysem)'. Junel 2 9. Rdp (994) Hese gonen jk koy dk chsa (A Survey on he Trend of Empoymen n he Frs Haf of 994). 240-42 Rohen T.P. (94) Fo Hamony and Sengh Berkeey Unversy of Calforna Press. Rosow (99 [960 ) The Sages oconoc Gowh New ork Cambrdge
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Unversy Press Roya K.C. (982) Royalls Speech on Amercan Polcy Towards Japan n Shwa zasesh: shsen kaa kwa made (The Hsory of Fnance of he Showa Perod rom he End of he War o he Concluson of he Peace Treay) eded by Okurash Zaseshshsu Tokyo Ty Keza Shnpsha Vo 20. Sabe C. (994) Leang by mOnorng The Insuons of Economc Developmen In The Handbook oconomc Socology eded by Nel J Smelser and Rchard Swedberg Prnceon Prnceon Unversy Press pp.l 3- 6 5. Saek K (994) Seka o oou keza no sejka" o hese fuky (The Goba Spread of he Pocazaon of Economy" and he Depresson of Hese)' konomsuo May 344-50. Samueson R.J. (994) Here's Some Good News Amerca Newsweek January 35. Samuels R.J (994) Rch Naon Song Amy Ihaca Coe Unversy Press Sanbesu K. (949) Dana nado ksery g o yakuwar (The Sgncance and he Funcon of he Revson of Organzaons). In Shy sengo nnen sh: keza (M�eras on he Tweny ear Hsory of he Poswar Japan Labour) eded by Okch Kazuo. Tokyo Nhon Hyronsha pp l 20-24. Sao N. (958) Sesanse kj o chngn koy (The Promoon of Producvy and Saary and Empoymen). konomsuo February 22505 5. Sawa T (984) Kdo sech nen o sesaku no ddash (The Hgh Growh Hsores of Boh Theory and Polcy) Tokyo Nhon Hs Shuppanka. Sco R. (99) Unpackng Insuonal Argumens'. In The New Insuonalsm n Oganaonal Analyss eded by Powe and Pau J DMaggo. Chcago The Unversy of Chcago Press pp. l 64-82. Shmada H. (1983) Japanese ndusa ReaonsA New Genera Model? A Survey of he EngshLanguage Leraure In Conempoay Indusal Relaons n Japan eded by T. Shra. Madson Unversy of Wsconsn Press. Shmada H. (993) Senshnkoku gaa koy n shfuo o soge Accelerang he Sh Towards he Employmen Paern of Advanced Counres). Shkan Ty Keza Aprl 242224. Shmada H. ( 994a) Shnsangy koy sshusu kgaku" o soge (Makng Pans Qucky for he Creaon of Empoymen New Indusres)' Ch Kon January48-62 Shmada H (994b) Kse kawa de shnkoy no sshusu o Creang New Empoymen by Dereguaon). Shkan Ty Keza (Augus) 3-20 Shmomura (958) Keza sech suken no ame n (For he Reazaon of Economc Growh). Tokyo Kchka. Shmomura (959a) Nhon keza no kch o sono sechryoku (The Basc Condon of he Japanese Economy and s Growh Power). In Shmomua on o sono hhan eded by Kny Zase Jj Kenkyka pp.3-30 Shmomura ( 959b) N hon keza no sechyoku o sech rron (The Growh Power of he Japanese Economy and he Growh Theoy)' In hmomu on o sono hhan eded y Kny Zase Jj Kenkyka pp8-22 Shmomura (962) Nhon kea sechon (On he Japanese Economc Growh) Tokyo Kny Zase Jj Kenkyka Shmura (994) Consumer Technology Gone Asray'. Japan cho Vol. XXI (Specal Issue). Shozawa ( 993) Sa ygana bosuraku o junb shy (Le's Prepare An Eegan Declne). konomsuo December 683
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Efciency culture and plitics
Ba Ga Shukan Ty Kea (1994), Kek handan krea kse kanwa made u no ponto (en Ponts: From the Predcton o Economc Stuaton to Deregulaton)'. August:l3-20. Shy, ([ 8 96 6) Sesanse zky n tasuru khontek tado (he Basc Poston on the Promoton o Productvty) . n koch Kazuo, ed Shry sengo nnensh Vol 4 rd. okyo: pp306 -308 Sdme Danka ch nka kette: sesanse k und n tasuru sdme no tado (he Decson by the Second Meetng o Centra Commttee: Sdme's Atttude oward the Productvty Movement) n koch Kazuo ed Shry sengo nnensh: Vol 4 rd okyo: p308 Sugta H (989) Shwa no ekonomsuto (Showa Economsts). okyo: Ch Keza sha Swedberg, R and Granovetter M. ( 992) ntroducton'. Pp. -26 n The Socology of Economc Le edted by Mark Granovetter and chard Swedberg Boulder: Westvew Press Swdler A (986), Cuture n Actons: Symbols and Strateges', Amercan Socologcal Revew 1:23-286. SWNCC0/3 (982 [194] ), Unted States nta PostDefeat Polcy Reatng to Japan: SWNCC 10/3'. n Shwa asesh shsen kaa kwa made (he Hstory o Fnance of the Showa Perod: From the End o the War to the Conclusn o the Peace reaty) edted by kurash Zaseshshtsu okyo: y Keza Shnpsha Vo 20 pp63-6 achbanak, ( 1984) Labor Mobty and Job enure'. n The Economc Analss of the Japanese Frm, edted by Mashko Aok Amsterdam: Esever Scence Pubshers B, pp-102 akajma K (93) Mujun no shchtek hygengrka (he Pofond Reecton of ContradctonRatonalzaton). Keza Hyron August:0-. omnaga, K. (993) Fuky ga kasoku suru nhontek shsutemu no shukushka (he Decne o the Japanese System Accelerated by the Recesson)' Ekonomsuto May 2:18-23 suruda, S (1994), Hkantek sugru sangy kdkaron (he OverPessmstc heory o Dendustrazaton) Ekomosuto July :40-43 ssan, DKC (94) Sengo keza jnensh (A en Year Hstory o the Postwar Economy). ssansh (ed) (9), Sangy grka hakusho (he Whte Paper of ndustrial Ratonalzaton) okyo: Nkkan Kgy Shnbunsha Uchash K., ( 9 93) Nhon gata koy chse no ugam o tadase (Correctng the Dstorton of the Japanese Stye Adustment o Empoyment)' Shkan Ty Keza Aprl 24:820 Uchhash, K and az (1993), Mono zukur n shme to hokoru o tormodose (akng Back the Msson and the Prde n Makng hngs) Economsto November 6 :34-3 8 Ueda, N., (994), Endaka, kse, shkank ga kdka o kasoku suru (he Apprecaton o Yen the Government Regulaton and the Busness Custom are Acceleratng the Dendustrazaton) Ekonomsuto July :30-3 Weber M. (968) Economy and Socety New York: Bedmnster Press Vol 1 Wer M. (1989), deas and Poltcs: he Acceptance of Keynesansm n Brtan and the Unted States n The Poltcal Power ofEconomc Ideas: Keynesanm Across Natons edted by Peter A. Hall Prnceton: Prnceton Unversty Press, pp 3-8
r M and Skocpol (98) State Structures and the Possbtes or Keynesan Responses to the Great Depresson n Sweden Brtan and the nted States n Brngng the State Back In edted by Peter B. Evans, Detrch Rueschemeyer and heda Skocpol Cambrdge: Cambrdge Unversty Press, pp.03-16. llamson OE (9), Markets and Herarches: Analyss and Anttrust Implcaton New York: he Free Press llamson OE (198) The Economc Insttutons of Captalsm New York: he Free Press. llamson E, (198) he Economes o Organzaton: he ransacton Cost Approach Amercan Journal ofSocology, 8(3). rong D., (96) he Oversocalized Concepton of Man n Modern Socology' Amercan Socologcal Revew 26:183-93 amaksh A., (1993) Nj sek wa bery no rsh kanke n tenkan (he ransormaton owards the EuroAmercan Style o Labor Reatons). Shkan Ty Keza Apr 24:1 3. oshda, S ( 9), Kas jnen (en Years' Recollecton) ky: Shnchsha. Vos. 1 2 3 4 Zeer A. (1988) Beyond the Poemcs on the Market: Establshng a heoretcal and Emprca Agenda'. Socologcal Forum, 3(4):64-634 Zukn S. and DMaggo (1990) ntroducton. n Structures of Captal Socal Organaton ofthe Economy, edted by Sharon Zkn and Pau DMaggo. New York: Cambrdge Unversty Press pp.l- 36
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The Editoril Bord oThe Soiologil Review
1998
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Recmbinnt ppety in Est Eupen cpitlism
Reombnant property n East European aptalsm
Dvid Strk · Inroducion: he science of he no ye
Sociology began as a science of transition founded at our century's turn on studies of the epochal shis from tradition to modernity, rural to urban society, Gemeinschat to Gesellschat, feudalis to capitalism and mechanical to organic solidarity. For the founders of sociology the crisis besetting European societies at the end of the 9th century was diagnosed as a normative and institutional vacuum. The old order regulated by tradition, had passed but a new moral order had not yet been established During our own n de sicle not the crumbling of traditional structures but the collapse of communism gives new life to the transi tion probematic (see Alexander, 1994 for an extended critical discussion) As the science of the not yet transitology studies the present as an approximation of a designated future (Blanchard, Froot and Sachs, 994) risking an underlying telelogy in which concepts are driven by hypostasized endstates In that framework the transi tional present is a period of dislocation as society undergoes the passage through a liminal state suspended between one social order and another (Bunce and Csanadi, 1992), each conceived as a stable equilibrium organized around a coherent and more or less unitar logic But is ours still the century of transition? And is that model of socia change, so formative in the launching of sociology still ade quate for understanding the momentous changes in contemporary Eastern Europe? Dicult to assimilate within the transition problematic are the numerous studies from Eastern Europe documenting parallel and contradictory logics in which ordinary citizens were already experiencing, for a decade prior to 1989, a social world in which various domains were not integrated coherently (Gbor, 1979, 1986; © Copyright hld by Th Amria oural of Soiology
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Szelenyi 1988; Stark, 986, 989) Through survey research and ethnographic studies researcers have identied a mutiplicity of socia relations that did not conform to ocially prescribed hierarchica patterns These relations of reciprocity and marketike transactions were widespread inside the socialist sector as well as in the second economy and stemmed from the contradictions of attempt ing to scientically manage' an entire national economy At the shopoor level shortages and supply bottlenecks led to bargaining between supervisors and informal groups; at the managerial level, the task of meeting plan targets required a dense network of informal ties that cut across enterprises and loca organizations; and the allocative distortions of central planning prodced the conditions for the predominantly parttime entrepreneurship of the second economies that diered in scope density of network connections and conditions of legality across the region (Gbor 1979; Kornai, 1980; Sabe and Stark, 982; Szeenyi 1988). The existence of parallel structures (however contradictory and fragmentary) in these informal and interrm networks that got the ob done means that the colapse of the formal structures of the socialist regime does not result in an institutiona vacuum Instead, we nd the persistence of routines and practies organizational forms and socia ties that can become assets, resources and the basis for credible commitments and coordinated actions in the postsocialist period (Nelson and Winter 1982). In short in pace of dis orientation we nd the metamorphosis of sub-se organzational forms and the activation of preexisting networks of aliation If, by the 980s the societies of Eastern Europe were decidedly not systems organized around a single logic, they are not likely in the postsocialist epoch to become, any more or less than our own, societies with a singe system identity. Change even fundamenta change, of the social world is not the passage from one order to another but rearrangements in the patterns of ho mutiple orders are interwoven. Organizational innovation in this view is not eplacement but recombination (Schumpeter 1 934) Thus we examine how actors in the postsocialist context are ebuilding organizations and institutions not n the uins but with he uins of communism as they redeploy avaiable resources in esponse to their immediate practical dilemmas. With such a conception of path dependence we explain not the persistence of the ast but how mutiple futures are being contested in the presen nstead of paraysis and disorientation or of condemnation to repe ition or retrogression 3 we see ongoing processes of organizational Copyrigh hld by Th Amria oural of Sooogy
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Recombinant property in East European capitaism
Davi Stark
inovatiofor it is through adjusting to new ucertates by improvisig o practiced routines that new orgaizational forms emerge (Nelson and Winter 982; White 1993; Kogut ad Zader 1992; Sabel ad Zeitlin 96). Th analysis that folows emphasizes the organizatioal reexivity that is possible when actors ma oeuvre across a multipicity of legitimatig priciples and strategi · cally exploit ambiguities in the polyphony of accouts of work value ad justice that compose modern society (Boltaski ad Theveot 1 99 ; White 992; Stark 990; Padgett and Asell 1 993)
A new ype of mixed economy?
This chapter examies the recombiatory ogic of organizational iovatio in the restructuring of property relations in Hugary I · asks re recombinant processes resulting in a new type of mixe economy as a distinctively East European capitalism?' For more tha 30 years' policy aalysts in Eastern Europe debated the correct mix of plan and market' (Stark and Nee 989). By the mid980s in Hugary the debate had shied to the correc mix of public and private property' as the earlier sacrosanct status of colective property eroded with the growth of the second econ · omy. It was thus in the wanig years of state socialism that Gbor (1986) and Szelenyi (1988) coined the term sociaist mixed eco omy' to desigate the new economic coguratio. Meanwhie Stark (1989 p. 68) amplifying Gbor's call to acknowledge a mixed ecoomy as a viable hybrid form ad ot s iherently unstabe ad necessarily transitioal' wodered oetheless whether the conct f mixed ecoomy was adequate to grasp the emergent phenomena of late socialism O the basis of ed research on intrapreurial' subcotractig uits i Hungaria rms he argued that aspects of emerget private property were ot respecting the boudaries of the secod ecoomy but were beig fused with public ownership insie the socialist rm resultig in diversicatio of property forms'. Identifying hybrid mixtures of public ownership and private iitiative' Stark (1989 pp. 68) argued that instead of a mixed economy with wellbounded pubic · and private sectors anaysis should begin to address the growig plurality of mixed property forms' that transgressed ad blurred traditiona property boundaries. Scholars of economic reforms in China subsequently developed reated cocepts to aalyse the scal reforms reshaping incentives
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© Coyrigt eld by Te Ameic oul of Sociology
mong ocal governmets that gives rise to township ad village terprises'. Oi's ( 992) concept of ocal corporatism' Nee's (1 992) ybrid property and Cui's (i press) otio of moebiusstrip ownship' each illuminated a particular facet of Chiese property eforms that supported the general conclusio that Chia's is not a mple mixed ecoomy but a kaleidoscope of mixed public and rivate property forms. Of specia relevance to my cocerns is Walder's ( 994) isight that roperty reform should not be equated with privatizatio. Walder rgues that clarication of property rights' in the Chinese scal eforms ca yied perfrmace enhacing incentives eve whie aintaiing public owership' without privatizatio. Our aalysis of the Hungaria case also demonstrates that property trasformation ca occur without coventioa privatization The dierece owever is that property trasformation in Hugary does ot ec ssariy carify property rights As we shall see the emerging new roperty forms i Hungary blur (1) the boundaries of pubic ad rivate (2) the organizatioal boundaries of enterprises ad (3) the oudedess ofjusticatory pricipes. To deote these processes of tiple boudary blurrig I adopt the term recombinant property Recombinat property is a form of orgaizatioal hedgig or ortfolio maagemet i which actors respod to uncertaity i th organizatioal evironment by diversifying their assets redeig nd recombiig resources It is an attempt to hod resources that an be justied or assessed by more tha oe standard of measure. The distinctive variant of organizational hedging that is recombiant property in Hungary is produced i two simultaneous ocesses: Parallel to the ecentaize reorganization ofassets is the entraize management of iabiities. O the one had deentralzed reorgaization produces the crisscrossig lies of iter nterprise owership etworks; o the other debt consolidatio ansforms private debt into public liabiity. Although these two dimesions are discussed separately their simultaneity gives disticve shape to Hungarian property The cash of competig orderig inciples produces orgaizational diversity that can form a basis r greater adaptability but at the same time creates acute probms of accountability. ata
y arguments are based o data collected durig a 1 1moth stay Budapest in 199394. That research icludes () eld research in Coyrigt eld by Te Americ Jor o Sociology
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David Stak
Recombinant popety in Eat Eopean capitalim
six Hugaria eterprise, (2) compilatio of a data set o the owership structure of Hugarys 200 largest corporatios ad top 2 baks ad (3) iterviews with leadig actors i baks, propert agecies political parties, ad govermet miistries
rise level. The results, however, are ot welldeed rights of priate property, yet either are they a cotiuatio or reproductio of old forms of state owership. ew fom oftate owneh
formerly state rms are trasformig property relatios at the
ake rst the shareholdig compaies (RTs) o lie two of the table Some of these corporatios are private vetures ewly established er the system chage But may are the legal successors of the tateowed eterprises that would have bee eumerated i the revious year o lie oe of the table. Through a madatory process f corporatizatio, the former stateowed eterprise trasforms s legal orgaizatioal form ito a shareholdig compay The uestio, of course, is who is holdig the shares? I most of these orporatized rms the maority of shares are held by the State roperty Agecy or the ewly created State Holdig Corporatio VRt) That is, as public ad private actors coparticipate i e ew recombiat property forms, the ature ad istrumets of e public dimesio chage Whereas state owership i social meat umediated ad idivisible owership by a state miistry .g, Miistry of Idustry), corporatizatio i postcommuism tails share owership by oe or aother govermet agecy sposible for state property Such corporatizatio madated by a privatizatio agecy i the ret cotext has some distictive features of reatioalizatio. I e 980s, maagers i Hugary (ad workers i Polad) exercised facto property rights. Although they ejoyed o rights over dis osal of property, they did exercise rights of residual cotrol as well ights over residual icome streams I the 990s, corporatizatio radoxically ivolves eorts by the state to reclaim the actual exere of the property rights that had devolved to eterpriselevel ors. Iroically, the agecies resposible for privatizatio are act as agets of izatio (Voszka, 992). he trap of cetralizatio (Bruszt 988) already well kow i regio, stads as a warig, however, that the eective exercise o uch cetralized cotrol varies iversely with the scope ad the ree of direct itervetio Oe ecouters, therefore, proposals privatizig the asset maagemet fuctio. I such programmes state retais the right to dispose of property but delegates its s as shareholder to private cosultig rms ad portfolio ma et teams who oversee daily operatios ad strategic decisios o a subcotractig or commissio basis.
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The decenralized reorganizaion of asses Althoug h they fail to correspod to the policy prescriptios o either big bag or evolutioary ecoomics, sig icat popert trasformatios are takig place i Hug ary. Sice 989, there has bee a explosio of ew ecoomic uits I Table we see that •
• •
the umber of state eterprises declied by about 60 percet from
the ed of 988 to the middle of 994; the umber of icorporated shareholdig compaies ag, or RT) icreased by more tha twetyfold (from6 2,679); ad the umber of limited liability compaies (korlatolt tag, or KFT) icreased most dramatically from
uits i 988 to over 79,000 by the middle of 994
Tae Man enerre n Hungar - rgnon or Stae enerprises Shareho1ding companies (RTs) Lmed labty companes (KFs
19 199 199 1991 199 199 994
2,378 2,400 1 16
307
2,363 2233 1,733 1130 646 1,072 1712 2,375
450 4,464
Source Naiona Bank o ungary, Monthly Report 9942, and ungarian Saiscal Oce, Monthly Buletn ofStatstcs 99/ Note he daa epresen he numbe o ms couned in ecember o eah
ecep o 994 whch uses he coun rom ay
Table clearl idicates the sudde proliferatio of ew uits the Hugaria ecoomy. But does the table provide a reliable
of property relatios i cotemporary Hugary? No, at least ot the data are forced ito the dichotomous public/private that structure the discussio about property trasformatio i post-socialist coutries. As we shall see, actors withi the © Copyright hld by Th Amric Jourl of
yright hld by Th Amric Jol of Sociology
2
Recombinnt popety in Est Euopen cpitlism
Dvi Stk Inteentepise ownesh
Figre presents two discrete networks formed throgh sch terenterprise ownership (Nmbers refer to specic rms; ines dicate the direct ownership ties among them. Weak ties (shareodings with other rms that do not have at least one other tie hether as owner or owned to any other rm in the network are ot dispayed The relations depicted in the gre we empasize e the direct horizonta ties among the very largest enterprises e sperhighways so to speak of Hngarian corporate networks. he diagrams presented in Figre indicate a dierent way of maping the socia space of property transformation than that sgested in Table . Whereas Tabe groped entities according to eir legal corporate stats here we trace not the distribtion of ttribtes bt the patterns of social ties In anaysing the relational dynamics of recombinant property we ow shi or focs from the corporate thoroghfares inking the ge enterprises to examine the ocal byways linking spino propties within the gravitational eld of large enterprises.
The state is sedom however the soe shareholder of the corpora tized rms. Who are the other sharehoders of the RTs enmerate on ine two of Tabe ? To answer this qestion I compiled a set on the ownership strctre of the argest 200 Hngarian corpo rations (ranked by sales. These rms compose the Top 200 of t 993 isting of Figyel a leading Hngarian bsiness weekly. their Fotune 500 conterparts in the United States the Figyel rms are major payers in the Hngarian economy empoying estimated 2 percent of the abor force and acconting for 3 cent of tota net saes and 42 percent of export revenes 993). The data also inclde the top 25 Hngarian banks by assets. Ownership data were obtained directy from Hngarian Corts of Registry where corporate es contain only information on the company's ocers and board of bt aso a complete list of the company's owners as of the anna shareholders' meeting The data analysed here are limited · the top twenty sharehoders of each corporation. In the Cort of Registry and the 9 Conty Registries we were abe locate owership es for 95 of the 200 corporations and for a the 25 banks referred to beow as the Top 220' rms Who holds the shares of these 220 largest enterprises and bank I fond some form of state ownershiwith shares held by the V Rt (the State Hoding Corporation te PA (the State Agency or the instittions of local government (who had exchanged their real estate holdings for enterprise in the overwhelming majority ( percent of these enterprises banks More srprisingy given the reativey short time since system change' in 98990 we fond 36 companies (i.e. more thaQ 6 percent of this poplation in majority foreign Hngarian private individals (smmed down the top 20 hod at least 25 percent of the shares of ony 2 of these enterprises and banks Most interesting from the perspective of this paper is the of 8 cases in which another ngarian company is among te argest sharehoders In 42 of these cases the other Hngarian panies together hold a clear majority (50 percen pls one Ths by the most restrictive denition amost 20 percent of Top 220 companies are nambigos cases of interenterprise ership; and we nd some degree of interenterprise ownership almost 40 percent of these large companies
e trn ths to the form with the most dramatic growth dring the ostsociaist period te newy estabished limited iabiity company FT enmerated on ine three of Table . Some of these KFTs e geninely private entreprenerial ventres. Bt many of these ited iability companies are not entirely distinct from the trans med shareholding companies examined above. In fact the for rly socialist enterprises have been active fonders and contine as rent owners of the newy incorporated nits. The basic process of this property transformation is one of decenized reorganization Under the pressre of enormos debt cining sales and threats of bankrptcy (or in cases of more prosos enterprises to forestall takeovers as we as to increase tonomy from state ministries directors of many large enterprises breaking p their rms (aong divisional factory departmenta even workshop lines into nmeros joint stock and imited ia ty companies. It is not ncommon to nd virtaly all of the vities of a large pblic enterprise distribted among 520 sch llites orbiting arond the corporate headqarters. s newy incorporated entities with egal identities these new ts are nominally independentregistered separatey with their directors and separate baance sheets. Bt on closer inspection stats in pracice is semiatonomos. An examination of te
22
pote stelites
yrght hed y The Amecn oul of Socology
23
David Stak
Recombinant popety in East Euopean capitalism
26
Network I
,.-'22"� -5
rms represeted i Figure 2 As we see i that gure Heavy etal a eormous shareholdig compay i the portfolio of the Sate Holdig Corporatio is the majority shareholder of 26 of its 40 corporate satellites Like Saturs rigs Heavy etals satellites revolve aroud the giat corporate plaet i cocetric orbits Near the cetre are the core metallurgy uits hotrollig mills eergy maiteace ad strategic plaig uits held i a kid of geosychroous orbit by 00 percet owership. I the ext rig where the corporate head quarters holds roughly 5099 percet of the shares are the coldrollig mills wire ad cable productio oxyge facility galvaizig ad other ishig treatmets specialize castigs quality cotrol ad marketig uits. As this listig suggests these satellites are
Network II
N22 Figure
Two inteentepise owneship netwoks in Hungay
computerized records of the Budapest Court of Registry for example, that the controlling shares of these corporate are typically held by the public enterprises themselves. This is exemplied �y the case of one of Hungary's larg est
••
Rt Shholding Compy Lmid Liabi Compy Bt Pe Nuers in ics dica Heavy Metal' oweip e allite.
gure
a ven
Copoate satellites at Heavy Metal based on data fom intenal company documents
David Stark
Recombinant property in East European capitaism
lined to eah other and to the ore nits by ties o tehnologia deendene. Relations beteen the middlering satellites and th omany entre are mared by the entre's rerrent eorts to de striter aonting roedres and tighter nanial ontros These attemts are ontered by the nits' eorts to inrease thei atonomyoordinated throgh ersonal ties and ormalized in the bieely meetings o the Clb o KFT Managing Diretors'. The satellites o the oter ring are even more heterogenos in thei rodtion roles (onstrtion indstrial servies omting eramis mahining) and are sally o loer levels o Units o this oter ring are less xed in Heavy Metal's gravitationa eld some have reently entered and some seem abot to leave Among the ne entrants are some o Heavy Metal's domesti s tomers. Unable to ollet reeivables Heavy Metal exhanged inter enterrise debt or eqity in its lients reerring that these meteor be set into an orbit rather than be lost in liqidation. Amongthes satellites lanhed rom the old state enterrise are some or hih Heavy Metal agments its less than majority onershi ith leasing arrangements to ee entrigal ores in he The ororate satellites among the limited liablity omanie enmerated on line 3 o Table 1 are ths ar rom nambigosy rivate' ventres; yet neither are they nmistaably statist' reside o the soialist ast. Proerty shares in most ororate satellites ar not limited to the onding enterrise. To and midlevel agers roessionals and other sta an be ond on the lists onding artners and rrent oners. Sh rivate ersons rarely aqire omlete onershi o the ororate satellite reerring se their insider noledge to exloit the ambigities o instit tional oonershi The ororate satellites are ths artially a reslt o the hedging and rissharing strategies o individal man agers We might as hy a given manger old not ant to aqir 1 erent onershi in order to obtain 1 erent o the ro bt rom the ersetive o a given manager the alls instead Why aqire 1 erent o the ris i some an be shared ih ororate entre?' With ambigos interests and divided these rissharing (or risshedding) oner/managers are tionally hedging (Sabel 1. Not nommonly these individals are joined in mixed ner shi by joint sto omanies and limited liability sometimes by indeendent omanies oten by other KFTs in similar orbit arond the same enterrise and reqenty by holding omanies or KFTs sinning arond some other
1
with lines o rhase or sly to the ororate nit (Vosza 1. Bans also artiiate in this orm o reombinant roerty n many ases the establishment o KFTs and other ne ororate orms is triggered by enterrise debt. In the reorganization o the nsolvent rms the ommerial bans (hose shares as joint sto omanies are still redominantly stated oned) beome sharehold ers o the ororate satelites by exhanging debt or eqity. We have sed the term ororate satellite' to designate this nstane o reombinant roerty. An exat (bt mbersome) ter inology reets the omlex intertined harater o roerty elations in Hngary a limited liability omany oned by rivate ersons by rivate ventres and by other limited liability oma nies oned by joint sto omanies bans and large bli enter rises oned by the state. The ne roerty orms ths nd horizontal ties o rossonershi intertined ith vertia ties o ested holdings ecombinets
he reombinant harater o Hngarian roerty is a ntion not only o the diret (horizontal) onershi ties among the largest rms and o their diret (vertial) ties to their ororate satellites bt also o the netor roerties o the ll ensemble o diret and ndiret ties lining entities irresetive o their attribtes (large smal or o varios legal orms) in a given ongration. The avail able data do not alo s to resent a omrehensive ma o these omlex relations. Reords in the Corts o Registry inlde do ents on the oners o a artilar rm bt enterrises are not eqired to reort the omanies in hih they hold a stae. oever on the basis o enterrise level eld researh examination o bli reords at the State Proerty Ageny and intervies ith baners and exetives o onslting rms e have been able to eonstrt at least artial netors reresented in Figre 3 For orientation in this grahi sae e osition Figre 3 in rela tion to Figres 1 and . Figre 1 resented interenterrise oner shi netors ormed throgh hrizontal ties diretly lining large enterrises. Figre zoomed in on the ororate satellites o a sin le large enterrise With Figre 3 e ll ba to examine a rag ent o a broader interenterrise onershi netor bringing into os the ties that lin ororate satellites to eah other and that orm the indiret ties among heterogenos nits in a more loosely oled netor
David Stark
Recombinant property in East European capitaism
simpl regrouping such assets within existing enterprises alone (on rmbrm basis) cannot equal the more ruitul recombinations o complementar assets across a set o rms Restructuring via the ecombinet thu opens the possibilities o increasing the value o existing assets through their recombination. This regrouping does ot necessaril impl bringing interdependent assets under the comon ownership umbrella o a hierarchicall organized enterprise s such Hungarian recombinant propert provides examples o ntercorporate networks as alternatives to a dichotomousl orced choice between markets and hierarchies he cenralized managemen of liabiliies
Figure metamorphic network based on datafrom Heavy Meta intea documents SPes corporate es and the Budapest Cour ofRegistry We label this emergent orm a recombine a term designating network ofrecombinant property Here we see that the limited it companies that began as corporate spinos are oriente thrugh ownership ties either to more than one shareholding pan and/or to other limited liabilit companies In the recombine actors recognize the network properties o their assets and regroup them across ormal organizational These creative regroupings ail to respect the organizational aries between enterprises as well as the boundaries between pu and private With ew exceptions (Sabel and Prokop 994), the literature postsocialist propert transormation (most o it conned to vatization) assumes that the economic unit to be restructured s individua enterprise But the identication o interrm suggests that policies and practices aimed at restructuring target not the isolated rm but networks ofrms. Such an tive strateg o restructuring recognizes that assets and hae distinctive network properties (Stark and Bruszt 998). The industrial structure o the socialist econom grouped within a single enterprise assets that were (except within the logic o central planning). Merel separating 28
n the previous section we examined the decentralized reorganizaon o assets. Propert transormation however involves not onl ssets and rights but also liabilities and obligations In this section e analse what happens in a postsocialist econom when actors re called to account or enterprise debt. aking the ast sma steps
he liabilities management stor begins in 99 when the Hungarian overnment undamentall modied three important laws regulating he accounting o assets and liabilities in an attempt to maintain its ead in regional competition or oreign investments and inter ational credits Hungars comparative advantage it appeared was s gradualism which across the decades o the 970s and 980s ad ielded a ull range o marketlike institutions. Admittedl these ere not the institutions o a market econom but the were close; d so the government reasoned wh not take the last small steps? s the pioneer attempt to bring postsocialist practice in ull conorit with Western accounting and banking standards the new meares could be cast as a bold move when appealing to inteational ding agencies. But because the were not big steps the new meaes could gain external legitimation without creating a domestic ock Tus the new Accounting Law o 99 (which took eect on uar 992) required enterprises to switch to Westernstle counting principles. A simultaneousl enacted tough new sternstle Bankruptc Act similarl contined sti personal alties or directors o enterprises that ailed to le or bankruptc er the accountants (using the new accounting principles) sounded 29
David Stak
Recombinant popety in East Euopean capitalism
the alarm. At the same time the new Act on Financial Instittions introdced in December 99 was designed to pt Hngary's comercial banks on a Western footing. In particlar the reserve reqirements for measring capitaladeqacy ratios were modied and the secrities and other nancial instrments for provisioning against qalied loans were respecied The last small steps proved to be a leap into the abyss. Already reeling from the collapse of the CMEA markets enterprise directors now learned from their accontants that the new accontant prac tices were coloring the companies' books even redder tha expected. By the end of 992, over 0,000 bankrptcies and liqida tion proceedings had been initiateda gre ten times higher than dring the previos year when enterprises had experienced the worst shock of the collapsed Eastern markets (Bokros 994. With onethird to onehalf of enterprises in the red the lossmaking rms began to stop payment on their bank credits. By the end of 92, the overde loan stock of the banking system was 27 billion forints (Ft (.5 billion in US. dollars p 90 percent from the previos year (National Bank of Hngary 992, p 09. With thosands of rms ling for bankrptcy the banks were forced by the new banking law to reclassify loans. The sbseqent dramatic increase in the new legallyreqired provisionings agains poorly performing loans ct deeply into bank prots slashe dividends and tax revenes from the banking sector to the stat treasry and trned the banks' capitaladeqacy ratios from posi tive to negative The banking system was in crisisrst annonced no less in The Financial imes (Denton 993.
Fom small steps to big bailouts
The same government that had lanched an nintended nancial shock now initiated a bold plan to save the banks In its 992 loa consolidation programme the government boght 049 bll forints (abot $ billion of qalied debt (almost all in the bad debt classication involving 4 banks and ,885 companies In a related move in early 993, the government also prchased the ban debt of giant enterprises (the socalled dirty dozen for roghl $300 million Bt the loan consolidation and enterprise recapitaliza tion programmes did not restore stability in the banking sector By September 993, only nine months later nancial experts were esti mating that loans in arrears had once again soared to 20 percent o
total loan portfolios. And the 0 largest banks were again hovering at or below the zero percent capitaladeqacy ratio (a condition of technical insolvency. For the govement the new banking rles did not exclde bailing ot banks and enterprises again and again. Bt the big bailot of 993 had a new twist. Instead of bying the debt from the banks this time the government adopted a twostage strategy of rst recap italizing the banks and then sing the banks to work ot the enter prise debt. By injecting enormos sms of fresh capital into the banks the Ministry of Finance became the dominant shareholder of the large commercial banks. The rst stage of the strategy then cold be smmarized in a phrase: Don't acqire the debt; acqire the banks The second stage of the strategy was designed to harness the expertise of the banks to the service of the state. Becase it was the banks and not the state that wold be le holding the qalied debt the banks wold have an incentive to collect that debt or at east the part they had not already written o their books. And they wold do so this time not with the state as their sometime partne bt with the state as their majority owner. Bt eorts to exercise control throgh direct ownership do not eqal more eective state capacity. The conservativenationalist government seemed deterined to learn the lesson of the trap of centralization' from its own experience Banks have shown almost no willingness to se the consolidation fnds for actively restrctring rms; and despite the assmption that the Ministry of Finance's ownership wold yield control of the banks the government has been almost entirely inef fetive in monitoring how the banks se the recapitalization fnds The massive bailot programmes were not of corse withot eects: At 300 billion forints ($3 billionamonting to 0 percent of Hngarian GDP and 8.3 percent of the 94 national bdget the bailots creatd a long qee of banks and rms with their hands ot reaching for the state's pocketbook. Ths at the same time that the corporate networks were engaged in the decentralized reorganization of assets the Hngarian state attempted the centralized management of liabilities That centralization has not le the decentralized processes ntoched. From the perspective of the enterprises debt consolidation' triggers the organizational separatio of debts from assets. The Hngarian government's attempt at the centralized management of liabilities stimlates the networks to complement their strategies of risk spreading with new strategies of risk shedding Two types of strategies can be
David Stark
Reombinant property in East European apitalism
to us at hig her than market rates to articially raise bank
its in order to pay dividends into a state treasu ry whose
had dwindled when corporations like ourselves
stopped paing taxes.
And so we must ask, into whose account and by whic h account ·
debt forg iveness ow? Or, in such a situation, is anyone
able?
An Eas European capialism?
How are we to understand these unorthodox form s hese tional monsters' reg rouping the seeming ly inco g ruous? concluding section, we reconsider the three aspec ts of
;
property (blurring of public and private, blurring of enterpri boun
?
aries, and blurring the boundedness of leg itimat ing prin ples) terms of three underlying conceptsmixtu re, diversity, an complexity. Mixture
Imag ine two economies, each of equal parts publi c and private. I one, half the rms are fully private, half are fully public In the other, every rm is half public, half private Each is a mixed econ omy'. Yet it is likely that their dynamics will be the same? No two econoies closely approximate the thoug ht experiment's ideal types; but it nonetheless puts in sharp relief the question What is the mix ofthepost-socialist mixed economy?
My nding s of corporate spin-os and recombinet a the e�terrise level, and of widespread public reorg anization ownership com bed th erenterprise ownership networks among the very lrg est enterpses, challeng es the assumption, widely held on all sdes of the privatization debate, that post-sociali st economies can be adequately
represented in a twosector model. That analy
tic shortcoming cannot be remedied by more precise speci cation of the boundary between public and private: the old prope rty divide has een so eroded that what mig ht once have been a distinct boundary le IS now a recombinant zone. Hung ary is a post-s ocialist mied economy not because of a simple dualism of well-bounded state owned rms in one sector and privately owned rms in another but because many rms themselves exploit aspects of publi c and private property relations. What we nd are new forms of property in which
�
1 36
t roperties of private and public are dissolved, interwoven, and bined. Propert in East European capitalism is recombinant ert, and its analsis suggests the emergence of a distinctivel t European capitalism that will dier as much from West \ropean capitalisms as do contemporar East Asian variants. he concept of a postsocialist mixed econom is a useful rst roximation of an East European capitalism. But its essentialist egories of public' and private' (and the related dualisms of rket' and redistribution')ven when opened up to the possi t of being mixed together in the same organizational setting be more limiting than illuminating. or decades, capitalism was dened vis-vis ocialism, and vice rsa. Their sstematic comparison enriched our understanding of oth, but the methods of mirrored opposition' and similar conructs (Stark, 986; Szeleni, 978 988) that worked wih these alisms are no longer fruitful The demise of socialism challenges at analticall forced choice, and it oers an opportunit for riching comparative institutional analsis When we stop dening pitalism in terms of socialism, we see that, in our epoch, capital m as a construct is onl analticall interesting in the plural: api a/isms must be dened and compared vis--vis each other iversity
Our rst analtic shi, therefore, must be from the conceptual tools round the concept of mixture to those around that of diversity. Capitalisms are diverse, and that diversit is manifested in forms that cannot be adequatel conceptualized as mixtures of capitalism and socialism. B analzing recombinant propert not onl as te dissolution and interweaving of elements of public and private but also as a blurring of organiztional boundaries in networks of inter locking ownership, we can escape, for example, the terms of the debate about whether the lessons of East Asia for Eastern Europe' are the virtues of neoliberalism o of neostatism (World Bank 993; Amsden, 994). Instead we join economic sociologists who are studing the East Asian economies from a networkcentred approach in which not markets, nor states, nor isolated rms, but social networks are he basic units of analsis (Gere, 994; Hamilton, Zeile and Kim, 990; Hamilton and Feenstra, 995) In this perspective, the abilit of the East Asian economies to adapt exibl to changes in world markets rests in the interlocking ties characteristic of corporate groups (Orru, Biggart, and Hamilton,
David Stak
1991; Granovetter 1995) whether these be the patterns of mutu shareholding within the Japanese keietu (Gerlach and Lincoln 1992; Hoshi 1994); the ties of family ownership within the mor vertically integrated South Korean chaebo (Kim 1991; Hamilto and Feenstra 1995); the social ties of the more horizontally int grated Taiwanese quanxiqiye related enterprises' (Numazaki 1 991 or the dense ties that transgress organizational boundaries in th buyerdriven' and producerdriven' networks in Hong Kong Singapore and elsewhere in Southeast Asia (Gere 1994). These recent studies of the social embeddedness and local organ zational innovation characteristic of East Asian corporate network suggest that the strategic choice is not plans or markets or eve clans or markets but clans fo markets Market oientation must distinguished from market coodination a broad variety of institu tions of nonmarket coordination are compatible with high perfor mance market orientation (Schmitter 1988; Boyer 1991; Bresser 1993). Many of the most successful forms of network in East Asia moreover appeared to early observers as highy improbable forms whose atavistic features could not possibly su vive beyond the period of postwar reconstruction from which arose. Our point of departure it should be clear however is n ot look to Eastern Europe to nd Hungaian keietu or chaeo Instead of searching for direct counterparts Asian/East European comparisons will yield new concepts when grasp the specicity of the regional variants by explaining the ence among the various countries within a egion Compexity
In restructuring assets we might say that actors are identifying new resources but this would suggest that the resource was simpl hidden or underutilized and only needed to be uncovered In fac before recombining resources they must rst redene them. We ca this ability to recognize the properties of persons nd things ogani zationa eexivity It cannot be derived from the ambiguity property claims but is a function instead of the ambiguity of orga nizing principles (Graber and Stark 1997; Stark forthcoming) The key to adaptability in this view is not simply the diverity types of organizations but the possibilities for inside and across organizations where multiply operative legitimat ing principles collideor in Harrison White's (1993) phrase values mate to change' 1 38
Recombinant popety in Eat Euopean capitaim
Some might argue of course that multiple orders are ne rovided that each occupies a distinctly bounded domain Such is e model of modernity in modernization' theory: through diereniation each domain of society would develop as a separate utonomous subsystem with its own distinctive logic Complexity in is view requires diversity but only as the juxtaposition of clearly ounded rationalities Marxism of course has its own conception of complexity: the temporary overlap of mutually contradictory rinciples Both modernization theory and Marxism are deeply rounded in the transition prblematic The noisy clash of orders is only temporary: the revolutionary moment for one the passage to ierentiated domains in the other. If we break with this transition problem we can escape from the poverished conceptions of complexity in both Marxism and odeization theory In the alternative conception oered here omplexity is the interweaving of multiple justicatory principles on he same domain space That view of course shares with modernzation theory the notion of distinctive domainsrelatively utonomous elds of action And it shares with Marxism the otion of the collision of ordering principles. But unlike modernizaion theory each domain is a site of heterogeneity; and unlike arxism that tension is not consolidated and then released in an llencompassing revolutionary moment The noisy clash of orders occurs throughout the social world and it is not transient but ongo gpunctuated by relative localized stabilizations but never equibrium (Latour 1988). Postsocialist societies are entering this discordant world To still at noisy clash by the ascendancy of one accounting with proftability as the sole metric and markets as the only coordinating echanism would be to duplicate the attempt of Communism with ts imposition of a unitary justicatory principle a strict hierarchy of property forms and a single coordinating mechanism. To repli ate the monochrome with a dierent colouring would be to destroy e heterogeneity of organizing principles that is the basis of adaptbility As this account f recombinant property has demonstrated postocialist societies are not lacking in heterogeneous organizing rinples. The problem therefore is not a simple lack of accountability ut an overabundance of accountability: An actor who within the e domain space is accountable to every principle is accountable o none. The adaptability of modern capitalisms rests not simply in e diversity of organizations but in the oganiation of diveity 1 39
David Stark
Recombinant property in East European capitaism
enogh overlap of legitimating principles across domains to rivalry of competing acconts within domains and enogh edness of rationalities to foster accontability It is not in nding right mix of pblic and private bt in nding the right of diversity to yied both adaptability and accontability that socialist societies face their greatest challenge Noes A ch it hare many of the hortcomng of preen' hioryreading pat a appoximaon of aer ocome (Somer and Gbon, 1994 n reated criiqe in he ocoogy of cience, Coln (1982, Lator (1988, Pcerng (1992 rn from ocome to controvere 2 at ropean choar have long arged hat ocia change a rehapng of endring trcre exhiing mtplcy raher than (Konrad and Szeleny, 199; Szc, 1985; Sanz, 1993; Szeleny, 1994. 3 See, by contra , Brawoy and Krotov' accont of change a retrogreion: cae dy gge hat wih the wihering away of he party tate the economy, far from collaping or ranformng elf, ha amed an verion of it former ef' (1992: p 34 4 Szeeny (1 98 arged tha mxre' characerized boh at and et wheea a redtribve wefare ate miigae neqaltie prodce by maret nd advanced capitalim, n ate ocialm ubordnaed marketlike iniution mii
gae neqalite prodced by the domnan redtrbtve mechanm lewhe (Sar, 1 986 I abelled hi analytc mehod mirrored oppoition' and ed analyze derence beween capta and ocalit nerna abor maret. 5 In her analyi of poliica capitam' n Poand, Sanzi (1 99 1 milary ien tie hybrid form' of ndened dal ta' in a variey of leang form an cot hfting arrangement throgh which nomencatra compane enjoy th benet of property tranformaion witho privatiaon 6 Three of hee rm are among the 2 arge rm in Hngary and are at h core of Hngarian manfactrng in metalrgy, elecronc, and rbber prodc Three are mall and medmize rm n pac machinng, and ndra engineerng Thi ed reearch wa condced in collaboraon with Lz Neumann, and nvolved longudinal anayi of the ame rm in whch we had
earier tdied an organzationa nnovaon of ntea bconacting nde h ocalit enerpre (Star, 1986 , 1989, 199; Nemann, 1989 Thee data were agmened by ownerhip data drawn from the le o f ome 8 rm nder h e portfoo management of the Sae Propey Agency. 8 A paral i of ntevewee inclde; he former predent of he Naonal Ban the former deptymniter of he ny of Fnance; exective of the for arget commercial ban and wo eading nvetmen ban; the former preient of he Sate Hodng Corporation; direcor, advior, and ocal of he Sa Property Agency; enor ocal of the ord Ban Hngaran on; th
chief economc advor of the two major lbera pare; he preiden of he Federaton of Hungaan Trade Unon; and leading oca of he Hungaran
Socalit Party (who laer acended o hghlevel poition in he new Socait Lbera coaon government
veloped. ch daa colecon no a mple maer where capal maret are poory There no Hngaran Moodys and cerany no corporae direcory
qvalen to Indusrial Groupings in apan or Kirsu no Knkyu (ee, for exam e, Gerlach and Lincoln, 1992 The aborntenive oon ha been o aher that daa drecly from the Hngarian Cor of Regtry y han o ajo V, Profeor of Law, LT, and Recor of the Inte for Advanced Sdy, Colegim Bdapet, for hi nevenon to ecre acce to thee ata and o Szabolc Kemny and Jonhan Upho for aiance in daa col ecion 10 Th 2owner mitaon i a convenion adopted n reearch on intercorporae ownerhp n a Aa (Gerach and Lncoln, 1992 Hohi, 1994 In he Hngaran economy where ony 3 rm are traded on the Bdape toc xchange and where corporae hareholdng no wdely dipered among hn dred of ma inveor,the 2owner rercon aow o accont for at eat 9 percent of he hare hed n vray every company See Star and Kemny (199 for a dealed analyi of hee data on nerorgan zaona ownerhp e Intead of regarding an ownerhp portfoo a he prop ery of an oaed rm, tha paper vew porfoo a the properie of newor of rm xploiting the dobe meanng of newor propertie (a propery holdng, on he one hand, and a characerc ch a denity, centray, and extenvy, on the other, e a combnation of correpondence anay, cqng mode, and bloc modelng echnqe to dentify eight dincve traegie of newor porfolio management by bne grop n he conempo rary Hngaran economy any of thee mdlevel manager had experence n he 198 wih an organza iona precror of he preent recombnan formhe nraenerprie parner hipin whch ematonomo bcontracng nit ed enterpre eqipmen o podce good or ervce drng the o hor' (Sar, 1 986, 1989 Lie econd economy' prodcer who contined o hold a job n ae enerprie, thee nraprenerial ni were a wdepread ret of hedging trae ge n he Hngarian economy Some o f hee partnerhip were carcely di ged reneeng cheme ha prvaized pro tream and le expene wh he ateowned enterprie Oher creativey redepoyed reorce from dvere par of the hopoor and regroped, a wel, he nforma norm of recprocy wih he echncal norm of the profeona To p hee gre in perpecve, for the United Stae he $1 5 bon avng and loan bao repreen 16 percent of GNP and percent of he projeced 19 95 federa bdge Venezela' recen $6 1 bilion ban baio i on a magn de wh he Hngaran programme repreenng percent of Venezela gro naonal prodc and 5 percent of he government 1994 naonal bdge (Brooe, 1994. 14 Thoe analyt who tend to foc on srong is n an deaona neworha , where he coniten ideabloc of a form are ghy coped and ned n dene pattea hee form ideooge' (for he clac atement, ee Bendx (1956 Thoe anayt who emphaize the comprehenbe, a oppoed to com prehenve, qality of form foc on the wak is in an deaona newor, a treed n her employmen of the term tore' and heir attenion to narrative ctre (hie, 1992; Sabe and Zeitlin, 1996. Ideooge are e roadmap, demontratng the comprehenve connecon; tore are le etched pahway, elng how one go from there o here hogh a particlar chain of connection
Recombinnt property in Est Europen cpitlism
Dvid Strk 5 See Padgett and Ansell (13 ) o an analsis o suc multivocalit in anothe istoical setting 6 n a elated at deendent tought exeiment magine two mixed economies eac with hal te ms ull ulic and al the ms ull ivate e st aived at that sectoal mix om a stating oint o onl ulic ms e othe om a stating oint o onl ivate ms Ae tei dnamics likel to e te same? 7 M agument tus, eas no esemlance to tid oad solutions (ie te mis taken notion tat thee could some comination o the est eaes o aital ism with te est eatues o socialism, and it ollows that am not aguing tat ecominant oet is a est wa As eole living in ast Cental uoe have known o decades i not centues all te est oads to caitalism stated somewhee else am eminded o te oke in which an isman in the a coun tside is asked, Wats te est wa to get to Dulin? He thinks o a minute and esonds Dont stat om ee 1 nconguit, in itsel, neithe insues suvival no condemns an oganization o to an eal death Kims ( ) discussion o the cominato logic o the oma tion o the chaebol in Kea immediatel ollowing Wold Wa invites comai son wit te omation o ecominant stuctues duing te contemoa eiod o ast uoean econstuction 1 Stak and Buszt (), o examle, comae cooate netwoks in Hunga and the Czec Reulic e nd that Hungaian netwoks ae omed edom inantl thoug enteisetoenteise links, sometimes involving anks e asent ties etween anks and intemediatelevel institutions suc as investment comanies n the Czech Reulic, contast, owneshi netwoks ae omed edominantl thoug ties at te mesolevel in the coss owneshi o anks and lage investment unds ut diect owneshi connections among enteises temselves ae ae Wheeas Hungaian netwoks ae tightl couled at te level o enteises ut loosel couled at te meso level, Czec netwoks ae loosel couled at the level o enteises and tightl couled at te meso level 20 See eseciall Gae (4) o a discussion o how ival o coexisting ogani zational oms contiutes to eexivit and adatailit o elated views on adatailit and comlexit see andau (6), Moin (174), and Conad (13)
References Akelo GA and Rome, M (3), Looting e conomic Undewold o Bankutc o Pot Brookngs Papers on Economc Actvty 2-73. Alexande JC, (14), Mode Anti, Post, and Neo How Social eoies Have ied to Undestand te New Wold" o Ou ime" Zetschrtfr Socologe, 23: 65-197.
Amsden, A, (4), Can aste uoe Comete Getting the Pices Contast wit ast Asian Stuctual Reoms P 1-07 in Captalsm Alteatve Roads ter Socalm and Drgsme edted Ands Soimano Osvaldo Sunkel and Maio Blee Ann Ao he Univesit o Michigan Pess Bendix, R, (156), Work and Authorty n Industry Ideologes ofManagement n te Course ofIndustralzaton. Bekele Univesit o Calioia Pess
lanchad, O, oot KA and Sachs, JD, (4), ntoduction to The Transacton n Easte Europe ol 2, edited Olive ean Blancad, Kenneth A Foot and ee D Sacs Cicago Univesit o Cicago Pess okos, , (4), Pivatization and te Banking Sstem in Hunga P 305-320 in Prvatzaton n the Transton Process Recent Experences n Eastern Europe edited Lszl Samuel Geneva United Nations Coneence on ade and Develoment and KOPNDAORG oltanski and venot (), De a justcaton: Les economes de a grandeur Pais Gallimad oe R, (1) Makets witin Alteative Coodinating Mecanisms: Histo, eo and Polic in the ight o the Nineties Pae esented to the Coneence on te Comaative Goveance o Sectos, Bigoio, Switzeland esse, P and Calos L, (13), e Cisis o te State Aoach to atin Ameica Discussion ae no , nstituto SuNoe, Noveme uszt L (), centalizci csadja s a olitikai endsze eomaltena tivi (e a o Centalization and the Alteatives o Reoming te Political Sstem Medvetc nume 7 17. Bunce, and Csandi, M, (3), Uncetaint in the ansition PostCommunism in Hunga East European Poltcs and Socetes 7(2)240275 uawo, M and Kotov, (2), e Soviet ansition om Socialism to Caitalism Woke Contol and conoc Bagaining in the Wood ndust Amercan Socologcal Revew 576-3. Collins, HM (ed (2), Knowledge and Controversy Studes ofMode Natural Scence Secial ssue o Socal Studes ofScence, 2( ) Conad, M ( 3), Adaptablty New Yok Plenum Pess Cui, Z (in ess, MoeiusSti Ownesi and its Potote in Cinese Rual ndust Economy and Socety Denton, N, (13), wo Hungaian Banks Said to Be ecnical nsolvent Fnancal Tmes Ma 20. ukheim, , (7), Le sucde: tude de socologe. Pais Pesses Univesitaes de Fance gye/, (3), Top a legnagyobb llalkozsok e o 200 Lagest nteises] Secial ssue Go , (7), he Second (Seconda conom Acta Oeconomca 22(3-4):1-3 Go (16) Reomok msodik gazdasg, llamszocialius A 80as vek taasztalatainak eldstani s sszeasonlt gazdasgtani tanulsgai (Reoms second econom, state socialism Seculation on the evolutiona and comaative economic lessons o te Hungaian eighties Valsg, no 6, 32-4 Gee G (4), he Oganization o BueDiven Gloal Commodit Cains: How US Retailes Shae Oveseas Poduction Netwoks P 1122 in Commodty Chans and Global Captalsm edited Ga Gee and Miguel Konzeniewicz Westot Conn Paege Gelac, ML and incoln, JR, (2), he Oganization o Business Netwoks in te United States and Jaan P 4-520 in Networks and Organzatons edited Nitin Noia and Roet G ccles Camidge Mass Havad Business School Pess ae, G (14), In Prase of Waste: Redundancy n Regonal Development Belin dition Sia
I
David Stak Recherche en Scences Socales Pris) n 85 Nvember pp 3-19 In ngish s
Wrk Wrk nd sice' Hrvrd Universiy Cener fr rpen Sdies
Program on Cenral and Eas Europe Workng Paper Seres #5
Srk D (199) Ph Dependence nd Privizin Sregies in s Cenr rpe' Eas European Polcs nd Socees 6 17-51 Srk D frhcming) Heerrchy Asse Ambigiy Orgnizin Innvin nd he Pssciis Firm Pper presened he Ann Meeings f Americn Scigic Assciin New Yrk Ciy Ags 1996 Frhcming in vme edied by P DiMggi Princen Universiy Press Srk D nd Brsz L (1 998) Possocals Pahways Transormng Pols and Propery n Ease Europe. New Yrk nd Lndn Cmbridge Universiy Press Srk D nd Nee (1989) wrd n Insiin Anysis f Se Sciism Pp 131 in Remakng he Economc Insuons o Socalsm Chna and Ease Europe edied by Vicr Nee nd Dvid Srk Snfrd Universiy Press Srk D nd Kemny S (1997) Pssciis Prfis Newrk Sregies in he Shdw f he Se' Deprmen f Scigy Ce Universiy Workng
The making of an industry: electricity in the United States
V
Mark Granovetter and Patrick cGuire nroducion: economic socioogy and he socioogy o
Papers on Neworks and Inerpreaon 1997 #7 Szeenyi I (1978) Sci Ineqiies in Se Sciis Redisribive cnmies Theory and Socey 1-63-87. Szeenyi I (1 988) Socals Enrepreneurs Mdisn Universiy f Wiscnsin ress Szeenyi I (1994) Sciis nreprenersRevisied Workng Papers Inein Insie Universiy f Michign n 4 Szcs (1985) Les ros Europes Pris Hrmn hven L (1985) Res nd Impemens Invesmen in Frms Socal Scence Inormaon 3(1)1-45 Vsk (1991) Hmyb hmyb A dnsi szerkeze ngyiprbn Frm wiigh wiigh Prpery chnges in rge indsry) Trsalm Szemle n 5 pp 3-1 Vszk (199) scping frm he Se scping he Se Pper presened
he Arne Ryde Sympsim n he rnsiin Prbe Rngsed Denmrk ne Wder A (1994) Crpre Orgnizin nd Lc Gvemen Prpery Righs in Chin' Pp 53-66 in Changng Polcal Economes Prvazaon n Pos Communs and Reormng Communs Saes edied by Ved Mir Bder C Lynne Rienner Whie HC (199) Ideny and Conrol A Srucural Theory o Socal Acon. Princen N Princen Universiy Press Whie HC (1993) Ves Cme in Syes Which Me Chnge' Pp 63-91 in The Orgns o Values edied by Miche Hher Lynn Nde nd Richrd Michd New Yrk Adine de Gryer Wd Bnk (1 993) The Eas Asan Mracle Eonom Growh and Publ Polcy Oxfrd Oxfrd Uiversiy Press
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indusry lthogh ecoomic sociology has ejoyed a strog resrgece i recet years it has focsed o relatively low or hig h levels of agg rega tio Oe cetral cocer has bee what determies the actios of idividals ad rms ad aother the role of govermet ad larg escale iterest grops i the g overace ad evoltio of the ecoomy With some otable exceptios (eg Hirsch 1 972; Campbell Lidberg ad olligsworth 1992; Dobbi 9 94 Roy 1997), few have paid close attetio to middle levels of agg regatio sch as idstries Problems of idstrial orgaizatio have largely bee le to ecoo mists who treat idstry bodaries as resltig problematically from the atre of the prodct the state of techology at a give time (as smmed p by prodctio fctios) cosmer demad ad the attempt to redce prodctio ad trasactio costs.
Sociologists have reacted to some geeral argmets o the sb ect of orgaizatioal form especially those of Chadlr ( ) ad Williamso ( ) ad to some of the other stadard assmptios. Bt these critiqes whatever their merits have bee largely defesive; they have followed ad respoded to ecoomic agmets ather tha settig the ageda with a distic tively sociological positio abot idstry ad orgaizatioal form. sbstatial sociology of idstry mst be a persasive alterative based o serios research abot particlar idstries ad their evoltio rooted i a coheret view of how people ad orgaizatios form ad cooperate i sch a way as to prodce those goods ad services that cosmers demad. We do ot dispte the coveiece of deig idstries as sets of rms that prodce the same or related prodcts. Bt we arge © The Edtor Bod of The Socologcl Revew 998 Published by Bckwel Publishes,
The making ofan int
Mak Ganovette an Patick McGie One impication of our approach is that at severa historica
tues, quite dierent outcomes mig ht have emerged and had occured it woud ikey have been argued, as it has for actua comes, that those were the most economicay or technicay cient. Our goa is systematicay to anayse the particuar within each historica setting and consider the options and
inuencing path seection at each point of decisionmaking. method aows us to dierentiate between seected and
opportunities, between intentiona and unintentiona outcomes, provide a more nuanced and reaistic depiction of how institutions are formed. It removes the need to infer the intentins of rm eaders from known outcomes, or to rey on categories such as technica and economic eciency to expain
outcomes.
Elecriciy he inii a boundaries of an indusry
In 880 Thomas Edison had ony begun to deveop the incandes cen eectric ig ht, and most homes and factories were it by naturaL g as. Onsite eectric ighting systems had been sod and instaed as eary as 878 and by 88 were a booming business invoving ove ,00 arc and incandescent systems, operating in homes and facto ries (American Eectrica irectory, 886). Aongside these isoated pants' (as these systems were known), a edging industry of pri vateyowned centra eectric stations bossomed from ess than dozen rms in 882 to amost 00 in 88 and amost 2,000 inde pendent oca rms by 89 , using dierent technoogies and orga nizationa structures. 1 These rms were hobbed by oca governments and arg e equipment manufacturers, and wracked by destructive competition. Yet by 929, isoated g eneration was reced ing in importance, and the industry was dominated by a few arge
hoding companies overseeing centra station rms using standard
ized methods of production, saes, and marketing, common organi
zationa structures, and protected by government agencies that
reguated them, guaranteeing prots under the concept that eectric
ity provision was a natura monopoy (Bonbrig ht and Means 969; Rudoph and Ridey, 986; FTC, 93; McGuire, 98 526529; American Eectrica Directory, 1 892).
We have reviewed the histories of 80 centra station rms and the careers of over 200 onetime empoyees of Thomas Edison anaysed the participation of ,00 executives in forprot rms in
0
dustry trade associations and studied severa hundred other sec ondary and archiva sources. We nd that the boundaries composi on and dynamics of the U.S. eectric utiity industry were onstructed by identiabe socia networks. e wi use the content of severa industry contests to demonstrate how and why these net works acted to construct an shape industry deveopment and boundaries in particuar ays and not in others of apparenty equa iabiity. Centra station eectric systems were a maor commitment for Thomas Edison who mobiized his persona nancia and patent based resorces and those of his subordinate coworkers and their famiies to create and manage the Edison (ater Genera Eectric) eectrica equipment manufacturing rms (McGuire Granovetter ad Schwartz 993). He strongy argued that eectricity shoud be the primary commodity and that eectric equipm ent sho ud be buit for and sod to centra stations rather than to each buiding owner who woud generate his own eectricity (in a process simiar to sys tems producing heat for a singe buiding) Edison aso mobiized ongstanding associates to se and/or invest in severa centra station rms. They secured funding for severa additiona centra station rms by expoiting antagonisms and fears among nanciers. nd by exchanging equipment for securities of oca rms Edison created shared ownership between the patentowners equipment anufacturing rms and centra station rms. Edison was estabishing the initia boundaries among eectric ndustries. Again drawing upon the coective resources of himsef and associates and their famiies and upon a production monopoy secured by excusive contracts they separated eectric ight current business from the manufacture of eectric devices eectric troeys eectropating teephone etc. each of which preceded the incandes cent ighting system and invoved miions in invested capita and saes by 88 (Bright 92:33). Edison aso worked to retain the separation between incandescent ighting (mosty indoor) systems such as his own and the weestabished arc ighting (mosty street and pubic spaces) systems keeping them separate industries and arkets. Through 884 Edison aso argued the need to dierentiate between rms seing eectric current for ighting and those sppy ng it for motors (Conot 9920) given his own ack o f persona nvestment in devices run by eectric power and his strained per sona reations with innovators of such appications (Conot 99:Ch. 8). But for a series of reasons he was unsuccessfu at
Mark Granovetter and Patrick McGuire
The making ofan industry
ad soo drew back from isistig o this separatio. First, sm of his frieds ad ivestors i his mafactrig ad cetral rms came to ow crcal patets related to power, tailored eqipmet derived from these patets so as to operate o his statio system, ad siged exclsive prodctio cotracts with Ediso mafactrig rms (Passer, 962, 953:238239, 990, McGire, Graovetter, ad Schwartz, 993. As a may local tilities bega to simltaeosly serve both arc icadescet lightig systems as well as power cstomers. Give dieret bt compatible applicatios o these techologies, ad techical possibility of servig all cstomers from commo eq met, it became diclt for Ediso to arge that separatio eciet. Moreover, Ediso was preoccpied with strggles agaist his aciers for the cotrol of his rms ad patets, ad was tracted from this isse. Ths, i this period, friedships, family ectios, persoal fears, mobilized collect ve kowledge resorces, scarcity of capital as well as vested iterests ad possibilities, all shaped the iclsio of varios withi what became the electric tility idstry. While Ediso had created the basis for cetral statio rms, was ot ievitable that they wold srvive or become the form of electric service. Isolated systems (i idividal homes factories were viable ad wold be the most commo spplier electricity to cosmers throgh 95 i most cities (c 99:209. While ecoomic argmets were moted o behalf each type of service, it appears that isolated systems i a factory apartmet bildig were at least as viable as other deetlie ameities, icldig home fraces, water wells, ad persoal mobiles, each of which became a orm (Gilchrist, 940:, Adams, 900. Isolated systems had sigicat rst mover tages: thosads had bee sold before Ediso ever opeed his cetral statio(Brsh, 882, Stot, 909 ad they had the port f maor acial hoses, sch as that of J Morga We fod examples of coordiated distribtio systems may isolated statios (Marvi, 988: 70. Two other idstry bodariesthe selectio of the form of cret, ad the stadardizatio of crret freqecy at ad 60 cycles (for power ad light, respectiveyalso reslted persoal isights, compod historical accidets, friedships, ad corporate iterlocks (McGire, 990. AC ad crret each had advatages ad disadvatages (Passer
Throgh 890 the deitio of the electricity idstry iclded both the eqipmet mafactrig rms ad all the local operatig tilities. I 885 the owers of oEdiso electric crret sales rms met ad formed a trade associatio, the Natioal Electric ight Associatio (NELA. The NELA iclded rms makig, ellig, operatig, ad repairig (especially arc light ad power ystems. By 888, it was domiated by the leaders of the Electric Cb, a New York orgaizatio with a atioal roster (Nye, 990:73, NELA, 888 that costitted a primarily oEdiso ocial etwork. I respose, Samel Isll, secretary to Thomas diso ad a exective who helped Ediso sell ad ope cetral tatio rms, formed the Associatio of Ediso Illmiatig
52
� The Edtoral Board of The Soologal Revew 1998
The Edtorial Board of The Soologal Rev
6466 bt either was itrisically preferable or domiat. AC became the pricipal US. crret form becase both Geeral Electric ad Westighose, the two major mafactrers, had AC eqipmet ad their leaders had o persoal stake i promotig a exclsively DC system, ad becase JP. Morga had a ligerig atagoism toward Ediso who held ad cold have reaped a had some prot from cotied se of crcial DC patets (David, 987 There was o overwhelmig techical or ecoomic imperative drivig the selectio of AC or of 25 ad 60 cycles as the idstry orm. The rotary coverter' that trasformed AC ito DC crret also worked i reverse Systems i which crret was geerated ad trasmitte i AC ad the coverted to DC for distribtio were feasible, ad ideed were typical i Erope throgh most of the 20th cetry ad i most U.S. cetral city areas throgh the 920s. otors ad appliaces for each crret type were mafactred ad sold here, ad so each crret type cold have had its ow iche. Frther, the iitial selectio of two freqecies of crret as a orm (rather tha oe as occrred i Germay ad i parts of Britai ad of CaliforiaHghes 983:29 embedded a techical ad eco omic ieciecy that ligered geerally throgh 950 whe most of the remaiig 25 cycle egies were rewired at tility expese (cfee, 9479, Bsh, 97350 Social factors icldig ivolvemet of decisiomakers i mltiple rms (corporate iterocks, persoal friedships ad aimosities gided these decisios ad helped to lock i these techical ad ecoomic ieciecies. 3 The sabilizaion of boundaries and pracices in privae cenral saion rms
53
The making ofan indutry
Mark Granovetter and Patrick McGuire
Companies (AEIC) in 885 Eary AEIC members were mostly pe· sonal friends of Edison and/or Insul who were aso executives o smal Edison central station incandescent ighting systems. Beginning in abut 890 both trade associations began to rede ne the boundaries of the electricity industry by denouncing city� owned electric rms, even thoug h such rms used the same equipment, sod the same commodity, and operated in a similar wa (NELA, 89064 79, 898, 900 42, Rudoph and Ridey 1 896:23-34, and Toledo Edison 2:8 3 2/4/1897). The association
tried to exclude them from their org anizationa meetings, propose boycotts of manufacturers who suppied them, and mobilized to oppose and impede their creation They also soug ht and secure state legislation that imited not-for-prot systems to street lig hts in some cities, such as Detroit (Wicox, 908). This new industr boundary was being buit based on form of ownership, contrary to the ogic of the Bureau of the Census and its SIC codes which o cially dene industries (McGuire, 986). A seond boundary was being constructed simultaneously durng the earl 1890s as ocal utilities sought to separate themseves from the electric equipment manufacturing rms NELA members included rms selling and operating al types of electric devices involving severa protoindustries, such as eectric arc lig ht ad electro-pating, telephone, electrical medicine, and electric moo devices In fact the rst major eectric lig ht company in Chicag o Chicag o Arc Lightmerged from a combination of electric medi" cine and central station service (Platt, 199 :268) Many of these industries were in place and had millions of dollars in investments and/or sales before Edison even invented the incandescent light bu ·
(Bright, 1972:3 3) The NELA's concept of electric ight service (and
by extension the composition f the industry) involved verticaly integrated rm components, incuding manufacturers, operating utiliies, contractors, and repairmen, similar to Bel Telephone
AEIC membership was imited to people from the Edison aliated central station electric lighting rms and their associated Edison manufacturing rms (rst Edison Manufacturing then Edison Genral Electric). Through 893 the AEIC promoted a lim ited notion of industry involving a twoleve verticaly integrated industry of equipment manufacturers (GE) and Edison incandes cent central station rms The central stations had exclusive con tracts with the manufacturing rms and depended on them or nancing suppies and innovations factors that in eect le them as subordinate cheerleaders in the AEIC. This changed when in 54
892 J.P. Morgan and his alies wrested full control of Edison Genera Electric from Edison and his supporters in a leveraged buyout through competitor ThomsonHouston; the resulting rm was renamed General Electric. Beginning in 893 the owners of early but small Edison centra station rms became less prominent in the AEIC and the organization was increasingly dominated by a smal group of former Edison employees Samuel Insul le General Ectric aer the buyout to become a utility executive in Chicago; he and other urban executives mobilized to counterpoise their cen tral station rm interests to those of General Electric redening the electric utility industry boundary to exclude manufacturers There were numerous conicts of interest between the equipment suppliers and the central stations Exclusive contracts ocked the central stations into purchase from one supplier In return the sup piers were supposed to refrain from selling isolated generation equipment within the franchised erritory of the utility companies. That they often ignored this provision is evidenced by sharp exchanges at AEIC meetings. Riva centra station rms still operated within the same areas and expected their suppliers to pursue patent infringement suits against other such rms using dierent equipment; but this was a low priority for the manufacturers The exclusivity of contracts gave equipment suppliers market power which they used to keep prices higher than seemed reasonable to central stations Service issues such as delivery time were frequent bones of contention. Manufacturers for their part considered the central stations unreliable customers whose often strained nancial condition made them delay payment for equipment or issue new securities to meet this obligation which might then be drastically devalued in the next recession. Personal distrust between these groups in part resuting from past history of conict and resulting animosity between the JP. Morgan interests who dominated General Electric after 892 and the Edison/Insull group ight in a transactioncost account have presented a need for vertica integration between manufacturers and central stations so as to achieve consummate rather than perfunctory cooperation (Wiliamson 985). But central station executives were pullin forcefully in the opposite direction to preserve their independence and assert their own interests through colective action. The crucial group in this emerging industry is what we will call the Insull circle' consisting initially of men who had worked in the drafting room of the Edison Electric Light Companys Goerck 55
The making oan inuty
Mak Mak Ganovette an an Patick Patick McGuie
Street (Manhattan New York) eqipment manfactring between 882 and 885 at a time when Samel Insl was most trsted condant and head of the Edison manfactring ations (c McDonald 962). While hndreds of others worked Edison dring this era a smal grop of for who had both in the Goerck Street pant in the early 880s and had attended cia classes together were especialy inential They had also among the men sent ot by Insl and Edison to help set p and tiay operate central station light systems The for were Insll ohn Lieb Chares Edgar and Lois Fergson. They with another set ofgradaly shifting bt probably never than eightose associates of Samel Ins wold become key to indstry development for for the next 40 years. One of ther eorts was to distance themselves from GE domination in AEIC and to create a certifying boardthe Electrica Laortoryto assre GE qaity and innovatioand in assert their (and central station in general) control over the AEI The board of ETL consisted of Lieb Edgar nsl and Barstow who began working for the Edison manfactring opera tions aer they moved to Schenectady in 887. We refer to this as the ns circle becase of its domination Insl and in or ongoing research we exaine Ins's Chicago Edison and detil his access to U.S. and Eropean e explain how his personal knowledge his connections to Eropean technical and nancial commnity and a grop of talented friends and associates created both atonomy and tive opportnity for Chicago Edison Insll broght Eropean innovations (incding the Wright rae system load bilding and trbines) to the U.S and actively moted emation of and adoption of these techniqes and among te other principal rms within the AEIC (Hghe 983:27233). His circe identied deliberated pon and moi ized to promote these and other technical and changes among AEIC members and then the rest of the central tion tility indstry The overarching thee linking their was the prsit of what we hae called a growth approachscrap and replace old technology with new create expand a territorial monopoly increase tota and per capita and establish load balanceas an indstrywide development egy. 7 They sed their personal and trade organization reationships to promote adoption of this strategy and associated technology technology we will detai alternatives that invoved more decentralized an
56
malerscae provon of electricity separation of generation ransmission and distribtion provision provision combined with the prodcion and sale of other prodcts (sch as heat in cogeneration arrangements) or provision by notforprot companies were eecivey attacked and discoraged by the Insll grop. Crcial to the embedding of their collective template of indstry development was domination of the AEIC as a method of transferring technical and organizational norms Inslls circle held over 90 er cent of the AEIC ocer and committee positions and from 892 to 897 in combination with the technical experts from what we wil call the Six Cities' rms they led (New York Philadelphia Brooklyn Detroit Boston and Chicago Edison) delivered amost all the paper presentation at AEIC annal meetings. Leaders of rms in other arge citiesBalo Providence St. Lois Baltimore and Pittsbrghid Pittsbrghid not participate in the AEIC leadership despite their having large poplations and load Regardless of rm or load size we nd that throgh 90 most rms only oined and/or became active in the AEIC after hiring other former Goerck St. emplyees and/or family members of the inner circle's exectives Or analysis of the composition of AEIC committees from 897 to 90 shows that pesonal networks and rm domination of the AEIC became instittionaized as exectives from Insls circe were repaced. Twentythree ot of 28 times that one of these e a committee position he was replaced by a sbordinate exective from his own rm an 80 per cent rate of reconstittion of broken ties' (cf. Palmer 983). Men from the Six ities rms occpied 275 of the 287 committee positions on AEI cmmittees and presented 7 per cent of al papers between 90 and 90. Direct almost monolithic control over the AEIC by this grop contined albeit throgh rm sbordinates. Bt important as the AEIC was on its own it was not scient to dominate the indstry; it was a highly selfselected gro associated with large rban rms and it worked closey with General Electric. The other indstry trade association the National Electric Light Asociation (NELA) was broader bringing together man smaller rms those not dependent on General Electric eqipment and in cloe contact with contractors obbers and workers. It held the otentia for indstry dominance that cold not be assred from an AEIC base. Correspondingly an informal system of indstrywide self goveance emerged after several Six Cities rms oined the NELA. hile several AEIC rms oined the NELA in the early 890s they 57
Mark Mark Granoveer and Parick Parick McGuire
forms. There were several viable alternatives to the dominance urban central station systems and to the growth dynamic during the 18901910 era. Isolated systems in individual buildings and/or factories continued to grow in size and in until by 902 they produced half of all the horsepower from electric ity in the US. (USDCL 1905:3 190:4) They were so successfu that more U.S. customers (homes and factories) were served by iso lated than by central station systems through 1918 1 946:2 1) . As late as 1 91 2 more than half half of all all electric electricity ity prod prod and distributed in the United States was attributable to rather than than to electri electricc utili utilities ties (DuBo (DuBo 1 979:4 1 2 9) Even in urban centre such as Chicago central stations only produced 70 per cent of the elect electrici ricity ty consu consumed med in in 922 (Platt (Platt 1 991 :2 1 3). In muc muc of rural America isolated stations were the only form of electi service availale before 930 (Nye 1990:296297) There were also neighbourhood systems serving small geographi territories Some were dedicated cogeneration systems supplying neighbourhood with both electricity and steam for heat Entre preneur Homer Yaryan for example built and operated dedicated steam and electric neighbourhood plants in 35 cities stretching from Cleveland to LaCrosse Wisconsin including Chicago Detroit Toledo and Fremont Ohio (Scribner 90; Cyclopedia of America Biography; Meyer 972: 102103; Porter 1986) Prominent and electricity/natural gas magnate Henry Doherty argued that thes multiuse systems involving steam were the hardest to displae because of their eciency: waste heat from electricity generation could be cycled back into the heating operation rather than requi ing additional energy for cooling the equipment as in traditional ge eration (cf Hirsh 989) or being dissipated into streams and thu upsetting the local ecosystem by raising temperatures Investor owned utilities were in fact so determined to dispose of this compti tion that they oen built otherwise unneeded steam plants to mee the full need of the customer and ran them at a loss ust to eliminate the competition for electricity (Doherty 923: 125 140). Other neighbourhood systems originated in a base factory hotel or trolley rm and then sold surplus current to othe nearby customers (Greer 1952:14) Some of these were dedicated electric systems while others involved selling electricity in combina tion with ice irrigation pneumatic air water pumping and trolleys For exam example ple 47.4 47. 4 per per cent of of all all electricity electricity sold to the the U.S. public public in
1902 and 449 per cent in 1907 were sold by 251 and 330 street rail roads repectively (USDCL 910:14). Such mltipurpose and/or 1 60
The making ofan indusry
decentralized systems were common in the U.S. through 90 and they became the norm in Scandinavia Canada and most of northern Europe and Russia (Nye 1990: 384; Armstrong and Nelles 1986:0104; USDCL 1910:1327. Some such systems sold o current continuously and others sold surplus current during opeak periods This type of rm was espe cally common in areas with hydroelectric potential and/or geo graphically diused energyintensive factories such as the Carolinas Georgia the Rockies New York Minnesota and Michigan Through the 1920s these factories served their own needs and aer normal closing time when the electrical equipment would have otherwise been idle they sold their spare current to utilities that engaged only in transmission and distribution. This practice revived in the late 20th century under the rubric of wholesale wheeling promoted more ecient capital utilization and load balance
involved this era involved during th lized schema schema during decentralized common decentra Anoth Another common d central central ntegrated ticallyintegrate ical verticallyi ver typ functions of the typical the functions separation separation of the ctivity ution a distribution distrib smission and transmission on tran Generatio rms. Generati station station rms. y distinc distin ct rmed by b perfo be performed of two) be combinations of could could each (or in combinations mple exa industries For example distinct industries extension could be disti and by extension rms and State Company in New York State Electric Company Ontario Electric and Ontario ara Loc Lockport and iag ara d factorybased The factorybase (USDCL 90 03) The n rm (USDCL transmission was only only a transmissio separate (but oen co sold to a separate generation generation systems noted above sold Ho evening Ho current during the even resold current electric rm that resold owne owned) electric transand transgenerating and tyowned gener cityowned exampless f a ci are even example 1973) here here are factories and factories railroads and street railr only to street current only rm that sold current mit mitting rm current sales (ie of current 191 2:98) Bulk sales (BOC 1912:98) period (BOC early period during during this ea were sales among ine which were some of which another some utility to another from one utility nonintefrom non and/or from sales to and/or of which were sales rms and others of grated grated rms described as they were described common that by 1907 they became so co ms) became grated grated rms) Similar 1910:8 4). Similar (USDCL 1910:84 industry' (US electric industry' special branch of the electric a special n rms distribution tting and and distributio transmitting generating transmi etween generating separations separations between Rural U..S. Rural among U subsequeently among developed subsequ ons developed combinatio in various various combinati d in ow and an to n m 1930 193 0 ps from fro n coops coo istration Admin Electri Electrication Administratio elles and and 263 Nelles N 79:253263 19 Reinemer 1979:253 and Reinemer (Doyle and Britain (Doyle Canada and Britain o these sales to t ipment equ Most equipment 1979) Most Hannah 1979) 1986; Hann rmstrong 1986; Armstrong between cityowneed rms between ilroads and cityown railroads hbourhood ra neig hbourh lternative' neig alternative' Electric General Electr Westinghouse rather than by Genera 1895 and and 1906 were by Westinghouse Con 1 909) house 898 906: 56 Con Westing house (Westing
The technical merits and limits of such alternative constructs are variable locallyspecic and debatable In some cases they were technica technically lly and energyecient energyecient (especially if combined combined with new 16
Mark ranovetter and Patrick Mcuire
urba cetral statio electric rms i the U.S. (two of which were ot amog Big Six rms) costituted oly 20 per cet of the cetral statio equipmet purchases (itself less tha half of public salesa category ivolvig barely more tha half of all electric sales) ad geerated 25 per cet of all cetral statio prots (USDC 1 905 :1 01 1 ). I fact, the largest 73 cetral statio rms held oy 56 per cet of istalled cetral statio capacity (USDCL, 191 0:6768) Thus the market positio of the Six Cities rms was importat but it certaily did ot represet a overwhelmig portio of customer demad for equipmet such that it could result i their havig leverage o maufacturers for this reaso aloe.
5 Resrucuing he marke insiuionalizing he growh dynamic model
Isull's circle ote had to mobilize ad reorgaize the market to help lock i their preferred template. We detail how they altered the iteral dyamics, stadards ad cotet of the trade press, uios, college ocials, ad professioal associatios We repeatedly d that several of them were also ocers i these groups, ad/or tha idividuals from the larger Goerck Street group, ad/or AEIC om mittees were the pricipal advocates of chage i the directio of a growth dyamic, ad/or sat o committees charged with securig such chage. These extraidustry groups ad others icludig sup pliers ad orgaized customer groups (agai oe ivolvi Goerck Street alumni) typically established legal/cotractual obliga tios ad created vestd iterests that iueced rms ivolved i sales of electric curret Groups also emerged that promoted orgaizatioal ad occupa tiorelated chages amog relatively autoomous ad diused idustry rms. These icluded NLA subgroups, occupatioal/ frateral clubs (that icluded iitiatio, parades, ad picics), cor porate welfare ad employee clubs (that promoted loyalty through ritual social activity), ad/or professioal associatios (with aual cofereces emphasizig social ad professioal obligatio) Here agai we ote the participatio ad leadership of the ier circle ad of AEIC associated rms. I oe case, four key gures (Lieb, Edgar, Isull ad Barstow) costituted the board of a collectivelyowed lab, the Electric Testig Laboratory, that created th techical criterio ad sta dards for productio of bulbs ad other eduse devices (c 164
The making ofan indutry
McMaho, 1985 : 1 720). his allowed them to moitor, licese (or ot), ad potetially to disciplie major maufacturers icludig GE. It also allowed them physically to create the basis for techical cotiuity ad itegratio amog the cetral statio rms of the idustry. Their friedships with GE maufacturig executives ad importat cosultig rms (several members of whom had also bee at Goerck St.), their persoal ad/or rms subsequet owership of smaller ivestorowed rms ater 1905 d their logestablished ad istitutioalized policy of loaig of executives to other rms (oe through the aegis of the NELA), helped to promote the trasfer of preferred policies that redered disproportioate beet to their capitalrich, itegrated, urba cetral statio rms The most importat exteral issue was the passage of state regulatio as a method for diusig the growig challege of public takeover ad owership of cetral statio urba electric rms. Uable to mobilize support amog idustry rms for state regulatio, or to impose it through iformal goverace or social peer pressure, Isull's circle tured to frieds outside the idustry with whom they shared membership i mes clubs, busiess groups, ad/or corporate iterlocks. Several of the circle, Board members from their Six Cities rms, ad Geeral Electric, ecouraged the Natioal Civic ederatio to study this issue ad idividuals icludig Samuel Isull ad Charles Edgar became members of the study committee Aer the itroductio of multiple atipublic owership biases ito the study process, ad despite mixed digs geerally more favourable to public tha privatelyowed rms, the NCF adopted the specic provisios that had bee proposed by Isull ad promoted by his circle for almost a decadeprovisios favourig state regulatio that protected ivestors ad (to some limited extet) the public specically by rewardig the pursuit of a growth dyamic' strategy ad ot decetralized alteatives, ad rewarded rms with the greatest access to ivestmet capital. These provisios trasformed bakers (dee det upo the kowledge of ad oe sharig iterlocks with Isulls circle) ad holdig compay executives (which icluded several of the circle, ad others of whom were former Goerck St. employees) ito agets of idustry stadardizatio. The bakers ad the NELA policy committee (domiated by Isulls circle) the secured support from other ivestorowed electric rms for state regulatio that had previously bee resisted (McGuire, 1989). The NCF promoted its pla to state govermets, several of which were directly lobbied by Isull's circle. Aalyses the ad ow 1 65
Mak Ganovette and Patick McGuie ory of idustry would specify uder what coditios all this shiig
of boudaries would solidify. Were we to follow the idustry past its formative years chroicled here, we would d that processes ad
relatioships oce shaped by idividuals became istitutioalized i
more formal org aizatios, istitutioal alliaces, stadardized practices, ad idustry orms As i other idustries, we arg ue, such patters become embedded as orms, uless ad util a idustry" wide crisis occurs.12 At that poit, a ew social etwork of rm eaders has the potetial to re-dee ad recostruct a ew idus try based upo various elemets of the old.
Acknowledgemens
The authors are listed aphabetically. We ackowledge the acial
support of Natioa Sciece Foudatio Grat SBR 9601437 the
Urba Aairs Ceter ad Oce of Research of the Uiversi;y of
Toledo which helped to uderwrite the collectio of"archiva data
ad the Ceter for Research o Social Orgaizatio of th� Uiversity of Michiga whic provided other material resources. We are also gratefu for the commets of Chi-ie Chug , Valery Yakubovich ad members of a semiar o the electricity idustry that meets periodically i the Departmet of Sociology at Stafor Noes Of the centa taton exting in 1 882 , only a handfl poweed ncandecent ght, the et povdng ac lghtng fo otdoo lnaton, o fo hotel, facto ie o age plc dng The t ncandecent taton wa oght on ne y Edion helf, on Octoe at ea Steet, n New ok' nancia ditct t eved no oe than aot a qae le Ac ighting taton ex ted fo 1 89 on, t it wa ony ncandecent taton that povided eidentia evice and whch eventay dplaced ac lghtng taton entey Th it coon, f not lteally coect, to decie ea Steet a the t cental taton intaaton In the ealy peod of the ndty, ac and ncandecent yte an on de ent cycle and feqence, and each podct lne o yte of lghtng had own dtinctve cent and feqency fo opeating t devce 2 Ionically, howeve, in th peiod, an Edon wa ao the ain povde of geneato to hoe and inee Depite Edon' dtate fo thi opton, i tantal pot and coneqent appova y nveto dicoaged hi fo cing it 3 The t centa tation wee oented alot entiely to lightng, and Edon, ke ot othe, ndeetiated the eqent deand fo cent ed to powe oto The capacty of cental tation n the 1880 wa ated y the n e of lap they cod ppot
1 68
The making ofan industy 4 In fact, ntil the ealy 20th centy, t wa not even nevtae that electcty wold dplace natal ga a the doinant ghtng ed fo hoe e Many hoe in which eectcity wa intaed thogh 1900, had dal yte ing ga fo daly lght and the oe expenve option, electicity, only when entetan ng get (latt, 199180,154-155) 5 Inecience contine o exape, Toledo (Oho) Edion, nt 1 996, opeated a geneato podcng 25 cyce cent n an otherwie aandoned powe plant in ode to eve a nge ctoe, which, coneqenty, did not have to ewe t oto (Shap, 1995) 6 One NEA eeWete Electcanfacted telephone a nd old the to Bel a it ain ine, t ao podced ntalled, and epaed elec tc ac and incandecent eqipent (Sith, 1985) By gowth dynaic' we ean oething eentally iila to what Rchad Hih (1989), in h potant accont of the ipact of technology on the tility indty, call the gowandd' tategy 8 A good exape of thi i the NEA ic ocy Cottee, 19 04 8 9 Many of thee contant wee theelve Goeck St al ni ch a edeick Sagent, (Sagent and Lndy 1961:15-18 Toledo Edon, 119 9/101894) o ee of In own cicle, ch a Willa Batow (1900-1905 Naonal
Cyclopeda oBography) 0 te A good ndcato of viaty of cogeneaton fond n the cce of ch y n the aeath of the 1 98 URA Act which eqed cental taton
to pchae cent fo ch podce at a ate eqa to the own (low) podction cot It ped the ie of ove 3,000 ndependent powe genea toany of the cogeneato Th ha acconted fo ove half of all new pvateyowned electca geneaton n the US nce 1986 (Hoan 1994:10-13) Alo, ot of the 1,900 pc in the USA ae tanion and dtton, o dttononly 91 pe cent y pat and 5 pe cent y al of thei powe fo geneatng and/o tanittng 1 1 Indeed efoe the advocate of the gowth dynac had won decvey, the die ence cold even lead to plic qae In 1902, Heny Dohety, then pedent of NEA, and a ceptic aot the vte of nlited gowth, phyicaly tled on the da of the eeting with the vcepedent, Inll' depty, oi egon fo Chcago Edon, aot who wold have the chalk and chalkoad and who wold ae the (ent) Chai oe at the eetng Dohety (1924III, 136-13) had had feeing fo yea aerwad, and coplained aot egon' contant pooton of hi agenda 12 Hih (19 89) povde an excellent accont of what pecpitated ch a cii fo the electicty indty in the 1960 and 1 90 conation of technica ta the ndtry having eached oe aic phyical ltation in inceaed econoe of cale, naton, pply hock fo fel, and a changng poltcal cl ate that edced toleance fo potion whe inceaing cone etance to ate inceae
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The making ofan inusty
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oedo dison, (varios years), Scrapoo Coecion oedo dison Papers Ward Canaday Cener, Universiy o oedo, oedo Ohio. S Dep of Agricre, (96), lecric Power Developmen In S 64h Congress 1s session, Docmen #3 6, Senae, VV8, 9, 10 Washingon Governmen Prining Oce S ea of Corporaions ( 9 2) Waer Power Developmen in he Unied Saes Washingon, DC Governmen Prining Oce S Deparmen of Comerce and aor, ( 90), Special Census of he lecrical Indusries, 1902 Washingon DC Govemen Prining Oce. S Deparmen of Commerce and aor, (19 10a), Special Repor on Cenral lecric Ligh and Power Saions 90 Washingon Governmen Prining Oce. S Deparmen of Commerce (9) Special Repor on Cenrl lecric Ligh and Power Saions and Sree and lecric Railways 92 Washingon Govemen Prining Oce seem, M (1984) he Inner Circle Large Corporaions and Business Poliics in he S and he New Yor Oxford Universiy Press oi R. (1990), Why Inea Comsion? Invenion echnoogy, Invenion and echnology, Fa Pg 42-47 esinghose ecric and Manacring Company, ( 1898), A Quarer Million Horse Power of Polyphase lecric ransmission Apparaus. Pisrgh Wesinghose ecric and Manfacring ompany Wesinghose ecric and Manfacring Company (907), Repor o he oard o Direcors o he Sochoders o Wesinghose ecric and Manacring Company Pisrgh esinghose ecric and Manfacring Company hie, . (98) Where Do Mares Come From American Joual ofSociology 87 (Novemer) 747 Wiiamson, (97), Mares and Hierarchies Analyses and Anirus Implicaions New Yor Free Press. Wiiamson, (1981), he conomics of Organizaion he ransacion Cos Approach, in American Joual ofSociology 87(3)48-77. Wiiamson, (98) he conomic Insiuions of Capialism. New Yor Free Press
0 0 0
Wright (1 957), History of the Georgia Power Company,
1885-1956.
Atlanta, Ca.:
Georgia Power Company
1882-1884: A Memento of the Early Days in the Electric Service Business. Edie y George H So Chicago Privaey Pished Same Ins Coecion, E.M
Cdahy irary oyoa Universiy a Chicago ox 98
17 3
The margin ofaccounting
The margns o accountng
Peter Miller Accounting is most interesting at its marg ins. For it is at the mar� gins that we see new calculative practices added to the repertoire accounting. It is at the marg ins that accounting as a body of legiti · mated practices is formed and re-formed by the adding of devices ; and ideas of various kinds It is at the marg ins that accounting intersects with, and omes into conict with, othr bodies of exper� : tise. And it is at the margins that acounting comes to be linked up > to the demands, expectations and ideals of diverse social and insti tutional agencies The term marg ins is used here to refer to that part of the terrai or surface of accounting that, at a particular point in time, is imme . • diately within its boundaries. Categ ories of xed and variable costs • principles of discounting , and practices of standard costing, were al initially located at the very boundary of accounting practice, and · only g radually moved towards its centre. To attend to the marg ins . of accounting is to attend to the ways in which these calculativ practices and their related rationales have, in certain countries, ini tially permeated accounting at its boundaries, and g radually come to occupy a dominant position. To attend to the marg ins of accounting is to emphasize that there are dierent marg ins at dierent points in time, and in dierent · places (Hopwood and Miller, 1994). The margins of accounting chang e as the boundaries of accounting are redrawn The margins are uid and mobile, rather than static. What is on the mrgins at 'I one point in time can become central or taken-for-granted, rela• .'! tively xed and durable, at a later date Moreover, the marg ins o ' accounting vary from one national setting to another 1 In all these dierent respects, there is a multlicity ofmargins to be considered This adding of practices to accounting at its marg ins typically takes place through a process of problematizing (Rose and Mille ·
© The Editorial Board of The Soologial Review 1 8 Published by Blakwell Pblshes
'•
1992) Existing practies are criticised Claims are advanced that other practices not only remedy these defects but go substantially beyond them oer something more something dierent something better Not all such criticisms result in accounting being transformed and its boundaries redrawn But fro time to time the critics and reformers win. The questioning f a particular technique the hopes of those seeking to modernize' accounting practice the aspirations of those with new promises and products to sell result in a relatively enduring alteration in the contours and boundaries of accountig This problematizing of existing practices is itself an accomplishment. Problems have to be made recognizable a particular perception has to form people have to be convinced that problems are intrinsic to a particular device rather than contingent a measure of agreement has to be reached as to the nature of the problems identied a consensus has to form that something needs to be done and another way of calculating that ts the problem identied has to be made available. Then and only then do things change. Sometimes this problematizing of existing practices is done by accountants themselves Indeed over the last decade and more and particularly within management accounting there has emerged an industry of selfcriticism This may turn out to be little more than an intensication of a perpetual process of critique and reform of dream and disenchantment a process that no doubt is not limited to accounting None the less it is in particularly sharp relief at present within accounting Accountants are busy deouncing existing ways of calculating and identifying limitations in longestablished practices (Hopwood 985) A range of new calculative practices and concepts drawn from beyond the existing boundaries of accounting and owing more to manufacturing and engineering traditions than to existing ways of calculating are being celebrated Devices that had apparently served rms successfully for many years are now seen to b inherently awed The boundaries of accounting are being redrawn and new ways of calculating called for that are currently at the margins of accounting. Sometimes this problematizing of existing ways of calculating is done by outsiders People working within a variety of other disciplines or at least drawing extensively from them including economics business strategy engineering and marketing have at dierent times argued that accounting is lacking in specic respects that accounting needs to be supplemented or modied in particular areas or that it needs something wholly new. 75
The mrgin ofccounting
Ptr Mr
Smetimes this prblematizing f existing practices is dne b regulatry bdies gvernment agencies and ther institutinaliz actrs wh argue that there is a prblem' that smething needs t be dne and that accunting is the way t d this. Frequently the alleged prblems have nthing immediately r selfevidently t d · with accunting But with sme guidance peple can en b helped r persuaded t recgnize hithert unidentied cnnectin and t appreciate that an altered way f accunting might help f ter r imprve such things as natinal eciency ecnmic grwt rats inteatinal cmpetitiveness emplyee empwerment th eciency r value fr mney f public servces and much els besides Accunting can be prblematized in these ways and in th prcess linked up t the big ideas characters and macractrs th have ppulated plitical culture and scilgical narratives fr s lng. All this as nt gne unnticed Accunting has lng been seen even by accuntants as linked t the attempts y varius actrs and agencies t prmte themselves t sell their ws t argue fr any� thing that benets them and t get thers t fllw them r think in their terms A ntin f interests' has been invked as a way seeking t explain this activity. Fr is it nt selfevident that indi .
viduals and organizations will always act and arg ue in ways tha
imprve their welfare that they will always be ready t take advan tage f situatins that will expand their terrain imprve thei pprtunities and increase their ecnmic retus? Indeed is this nt the essence f ratinal dcisins and utilitymaximizing behav iur? Ntwithstanding the appeal f this mdel fr thse wh believe that the wrld is inhabited by such actrs and dened by such acts this search fr parsimny has limitatins. Mst imprtantl it can lead t a neglect f hw' type questins. Studies f the prcesses by which particular accunting practices emerge in specic cntexts can be seen in a less favurable light than studies that draw upn a predictive mdel. Researchers we are tld are sceptical f anecd tal evidence' and prefer large samples that they can use t test their hyptheses fr statistical signicance' (Watts and Zimmerman 186 p. 1 1. Yet analyses f the claims and cunterclaims made in relatin t a particular accunting practice the ideals and aspira tins that articulate a rle fr it tgether with analyses f the cndi tins f emergence f such arguments, can help us t understan
and explain why it is that a particular practice cmes t appear prblematic and is eventually seen t be in need f mdicatin r 1 76
·
replacement Fr it is thrugh this activity f prblematizing that the denitin f what might cunt as a pssible slutin' emerges. Mrever this specicatin f a slutin that may cme t be deemed acceptable by the participants helps t structure and delimit the eld f pssible interests in imprtant part by dening the terms in which debate can take place Interests' emerge are articu lated and mdied thrugh the prcess f prblematizing a particu lar practice. The interests in questin d nt necessarily preexist the activity f prblematizing The prblematizing f existing ways f managing is ten fstered by a variety f actrs and agencies nt necessarily acting in cncert r with the same bectives. Relays and linkages have t be frmed between a multiplicity f disparate cmpnents and ambitins and temprarily stabilized. A level f agreement has t btain between distinct and ten unrelated actrs. It is the emergence f such temprarily stabilized ensembles r assemblages at the margins f accunting that we need t attend t (Miller 17). Fr it is thrugh such prcesses that accunting as a bdy f expertise is frmed and refrmed. And it is thrugh the accretin f such prcesses that accunting gradually acquires a centre' ne that cmes t be regarded widely as selfevident and which in turn becmes the target f criticism during subsequent attempts t bring new calculative practices within the bundaries f accunting. A cncern with the margins f accunting is thus a cncern with the cnditins and cnsequences f accunting practices It is a cncern with prcesses and utcmes It is a cncern with emer gence and stabilizatin. The margins f accunting are prduced rather than given This puts t the fre the analysis f the ways in which present calculative practices have been frmed histrically what cnditins made them pssible what ideals and aspiratins they embdy and hw they seek t prgramme the wrld s as t t these ideals. Such a fcus n the multiplicity f cnditns that have helped frm accunting practices has the advantage that it can deprive existing techniques f their selfevidence Fr if a particular calculative technlgy emerged nly recently and under specic cnditins it is reasnable t expect that it may be mdied r replaced in due curse In demnstrating that accunting is itself an ensemble f devices and ideas frmed at particular times and in par ticular lcales rather than an immutable and universal starting pint a fcus n the margins f accunting can help in the inven tin f new ways f rganizing and administering. Mre generally by examining the margins f accunting and the cnditins under © The Editoria Board of The Socioloical Review
18
1 77
Peter Mier
which these are altered, we can begin to unravel the intrinsic lin between accounting and changing modes of governing the prise (Burchell et a, 180; Miller and Rose, 10. A conce with the conditions and consequences of practices directs attention to the historically and culturally evets that have helped dene the territory of accounting. accuntants could think about costs in particular ways, before could conceptualize income in a specic sense, before they calculate investment opprtunities in certain terms, the of ccounting had to be dened and redened. It is through process of creating and recreating boundaries that accounting actually constituted as a body of expertise. A number of will serve to illustrate the point. Let us begin by considering most basic and apparently selfevident of categories, the notion costs. Liing co o deciion
ostvolumeprot calculations, breakeven graphs, the beteen xed and variable costs, and the notion of marginal are central to contemporary management accounting. It is to tink of these concepts and calculations as existing at the gins f accounting. It is even more dicult to thin of them as tices nd ideas that once fell outside the boundaries of accoun But we look back only as far as the early 120s, starting at Unersity of hicago, we can begin to appreciate how the cost cepts of accountancy were constituted by the extension and tio f economic reasoning. Students at the School of ommerce a the University of alo with students in the department of Political Economy, sho what M. lark described as an experiment in a type ecmic theory which is largely inductive (lark, 123, p. Unused capacity, or costs which do not vary with output, wer centl features of larks concerns. Indeed, he went so far as speculate hether the whole body of economic thought bece an economics of overhead costs" (lark, 1 23, p. ix. ecomic theory was not only for graduate students in they. Such students should study the accountants conception costs. Eqully, the accountant should know the meaning of fro the standpoint of disinterested economic science, for it this cncept of cost that embodies, in a sense, that impossible
The margins ofaccounting
to which his practical devices serve as approximations (lark, 23 , p. x).
lark was not an accountant but thought that the unconven tional standpoint of an outsider might help throw a useful light upon the question of what cost accounting can and cannot be expected to do (lark, 123, p. 234. lark argued that costs should be analysed separately from the formal books of account, rather than being constrained by the rules that govern nancial account ing ne might include certain items in cost accounting that would be excluded for purposes of making up the income statement. According to lark, it was the railways that brought clearly into view the question of the behaviour of costs and the importance of the notion of overhead costs in particular. For it was soon realized that additional trac could be carried o the railways at little or no additional cost. Price discrimination could be justied on the grounds that added trac was not responsible for those costs which did not increase as trac increased. In any case, it was held impos sible to determine the proper share of costs traceable to an individ ual shipment r unit of business (lark, 123, p. 10. While it was initially argued that railways were dierent from other industries because the large part of their costs were constant, or independent of the volume of trac, it was not long before this argument came to be applied to other industries. The distinction between constant and variable costs as soon to become a general principle for the classication of costs. lark was concerned with the underlying functions (lark, 123, p. 234 of cost accounting. e argued that these were multi ple, and that they required an elastic technique which he described as cost analysis or cost statistics. The functions of cost account ing, according to lark, were: to help determine a normal or satis factory price for goods sold; to help x a minimum limit on pricecutting; to determine which goods are most protable and which are unprotable; to conrol inventory; to set a value on inven tory; to test the eciency of dierent processes; to test the eciency of dierent departments; to detect losses, waste and pilfering; to separate the cost of idleness from the cost of producing goods; and to tie in with the nancial accounts (lark, 123, p. 236. These dierent functions of cost accounting called for dierent concepts of costs. These included the total economic sacrice of produc tion, including interest on all investment; dierential costs; complete records of actual costs and also standards of ecient per ormance against which to compare them; residual costs; and total
Th magin ofaccounting
Pt Mi
d he vidble css f he l upu less h he receips. Eve if i ws upi hik h such psii mig be reched i prcice he hped h he cs ccu my ree his echique ke ccu f vriis i css d h fcili he sk f he busiessm (se 1 81 p. 1 02. I ddii se rgued h he i f ppruiy shuld be he cer cegry f cs ccuig This ccep f css he rgued ws he ly e h fcused he lerive curses f ci which re pe he m (se 181 p. 108. Edwrds hd rgued fr ei fuure vribe css d se reiered his sig h I useless k bck he ps excep s bjec ess. se we e sep furher i prpsig he i f css s wy f ecpsulig i sigle ccep he lkig chrcer f busiess decisis. I ws be sme yers befre hese cceps ppered i he pedggy f ccuig Mrever he ccep f iy cs remis eve dy he mrgis f ccuig Ye he prpsls f rk Edwrds d se i he l 20s 130s mdeize cs ccuig by mes f cceps frm ecmics hd frrechig eecs. The budries ccuig were redrw. s ccuig ws prvided wih f is ms bsic devices such s he csvlumepr grph brekeve lysis. Als d equly imprly cs ws prvided wih rue hrugh which i migh mve up he pre hierrchy By likig css he ide f chices by hese chices decisis d by esblishig likges bewee cceps d he i execuive decisimkig ccuig ws give sigicce i erms f mgeril which i hiher lcked. A ew ermilgy brugh wih i wys f clcuig d ew wys f hikig. This eve he gis f ccuig lid he grudwrk fr he psWrld Wr rsfrmi f cs ccuig i mgeme ccuig •
SO
debe ver he ls hlf ceury. Three sepre pis i ime dur ig his perid will serve illusre he wys i which his spec f ccuig hs bee mdied he mrgis he yer 138; he yer 165; d he decde f he 1 80s. I 138 i lg series f ricles i he pges f Th ccountant, Rld Edwrds rgued h i ws esseil use dis cuig echiques whe csiderig erive ivesmes. ly i his wy cud ll cil vlues be rsled i prese vlues. The iuece f ime shud he rgued be elimied s s mke cmpriss pssible A series f semil ricles by Rld se eiled Busiess rgizi d he Accu i he sme ul reifrced he pi d riculed he ide h he ime vlue f mey d priciples f discuig were essei whe seekig express css d reveues i mey erms.
In response, Staney Rowand, a coleag ue of Edwards at the London Schoo of Economics, referred to discounting techniques as dang erous nonsense' and sheer insanity'.9 Rowland drew up batte lines between economists and accountants. The arguments of
Edwards, he rgued, had the unanimity which is so characteristic of economists' Edwards, he stated, was enjoying for its own sake the sport of bludg eoning the heads of accountants with intent that they shall be both bloody and bowed' . 1 0 According to Rowland, the domain of the accountant was that of the ledg er, a world in which cool sanity reigns (. . .) the bed rock on which his whoe scheme rests' . 1 1 The accountant should be content to record the present as it ows into the past' and shoud eave to others the risky business
of tearing aside the veil which conceas the future'
The permebiliy f ccuig he cceps d clculis ecmics hs cribued he mkig f mgeme ig i furher respec. The evlui f mjr cpil is perhps e f he ms sefevidely mgeri specs ccuig d hs bee he fcus f csiderble d e
By 165 higs hd chged fudmelly. The clculus f dis cuig hd becme pr f ccuig. A ew meliy reiged A ediri i Th ccoutant i 165 prvides cveie mrker. This sed cdely h N e wuld dey he uiliy f he DF echique relive her less precise mehds. Much hd hppeed sice he erce debe i he pges f Th ccountant i 138. I 154 Je De hd published his mssively iuei rice i he Hava Buin Rviw (De 154. This ppeed discuig echiques s demsrbly superir exisig lerives i ccurcy relism relevce d sesiiviy (De 1 54 p. 1 2. De rgued h mgeme relied wrryig degree iuii d uhriy d h i lcked he skilled lysis d he scieic crl eeded fr irice vil cpil ivesme decisis (De 154 p. 12 A vlche f
1 82
© Th Edoria Boad o Th Sociologica Rvw
Making he fuure caculable
998
1 83
The margins ofaccounting
Ptr Mir
fatry. It supplemented the traditinal nerns f aunt wth the delty r hnesty f the persn N lnger wuld unting limit itself t the alulatin f atual sts. auntng wuld nw embrae individuals and make the auntable by referene t presribed standards f perfrman st aunting wuld be based n predetermined sts and wu seek t quantify the variane f atual frm standard. By means st aunting wuld seek t bring t the attentin f agement preventable ineenies (arrisn 130 p. 8) s these might be elimnated. The ndvidual wuld be set standards perfrmane and varitins frm these standards wuld make ble the existene f neienies Thus might eeny be made indvidual as well as a lletve phenmena As a way f seeking t fster the alulated gvernment f within the fatry standard sting was alled t that vast prjet standardizatn and nrmalizatin that has been alled management. Standard sting and budgeting emergd n a al relatnship wth sienti management. Indeed paper n Shp Management ntains many f the elements dard sting. And the wrk f arringtn Emersn expliitly aged smething akin t a standard sting (Emersn 11 Sient management sught t make vsible the wastes that it as arsing frm the atns f individuals. A senti f the exat extent f suh wastes wuld be the rst step The nd wuld be the systemati eliminatin f suh wastes. Thse as the Gilbreths wuld jin with Taylr in seeking t dsset analyse the minute mpnents f whih dverse prdutve ties were mpsed. The atins f the wrker eah and eve mvement f the wrkers bdy wuld be studed s as t the eieny f eah individual atin. N matter hw mnute apparently trivial the ativity sienti management prmsed gvement f the fatry that wuld be based n the bjetivity expertise These new prpsals fr gverning the fatry did nt emerge a vauum. They were linked t a variety f praties beynd the fa try and beynd the enterprise that tk the prmtin f ieny as the bjetive f gvernment. Indeed the ntin eieny helped establish a reipral relatinship between the try and the natin as distint sites fr the prmtin f and lletive eeny. Eieny was t b prblematzed made quantiable in a multpliity f arenas and by means f plethra f devies inluding statists industral psyhlgy ntel
1 86
lig ence testing , and much else besides. The noton of eciency pro vided a 'convnent label under whch could be g rouped a rang e of activities, assumptions and nterventions by diverse · actors and
agenies.
A dscourse of 'national eciency articulated a concern with e cency at a macro-level But if such concerns were articulated at the level of the nation as a whole, it was held to be in 'private locales, such as the factory, the school, and the home that the ecency of the individual could be acted upon and optimised. Such locales were thus to become key sites withn which the quest for health, prot and eciency would be addressed. Experts of varying knds, including cost accountants, industrial psychologists and others, were to act upon ndividuals n such locales. Attempts to improve the eciency of indviduals n such settings ould, or so it was hoped, foster national eciency Fr if the purpose of g ovement was to promote the 'g ood life of its citizens, it would be able to do so successfully only by acting upon the individual in those most
private f dmains
The transformation of cost accountng broug ht about by the invention of standard costing and budgeting was profound, and was part of a wider ensemble of practices that soug ht to indvidualize and normalie ecency, and to make it calculable. The search for eciency within the factory was reinforced by a wider quest for ecency, one that took place in diverse locales. Within the factory, ideas and devces that had hitherto been the province of engineers rather than accounants were initially borrowed, and then made the cornerstone of a transformed cost accountng. Cost accounting g ave monetary form and visiblity to the ambtions and concerns of other bodies of expertise within the factory Those such as Towne had soug ht to construe the engineer as an economist. And those such as Emerson had envsag ed engineers and accountants collabo rating in the task of detecting and analysing ineciencies But it was only when these concerns were artculated in the language and devices o cost accounting , when they were made visble and calculable in monetary terms, that they could become central to the g overnment of economic life withn the factory
The redentin f the bundaries f auntng s an nging press rather than a xed amplishment. st auting and management aunting ntinue t remain permeable t the n erns f thse bdies f expertise suh as engineerng that seek t manage prdutn presses by reurse t nnnanial means. This permeabilty f aunting t ther bdies f expertise that © The Edoril Bod of The Socologicl Reviw 8
1 87
The magins ofaccounting
Pete Mile
appea t e se t te pdut ad pduti pesses has ee a patiulaly tale eatue the past deade Ass the 180s, maagemet autig has ee plema tized ieasigly withi a esemle agumets ad paties that has ee temed elsewhee the pitis the pdut' (Mile ad 'Leay, 1 30. A edisvey the aty' withi Ameia pitial ad emi deates has etailed a iditmet the ati's aties pduig pduts lw quaity Ameia mauatuig idusty has ee itiised ieiey, the elativey lw eduatial ad skil levels its wke, ad seekig shttem pts at the expese lgtem gas Jus a the jets ad jetives st autig wee edeed i the ealy yeas this etuy thugh stadad stig, s t is ma agemet autig uetly eig mdied at the magis i el · ti t a itesied e with the pdut his edisvey the aty' has had maj impliatis maagemet autig hist maagemet autig e hed ut the pmise makig etepises gveae at a distae, ad ' adig t the aial ats, it is peisely this distat atue suh expetise that is w held t e the pem The idea maagig the aty ad the etepise at a distae, thugh th aia umes ae, is ieasigly questied. F the pe• upati with shttem st eduti athe tha lgtem petitiveess, ad with aia estutuig t lste pts tha tehlgial ivati, is held t have aise ut aial metality that dmiates the maagemet mauatuig idusty Autig has me t e egaded a pat the plem, athe tha the sluti It is diult assess the extet t whih this questiig maagemet autig will tasm the gvemet the a · ty i weste emies. Ad it is als diult t estimate th extet t whih maagemet autig will e mdied i h pess, wil lse ut t the dies expetise that pmise t ig the gvemet the aty it lse pximity with t pdut' t is etaily the ase that ieasig appeal is eig ma withi maagemet autig t a wide age measues, iludig setup times, ivety evels, deet ad wk ates, mateia ad pdut velity with the aty, muh else esides Issues stategy ae mig t e see as pat the legitimate amit maagemet autig Ad the · ad aspiatis, suh as thse tasmig mdes itizeship', ealig wke empwemet', ad istali
1 88
ustmedive mauatuig' ae pemeatig the dmai maagemet autig. Eve i e egzes the disepay etwee suh ideals ad aty ie, thei tasmative ptetia is sideae weve, thee ae als develpmets whih g i the the dieti, iwads twads autig's idea pduig a atual ad aia aulus emi elatis, athe tha utwads twads adjaet dies expetise The uet ethusiasm ativityasedstig a e egaded as e suh attempt t este the legitimay e key aea st autig, withut udametaly tasmig its aulative paties its ideals The hpe seems t e that maagemet autig might e eivigated i this way, y a evival that elusive deam gettig eve lse t tue' pdut sts. But a attempted eupeati maagemet utig's existig appaatus is t eessaily at dds with a extesi its teity N d these develpmets it with the agumet hee examiig the magis autig F whateve the peise utme this uet peid itese questiig maagemet autig, thee seems little dut that its udaies ae eig edeed, its ideals mdied, ad its alulativ tehgies suppemeted. Maagemet sutats, textk wites, aademis, ad mmetats vaius kids ae appealig ieasigly a me diet ad immediate way gaspig ad makig visile the pdut ad pduti pesses e agai, maagemet autig is eig mdied at the magis. Conclusions
By kig at the magis autig, we a udestad hw this iuetial dy expetise is med ad tasmed A ume aspets this pess a e ted Fistly, the alte ati autig at the magis takes plae i multle sites an has multiple souces. Fm eve the ie disussi pvided ave, it is ea that autig ivati is t the peseve ay si gle gup Patities' ae t the sle eve piipa sue ivati. N is ay the sigle gup the sue igi a patiula autig patie. Istead, the tasmati autig as a dy expetise takes plae withi ad thugh a histially pei esemle elatis med etwee a mplex ats ad ageies, agumets ad ideas, alulative devies 1 8
The magins ofaccounting
Pete Mie
Q
and mechanisms It is such ensembles or assemblages that nee be addressed Secondly, a conce with the margins of accounting makes appa ent the extent to which accounting is pemeabe to othe boies expetise. Accounting has been made and remade by calculative technologies and rationales from a disparate range knowledges and associated ideals Accounting, one might say, has low epistemological threshold Even though there are oen arguments and disputes when a new way of calculating is duced, and appeals are made to various matters of principle, malleability of accounting is quite remarkable The criteria for can count as accounting are historically contingent and only porarily stabilised Accounting is riven with tensions as to its tity and its bounaries Proposals for new ways of merely serve to heighten these tensions, and to make them Thirdly, and perhaps most fundamentally, the implication of above is that accounting is itte moe than an ad hoc accetion pevious magins. If accounting is made and remade at its and out of components borrowed from other social practices, there is no essence or core to accounting Accounting is instd form of bicoage an activity whose tools are largely improvised adapted to the tasks and materials at hand There are no principles by which one might be able to arbitrate as to what be inside and what outside accounting For what is outside ing today can be a central and takenforgranted part of within as little as a decade There is a lesson here for all those modernists' who have discovered fraentation, and are busy ing it everywhere, including within accounting Fragmentation intrinsic to accounting, to managerial expertise more generally, no doubt to other socially legitimated bodies of expertise Finally, a word of caution may be in order The above might apear to some to amount to saying that accounng does really exist, or tha the connections between its various practices so tenuous and insubstantial as to question its rationale and tence This is certainly not what is intended by my arguments The aim instead has been to draw attention to the ways in which calculative practices and rationales of accounting have been bled in an a hoc fashion in relation to historically and cally localed concerns and issues In this, accounting may much in common with other bodies of expertise, ranging from most strongly legitimated ones such as law and medicine, to more weakly established forms of knowhow such as business
egy, psychotherapy and marketing The aim has also been to oer an historical snapshot of some key aspects of accounting To the extent that accounting has come to be almost synonymous with management in certain countries since World War II, this historical snapshot hopefully tells us somethin about the ways in which enterprises have come to be governed over that same period Noes
2 3
4 6
8
9 0 2 3 4 6
he examles provided below are tae rom Aglo-America cotexts ad thus provide a particular view o the margis o accoutig. A study o dieret atioal cotexts would provide a dieret set o margis ad a dieret picture o the chagig boudaries o maagerial expertise. tae as selevidet that the margis' discussed here are ot uiversa he clearest ad most developed example o this is the utility maximizig approach to the choice o accoutig methods advocated Watts Zimmerma (986). terestigly dwards stated that cotemporary textboos give too much space to the coce with ways o icreasig ececy (ards 98 p 8). He was cearly sceptical o stadard costig systems ot least because some o them were exceedigly complicated (ibid, p. 88). deed they required such little eort that each article was typed late o a Wedesday ight ad delivered to the oce o the Accounan by his wie whilst he slept. They appeared i prit the ollowig Saturday (Coase 98 p. 9). O the developmet o cost accoutig i the UK the early decades o the 20th cetury see Lo (994) See i particular Baard ( 9 38) or a clea r statemet o these lis O these developmets more geerally see Miller ad OLeary (989) O the lis betwee admiistrative theory ad the subective' theory o cost see hirlby (92) My discussio here is deliberately brie as have discussed the rst two o these momets extesively i Miller ( 99 ) Discoutig is a calculatio or traslatig uture cash ows (such as those aris ig rom a ivestmet) ito preset values t is based o the otio o the time value o moey the idea that £ today is worth more tha £ i oe years time because the use o moey has a cost (called the cost o capital or iterest rate). he Accounan 98 pp 609-6 0. h Accounan Ocober 938 p 9 he Accounan October 9 38 p. 22 heAccounan October 938 p 22. he Accounan 6 February 96 pp 4-46 DCF is the comoly used abbreviatio or Discouted Cost Figure O this cocept see . 8. See Miller ( 99 ) pp 4 3 . o a more detailed discussio o this literature For a more exteded discussio o these issues see Miller ad O'Leary (993) See Miller ad OLeary ( 99 ) o the developmet by a maor US corporatio (Caterpillar c) o a broader ramewor or evaluatig ivestmets i mode mauacture
&
1 1
The margins ofaccounting
P
References Avishai A (1989), CEO's Common Sns o CIM An Intrviw with J Tra O'Rourk' Harvard Business Review (anuar-Fbua Baard C.I (1 938), he unctions of the xecutive, Cambidg Mass. Harva Univrsit Prss. Burhll S Clubb C. Hopwood A and Hughs ? (1980), Th Rols o Aounting in Organiations and Soit' Accounting Organizations and Soci Vol. 5, No. l pp 5-27 Cark JM. (1923) Studies in the conomics ofOverhead Costs, Chiago Univsit o Chiago Prss. Coars R.H (1981 [1938] ) Businss Oganization and th Aountant' in Buhanan and G Thirlb (ds) LS ssas on Cost, Nw York Nw Yo Univsit Pss Originall publishd in thAccountant, 1 938 . Dan (1954), Masuing th Produtivit o Capital' Harvard Business Review pp. 120-130 Edwards RS (1981), Th Ratina o Cost Aounting' in M Buhanan an G Thilb (ds) LS ssas on Cost, Nw York Nw York Univrsit Prss Harrison G C (1930), Standard Costing, Nw York Ronald Pss. Has R.H and Garvin D.A (1982), Managing as i Tomorrow Mattrd Harvard Business Review, Ma-un 1982 Hopwood A (1985), Th Growth o "Worring about Managmnt Aountin , in pp 227-235 in KB. Clark RH Has and C Lorn (ds) e Unea Alance: Managing the Productivitechnolog Dilemma, Cambridg Mass Harvad Businss Shool Pss Hopwood AG. and Millr (ds) (1994), Accounting as Social and Pctice, Cambridg Cambridg Univrsit Pss. Kaplan RS and Atkinson AA (1989), Advanced Management Accounting, 2n dition Englwood Cis NJ PrntiHall In Lo A. (1994), ountan and th First Word Wa pp 116-137 in A.G Hopwood and Millr (ds) Accounting as Social and nstitutional Practic Cambridg Cambridg Univsit Pss Millr P. (1991), ounting Innovation Bond th Entrpris pobmatiin invstmnt disions and programming onoi gowth in th UK in th 1960 Accounting Organizations and Societ, Vo. 16, No 8 pp 733-762 Millr (1997), Th multipling Mahin' Accounting Organizations and Societ Vol 22, No 34, pp 355364. Milr P. and O'Lar T (1989), Hiahis and Amian Idals 1900-1940 / Academ ofManagement Review, Vo 14, No 2 pp. 250265 Milr and O'La T. (1993), ounting Expis and th Politis o t Podut Eonomi Citinship and Mods o Corpoat Govrnan Accounting Organizations and Societ, Vol 18, Nos. 23, pp 187-206 Milr and O'Lar T. (1994), Govrning th Caluabl Prson' in A Hopwood and Mill (ds) Accounting as Social and nstitutional Pracic Cambidg Cambridg Univrsit Prss. Mir and O'Lar T (1997), Capita Budgting Pratis and Complmntarit Rlations in th Tansition to Modrn Manuatur A Fil Basd Analsis' Joual ofAccounting Research Vol 35, No 2 pp. 25-271 Mill and Ros N. (1993 [1990 ) Goving Eonomi Li' conom an
Societ, Vol 19, pp. 1-31, pintd pp. 75-105 in M. Gan and T ohnson oucault's New Domains, London utldg Portr ME (1992), Capital Disadvantag Amria's Faiing Capita Invstmnt Sstm' Harvard Business Review, (Sptmb-Otobr 1992) Ros N and Millr , (1992), Politia powr bond th Stat problmatis o govrnmnt Brith Joual ofSociolog, Vo 43, No 2 pp 173205. Thirb G. (1952), Th Eonomist's Dsription o Businss Bhaviour' conomica, 19, pp. 148-167 Watts R.L and Zimrman L (1986), Positive Accounting heor, Englwood
Cis NJ PrntiHall.
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Ano ther discipline for the market economy
Another discipline for the market economy: marketing as a performative knowledge an know-how for capitalism
Franck Cochoy Thanks t varus crcumstances . . . ne dscvered hw t dscnnect experences frm the busnesses n whch they had
been acqured, t gather, keep and transmt them as an bjectve frm f captal. It s ths frmdable mass f experence that entals, when used, the frwardng f ecnmc ratnalsm t the hg hest deg ree fperfectn (Smbart, 166) Hw des the market ecnmy wrk? n the ne hand; rthdx
ecnmsts have lng argued that market equlbrum depends n l the autmatc adjustment f supply and demand n the the t hand, heterdx ecnmsts (Wllamsn, 185 ; Arthur, 18, bu als hstrans (handler, 77; Tedlw, 10 and sclgsts (Prus, 1 8 have tred t shw that supply and demand are scally cnstructed (Granvetter and Swedberg, 12), that managera practce shapes the cnturs f the market
manageral practces, there les the relatvely unknwn set f management scences. These scences f practces r practces equppd by scence wrk t perfrm the whle cnmc gae (bth theretcal and emprcal. Let us g a bt further. Amng management scences, amng the thrd partes anmatng the market, marketers surely deserve a par tcular attentn We ntend t shw hw marketng experts have lng played a medatng rle, and have ccuped a central pstn n the hstry f mdern captalsm. a!�ducers and cnsumers, halfway between ecnmcs and manageral· -"iaspecalsts have gradually renvented the funda mental market actrs and prcesses; they have succeeded n dscplnng (masterng/cdfyng the market ecnmy. w have marketers perfrmed the market ecnmy? ur argu ment s that the prgressve perfrmatn f the ecnmy by mar ketng fllwed a furfld prcess. Frstly, marketng pneers tred t tran themselves n the emprcal study f markets and t educate smlar specalsts (perfrmatn thrugh peerfrmatn. Marketers reached that rst bjectve by nventng specal human and cnceptual frames fr market knwledge and practce (perfr matn thrugh prefrmang. Frm that pnt nward, the adepts f the dscplne f markets played the game f managers and man agement, f ecnmsts and the ecnmy (perfrmatn as perfr mance actng and playng Eventually, they reshaped ther wn actvty, but als the market and the ecnmy altgether (perfrma tn thrugh refrmatn
ur bjectve n revstng ths debate s nt s much t radcalze
the classcal ppstn between the tw camps but, paradxcally
Performation through peer-formation: marketing as learning and teaching
and f ther 'natural r cntngent aspect; secndly, ther prps tns always ental a separatn f scence (ecnmcs) frm practce (manag ement) n rder t nvestg ate the cmplex crre spndences between the ne and the ther.
f curse, the discipline f marketng (the cntrl f markets began well befre the discipline f marketng (the scence f markets. Frm that pnt f vew, speakng f marketng as a cntrbutr t the cnstructn f markets s nt partcularly nnvatve. Numerus studes have lng dcumented the fact that the market ng knwhw f managers played a decsve rle n the rse f cn temprary captalsm snce the mddle f te 1th century, the prgressve ntealzatn f markets n bg cmpanes (chran, 172; handler, 177, the recurrent practce f market seenta tn (Tedlw, 10, r even the scal cnstructn f demand (McKendrck et a/., 182; Mukerj, 183; ampbell, 187; Strasser,
t utlne ther cmmn grund. Frstly, the arguments f bth g rups are always rted n an examnatn f supply and deman
Dscussng the fundatns f ths endless dspute seems t be a
r
gd way t reslve t In rder t understand the market ecnmy One CanJ9_k �Q!)flse, aq �\. . . A _
. .
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�!Jes the functnng f markets rest n processes ther t �'. �· �"· han thse f scence (ecnmcs and/r practce (management? In · askng thse questns, ne dscvers that, between ecnmcs and © The Editoril Bord of The Sociolocl Review 1998. Pubihe d by Blckwell Pblishes
Anh scpn f h mk cnmy
Fnck Cchy 989; hmann 1996 have cnrmed the victry f the visibe hand managers ver the invisibe hand f the market As ng as marketing is n mre than an rdinary weapn f business frces its study des n mre than reinfrce the idea f a scia cnstructin markets. As ng as marketing is viewed as the simpe extensin crd suppy pwer ver demand, ne can cncude that the theretica ecnmy is an bvius byprduct f cassica ecnmic between the prducer and the cnsumer interactins ie, wever the separatin f marketing knwedge frm market practices. The bective f this paper is t shw that the irth f marketing as a distinct bdy f knwedge cated haf way between suppy and demand but as between science and practice changes everything the emergence f marketing as an aternative discipine (rue/refer ence f the market ecnmy favurs the circuatin f knwedge the imprvement f new men and cncepts, thus the impementa tin f new ideas and practices In turn these transfrmatins are t renew nt ny the scia identity marketing actrs bu as t mdify the genera rientatin f ecnmic activities. Fm cnm cs mkng mkng s nng
In rder t understand hw the emergence f marketing as a ma agement discipine cntributed t the functining f markets, it usefu t bserve that frm its very beginnings the academic stud f marketing fund its rigins in the science ecnmics itse T funding fathers f mdern marketing thery were ecnmists the American Midde West wh were discipes f the German his . trica sch f ecnmis. They were ecnmists, because at tha time ecnmics was the ny discipine deaing with market phe nmena (Bartes, 1976. But as discipes f the German sch f ecnmics, their dua educatin cntrasted sharpy wi the cassica rientatins f their peers educated in the Unite States the German histrica sch insisted that the apprach t ecnmic matters shud be simutaneusy histrica, statistica and practica; in shrt riented tward the empirica study f rea markets (Jnes and Mniesn 1990 Eventuay they were Mi West ecnmists wh as members f Land Grant Universities we expsed n a daiy basis in the cmpex dicuties f agricutura exchanges which ed them t study the functining f rea ma keting channes and mre precisey the shipment f perishabe c mdities frm rura areas t urban paces (nverse D., 959. 96
Distanced rm cassica ecnmics and remte frm the business wrd the ecnmists wh funded marketing were frced t invent everything. This extreme marginaity paradxicay was as their surce f strength. In rder t buid a new knwedge these men undertk t fw physicay the mvement f cmmdities ang marketing channes; they decided t make an inventry f mar keting institutins, prcedures and practices. Frm that pint view, the testimny f L.D. Wed, wh authred the very rst marketing textbk, is particuary enightening: When I began t teach marketing in the fa f 19 there was practicay n iterature n the subect I had t get ut and dig up my wn infrmatin. I studied at rsthand the mvement f grain thrugh and the use f uture trading in the Minneapis hamber f mmerce. I persnay fwed shipments f butter and eggs and ther cmmdities frm the cuntry shipper in Minnesta thrugh the whesaers, bbers and retaiers t New Yrk, hicag, and ther cities. I anayzed each item f expense invved in this passage thrugh the channes f trade. I studied the methds f determining price qutatins, the pera tins f butter and egg exchanges, and the auctin markets in Easte cities I as studied at the rst hand the peratins f the cperative shipping assciatins f Minnesta and issued buetins n this subect (Wed 941 As a man frm nwhere knwing nthing, the uture marketing teacher ges thrugh the dmains f thers and picks up their knwedge. In visiting ther areas he buids a transversa knw edge. Befre him, knwedge existed, but cnceaed in every ink in the chain Aer him, the knwedge is reveaed, integrated redistrib uted. The whe picture is eventuay ready t be dispayed By the end f tw years f this wrk I ha d written my bk, The Marketing f Farm Prducts. (Wed, 1941 The academic desnt knw anything but when he earns sme thing, he tries t teach it And frm that pint nward this ut sider, this intruder in the histrica cmpetitin between private actrs, prpses a transversa disseminatin f his sten/ew knwedge; he anticipates a pssibe perfrmatin f the ecnmy by his new management science
97
Franck Cochoy
Another discipline for the market economy
g lobal unifying procedures, and this occurred because the circu• tion of men in the market economy (the invention of execut careers) demanded the standardization of their lang uages, quac· tions, and skills. In marketng, this standardization folowed a ·
double path.
ducts to institutions, then from institutions to functions, gave birth to an entirely new body of disciplines and group of specialists As a consequence, the ascending and decentralized standardizaton of marketing knowledge was soon furthered by a descending and cen tralized standardization of marketng peope.
Performation as pre-formating: the discipline of marketing
The second standardization ofmarketing: from marketing people to the marketing discipline
The rst standardization ofmarketing:from marketing knowledge to · marketing people
The rst standardization of marketing was ascending and interac� tive It was the progressive connection between the observations an knowledge acqured in loca elds about marketing commoditie
institutions, and functions We already saw that in order to eucidat· the mysteres of marketing channels, the economist-marketer ha
chosen to folow the movement of products The folowing of com modities led to the naming o f their origin, transit, and destinatin paces. In the second and third decade of the 20th cenury, th founding fathers of modern marketing -who received ther back g round education n nstitutiona economcs (Brown, 1 95 1)unde
took to describe all the institutions invoved in the marketin
process, from big wholesae estabishments to the smalest retai store (Bartels, 1 976) From this double inventory (what circulates commodities; what they circulates throug h: institutions) a rst gen eraization became possible The double entry through products an insttutions ed to the functiona approach, at a time when, pre
'1
csely, the marketing functon' beg an to be institutionalized in American companies (Faria, 1 983). The study of marketing functions was introduced by Arch W ,
Shaw (19 12) who poposed a taxonomy of the genera functons o middemen' (ibid) . The functions he described were the sharng o · risk, transportation, nancing , selling . Because it separated men things, and concepts, the functional approach ed to a transversa 1 g eneralzation and integ ration of local knowledg e Indeed, thi approach was reproduced in the rst marketing textbooks which from Wed's Marketing of Farm Products (1916) to Clark Principles of Marketing (1922), tried to complete rene and g ener alize Shaw's original taxnomy. Thus, step by step, the knowledg e of networks led to a network of knowedg e; the empirica and inductive approach g oing from pro 200
The academics interested in the marketing world met in the cotext of the professional associations they originally belonged to The Associated Advertising Clubs of the World favoured the meeting of margina psychologists among the new advertising community; the American Economic Association facilitated the recognition of mar ginal economsts among the crowd of their orthodox peers Indeed, the meeting of professional asociations gave to deviant persons the opportunity not only to discover their marginality among their for mer community but aso to gather together. The two groups of deviant economists and deviant psychologists, because they shared a common interest for marketing activities and a common identity as deviant academics, ended up merging into a Nationa Association of Teachers of Marketing and Advertising (Agney, 1941). Eventually, this rst group was soon joined by a third one: the group of executives and technicians specialized in market sur veys who, because they felt they were on the margins of business power and academic knowledge, had gathered since 1931 in an American Marketing Society The marginal specialists of the man agement of margins decided to merge:' on January 1 st, 1937, they launched the American Marketing Association (Agnew, 1 941 ) The appearance of an ad hoc professional association heped mar keting men to increase their control over business education and managementthus over the American economy a a whole. We have already suggested that the implementation of new knowledge and know-how depended on their generalization and abstraction by means of pedagogic devices. However, this rst ascending standard ization, because of its iterative and decentralized character, was slow and uncertain; it relied on hazardus encounters, on providen tial discoveries, on the variable availability of references, or on the goodwill and perspicacity of authors and publishers On the con trary, a professiona association provided the means that were necessary to overcome such diculties. As early as in the 1 920s, the AMA's ancestorthe National Association of Teachers of 201
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journals The resulting maturation of mareting institutions • ings and human societiesthe progressive preformating of m ing practice by mareting nowledge and networstestied to t implementation of a tight lin between nowledge and practc In short it permitted the performation of concepts through frames that were both disciplinary and managerial. From that p onward through the double action of mareting teaching (at t local level) and mareting standardization (at the global level) tion became synonymous with management. The tight between teaching materials and persons was successful in moving whole mareting world together in spirit if not in totality n and practice the discipline of mareting inuenced the general tation of the American economy at both the micro and macro Performaion as performance: playing wih and wihin he economy
" �-
A mccnmc pfmn: n yn mkng
At the micro level the pacing ofAmerican mareting by a spirit and toolit was prepared and furthered by the interrelation of the new science ofmarets and the principles of ing taylorism. Since the scientic management' of wor gave agement the means for a better control of production orJaztD some thought that the taylorian model could be transferred adapted to the mareting word so that the distribution syst could be scientically mastered (Cochoy 1994b). First as early as 912 a man named Charles W Hoyt manag to taylorize the sales department in the same way as Taylor had t� lorized the worplace In Hoyt's proposals the denition of sa quotas the description ofprecise selling routes and the prescripti o a standardized sales education became for the salesmen what ' production objectives analysis of woring tass and planning p cedures had been for the taylorized worer (Hoyt 912) For th rst time in history the inception of a scientic sales manageme programme extended the scientic management ofwor outside th worplace it spread the optimization of managerial activiti beyond the business plant Then in 1927 another author named Percival White radicaize and generalized Hoyt's project. Hoyt had extended the tayloria control of production towards the realm of sales; Whit 204
proposed to reverse the relation ie to start from a scientic mar eting management in order to control production as a whole. Foreshadowing the mareting concept and mareting management of the 950swhich as we will see aimed at subordinating the management of the rm to the prerequisites of consumer satisfactionWhite proposed putting the entire productive process under the scientic mastery not only of sales but also of advertising of distribution and more generally of th maret and the consumer White 1927) With this taylorian mareting the taylorism withi was eventually framed by a taylorism without from one end of the American maret to the other from production to consumption or rather from consumption to production the American maret was trapped dened managed and optimized through the implementation of the same doctrine the same procedure and the same control Between 912 and 1927 from Hoyts propositions to Whites formulations in the bacground of the shi from a simple sales management to a management inspired by the methodical observation and control of the maret there occurred the maturation of mareting nowledge of mareting glossaries of mareting techniques of mareting associations networs and institutions The taylorian mareting of the one and the more descriptive mareting of the other were not the same. But the two foms of mareting went forward on parallel routes they reinforced each other they made it possible to ppy to American businesses a whole set of concepts and devices thans to which one could conceive each business no longer as a single atom lost in the mareting universe but as a universe that encompassed its own maret With mareting the circle o scientic management was closed: the whole economic ccu, from each business to the big maret was amenable to a systematic controlmareting was smoothly but surely sliding from microeco nomics to macroeconomics A mc pfmn h mkng f h Nw D
At this point of our account it is important to observe to what extent the rise of company and disciplinary mareting coincides with a sudden weaness of the autoregulativ maret economy The decisive armation of mareting both as a management science and as a management technique is contemporary with the 1 929 crisis. In the 1930s mareters too over a new research domainthe governmental regulation of maretingand their community welcomed a new type of membersthe civil servants of the Federal 205
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State A few signs show it duing the cisis yeas, in the Jurn f pages, govenmental concens had taken second pl 167 pe cent of he papes) and state pesonnel epesented thid human foce of the Amrcn rkng Asscn 15.1 p cent of its membes) Applebaum, 1 947). What had happened? Fo us, who know the end of the stoy, the answe is easy t economic cisis of the 1 930s h gn h wy the cnx had p duced its ffc the economy had pefomed maketing athe t the contay But fo the actos of the 1930s, things wee no obvious. n those yeas, it was not the context which imposed eects on the actos, it was athe the actos who took advantage the context in ode to fowad thei own position. Fm this poi of view, the vey st issue of Th Amrcn rkng publishd in 1934, included a suggestive foewod fom its edito rkng
·
[1 ] All of us ealize that extemely impotant poblems in busine duing the next decade o moe will almost cetainly fall in the eld of maketing and distibution [2] As this st issue goes to pess, the National Recovey Administation and the Agicultu Adjustment Administation ae making bold attempts to hastn the etun of pospeity. [3] Whateve may be thei ultimate success and accomplishment they will cetainly have made a lasting impession upon business thinking [4] Unde the descen ing spial of the depession, business men have developed a fam of mind which makes them willing to accept leadeship along lines which a few yeas ago they would not have been willing to conside. [5] The Administation assumes that steady employ ment and adequate wages ae of st impotance in poviding a · mass maket fo ou mass poduction, and the nation is united i a geat pactical eot to put this conception into univesal opeation. [6] The esults will be watched closely by maketing executives, who will give geate attention to data on wages and hous, as indices of sales possibiliies. . . [7] The pupose of the Amrcn rkng Ju is st of ll to pesent wothwhile mateial which will be of inteest to those in chage of maketing opeations in business oganizations. [8] n othe wods, we hope to be one facto in helping to sell the esults of tue maket eseach to management [9] One of the toubles with much business eseach is that its pactical esults ae seldom placed befoe management in such a way that they can be used in modifying the methods of buying and selling commodities (Th Amrcn rkng Ju, 1934)
The geat depession, because it was disastous fo business, was a fantastic oppotunity fo the new maketing specialists The eco nomic chaos jeopadized the beliefs of the old manages, and so it made them moe eceptive to the implementation of new manage ment pinciples. Of couse, fo the new maketes, the cisis was positive only as fa its eects favoued the new expetise That is why they caefully managed to associate the economic disode with maketing poblems [1]. You poblems ae maketing poblems, and you cannot solve them by youself anymoe this was the way maketes spoke about the cisis to managesthei clients [7 8]. Actions by the Roosevelt administation gave an ultimate endose ment to maketes. Not only did economic conditions change, but management pinciples wee not the same anymoe The autoegu lative economy was being eplaced by the Fedeal inteventionism, with its aay of codes, ules, specialized agencies, accounting devices, new economic pinciples [2] Because the acceptance of the New Deal was univesal [5], to the point that the business commu nity itself seemed to accept its fatality [3 4], one had moe o less to cope with it, one had to ethink the whole of business life along the lines of an economy giving a lage ole to the State egulative action [6] The new discipline of maketing ook note of the New Deal, it fomulated concepts adapted to its eects it oeed busi nesses the means of micoeconomic inteventionism [8]. The Ju, fom that point would cay on the job aiming at gatheing and codifying these means, and binging them to its public know ledge [9]. The New Deal, as a macoeconomic context with capital lettes, became a new deal, a micosocial complex with small lettes. The Fedeal State poject eved the fomulation of a new discipline. The state ejection of maket autoegulation gave maketing the oppo tunity to quit the economics of its oigins oe would take the eco nomic wold as it was, and not as what it should be) the setting of the new pinciples of economic ction would seve as a basis fo the costuction of new mketing techniques Just as in the case of the moden welfae state, maketing was built at a time when eveything collapsed Fulleton, 1988b) ma keting was dwelling upon the weaknesses of the invisible hand in ode to impose its own mediation. Fo the Pince counsellos as fo the management consultants, the olts of the libeal economy seved as foundations fo the building of new sciences the epesentatives of the public and pivate sectos advocated the consequences of the lack of an adequate economic science in oe to justify the
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Performaion as re-formaion: from he reform of managemen sciences o he reformaion of markeing scieniss Th rfrm fmngmn scncs
In te future: at te end f te interwar perid a few markete were dreaming f a marketing tat wuld be really scientic te dreamed f a marketing tat wuld reverse te istrical relatin sip between managerial knwledge and practice In essence t wanted t escape frm a mre r less scientic management i rder t build a true management science Instead f deriving tei knwledge frm practice instead f accepting tat marketing p ceeds frm management) tey called fr knwledge t lead practi tey wised fr a science tat wuld precede management) Of curse te frmulatin f te rst marketing cncepts principles te impvement f market survey tecniques and fe mst Hyts and Wites prpsals ad paved te way. But te ntins were nly cdifying practice and te rst studies mstly descriptive Mrever as can be seen frm te liteature te times altug te idea f a scientic marketing manageme was extremely nvel it neveteless received rater limited attenti fm maketing academics In e 90s wever a furter imprtant innvatin in te American marketing realm: te scalled marketing Te marketing cncept prpsed a link between prt and cnsumer satisfactin and called fr management peratins tQ be submitted t te scientic study f markets in rder t place al ter business departments under te supervisin f te depatment Te nvelty was less te idea itself wic was remini cent f Wites scientic marketing management but rater its s tematic and entusiastic use witin American management circles Te mst striking and perplexing feature f te marketing cncep wever was nt its ptential perfrmative impact ver te America ecnmy but rater its evident lack f cgnitive eects upn te . munity f academic marketers. Altug businessmen ad been exp riencing r celebrating te marketing cncept trugut te 90s i was nly at te beginning f te 960s tat academic marketers impl mented it in tei wn speeces and activities Wat is te reasn f suc a discrepancy Wy did academic marketers resist s lng A wy did tey eventually give up at te turn f te 960s At rst sigt te reluctance f academics t accept te maketin cncept may seem surprising: in placing te cnsumer at te cet
20
f marketing and te prducer at te peripery Keit 960) te marketing cncept was giving academics te means t fulll teir wises ie t turn marketing int a science in its wn rigt and put practice under its guidance. But we dnt ave t frget te disciplinary identity f te rst marketers and te particular type f sci ence tat te marketing cncept was calling fr Let us remember: te pineers f marketing educated in institutinal ecnmics and in te descriptive analysis f marketing cannels were f curse able t cnduct market surveys but tey ad nne f te skills tat were necessary t explain te mysteries f cnsumer beaviur and/ t draw quantitative mdels f te functining f markets Te rst marketers were cnscius f te vulnerability f teir wn psitins: wile bserving te business wrld tey were per fectly cnscius tat te marketing cncept was attracting all srts f cnsulting agents te Ernest icter Burleig Gardne r Sidney Levyall tse w prpsed teir mtivatin studies all tse w prmted a psycanalysis f te cnsumer as a new way t cntrl te markets Kassarjian 994) In lking at American scial science marketing pineers saw clearly tat te specialists f te new tecnlgies brugt by te warperatins researc ecnmetrics general systems teywere lking twad management in rde t esure tei cnversin in a civilian cntext Reidenbac nd Oliva 983) and tey saw t wat extent a maketing management based n te cnsumer culd serve as an ancr pint fr te implementatin f tis kind f tecniques. Tus tey cncluded tat in rder t safeguard teir psitin it was imperative t prevent te cnsumer bject frm becming te Trjan rse f te new specialists by speaking again in terms f makets prducts institutins and functins f marketingin brie: ne ad better mistrust te marketing cncept. In 99 wever te Frd and Carnegie Fundatins launced an imprtant funding prgramme aiming at refrming te management sciences Tis prgramme was cnducted by Rbert Grdn and ames Hwell tw ecnmists w wee favurable t te new scial and quantitative sciences Teir idea was t fund te business scls tat wuld rst abandn te descriptive an inductive apprac f te rewar perid and secnd adpt a perspective grunded in te implementatin f bt quantitative tecniques and beaviural sciences Grdn and Hwell 99) Fr te ld generatin te alternative was cruel: refusing te Frd Fundatins recmmendatins meant missing enticing grants fr teir wn business scl; accepting te refrm meant being 2
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supeseded by ppoches they lcked the skill to implemet d thus losig thei pofessiol idetity. The ltetive ws cuel u ws ot without solutio. I ode to ecocile the iecocill i ode to peseve the cotdictoy iteests of thei peso cee d collective istitutios the seios elize they should mke little move eoucig the elds of techig d esec tey migted towds dmiisttive positios iside tei ow schools. I cceptig te ole of ogizig tht which outstipp them i becomig the dmiisttos of the efomi mgi the impottio of qutittive techiques d behvioul sciec to mgemet scieceste old busiess teches wee ble to st t the cete of busiess schools while mly implemetig the e oiettios Cochoy 1995). mketig efom ws ccepted ll the moe willigly sice i could be peseted s the logicl etsio of the mketig co cept. Oce istitutiol ecoomics ws bdoed quitti techiques d cosume psychology could be itoduced s t tul tools of mgemet fouded o the cosume oiet ; tio d the e of mketig mgemet could begi. Thks ' the hiig of youg specilists tied i te ew socil ecooi d qutittive scieces the mketig of the 1960s moved i double diectio. O te oe hd te implemettio of ope• tios esech d ecoometics led to the bith of soclled m ketig sciece: esech stem tht could model d optim mket ctivities. O the othe hd the impottio of sttistic psychology d behvioul lysis gve bith to the soclle cosume esech ppoch tht itoduced systemti study of cosume behviou Fom this double oiettio oe could poceed beyod ede R. Smits ituitio who poposed well befoe the efom to us the ecoomic theoy of impefect competitio developed by t Cmbidge school of ecoomics i ode to clify the old pctic of mket segmettio d poduct dieetitio Smith 1 95 Aldeso 1957). Thks to qutittive techiques d behvi oul scieces oe could develop the cocepts d the pocedue ecessy fo tue mketig mgemetfo techicl itegted dmiisttio of mkets. Moe pecisely the mketi mgemet pogmme etiled two mi poposls. Fist it p seted the ide of mketig mi Bode 19 64) which seeks to s the best mketig policy s optiml d cotolled combitio of pice pomotio plce d poduct sttegies McCthy 1 960) Secod it peteded to complete d eifoce this mketig mi
model thks to the systemtic use of the tyloi model of plig lysis d cotol Kotle 1967). Aoud the mketig cocept/mketig mgemet/mketig mi tiptych the isig implemettio of sttisticl devices i mketig icesigly showed tht beyod pices the esult of competitio depeded o the mgemet of the multidimesiol spects of poductsbove ll bds sevices pckgig Gee 1963) t showed tht o hd to ply o these mdimesios i ode to spe the mkets; the e !thods J l � costuctio of el blck bos fo techicl mgemet of mkets Little 1979) The cocepts of socil sciece d the systemtic study of cosumptio pctices mde possible ot oly the odellig of buye behviou but lso the implemettio of these odels fo the coduct of mketig sttegies Howd d Sheth 1969) Thus the cosequece of the efom of the 1960s ws the pid implemettio of double pefomtio of ecoomic mttes ecoomy/ecooics). O the oe hd the efom pefomed ecoomics i focig it to migte fom Stte to busiess i ddig to the modellig of the whole ecoomic cicuit logous fmig of mgeil pctices. O the othe hd the efom pefomed the ecoomy sice the geel implemettio of the sme fmewoks techiques d devices fom the Stte to busiess uits though ll distibutio chels ws boud to eifoce the eciecy of mgemet of mkets. The cotempoy phses of ublic mgemet Lufe d Pdeise 1990) o busiess govece Gomez 1996) futhe demostte the etet to wich ecoomics d mgemet scieces migted towds politics/politicl scieces d joied eco omics d mgemet. As the esult of gigtic tsltio d combitio pocess of mode scieces d pctices ecoomics mgemet d politicl scieces eded up beig oly dieet dimesios of sigle sociotechicl etwok Clo 1991). O te oe hd t the tiol d public level oe hd the geel mcoecoomic egultio the tiol ccoutig d politicl pptus; o te othe t the locl d pivte level oe evetully obtied micoecoomic mgeil egultio. Howeve it s bee little oticed tht the oe did ot go without the othe if mode mketig s we hve see s the tul child of ecoomic d scietic iovtios of the ew Del d postw yes mode ecoomics is getly idebted s f s its elevce is coceed to its eective pefomtio i d though 2
Fnck Cochoy
managerial sciences and practices. The microeconomic empiri
management o markets is the only way to have a sel-ulll
economy'; it is only through the generalization o the sa approaches, methods and tools-that is: through the action o double apparatus o economic policy on one side and o
management on anotherthat modern marketing practices
denitely quit the autoregulation o the smithian market and ent the regular rame o political, technical and managerial control
Fom nw foms ofmkng mngmn o h fomon of mkng scnss
By the end o the 960s, however, the success o the marketing cept, marketing management and marketing mix were produci some unexpected consequences. As previously outlined, i the
orientations were eventually implemented, it was only thanks to t hiring o new individuals; the coming o specialists was the pensable corollary o marketig quantication and socialization• Now, i the business schools were inclined to avour the use o
new sciences or managerial concerns, the new scientists were o less concerned with the managerial use o their knowledge th with the pursuit, within marketing itsel, o their original' orient·
tions and disciplines
In consequence, a split in the ranks emerged during the endemic protest atmosphere o the late 960s Whereas some propose
broadened concept o marketing liable to serve as the basis or social arketing, that is: or a marketing liable to be applied to on� business organizations (Kotler and Levy, 1 969; Lazer, 969; Kotl and Zaltman, 1 97), others saw this programme as a call or a soci etal arketing, that is: a marketing o a more undamental chara ter, a marketing that would be more preoccupied with the social rol
o commercial practices than with the search or prot and a nagerial ecienc Spratlen, 970; Sweeney, 972; Tucker, 974
Dixon, 978). To some extent, the idea o societal marketing helpd
its adepts not only to establish some political distance rom t
managerial orientation, but its most signicant eect was to restor the relative centic independence O the psychology, sociology or theoretical economics rom which they came Social/societal mar keting thus opened the opportunity or a certain disapplication' o
applied science The marketing o the 970s1980s ended up juxtaposing on th one hand the more technical practical and applied marketing an 24
Anoh scpnfo h mk conomy
on the other hand, a marketing more and more oriented towards social protest and/r towards undamental research, towards the study o the consumer or its own sake, rather than towards the study o the consumer or the optimization o markets Hunt, 1 97) How should we interpret this drit? Did te liberation o specialists entail a less eective perormation o the market economy by the marketing discipline? The double thematic and disciplinary broadening o marketing, the relative disapplication o the applied science, the prolieration o contradictory research steams without any managerial orientation, certainly entailed a loosening o the links between science and management, knowledge and power A closer look, however, reveals that the slackening o the technical, cognitive and human networks o marketing led more to their reconguration than to their rupture, and or three reasons Firstly, the invention o social marketing made the spreading o marketing beyond the tiny circle o private business activities possible The social marketing idea, ar rom breaking with the man agerial roots o the discipline, ensured on the contrary the extension o these roots to a ew sectors which, until now, had been outside its inuence the invention o political marketing, o causerelated marketing, o public marketing etc) ended up placing under the mar keting management umbrella a whole set o institutions which, po, were totally alien to it Just as the concept o marketing mix could apply the logic o competition ar beyond he unique price variable, the broadened concept o marketing could extend marketing knowledge ar beyond the rivate sector Secondly, the transormation o social marketing into a societal marketing resulted in a tightening o the links between prot and ntorprot marketing, thanks to the growing intervention o consumer research specialists in governmental services and agencies designed or consumer pro tectionFederal Trade Commission, Federal Drug dministration, Consumer Product Saety Commission, Oce o Consumer Aairs, Oce o Consumers' Education Bloom and reyser, 98) he development o consumerism, paradoxically enough, ar rom con demning marketing or not meting its commitments, ratied its eciency, and thus contributed to reinorce the nee and presence o marketers in the economy Thanks to consumers' protest, marketing specialists and their research methods were called or, as expert witnesses and devices, in order to help courts when they had to examine cases o deceptive advertising, commercial rauds and other marketing abuses against the consumer Kassarjian, 994) The aults and virtues o marketing thus contributed to the general 25
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izaton of marketing methods concepts and persons insd American insttutions from private companies to federal agn and udcial institutons Thirdly and nally the interpretation societal marketing as a pure' o fundamental' marketing favou of the migraton of other specialists or specialities such as episte • logy anthropology (Sherry 1986) history (Fullerton 1 9 Cochoy 1994a) postmodesm (Firat 1991) or even semiot literary crtcism (Stern 1 990; Holbrook and Hirschman ics 199 Just like the segmentation of marketng between business market and notforprot marketing eventually put all the compartmen the American socety under the guidance of the mcromarketts o governance the segmentaton of marketing between fundament marketing and applied marketing resulted in the enrolment of humanties and social sciences around the systematic analys s o markets Conclusion: the two meanings of discipline
As w have seen the marketing performation of the market nomy took four successive and embedded aspects The rst two e p formationsperformaton through performation; performat through the double standardization of knowledge and practic dwelled upon the empircal orientations of German insttu e economics n order to develop a network ofmarket knowledgetion · experts The thrd performationthe economic performancean marketingtook advantage both of the great crisis of the mark economy and of the technical and economic innovations of t tay lorism and the New Deal in order to promote a more active man agement of markets a micro-marketing policy for company us ventually the fourth performationthe immerson of marketin an ever-creasng set of dsciplnes and eldstried to the rst three performations; t aimed at replacng the theorrevrs ies f practices wth a practice inspired by theory along wth the doub model of quanttatve macroeconomics and behavioural sciences Here the bringing together of the four performations is mor than a mere concluding device The historical summary shows that at each stage marketing came from economcs in order to perfor r the economy without any direct use of economic framewors! Former economists le economcs in order to observe the econo my and subsequently used the economc collapse in order to reshap along their own lnes the new economc interventionism. Then e the 216
© Te Editoria Board of Te Sooloal eview 998
same mareters ended up importng the specialists and framewors of macroeonomics and econometrics n order to develop the tools upon which they could perform a mareting management of busi ness Meanwhile the maret was more and more embedded in a double set of rules and procedurs of concepts and experts that both dened nd shaped it Naturally the eciency of mareting is still unclear Marion 1995) Its performances are hard to describe complex to evaluate and dicult t measure emprcally But in this diculty lies the distinctve character of performaive sciences These sciences are truly sps, in the double meaning of the word: in ther case one cannot separate science from practice the disciplinenowledge from he disciplinecontrol since by denition these scinces arse in and through practice atour 1996) Managers go hrough mareting mareters go through management f course history shows us that the one and the other can do whatever they want with maret ing and management that the one lie the other can overcome or override them But mareting management for both of them is always a reference for action and its imprints are found wherever the observer of the capitalist economy may go: mareting presence action and eects are daily evidenced in toll free numbers maret surveys brand responsibility consumer culture and foremost in the extreme generalization of mareting vocabulary that is in the con stant use by all sorts of actors in every ind of situations of the metaphors of segmentation positioning advertisng targets and nches The best sign of the conomi performance of mareting lies per haps less in its direct eect on the maret than in its indirect impact on economists Economists ever since the wors of the Cambridge School have theorized imperfect competition which is itself per fectly managed by mareters Today economists sociologists and socioeconomists examine the many aspects of non price competition Debonneul and Delattre 198 Guellec 1990 ancaster 195 liveiraMartins 1990) the economics of quality Karpi 1989) and the diverse conventions framing the denition of mar ets and the qualifying of products EymardDuvernay 1989) But what did mareting do long before the economists if not provide suppliers and consumers with the conventions liable to help them qualify the products What did mareting do if not develop the rel evant tools to overcome price constraints and play on product qual ity srvices desgn and so on Contemporary analysts of the maret economy are oen running without even nowing it aer 21
Frnc ch
An hr scpnfr h mr
he edge areers ems was rm he beg e sg ds e mareg e a seuae mare dd beme, as me we he usee sr bh he e emy ad ems Note The word performation' is coined on Austin's notion of performative uttera linguistics According to Austin (1 962), a performative utterance is an utter
that ays and d?es what it says s multaneously (for example: I declare the meet . . open ) Accordg to ths deton, and thanks to a suggestion by Bruno Lat (1 996) and Michel Calon (see intoduction ofthis book), a performative scienc is a science that simultaneously describes and constucts its subject matter n ts respect, the performation' ofthe economy by marketing directly refers to the d e as�ect of marketing action: conceptualizing and enacting the economy at t
same tme
References Agnew, HE (1941), The History of the American Marketing ssociation, Joua ofMarketing, Vol 5 April, 374-379 Alderson, W, (1957}, Maretg Behavor ad xecutve Acto Homewoo d, IL
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W, (1 947}, The Joal of Marketing The First Ten Years, Joua o Maretg Vol 1 1, 355-363. Art ur, · (1 989), Competing Technologies Increasing Retus and Locin by Hstocal Events, he coomc Joua, March l l6-1 3 l . Austin, L., (1962} Ho to D o hgs Wth Words London: Oxford University
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Bartels, R., (1976), he Htory of Marketg hought (2nd ed) Colum us, OH
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Bloom, N. and Greyser, SA, (1 981 ) The Maturing of Conserism' Harvard ' Buse Reve, Vol 59 November-December 130-139 Boltanski L and Thvenot, L, (1991) , De a justcato Les coomes de a gradeur Paris: Gallimard. Borden, N.H (1 964), The Concept of the Marketing Mix', Joua of Advertsg
Research , June, 2-7. Boyer, L and Equilbey, N., (190}, Histoire du management. Paris: Editions d'Organisation.
Brown G. H., (195 1), What Economists Should Know About Marketing', Joua of _
Marketmg, Vol 16, January 60-66. Calon, M (199 1), Rseaux technicoconomiques et irrversibilits' in R. Boyer, B Chavance et 0. Godard (dir.}, Lesgures de /'rrversbt e coome. Paris:
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Campbell, C, (1 987), he Romatc thc ad the Sprt of Mode Cosersm. New York Basil Blackwell
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© The Edtoal Boad of The oooal evew 998
Chandler A.D Jr (977 he vsbe had h e Maagera Revouo Busess. Cambrdge MA The Belnap ress of Havard nversty Clar E. ( 922 Prcpes ofMareg. New Yor Macmllan Cochoy (994a The Emergng Tradton of Hstorcal Research n Maretng: Hstory of Maretng and Maretng of Hstory' n Research rados Mareg Glles aurent Gay len and Beard ras (eds Boston luwer Academc ublshers 383-397 Cochoy (994b a geston scentque des marchs: maretng et taylorsme dans l'entredeuxguees' Recherche e pcaos e Mareg Vol 9 n 2 974. Cochoy (995 De ma e ma ros hsores de mdao marchade de mar eg e e mareers, thse pour le doctorat de socologe Ecole Normale Supreure de Cachan Cochran TC (972 Busess Amerca Le: a ory New Yor: McGrawHll Converse J (987 Survey Research Ued Saes Roos ad mergece 190-190 Bereley CA: nversty of Calfoa ress Converse D (959 he Begg ofMareg hough he Ued Saes h Remsceces ohe Poeer Schoars Studes n Maretng No 3 Austn TX The nversty of Texas Bureau of Busness Research Debonneul M. and Delattre M. (987 a compttvtprx n'explque pas es pertes tendancelles de parts de march coome e Sasques, n° 203 octobre Desosres A (993 La poque des gr ombressoe de a raso sas que. ars a Dcouverte Dxon D (978 The overty of Socal Maretng MSU Busess opcs Vol. 26 Summer 5-56 EymardDuveay (989} Conventons de qualt et formes de coordnaton' Revue coomque Lcoome des coveos Vol 40 n 2 mars 329-359 Fara AJ. (983 The Development of the Funconal Approach to the Study of Mretng to 940 n S C. Hollander and R. Savtt (eds} rs Norh Amerca Worshop o sorca Research Mareg, East ansng MI: Mchgan State nversty 60 -69. Frat A (99 The Consumer n ostmodety' n: Rebecca H. H. and M R. Solomon (eds Advaces Cosumer Research, Vol 8 70-76 Fulleron R.A. (988a} How Mode s Mode Maretng Maretng's Evoluton and the Myth of the "oducton Era' Joua ofMreg Vol 52 January 08-25 Fullerton R.A. (988B} Modern Weste Maretng as a Hstocal henomenon Theory and Illustraton' n: T Nevett and Fullerton (eds orca Perspecves Mareg ssays oor of Saey oade exngton MA: exngton Boos 7-8 9 Gome (996 Le gouvereme de /ereprse Mod/es coomques de /erepre e praques de geso ars: InterEdtons. Gordon R.A. and Howell E (959 gher ducao for Busess New Yor Columba nversty ress Green E. (963 Bayesan Decson Theory rcng Strategy' Joua of Mareg Vol 27 anuary 5-4 Guellec D. (990} Quelques analyses de a compttvt horsprx' oe de INS n 43/42 mars Holbroo MB and Hrschman E. C (992 he Semocs of Csumpo Berln Mouton de Gruyter
© The Edoal Boad of The ooloal evew 998
2 19
Th unky ncunr bwn cnmcs n mrk
silled labu The innvain ess is fas sl Buyes f he du ae hemselves eihe he nal nsumes inemediaies suh as hlesales eailes h indusies Hene ae he enmi nes adjused suh ivesiy Can hey hel in fmulaing guidelines f he ganizain f maes These ins aise a fundamenal issue: h and hen d enmiss and hei mdelling enune he aialiies f he mae enmy In bade ems h des a given mae ene enmis exbs and h des enmi hey ima n is ing and ganizain The ase sudy aah f he emen indusy ill vide insighs n hese issues
The unlikely encounter between economics and a market: the case of the cement industry
Herv Dumez and Alain Jeunemare Enmis emeged as a sial siene in he 18h enuy ih e · . hey f makes Adam Smih and Fenh enmiss vide demnsain ha fee makes ee ensuing he imal alla in fesues in he enmy. A ha ime hei heeial k as ehing vey agm deaes n he ganizain f makes. In aiula, hee as ai sensiive issue f he makes. In 1774, he Fenh enmhe · is Tug, hen Contrleur Gnrl des Finances, libealised h ade in Fane, beaking aay fm he meanile adiin an uing in ae he fee make enmy iniles A he sa, he elainshi beeen enmis as a siene and he agmai ganizain f makes seemedsial sel eviden. Enmiss uld vide he aiines ih he aiae analial ls deide un he suiable make aangemens. ·
But, the dialogue between theory and practice chang ed. Firstly
he suuain f a sieni eld had an ima n he dvel men f enmi hinkng. Sendly, makes ee divese and mlex A he end f he 1h enuy, enmi knledge as due� in aademi insiuins and ublished in sieni junals _ aunmy, he disil Gag ie beame ineasingly islaed fm he dayday k f makes eside�, businessmen ave alays emhasized he seiiy f he avy hh hey iued as had enile ih he eduinis aah f he enmiss. Eihe invesmens ae said be aial inensive ih a lng life exeany, immaeial enabling eny a ls. The du is duable, i is n. and The manufauing ehnlgy is egaded as simle mlex The vaius duin sages neessiae n he emlymen f
·
© Th Edoral Board o Th Sooloal vw 9 98 ublshd by Blakwll ublshs, 08 Cowly oad, Oxfod OX4 JF UK and 350 Man Sr Maldn MA 02148 USA
Why he cemen indusry?
The emen indusy is used as a sandad maeial in indusial enmis exbs The indusy is amng he ms sudied and mdelled Ye in enmi ems he se is ahe negligible As ned Rbe R Salyad ne f he minen manages f Ameian Cemen C: Tal annual sales vlume f he emen indusy $145 billin) is he same as ha f he eail sales f he geeing ad he ae indusy This is n a huge indusy and i ann ealisially be hugh f as if i ee in he same size aegy as il seel aus In 1970 hee ee 84 US indusial ains ih individual annual sales geae ha he al emen indusy Meve he indusy is siingly simle Lee Cummings f Lehigh Pland Cemen Cmany bseved This is an unmli aed indusy ee in Weve g ne du sld a ne ie ued in US Disi Cu f Aizna 1983) The du has als hanged lile sin i as maeed a he beginning f he 19h enuy Ceen has ell dened ehnial seiains and even if ee ae dieenes in emen nsumin ading limaes he du an be said be undieeniaed and hmgeneus Anhe feaue f he indusy is ha he duin ess has evlved hugh ehnlgial leas and he indsy iself is aial inensive ih high enmies f sale in duin In he ds he lage he lan he le he uni duin s Bu emen is als a ndeus du ih high sage and ansain ss Theefe in a given lain a ae
\1
223
Herv Dumez and Alain Jeunemaftre
Federal government, the State authorities, and the local counil placed cement orders This created temporary new markets t were frequently situated outside the main urban centres and dista from the plants In order to reduce costs and to get large vol discounts, they neither placed orders with wholesalers, nor negoti· ated directly with the producers They used public procurement p cedurs Tenders were submitted under sealed oers and, strikingl the pces quoted by the producers turned out to be identical, a f as th decimal ?ints, reecting the use of the basing point pricin · For dstant locatns, where no market existed, the producers used a , more sophisticated formula In 933 , the governor of Illinois tried a dierent approach He publicly announced an order of 33 millio barrels of cement for the year to come, and requested the ceme prduers to submi � written oers specifying a fob (free on board mll pce No submssons were sent to his oce In 93, the Senate had already asked the Chairman of the F to examine the competitive situation in the cement industry Th FTC reported to the Senate in March 932 (US FTC, 1932) H main nding was that the basing point system introduced stickines in the price system and reduced competition Meanwhile, co plaints had been ooding in from State authorities and the Federa Goverment Governor orner of Illinois played a key role in th lgal dispute about the basing point system In July 937, a formal inquiry was launched Four years later, in 94, the FTC sta mad known the results of the inquiry and outlined the anticompetitiv eects of the basing point system On 7 July 3, the FTC issued an order to cease ad desist' The decision was brought before th courts of justice and nally, the Supreme Court published its ruling in 948 Throughot the legal proceures, economists were heard as they de?ated the competitive and anticompetitive eects of the basing pot system. On the side of the FTC was Frank Albert Fetter, Professor at Princeto� University, who testied before the Congress Commssons and the courts Fetter had a clearcut view about cement pricing practices In his opinion, only the uniform o b mill pricing should be allowed Under this pricing mechanism, each cement plant publishes a mill price and buyers manage thei own transportation from the plant As there is no freight absorptio, each plant dominates in its geographical market The size of e natural market of a plant hinges on its competitive aggressiveness when setting its mill price If a plant is willing to expand o r reduce
The unlikely encounter between economics and a market
the size of its geographical market, it simply modies its mill price. Fetter considered that all other pricing mechanisms should be pro hibited He was backed by two prominent economists, Vernon A. Mund (Washington University) and Fritz Machlup (John Hopkins University On the side of the defendants, the cement industry, were Nathaiel H Engle (Washington University), Melvin T Copeland (Harvard Graduate School of Business) and above all John M Clark (Columbia University) In 1934, the board of the Cement Institute appointed Clark as their economic expert, and he remaied i that position for four years He gave a synthesized account of his views in 938, and years later, in 949, he issued a comment on the Court rul ing He argued that a multibasing point system based on the use of railways transport price schedules, but allowing the custome to pickup cement from the plant, was the optimal solution To all appearances, Fetter won the economic contest He proved very skillful at ealing with the various aspects of the debate I the rst place, he managed to covince key persons in the decision making process Many economists in antitrust agencies had bee Fetter's students Moreover, he had rallid Walter B Wooden, the FTC Chief Attorney to his economic ideas Walter Wooden occu pied this position at the FTC from the early 1920s to th nd of th 940s and was the voice of the FTC in the main antitrust Courts casesSalt producers, Staley, Corn Products, Pittsburgh Plus, Cement Institute, Malsters, Ice Cream Can, Crepe Paper, and Book Paper He chaired an inteal FTC Committee, the basing point committee' which was set up to elaborate the Commissions doc trine on the basing point Fetter also made judicious use of his neutral scientic status and discredited the economists supporting the cement industry During a hearing session of a Congress Commission, in 1 936, he introduced himself in this manner I will say, Mr Chairman that I speak as a mere theorist A theorist according to one denition is a fellow who is very much interested in understanding what makes the grindstone turn but hasn't any axes of his own to grind I t is a sort of unpractical attitude, and my interest in this or any other subject of this kind is simply the same as any citizen would have I am interested in i t as a student of the subject and trying to understand it, having no antipathy, no feuds, and o favourites in the matter (S imon, 1950:22) 229
H u
The verical inegraion case
The Supreme Court rulng on the basng pont system had lt practcal mpact. In the md 1950s, US economc grow th was ston and the cement plants had dculty n meetng demand. In the • nomc euphora, massve nvestments n producton capac ty w made Wth a tme lag, they were operatonal at the end of the 1 950s, by whch tme cement demand had slowed down , resultn in excess capacty n the ndustry (the average rate of capac ty ut ton dropped from above 90 per cent n the md 1 950s to around 7 per cent n the early 1960s). Reactng to the excess capacty stuaton, the cement produ began to acqure Ready Mx Concrete (RMC) cmpanes c 7 Fro 1956 to 1 969, 55 vertcal acqustons deals occurred (Allen , 191 The FTC requested ts bureau of economs to report on vertc ntegraton (US FTC, 1966a) . Followng the report, the Cmm son organzed publc hearngs, and nvted cement produc ers an concrete companes to comment (RP, Stearn, Augu st 1 966). Th outcome of recent anttrust nvestgatons and ndngs from th economc report and the hearngs, were that, n Janua ry 1 96 the FTC ssued a statement of general polcy enforc ement' po hbtng cement producers from takng over RMC comp anes. Once agan, economc analyss nfrnged on busness markt practces. The debate focused on the ndngs of the report of the FT economsts The report gathered evdence and put forward an econo mc nter
pretaton. here was lttle argung about the collecton of facts
and data, but the nterpretaton strred up controversy. The facts were complex. The ntegraton vertcal move s were the
result of dverse busness strateges
There had been forward ntegraton strategesement produ cers takng over RMC companesand backward ntegr aton strategesRMC compane nvestng n cement producton assets. Part of the strategc moves were defensive cemen t produ cer would buy large RMC customers to prevent entry n hs marke t. Others were onsive- cement producer would buy RMC compa nes to penetrate a compettor's market The vertcal ntegra ton moves went from the extreme case of full acquston to the develop ment of vertcal lnks, for example a cement proucer would lend money to a
concrete company n return for an exclusve purchasng oblga-
232
© T Edoal oad ofT Socoocal Rw 1998
Th unk ncunr bwn cnmcs n mrk
ton All vertcal control strateges were entangled and adopted smultaneously by the cement producers n the maretlace, onsve and defensve vertcal moves respondng to each other, bngg about a ow of vertcal acqustons he economc context was as follows On a natonal bass, the concentraton of the cement maret was relatvely low but ncreasng Although new entres had occurred partcularly from steel and RMC companesbacward ntegraton), the number of cement producers dmnshed by a quarter between 1950 and 1960 he RMC companes were numerous 4000) and delverd wth a short dstance radus rarely above 30 mles) But 12 per cent of the RMC companes accounted for a 60 per cent share of the natonal maret herefore, the concrete maret was a mx of large Ready Mx groups controllng a substantal share of the US local marets and small RMC companes Of course, the cement producers targeted n the rst place the largest concrete busn ss Actually, cost savngs were not expected to follow from acqutns here was also no convncng evdence that the returns were hgher the con crete ndustry than n the cement ndustry he hearngs organzed by the FC subsequent to the publcaton of the FC economsts report asserted the complexty of the vertcal ntegraton crcumstances deal, a major cement producer, was on the eve of acqurng Bulders Supply Co, a Houston RMC rm when the FC prohbted the deal Conway, executve and VceCharman of deal prased the FC decson deal had bdden for Bulders, one of hs regular cusomers, only to prevent one of hs compettors from tng t over Conway was openly n favour of a general ban on vertcal ntegraton Raymond S Chase, the th en maretng VcePresdent of undee cement, was of the same opon He explaned that vertcal ntegraton moves were used by ncumbent producers to prevent the entry of more ecent ones Other cement producers baced the ntegraton moves One of th�m was Lehgh cement Lehgh ressted buyng concrete compaes untl 1965 and from then onwards, acqured massve holdngs n the concrete busness n the followng years, Lehgh totalled 50 per cent of the RMC acqustons Among the largest deals, n 1965, t acured two RMC companes n Florda, one n Vrgna and n 1966 one n Kentucy Lehgh hred Merton Pec, Professor of Ecoomcs at Yale Unversty, to contradct the ndngs of the FC report on vertcal ntegraton As regards the FC, t gave ts vew about the moves As more and more cement producers would ntegrate the downstream 233
Hev Dumz and Alan Jeunemaftre
Three main observations deserve to be outlined from the vertical integration case. In 1967, the FTC ruled on vertical integration not on the basis of a competitive assessment of individual cases but on the basis of the competitive consequences of a ow of vertical moves which would drastically change the market structure. However, it did not have the analytical economic tools to deal with the issue. The economists who backed its ruling did not succeed in formulating clearly the issue at stake and the appropriate economic approach to tackle it (Wilk, 1 968; Meehan, 1972). Perhaps it also lacked the legal tools to circumscribe the phenomenon Therefore it put forward the concept of market foreclosure' which proved to have little robustness and little relevance. Then, it was opposed by academics coming from the dominant economic stream (Peck and MacGowan, 1967; Liebeler, 1968) who highlighted the pitfalls of the market foreclosure approach in individual cases of vertical integration. In rescinding the ban on vertical integration, the FTC rallied the view commonly shared by academic economists while some of them were elaborating a theor on waves of strategic business moves (MacBride, 1983) The shi in the FTC thinking with regard to the working of the cement markets needs t be interpreted in its historical context. From the end of the 1950s to the end of the 1970s, the US antitrust authorities were rmly opposed to vertical integration which they considered anticompetitive. The rulings of the Courts of justice backed this general view. The most wellknown decision was the Supreme Court ruling in the Brown Shoe case (Brown Shoe Co. v. United States, 1962) The period ended up with another Supeme Court ruling, GTE/ylvania in 1977 In the economic mainstream, vertical integration was no longer considered per se anticompetitive Instead the view was that it should be individually assessed, according to a rule of reason' principle. The view expressed by Peck and MacGowan at the time of the FTC report on the cement indus trythat vertical integration was not a competitive issue where the horizontal concentration was littlegained momentum Johnson and Parkman (1987) commented the 1983 FTC rescind asat lastthe victory of economic analysis over the politicl approach to antitrust which had prevailed since 1 967. Finally, another factor played an important role. In the mid 1970s, the US cement industry was in deep nancial diculties. Insofar as the FTC prevented horizontal concentration and banned vertical integration, the cement producers diversied their activities (in 1968, Lehigh invested in the fuiture, the carpet and the ya
'f .
The unlikey encounter between economics an a market
': i ·
industries). These diversication attempts failed. In the early 1970s, the Clean Air ct increased production costs by 10 per cent by requiring additional plant investment. Th industry was n� loner able to nance its modernization. From 1974 onwards (startg wth the acquisition of National cement by Ciments Vicat, a French producer), foreign producers, most of them European, took ovr the US cement producers. Foreign ownership accounted for sghtl under 5 per cent of the production capacity in 1975 by 1980, t jumped to 22.8 per cent and continued to increase, reachi g 468 per cent in the mid 1980s (PCA, 1992). I n such an ecoomc context, the ban on vertical integration was no longer a ma focus of attention. Concusion
Economic analysis does not encounter the market in a straight orward dialogue It weighs on the organization of markets at partcular times, specially when a regulatory issue arises. What should be the rules goveing markets? How restrictive should they be? Su h issues are usually dealt with at the time of litigation cases, and particular of antitrust ases in the US or competition policy cases in Europe. The encounter between economics and arkets is therefore channelled through legal disputes and constraed by the legal dimension. Important consequences follow. . 1. The interaction between economics and markets s a dscontinuous process It is set in motion by the judicial agenda on regulatory issues. In between interactions, markets a re ut o from the _ s that the legal evolution of academic economics Another pot dimension compels the economists to analyse markets in a historical perspetive rather than to reect upon the prospec �ive dynaics of markets and the likely competitive outcome of partcular rungs. In the nal stages of the basing point case M. Clark made the following thoughtful, but disenchanted, remark: So the method remains a hybrid, of the baing sort in which years are spent arguing everything about the case except the eects (legal and economic) of the order that will nally be issued. During the basic litigation, economic considerations are elbowed out or distorted by legalistic exigencies, both sides probably producing about equally bad or irrelevant or onesided economics Since serious and realistic consideration of the eects 237
Hrv Dumz ad la Jumar
Johso, RN a Parkma, A.M, 987a), patia ompett a vertia itegratio; Cemet a Corete Revsite: Commet he Amercan conomc Reew, eptember, pp. 75753 Johso, RN. a Parkma, A.M, 987b), The Roe o Ieas i Atitrust Poiy Towar Vertial Mergers: Eviee rom the FTC CemetReay Mixe Corete Cases' he Anttrust Bulletn Witer, pp 84-88 Kamershe, R, 974), Preatory Prig, vertia itegratio a market ore losure: the ase o reaymix orete Memphis'. Industral Organaton Reew, 974, Vol 2, pp. 43-68 Liebeler, 968), Towar a osumer's atitrust law: the Feera Trae Commissio a veral mergers i the met iustry'. UCLA Law Reew, 968, Vo 5, pp 53 -22. Loesher, M., 959), Imperfect Couson n the Cement Industry. Cambrige MA.): Harvar iversity Press MBrie, ME, 983), patia ompetito a vertia tegrato; emet a o rete revste' Amercan conomc Reew eember, Vol 73, No 5, pp. 22 Mahup, 949), he Basng Pont System Philaepha: Bakisto. Meeha, Jr., 972), Verta Forelosure i the Cemet iustry A Commet he Joual ofLaw and conomcs Vol XV2), Otober, pp 46-47 Moomaw, R., 976), Vertia itegratio, preato a moopoatio: the symbiot relatoship betwee the emet a reay mx orete ustries Industral Organaton Reew Vo 4, pp. 7 9 MllerHeeberg, H a hwart, G, 958), Geset gegen Wettbewerbs beschrnugnen. Kommentar. K!/Berli: Carl Heymas Verag KG Haok, , 982), Basigpoit prig ompetitive vs ousve theories'. he Amercan conomc Reew o 72, No. 3, J, pp 289-36 Haok, ., 99), O the BasigPoit ystem: a Commet. he Amercan conomc Reew, Vol 8, No 4, eptember, pp 957-962. Hoppma, E., 967), Workable Competitio as Wettbewerbspoltishes Koept' heoretsche und nsttutonnele Grundlagen der Wrtschaftspolt Berli: Festshri r Theoor Wessels Katebah, E, 966), e untonsfhget des Wettbewerbs. Gttige Pek, M. a MGowa, , 967), Vertia tegrato i Cemet: a Crta Examiatio o the FTC ta Report he Anttrust Buletn, Vo XII, ummer, p. 55 et seq Phlips L., 993), Parallsme e ompotemets et pratiques oertes' Reue dconome ndustrele, 6, trimestre, pp 25-44. Phps, ., 995), Competton Polcy A Gametheorc Perspecte. Cambrige: Cambrige iversity Press Porta Cemet Assoiatio, 992), US and Canadan Cement Indtry Plant Acuston and Ownershp Report to Present. PCA: kokie imo, 95), Geographc Prcng Practces BasngPont Selng. Chago Callagha a Compay. tear, EQ, 966), FTC hees emet ustry peas' Roc Products, August 966, pp. 67-2 istrit Court or the istrit o Arioa 983), I Re cement and concrete anttrust tgaton. Appeix : Plantfsjont narrate summary ofltgaton and statement ofcentrafacts and legal ssues. M oket No 296, PHXMLR M) eptember 7 Feeral Trae Commissio, 932), Report ofthe ederal ade Commsson on
Th ulkly our bw oo m
M nn j' ti ! Cml the ederal rade Commson ransmttng n Response to Sena Rso/to No Seentyrst Congress A Report Relate to ompette ondo l i Cement Industry. Washgto.
Prce Bass Inury the BasngPont formula and Cement Pre
Feeral Trae Commissio, 933), Cement Industry Letter ro
Feeral Trae Commsso 966a), onomc Report on Mergers and erta Integraton n the Cement Industry. Staff Report to the ederal rade Commsson
Washigto C: Goveet Pritg Oe, Apr Feera Trae Commissio, 966b), C Publc earngs on Vertcal Integraton n the Cement Industry. Washigto C: 2 July 966 Wilk, ., 968), Vertal Itegratio i Cemet Reviste A Commet o Pek a MGowa he Anttrust Bulletn, pp. 69-647.
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243
n ssay n framng an rwng
An essay on framing and overowing: economic extnalities revisited by sociology Deniion(s) and issues .
Michel Calon Whe eviewig the coditios equied fo the existece of maets o cocept is moe useful o appopiate tha that of exteality The cocept of exteality is eectively cetal both to ecoomies ad to ecoomics So a attempt to claify its sigicace ad scope epesets a suitable poit of depatue fo eewed eots at coopeatio betwee sociologists ad ecoomists. Rathe tha highlightig the limitatios ad weaesses of the cocept with a view to attacig the limitatios ad weaesses of ecoomic theoy ited to show just how useful it is as a tool fo udestadig the dyamics of maets dawig upo sociology as a additioal esouce shall appoach this tas fom the pespetive of the sociologist of sciece ad techiques. This will allow me ot oly to highlight the ole of ivestmeti paticula techologicali the emegece of ecoomic aget that ae capable of stategies ad calculatio; it will also seve as a icetive to tae the pefomative ole of the sciecesad hece also of ecoomics ad sociologymoe seiously.
I shall start by putting my economists hat on in order briey to remind my fellow sociologists of the various ways in which the concept of exteality can be dened, together with its practical and theoretical implications. This will lead on to a discussion of the various mechanisms upon which the concept is predicated. I shall then touch rst upon what I shall here refer to as 'framing/overowing and upon the various issues associated with the identication, measuring and containment of such overows. I shall subsequently focus my attention on the role played by the technosciences in the proliferation of overows, ighlighting the active role of the social sciencesalongside the natural sciencesin the identication and management of externalities. Finally, I shall draw one of the most © T Edoral Boad of T Sooloal w 199 ubl d by Blakwll ubl
Dntns
Sice this text is iteded as much fo sociologists as fo ecoo mists shall stat by spedig a little time deig the cocept of exteality sice may sociologists ae cuetly ufamilia with it The simplest appoach is to stat with a example. A metalle gical factoy poduces alumiium ad emits chloiated fumes. These spead out ove the coutyside epesetig a theat to eighbouig livestoc ad cop fames ode to combat o elimiate the oxious o toxic eects of these fumes which cause weight loss i livestoc ad educe cop yields) the aected fames must mae cetai ivestmets. t is hee that the cocept of exte ality becomes petiet i the sese that i the absece of ay icetives to do so the chemical fails to accout i its calculatios f the costs that it is upo agets this case the eighbouig fames) the fact that they ae pelized by its activities emai to the sphee of ecoomic elatioships i which the compay itself opeates. This failue gives ise to extealitiesi this case egative The fames iteests ae compomised ad they ae uable to asse thei ow pefeeces sice i ode to emai commecially viable they must mae ivestmets fo which they ca ot egotiate ay compesatio But extealities ca also be positive. Coside the example of a phamaceutical compay with eseach ad developme R&) laboatoies that use sceeig methods to test lage umbes f molecules pio to udetaig cliical tests oce the vaious aciv substaces have bee idetied. To potect its digs ad h potetial pots it ca expect fom elated moopolies he c pay les patets which disclose some of the ifomatio tha h be poduced. The latte thus becomes available to comptit may ispie them to ethi the diectio of thei ow Such taspositios ae all the moe staightfowad ad p because they ae pedicated upo vey simila owl b Richadso 1972. Competitos may thus beet f f h, fom the eots ad ivestmets of a compay which h hd
A ssy o fmg ovow
il o
bear the assocated costs and rsks on ts own Ths case s a classc example o postve extealtes' the mrror mage o the precedng knd. It s easy enough to show that such stuatons are common place wherever busness actvtes result n the producton o nor maton wth the potental or largescale applcaton It appears that the concept could be extended to nclude behavour whch s not exclusvely economc n nature. Take the case o a teenager lvng n a terraced house who decdes to arrange a brthday party. The celebratons go on late nto the nght. Drven by a heady mx o booze and boppng, the volume o the musc steadly creases. Unortunately he dd not nvte hs neghbours to the party. I we magne that there s no legslaton bannng such latenght estvtes, the stuaton becomes comparable to that o the actory pollutng the surroundng envronment. The person holdng the party maxmzes hs own wellbeng, but only to the detrment o hs neghbours who have no legal means o elmnatng the source o the nu sance and so must devote a porton o ther resources tme and energy to combatng the nose Eects o ths knd are not necessarly negatve n themselves. I my house s o the beaten track and my neghbour decdes to buld a servce road, my wellbeng s mproved wthout any related expendture on my part. I lke me, my neghbour enjoys French Baroque musc and plays t loudly enough or me to hear every note clearly, my wellbeng s enhanced despte the act that I have not had to make any nvestment mysel The analyss could be extended stll urther The applcablty o such a generalzaton s clearly demonstrated by the now classc socologcal ssues underlyng the systematc negaton o the nvest ment and work requred to create a stuaton whch subsequently appears to be an entrely natural gven' In ths case, certan agents pursue courses o acton the costs o whch are bore by other agents, wth no vsble transer takng place. The concept s strkngly expressed by the Amercan emnst slogan o the '70s Behnd evey successul man s an exhausted woman'. I won't dscuss such wder applcatons o the concept o exteal ty, whch poses the now classc queston o how best to extend eco nomc categors such as cost preerence or nterest to cover all human actvty I shall restrct the dscusson to an ssue that s more specc, more techncal and also more nterestng: namely the nd rect e noncommercal) eects o commercal actvtes unoldng wthn a ramework o market relatonshps. The precedng examples and the restrcton that I have just mposed on ths dscusson suggest the ollowng denton o the
concept o externalty:
Let A B, C etc. be agents involved in a commercial transaction, or more generally in the negotiation of a contract In the course of the transaction or contract negotiation, these agents express their preferences or interests and then evaluate the various possible deci sions arising from them. The decision they nally take has positive or negative eects, here referred to as extealities, on another set of agents X, Y and Z (as distinct from A, B and C); the latter are not involved in this transaction or negotiation, either because they have no way of intervening or because they have no wish to do so 2 Issus sk In itself the existence of externalities is not in the least outrageous That certain people should pay for others or prot from others without bearing the associated costs is not disgusting or disturbing. Such transfers are inevitable : aer all the laws of thermodynamics teach us that you cannot have order without paying the price of chaos So it is not on moral grounds, but on the grounds of collective eciency and the optimization of resource allocation that the existence of extealities and various possible ways of eliminating them preoccupy economists to such an extent. In economics the concept of exteality is linked to a more gen eral category: that of market failures2 At this point it is iportant to obviate any misunderstandings The term market failure' does not mean that nothing good was produced Its meaning is more precise: as expressed in terms of eciency or in terms of the provision of socially · desirable goods, the best result that could have been obtained was not achieved in practice wht are the consequences of externalities in terms of the role by the market and prices in the allocation of resources? Within he framework of economic doctrine, the answer to this or negative whether question is simple ae render t market at leas artially) inecient because mar e vat betw for a mig t\�eecure to a is easy to understand. Take the factory mentioned earlier, belching out chlorind fumes that pol lute the surrounding countrysideccorng to the hypotheses of standard economic theory on this subject the factory will set the volume of its aluminium production in such a way as to ensure that its marginal income (ie, income corresponding to the last ton or
27
An ssy n frmng n vwng
hl ln
is dscriptio of itrprsoal rlatiosips of ic t rla tiosips ivolvd i arragig t gotiatio of a cotract rpr st o arctyp) oma rsorts to t cocpt of t fram
oma 1971) fram stabliss a boudary iti ic itractiost sigicac ad cott of ic ar slfvidt to t protagoiststak plac mor or lss idpdtly of tir surroudig cotxt. oma mpasizs t dual atur of tis framig procss. Clarly it prsupposs actors o ar brigig to bar cogitiv rsourcs as ll as forms of baviour ad stratgis ic av b sapd ad structurd by prvious xpric: t actors ar capabl of agrig a agrmt ic dos ot av to b xplicit) o t fram iti ic tir itractios ill tak plac ad o t courss of actio op to tm But t framig procss dos ot ust dpd o tis commitmt by t actors tmslvs; it is rootd i t outsid orld i various pysical ad orgaizatioal dvics. is is y framig puts t outsid orld i brackts as it r but dos ot actually abolis all liks it it I ordr to illustrat tis ditio omao lovs tatri cal mtaporsfrqutly taks t xampl of a stag prfor mac. iv t sris of itrcoctd xpctatios upo ic suc prformacs ar prdicatd ty could ot tak plac it out t tacit agmt of all tos takig part spctators ko at atcig a tatrical productio tails ad at ruls ty sould oby so for xampl ty ko tat as t curtai falls i prparatio for t t act ty may brak t silc by coug ig or clarig tir troats). I t sam ay t actors o stag ko at is xpctd of tm as do t usrtts ad casirs. But ts tacit agrmts ould sily fall apart if ty r ot cotaid iti a suitabl pysical framork. A ol sris of matrial mas ar usd to dmarcat t tatrical spac ad t actios tat tak plac iti it: t buildig itslf; its itral arcitur; t bll dimmd ligts ad raisig of t curtai tat idicat t start of t prformac. Similarly t d of t pr formac is framd by a sris of dvics likd i suc a ay as to mak t ucrtai spctator aar tat tis is HE EN ratr ta ust aotr itrval. various lmts tat form t pys ical fram ar tmslvs cotaid iti a istitutioal fram ork autors rigts safty rgulatios ta ictivs tc) ic lps to sur tir prsrvatio ad rproductio is bracktig ic assums tat boudaris ar dra bt t actors itractig it o aotr o t o ad ad t rst of t orld o t otr dos ot imply a total absc of rlatiosips. O t cotrary: for oma framig ould b ixplicabl if tr as ot a tork of coctios it t outsid orld: W caot say t orls ar cratd o
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© The Editril Brd f The Silil evie 1998
otr uit of alumiium sold) is qual to t additioal cost icurrd i producig tis xtra to or uit Accordig to a umbr of ypotssspac alas prvts us from discussig tm r coomic tory sos tat t quilibrium rsultig from t qualizatio of margial costs ad icom is a optiml o. But if xtralitis ar prst tis privat calculatio ic is supposd automatically to guarat a soial optimum is biasd it dos ot tak ito accout t ivstmts ic t armrs must mak i ordr to protct tmslvs fro t fums I tis cas i t absc of appropriat ictivs t arktas a dvic for obtaiig t social optimumis dcit is rasoig aplis qually to at ar ko as positiv xtralitis: a mdial parmacutical compay ca sit back ad ait for its comptitors to ivst i R& i t xpctatio of prtg from t rsults itout spdig aytig at all tir aity to prvt otrs from takig advatag of tm playrs i t sctor aoid commit tig rsourcs ad tis i tur mas collctiv lfar is substatially it could b if ivstmt ic tivs r i Ngativ xtalits im so cial costs t !. accout by privat dcisiomakrs; positiv xtr aitis discourag priva y socializig t ditio of tralitis sms to b clar rality it raiss a sris of qustios ic I o propos to ami i mor dtail ad ic ill allo m to outli t trms a cotract of co opratio bt coomics ad costructivist sociology. Framing and overowing
Bat t cocpt of xtality lis t mor fudamtal co cpt of framig ic implis t possibility of idtifyig ovr os ad cotaiig tm. Ecoomists do ot us tis cocpt ic I am borroig fro oma for t purposs of tis argu mt. Oc I av rmidd my radrs of its sigicac I ill mpasiz alog it costructivist sociology t siz of t ivstmts rquird to fram itractios ad cotai ovros. 2.
Frmng nrns
/ J
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sot ecause whethe we efe to a game of cads o to teamwok duig sugey use is usually made of taditioal equimet havig a social histo of its ow i the wide society ad a wide cosesus of udestadig egadig the meaigs that ae to e geeated fom it Goma 196 Goma thus emhasizes the fact that eveythig moilized i the famed settig guaatees simly y vitue of its esece that the outside wold is also eset he cocet of haitus oosed y Elias ad Boudieu is clealy oe way of desciig this lik ad the mae i which it is exessed i the couse of the actio ut Goma suggests that ove ad aove the huma eigs themselves ad thei discilied odies ojects ad thigs the theate stage its walls ad souds all lay a ole i settig u these itedeedecies his cocet of famig is easily alied to the iteactios that iteest ecoomists whethe i the fom of classic commecial tasactios o cotact egotiatios. o egotiate a cotact o efom a commecial tasactio eectively esuoses a famig of the actio without which it would e imossile to each a ageemet i the same way that i ode to lay a game of chess two layes must agee to sumit to the ules ad sit dow at a chessoad which hysically cicumscies the wold withi which the actio will take lace t is ossile to esod to this cocet of famig which is essetial to ay udestadig ad descitio of iteactios of whatve kid y adotig oe of two diametically oosed atti tudes which will ow examie i tu. Each of them gives efe ece to oe of the two dimesios of famig eithe y emhasizig the closue of the iteactios o themselves ad the ole of the layes mutual ageemet i ceatig this clsed situa tio o covesely y highlightig the omiesece of coectios with the outside wold ad the ieessile ad oductive ove ows which the latte ecouage 22.
Wn fmn s nm n vs ks
he st aoach teds to elieve that famig is the omi the doule sese of somethig that is desiale ad also statstically e domiatad that oveows ae excetios which must e co taied ad chaelled with the hel of aoiate ivestmets his ositio is adoted y micosociology which focuses o iteesoal elatioshis without cosideig the factos that sus tai these iteactios. t is also oula i ecoomic theoy whee 250
© Th Ediial Bad Th Silia Rv 8
oe of the cetal eoccuatios is to ostulate the existece of coguatios withi which a seies of agets develo commecial) elatioshis with each othe that ae suciet i themselves to accout fo all coodiatio equiemets he cocet of famig idicates that such closue is ossile idividuals whethe two o 2000 i ume whete y commuicatig though ices o tak ig tus to egotiate ctacts togethe egulate olems of esouce allocatio o oety tasfe while simultaeously esta lishig a temoaily imeetale aie etwee themselves ad the est of the wold this way ay two agets ca udetakei a ageemet that deeds solely o the execise of thei willsto iteact i a egotiatio ad the etu to aoymity oce the tasactio is comlete. his eectively ostulates the actual ossi ility that a maket could exist as a system of elatioshis etwee agets cosumes ad oduces) who each a equiliium o ha moious accod Famig dees the eectiveess of the maket ecause i this clsed iteactioal sace each idividual ca take ito accout the viewoit of evey othe idividual whe eachig a decisi this sese it is ossile to asset that extealities ae simly the esults of imefectios o failues i the famig ocess. Yet i cetai cases famig is eithe imossile to achieve o is delie ately tasgessed y the actos this oduces oveos which cause the aies to ecome emeale. Ecoomic theoy seems edisosed to the hyothesis that these oveows should e egaded as accidetal ad cosequetly that famig should e eceived as the om towads which eveythig should ted. By ioitizig the ceatio of fames desiged to avoid ema tue oveows ecoomists ae oliged to focus much of thei atte tio o the vaious foms of oveow that ca take lace ad how est to cotai them ie o all the eecussios of the cotacts likig A, B ad C o those ot ivolved i the egotiatios (X, Y ad Z). his has two cosequeces he st is to cause ecoomists to focus thei eotswith evidet successo the ideticatio of leaks ad the fomulatio of devices fo ceatig moe eective fames. he secod is to facilitate cetai tyical situatios the estalishmet of tiedadtested fames: as ecetly show y DHLs decisio to set u its Euoea hu i Stasoug the ham ful eects associated with the esece of a aiot ae o loge simly accouted fo ae the evet they ae ought ito the fame i the iitial stages of cotact egotiatio. © Th Ediial Bad Th Slal Rviw 8
25
Mhl Caon 2.3.
An essay on framing and overowing
Oveows are the norm: framing is expensie and always
imperct
he second attitude, typical of constructivist sociology in particular, takes the view that overowing is the rule that framingwhen pre sent at allis a rare and expensive outcome in short, is very costly to set up. Without the theatre building and its physical devices without years of training and hours of rehearsal put in by the actors without the habitual mindset of the audience and carefully written dramas which deliberately limit the range of preprogrammed interactions, the framing of a stge performance woul be quite simply inconceivable his viewpoint is thus the exact opposite of the preceding one instead of regarding framing as something that happens of itself, and overows as a kind of accident which must be put right, overows are the rule and framng is a fragile, articial result based upon substantial investments. Constructivist sociology does not deny that it is possible to achieve such clarity or put such frameworks in place, nor that such an objective is worth pursuing see below for a more detailed discussion of this point) But it is primarily interested in showing that such a framing process, in addition to requiring expensive physical and symbolic devices, is always incomplete and that without this incompleteness would in fact be wholly ineectual. Let us start by considering the concept of embeddedness rst put forward by Polanyi Polanyi, 1975) and subsequently taken up by Granovetter Granovetter, 1985) his does not so much represent yet another expression of the implacable hostility between soiology and economics8 as an armation of the omnipresence of overows. E. Friedberg rightly highlights the habitual misinterpretation of this concept Friedberg, 1993) Its signicance, which is both profound and radical and incientally the main theme of Granovetters celebrated article) centres on the hypothesis that the objectives, intentions, interests and projects of a given actor, and indeed his or her will, are not simply a set of attributes that dee is or her own per sonal, unchangeable identity which the actor could simply by intel lectual application, access or expresseven unconsciouslyif she or he were given the opportunity this being the meaning of the expression to reveal ones preferences). Nor are they the result of values, norms or institutions which reduce the actor to the status o the cultural dope so justiably ridiculed by Garnkel. In fact, they cannot be dissociated from the network of interdependencies in which the actor is enmeshed and to which he or she is continuously 7
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contributing Burt, 1992), Calon and Law, 1997). In short, the actors ontology is variable: his or her objectives, interests, will and thus identity are caught up in a process of continual recongura tion, a process that is intimately related to the constant recongura tion of the network of interactions in which he or she is involved From this perspective, all framing thus represents a violent eort to extricate the agents concerned from this network of interactions and push them onto a clearly demarcated stage which has been specially prepared and tted out But their links with the outside' worldlinks that betray their existence simply by the fact that the agents are simultaneously involved in other worlds from which they can never be wholly detachedcannot be reduced to personal rela tionships alone9 Overows have many sources and can ow in many directions, which tends to indicate that frames are even more problematic than Granovetter suggests ake the example of a research contract drawn up between an academic research unit and a commercial enterprise, nowadays a commonplace occurrence. Such a contract does not bind one human being to another, but one legal entity to another legal entity. Each of them is a more or less integrated complex comprised of human beings, equipment instruments, machinery), libraries and nancial resources. he contract provides for the performance of certain actions, denes the terms under which any property rights arising from the results of these actions will be shared, and denes the conditions for monitoring the proper performance of the contract he text of the contract sets out the joint ventures objectives he deni tion of these objectives is frequentlybut not exclusivelyouched in terms of concepts and ideas borrowed from accepted scientic theory for example: the work shall contribute to the development of an enzymatic electrode capable of functioning in aqueous media Cassier, 199) ); it also implies the application and/or possible development of experimental tools or procedures which are mentioned or described in a wealth of technical detail it genrally includes the names) of the researchers) or research team(s) who will be in charge of the research programme The contractual under takings may be more or less specic or complete; clearly all this is dependent on the degree of stability and predictability of the rele vant area of research. Clauses providing for the renegotiation of the contract if certain events should take place may also be appended. In short, the aim of the contract is to frame the interaction in as unam biguous a way as possible and/or formulate an agrement on any reframing procedures which may have to be implemented. 253
Michel Calon
But what are the conditions governing the stability (or lack of it) of a contractor rather, of the framing process that it applies by dening a limite number of actions to be undertaken in an innite world of possible relationships? As many have remarked since Durkheim, the framing of a contract presupposes the existence of courts of law, as well as the existence of a body of legal texts dening, for example, the content and scope of property rights, as well as the existence of solicitors entrusted with recording the state of know ledge held by each of the contracting parties before the contract comes into force, and so on. Butand this is ore interesting for our purposessuch general devices, all of which have a cost, in fact only play a peripheral role, as Williamson clearly perceived The actual text of the contract introduces a series of tangible and intangible elements (concepts, materials, substances, experimental devices, researchers etc.) which help to delineate and structure the frame within which it will be performed. The contract could not be framed and fullled' without the participation or requisition of each of these elements: they are involved in the same plot, the same scenario each of them is obliged to play a predened role. The actions wthin the frame are prepared and structured by the equipment, the theoretical statements, the skilled persons of the researchers and techni cians, the procedures and reports; all these elements ensure that they are not scattered or dispersed. Butand here we come to the crux of the argumentach of these elements, at the very same time as it is helping to structure and frame the interaction of which it more or less forms the substance, is simultaneusly a potential conduit for overows. The researchers interact with colleagues, tae part in con ferences, may move temporarily or permanently to dierent compa nies or research laboratories. Scientic ideas and conceps circulate on the Internet or through the intermediary of scientic journals, becoming the subject matter for debates and controversies which rene their meaning both within the group and outside it. If theories did not have a pulic life, they would not exist as certied knowledge. As for the instruments, materials or substances: they are cali brated, standardized and exist in various locations the way they are modied or perform in one location may have direct repercussions on their performance in other locations. The dierent elements constituting the research programme and by extension the research contract are simultaneously resources and intermediaries (Calon, 1991) they frame the interactions and represent openings onto wider networks, to which they give access. It is this dual nature that guarantees the productivity of the entire com
An essay on framing and overowing
plex represented by the programme which thus becomes capable of capitalizing to some extent on what is being done elsewhere, on what has been done in the past and on what will be done in the future. No contract is capable of, or has an interest in, systemati cally suppressing all connections, burning all bridges or eliminating the dual nature of every element involved Which is why the heterogeneous elements, that are linked together in order to frame the contract and its performance, in reality take part in its overowing: and it is precisely because they are sources of overows that they make the contract productive This can be expressed in terms of a paradox: a totally successful frame would condemn the contract to the sterile reiteration of existing knowledge 0 It is therefore illusory to suppose that one can internalize every externality by drawing up an allembracing contract that provides for every eventuality, just as it would be erroneous to equate the incompleteness of the frame with the incompleteness of the contract: the potential sources of overow are to be found in precisely those elements that give it its solidity, rather than in any areas le unmentioned. To recap: (i) framing is costly because overows happen all the time, since they are fed by multiple sources and ow down multiple channels Framing cannot be achieved by contractual incentives alone, because it is bound up with the equipment, objects and specialsts involved in the interaction: it is they who, in their stubborn and obstinate wayto paraphrase a suggestive remark by Whiteheadensure that certain courses of ction are followed and at the same time generate externalities (ii) this costly framing process is necessarily incomplete: rst because a wholly hermetic frame is a contradiction in terms, and second because ows are always bidirectional, overows simply being the inevitable corollary of the requisite links with the surrounding environment. Without overows, it would not be feasible to add value locally thus the only way to stamp out reverse engineering would be to bring all industrial and commercial activity to a standstill! It is because an actors output gets necessarily beyond her entire control so as to generate prots, that the actor him or herself is unable to avoid externalities. 3. In order to be framed, overows must be made measurable
In a recent article, Williamson denes the economic approach as follows: Calculativeness is the general condition that I associate 255
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An essay on framing and overowing
with the economic approach and with the progressive extension o economics into the related social sciences' (Williamson, 1993). Without calculative agents and without the minimum level o inormation that allows such calculations to take place, market coordination is bound to ail. This is why economistsan it is one o their great virtuesdemonstrate such an obstinate desire to dene the conditions in which actions become calculable, and to think up devices that will encourage such conditions to emerge. It is by allowing each agent to have preerences, to hierarchize them, and then to reveal and negotiate themin a word, to calculate his or her interests, express them and deend themthat transactions are allowed to take place, resulting in a robust and legitimate, i not necessarily, optimal reallocation o resources and property rights. It is at precisely this point that sociology can make its contribution. By ocusing on the omnipresence o overows, on their useulness, but also on th cost o actions intended (partially) to contain them, constructivist sociology highlights the importance o the operations required to identiy and measure these overows It also encourages us to question the mechanisms used to create rames by suggesting ways in which the social sciences might help to develop or to conne such such spaces o calculability ·
31.
Identying and measuring
The very denition of externalities (see 1 . 1 above) implies that it is possible to identify not only actors A B and C but also the e ects produced by their activities. Only onc this double identi cation has taken place is it possible to draw up a list of agent s who benet or su er from these externalities (X, Y and Z). These processes are often regarded as selfev ident and selfexplanatory. That this is not in fact the case is clearl y shown by the controversies surrounding the reality of the existen ce of externalities. Three problems arise: (i) The rst is how to identify the e ects,ie, how to prove the reality of the overow. The latterand this is a point that sociologists will take pleasure in highlightingannot be intangi ble. For some thing to happen that a ects agents outside the frame , it is essential that something should cross or break through the boundary drawn up round the commercial interactions within the frame Let us call these entities that secretly cross the frame's bound aries intermediaries they may be che�ical substances, sound waves rippling outwards, texts, scientic articles patents, or resear chers or engineers
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on secondment or moving to other institutions. No externality can exist without relationships; no link can exist unless it ollows a tra jctory plotted by a material object acting as the mediu or the externality. The existence o the latter is predicated upon ths simple but unavoidable quality o tangibility: or an overow to take place, something must overow But identiying the actual intermediaries is anything but straightorward. Some o them, by their very nature, are dicult to identiy others, like spy planes are deliberately camouaged by those who send or receive them. Between industrial espionage at one extreme and the publication o patents at the other, or example, there is an entire gamut o intermediate practices which are more or less easy to track down· between the colourul pollutant that indicates the presence o a le and the odourless, colourless umes that bae the most vigi lant observer, there is a wide variety o euents that are more or less easy to identiy In short, with very ew exceptions, specic w ? rk must be done in order to provide incontrovertible proo o the sm ple existence o an overow or leak, implying at the very least the implementation o monitoring procedures and sensors. Like the natural sciences, the social sciences are obviously involved in these devices, which without them could not exist. en a sociologist demonstrates that hauliers are eectively relying on car drivers to subsidize the cost o their business activities, he is taking part in the process o designing and implementing uch sensors When an economist ormulates methods o calculatn and constructs proxies designed to test or the existence o technological spillovers (another term or overows) rom on industrial sector to another he is contributing to this endless trackg process. The am o the �rocess is to map, as realistically as possible, the tr jectories o the various intermediaries which are constantly escapg rom the interactional rames that gave birth to them and scattering down a multiplicity o unpredictable pathways Similarly, a chemist taking and analysing water or atmospheric samples is partic pating in t�is immense work o identication occasionally it turns to a reale police inquiry, as in the inamous case o the Seveso barrels. . (ii) Providing proo o the tangible existence o over ows s e �tricably linked to the identication o their sources and mpacts. It s not enough to demonstrate the reality and consistency o overows it is also necessary to establish who is responsible or them and who is aected by them. Once again, the eort required is ofen immense Various environmental issues provide dramatic evidence o this. It is quite possible to uncover tracking in toxic waste
a
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invisible links to appear and also a recongured collective in which these now visible and calculable links have been renegotiated The social sciences contribute to this dynamic.
3
Tracng th mchan sms by whch con trovsa statons whr oowng s th rbcom cacab n othr words capab ofbngframd
For calculative ag ents to be able to calculate the decisions they take, they must at the very least be able to a) draw up a list of possible world states; b) hierarchize and rank these world states c) identify and describe the actions required to produce each of the possible world states. Once these actions have become calculable, transac tions and negotiations can take place between the dierent agents In the lig ht of the discussion in the preceding section, I shall now concentrate on the role of the technosciences in the dynamics of overows and on the possible contributions that could be made by sociology and economics respectively towards framing them and making them calculable. (i) In hot' situations, everything becomes controversial: the iden tication of intermediaries and overows, the distribution f source
and targ et agents, the way eects are measured These controversies
which indicate the absence of a stabilized knowledg e base, usuall; involve a wide variety of actors. The actual list of actors, as well as their identities, will uctuate in the course o f the controversy itself and they will put forward mutually incompatible descriptions of future world states
A Rip and myself have suggested that these highly confused sit uations should be g iven the name o f hybrid forums, because facts and values have become entangled to such an extent that it is no longer possible to distinguish between two successive stages: rst, the production and dissemination of information or knowledg e, and second, the decisionmaking process itsel Such forums have bee
proliferating ever since the emergence of the controversy over the
hole in the ozone layer in 1974 The crisis relating to mad cow dis ease is a classic example here, the turmoil has reached its apogee, foreshadowing situations which will probably become ery common in the near future. This hybrid forum is overowing continuously, with an evergrowing, ever-morevaried cast of characters beside which Leporello's catalogo pales into insignicance By tus we hear from vets, farmers, manufacturers of animal feed, proponents of Thatcherite dereg ulation, Cordelia (daughter of the British agri
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cultural minister who appeared on television with her father eatn a beefburger with evident enjoymet) Brussels the British govern ment denouncing protectionism the Germans (accused in passin of perdy by the British) outraged members of the public the media prions (or rather the biologists studying them) butchers frantically acquiring every quality certicate going politicians los ing their heads The controversy lurches rst one way then the otherbecause nothing is certain neither the knowledge base nor the methods of measurement. Not only are the various actors and their interests in constant uctuation but even when they enter the debate they are incapable of reaching agreement either on the facts or on the decisions that should be taken Framingpredi ated upon the assumption that actions and their eects are known and measuredis a chaotic process the implementation and control of which depend directly on the evolution of the controversies involved and on the construction of an agreement regarding the reality and scope of the overows (ii) In cold situations on the other hand agreement regarding onoing overows is swily achieved Actors are identied interests are stabilized preferences can e expressed responsibilities are acknowledged and accepted. The possible world states are already known or easy to identify calculated decisions can be taken The sudden but nevertheless foreseeablebecause already experienced pollution of a watercourse by a chemical factory falls into this cate gory sensors are already calibrated analytical procedures are codied the protagonists already know how to calculate their costs and benets and are ready to negotiate (if necessary on the basis of clearly formulated insurance contracts) in order to determine the level of compensation payable. (iii) Hot' and cold situations have coexisted ever since the sci ences and technology rst rose to preeminence in Western culture But the hot source of this mysterious Carnot cycle is becoming increasingly invasive and omnipresent for at least two reasons: The rst relates to the growing complexity of industrialized soci eties a level of sophistication due in large part to the movements of the technosciences which are causing connections and interde pendencies to proliferate. Here again the crisis over mad cow dis ease has a symbolic value The current situation is the result of the intertwining of a whole series of decisions and interrelated actions initially autonomous but gradually weaving a web over time that is proving very dicult to pick apart in retrospect so numerous and heterogeneous are the elements bound up within it. 261
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A regatory decision (to sto imosing a minimm temeratre for the rearation of animal feeds) reslts following a comle bt initialy nssectedbecase nheardofinterlay of interdeendencies, in the ossible infection of hman brains Within this labyrinth of neected and raidly roliferating con nections, establishing the facts (can rions infect hman beings?) and interreting them give birth to widesread debate felled by radical ncertainties which can only be resolved by making mas sive investments, by initiating vast and exceedingly costly iniries. The ocal and the globa are in constant interaction the rots of the btcher serving the little town of Antony, where I live, are directly aected by a decision by John Maorand it is very dict to distingish between shres of action or instit tions searated by clearly dened bondaries, so comlex has the fabric of the social strctre become. Reassring certainties give way to tormented erlexities. The second relates to the conditions in which knowedge is ro dced, and more articlarly, to methods of exerimentation. In a cold' sitation, it is enogh to call on the eerts and their aboratories Bt in hot sitations, exerts or scientists on their own, working in their sal wayie, sht away in their laborato riesan do nothing In order to trace links, correlate ndings, rodce and test hyotheses, they will aways be forced to dea with nonsecialists At a stroke, this trns the latter into key layers in the rodction of knowledge and the rocessing of the measrements reired to ma ot the eternalities. Once again, mad cows and their rions rovide a sefl sorce of isights Thee is no way of establishing the facts withot organizing ei demiological stdies, withot shedding light on the networks for selling and distribting anima feeds, withot imlementing ro cedres for tracing animal carcasses etc. Society as a whole mst agree to take action in order to rodce an ocially recognized body of knowledge and measrementsin the metrological sensein the absence of which the existence and geograhy of the eternalities cannot be regarded as dened; that is to say, withot which measrementsin the olitical sensecanno be taken with any legitimacy. (iv) Not only are hot sitations becoming more commonlace, more visible and more ervasive, thereby indicating that or soci eties are now thoroghly ermeated by the technosciences; bt more imortantly it is becoming exceedingly diclt to cool them down, ie, arrive at a consenss on how the sitation shold be described
and how it is likely to develo. Externaities are at the centre of b lic debates with no obvios conclsions Firstly, the exerts tend to emhasize their dierences, becase they do not wish to rn the risk of making facile commitments Secondly, economic agents can no longer be ket at a distance from the investigations which by the same token, they hel to hamer: some of them have an interest in maintaining the state of controversy and ignorance and do not hesitate to commit sbstantial resorces to doing so becase they can inence the content of conclsions by introdcing argments and roblems hitherto absent from the debate (v) In this hot world, which is becoming increasingy dict to cool down, the work of economists is becoming ever more ardos becase the actors they are tracking are faced by noncaclabe decisions This is the oint at which it wold make sense to draw a new contract between socioogy and economics The anthrool ogy of science and technology (AST) has acired some sefl tools for describing the dynamics of these confsed sitations or hybrid forms (Caon, aw and Ri, 986; ator, 98) Hence it is in a osition t kee track of controversies and the eeriments they engender withot giving recedence to any one oint of view, whilst at the same time reveaing the sociotechnological mas rodced by the actors involved as wel as the rogressive develoment of instrments for making world states calclable Ths AST can hel with the work of framing interactions by imroving the visibiity of varios eorts to kee track of overows as well as the visibiity of the disagreements or agreements to which they give rise. ike those satellite imaging systems hat enabe navigators to kee track of their relative ositions at all times, the anthrooogy of science and technology can rovide the actors with a cartograhical otline of overows in rogress, thereby aving the way for reiminary nego tiations. Whie the anthrooogist of science and technies and the econ omist cod choose to ignore each other withot major inconve niencethe one fascinated by science as it is being broght into existence in laboratories ct o from the world, the other more interested in comanies which, ot there in the cold word, are alying science already in eistencetheir insights are becoming comlementary and increasingly diclt to treat searately. Wherever they aear, the technosciences breed ncertainty and controversy or societies are hot thanks to the technosciences, which is why interdiscilinary collaboration is becoming essential to or nderstanding of them This i s the rice we mst ay if we wish
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© The Eoral Boar of The Soioloal evew 998
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to keep track of the mechaisms by which social spaces are formed i which decisios take by actors with recogized idetities ad iterests become calculable This does ot ecessarily mea that sociologists should be slavig alogside their fellow ecoomists i order to esure that a market ca cotiue to exist whatever happes Naturally some will decide to do so; others who are more critical or doubtful of the beets of the marketplace will prefer to ivest their eergies i the productio of charts desiged to reveal the everexpadig etwork of ivisible ad icreasigly ucotrollable coectios The former will regard framig as the solutio ad so attach more importace to the eec tiveess of cold calculatio; the latter will be more iterested i overows ad the heat they geerate But whatever they decide to do they will be uable to evade the logic of framig/overowig They are already a part of it
4 The negotiated marke O several occasios I have used the idea of egotiatio to describe the relatioships which come ito beig i hybrid forums: the actors egotiate their ow idetities ad iterests as well as the existece ature ad volume of overows The cocept of egotiatio which lies at the heart of the aalysis of sciece i the makig evokes the theoretical framework proposed by Coase i his aalysis of exteralities ad how we deal with them (Coase, 1960). I ited to discuss this framework i more detail below My aim is to show that oce agai the dieret approaches are ecessarily complemetary For Coase who is essetially preoccupied by the coditios goverig itervetio by the public authorities agets are quite capable of sortig out the issue of exteralities o their ow, ie of iteralizig them by meas of bilateral egotiatios provided that the two followig coditios prevail: (a) property rights are clearly deed ad (b) trasactio costs are il Oly i cases where prop erty rights are dicult to establish (so i the presece of idivisible etities for example: it is quite impossible to establish a property right to the atmosphere with a view to resolvig pollutiorelated issues) is state itervetio required Coase proposes a elegat solutio: the exisece of a istitutioal framework which allows egotiatios to take place This model is beautiful by virtue of its simplicity ad the geeral applicability of the uderlyig hypotheses but it presupposes the 264
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existece of (i) idetied agets (A B C ad X Y ad Z i my de itio) (ii) who are capable of egotiatig with each other ie of deig their iterests ad measurig the beets accug to them or coversely the harmful eects of which they are the victims; 4 Coase also eeds (iii) overows that have bee cormed ad ackowledged ad (iv) property rights allocated i such a way that the idetities ad resposibilities of the source agets ca be established as ca those of the target agets We have just see that these hypotheses which are straightforward eough i the kids of situatios we earlier described as cold i reality become very cumbersome as soo as we tu our attetio to hot situatios where each of these coditios ca oly be satised by makig substatial ivestmets i order progressively to accuulate kowledge ad create metrological frameworks They are the result rather tha the startig poit of a legthy coolig process What Coase wats to avoidad i this he adheres to a traditio with its roots i the political philosophy of the Elightemetis that state of ature i which coicts ad atagoisms are resolved by violece egotiatio ad the drawigup of cotracts these are the methods of oordiatio that he holds up as the ultimate fou datio stoes of civilizatio But i his preccupatio with cool situatios i which world states are already kow or easy to idetify Coase clearly forgets that this pacicatio is oly possible if it is upheld by istrumets that impose upo the agets subjective (ad cosequetly irrecocilable) viewpoits the trascedece of istru mets whichoce they have foud uiversal acceptaceguara tee the objectivity of the facts to which everyoe the agrees to submit The very fact that egotiatio is possibleor to put it aother way that huma relatioships are peaceablehas less to do with laws ad istitutios (a clear attributio of property rights) tha with the existece of this techical ifrastructure; ie to the existece of these istrumets ad their ifallible measuremets I order to achieve such measured behaviourthe word says it all oe must rst prove that behaviour is measurable Thus Coases theorem oly has a liited value To fully covey this poit it may be useful to draw a parallel with the distictio made betwee Newtoia physics (cold) ad Eisteiia physics (hot): the world views ad aalytical istrumets developed by these two paradigms are dieret but tey ae compatible whe the ratio o the velocity of bodies i motio to the speed of light teds towards zero Similarly, Coases theorem has cosiderable value i cold situatios ie whe developmets oly happe slowly or to 265
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u i anoher way when he acions required o sabiie he acual world saes and heir descriions are negigible in erms of coss and commimens comared o he dicul and demanding negoi aions beween agens aeming o reach agreemen on he redisri buion of resources or exchange of roery righs. Bu hings change once conroversies sar o dominae and siuaions sar o hea u now acions ha involve he idenicaion and measure men of exernaliies ake rioriy. The emhasis shifs wards he roducion of an acceable knowledge base and caibraed ceried measuring insrumens ha make i ossibe o ma overows wih accuracy. As we have seen if ere is negoiaion i relaes o he exisence nd naure of he overows o he ideniy of he source and arge agens. Only once he conroversy has been resolved can he oher kind of negoiaioninvolving he ransfer of resources roery righs ec.begin Those who ike o se u family rees would u he negoiaion regarding he exisence of overows a he o because his is he one ha deermines how acors and exealiies are idenied Wihou i framingin his case he iniiaion of negoiaions on roery righsis imossible. This disincion invies us o diereniae beween wo dieren yes of negoiaions (a) negoiaions aime a idenifying overows or ho negoiaions and (b) negoiaions aimed a framing hem or cod negoiaions. The creaion of commercial relaionshis resuoses ha boh kinds of negoiaions ake lace one afer he oher Thus he conce of framing/overowing hels us o undersand why seechesoimisic as well as essimisicon he inexorabe growh of he markelace have no foundaion in fac If only because of he roe layed by he echnosciences in wha we are leased o call advanced socieiesechnosciences which cause enanglemens and neworks of inerdeendencies o roliferae a heir leisurehe marke mus be consany reformed and buil u rom scrach i never ceases o emerge and reemerge in he course of long and sormy negoiaions in which he social sciences have no choice bu o ariciae Not Cf. Sta grondbeaking wok on the mechanim by which he immnent deah of a teminallyill atient in hoia i made inviible in the eye of the atient himef (Glae and Sa 965) Thi toic wa eamined in moe deail by Sta when he tdied how the io and ongoing wok diaear into the donene (Sa 99)
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2 Eealitie only eeen one kind of make faire among ohe fom which hey cannot eaily be dieeniaed in thei eniety: the bic good (which o ce eenaitie which ae geneay oitive); aymmeie of infomation and hei eec (moa hazad and adve elecion) eoce which ae com mon oey (ie which ae no owned by anyone bt can be ed by anybody). 3 The mot adical eenation of the centa role of obect in he faming of ineaction i t fowad by ao (Lao 994) 4 Ceain cren of ymbolic inteacionim aong wih ethnomehodology ake hi viewoin (and ot i by efeence to agmen tha ae at once boh heoetical and methodoogica) 5 A vey ohodo viewoint wold cetainy egad etenaliie a a ey invol naryie accidentaec 6 t wold be aoiae hee o cite nmeo wokin aticla on envion mental economicthat aim to fomate moe eecive rocede fo famng commecial tanacion. Hee am aging from he tandoint of conrcivi ociologyie ha oci ey i an achievementahe than tha of ctait ociology which egad ociety a he medim in which aco ae immeed and ometime downed 8 Thi anagonim i mmed in maey fahion by Deenbery in hi o cied hae: Economic i all abo how eole make choice ocioogy i al abot how the don have any choice to make (Deenbey 960) 9 Hee we edicove one of he baic th intied by H Becke and A. Sa tha aco belong imltaneoy o evea ocia wold and any analyi m take thi mltie identity into accont in ode o ace he dynamic of the inteacion 0 Th ooal meey the coneqence of what we hold obaby call a new heoy of acion in which what con ae he mediaion and no the oce (Caon 99) (Hennion 993) (ao 993). t i oible o demontae he geneal alicabiiy of thi ncile which elae not t to the commecial anacion b alo o he dieent mehod of coodinaion. t i no eaie o fame oliical elaionhi (between hoe ee ented and hoe who eeen them o eonal elaionhi beween eoe to take j wo wellknown and omnieen fom of ineaction. 2 Malad emind of he dy ndetaken by the monty jonal Que Chiir in Ai 993: mal eactive ti wee inclded wih he magazine enabling eade o meae the hadne of thei wae and i niae conen fo hem elve: the dake the ti the highe the evel of inviibe ollion ead he et accomanying he inmen and i inclded a coocoded li of nmeical eqivalen A Maad cleay demonae he ole of hee inment goe fa beyond thei ccial conibtion to he oce of calclating eecive inte et They ao aow to make he anon from economic ace o lega ace a tac ollion analye (C) rovide wih moe han a ge: a a of a metological famewok in which evey element i ceied i allow o act diectly on the ega deciionmaking oce (Maad 996a). 3 Tobacco comanie layed an imoant oe in taining the contovey egading the ileec of cigaee By nancing the eeach hey have been acively conibing o he oongaion of a ae of dob and ignoance. 4 Thoe eeking to how he imiation o gge a toneddown fomaion of Coae theoem m do moe han imly oin o he eitence of anacion co eating o he qe fo and ienicaion of the oce acto he econ
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ch on
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trutn o the relevant normaton and nally the neotaton te the tranaton ot are baed on the aumpton that the realty o the ena and the etene o the aent nvolved have been tabled But above that what have n mnd are the atual ondton o a neotat only eable areement an reahed on how bet to dene the Suh an areement an only be aheved albrated eaurn ntru avalable 15 t wa the ame entury and the ame author who eplored the onept property rht to ther lmt The phloophy o the ontrat and that erty rht are loely nterdependent ee or eample Hee 1990;
ur B 1994) Une ooloe an objet? Remarue ur lnterobetvt'.
vr
e du raa 4) 57-60 ard A. 1996) De ntrument leur uae Apeu ur la oordnaton par eure n Reprene Hyrde Crdnner Eole de mne de Par edted Cle ade and Vololona Rabeharoa 1797. ard A 1996) Le ntrument dan a oordnaton de 'aton' The CS
by
ole de mne de Par. ny ., 1971) [ 1957 The eonomy a nttuted Proe n rade and Mar he ar pre . Polany C. Arenber and H Pearon (ed. Chao nry Renery Co ardon GB 197) The Oanaton o ndutry n Jurna ptember 3-96 SL. 1991) The Sooloy o an nvble The Prmay o Work n the rn o Anelm Strau' n D ane (ed Sa Oanzan and Sa ee ay n Hnur f Ane Srau Hawthorme NY Aldne de uyter on 1993) Calulatvene Trut and Eonom Oranzaton'. Jurna �aw and n XXXVI (Aprl 45346. anee 194) The Genu and the Copyrht Eonom and Leal ndton o the Emerene o the "Author ' heenhCenury Sude 17 4)
194
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References Burt R 1 99) Sruura He he Sa Sruure f Cpen a Harvard Unverty Pre Calon 1991) Tehnoeono Network and rreverblty' n S fMner (ed pp 13-164 London Routlede Calon and Lw 1997) ter ndvdual n Soety Leon on rom Sen Tehnolo and Soety Canadan Jua f Sy
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Calon Law and Rp A (ed 1 96) Mappn he Dyna f Sen ehny London alan Caer 1995) Le ontrat de reherhe entre l'unvert et lnut arranement pour produre de ben prv de ben ollet et de · publ' (Reeah ontrat between unverte and ndutry or produn prvate benet olletve benet and publ benet the Eole de mne de Par Coae ER 1960) The Problem o Soal Cot' Jua f aw and 3) 1-44
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Dueenberry 1960) Comment on An eonom analy o ertlty � Deraph and en hane n deeped unre ed. The Natonal Bureau Commttee or Eonom Reearh Prneton Unverty Pre redber E. 1993) pur e a re. Par Le Seul Glaer B and Strau A 1 965) Awarene fDyn Chao Aldne. Goman E. 1961) nuner w Sude n he Sy f ndanapol Bobberll oman E 1971) rae Anay an eay n he ranzan f Chao Northeate Unverty Pre Granovetter 195) Eonom Aton and Soal Struture The Embeddedne' Aeran Jurna fSy 91 3) 41-510 Hennon A 1993) apan uae. Par tal Hee C 1990) Enlhtenment Eptemoloy and the Law o Authorh• Revolutonary rane 17771793 Repreenan 30 (Sprn 109137. Latour B Sene n An Cambrde a. Harvard Unverty Pre Latour B 1 993) We hae neer een de ay n yera London Harveter Wheathead
0.
Ix
Ix cement industry 28-30 235 antist cases in 225-37 Census ofDistribution, 208 central station systems 151 152 160 163 separation of functions 1 61 -2 stabilization of boundaries 15 3-9 Chamberlin E. 43 Chase R S. 233 Chicago Arc Light 154 Chicago Edison 156 China property reforms in 1 1 81 9 Chung Chiien 158 Clark J M. 29 1 7880 1 81 18 2 229 230 2378 Coase R H 52n 180-2 264-5 codication of marketing 208 209 cognitive psychology 4-5 Cottee on Denitions 202 Cottee on Marketing Techniques 203 commodities 18-19 comparative advantage 98-9 compensaon 62 63 comtiion 42 70 101 in cement indus 2257 230-1 perfect/imperfect 44-5 workable 23 1 240 complexity in recombinant property 1380 constitutive roles 70 72 consttutive rles 70-1 constructivist sociology 250 252 256 consumerreseah 212 21 3 consumersm 21 5 conngent contacts 7 contact negoiation 25 1 2535 contol 1-1 conoversial situaons amng 260 266 coordinaon of markets 6-7 Conway J 233 Copeland M T. 229 coporate satellites 123-7 corporatization 121 cost accounting 17880 185- 187 costs 178-80 linking to decisions 1 802 CuiZ. 1 19 culture and calculave agencies 5 constitutive eect 94 95 97 106 and economic change in Japan 94-100 of markets 69-85 Cumings L 223
Dean J 183
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decenalization i n electrcity indusry 1602 decisions costs and 1 802 degifting 36 Deleuze G. 39 Department of Justice (USA) 225 DiMaggio P. 5 54n 101 discounting 1834 discipline of marketing 1 9521 8 disentaglement 367 38 of money 345 36 disinterestedness 13-15 diversity o f recombinant property 137 8 Dodge plan 9 1 92 Doherty H. 160 169n domestic ansfers 604 donation of orgs 36-7 downsizing 93 95 96 dualism 1 1-1 2 Duesenberry J 267n Durkheim E 51
eaarking 5960 601 64 65 East European economies 41 13 60 see also Hungary economic sociology 501 147-50 economic theoy 30 50 51 52n overows and 250-1 258-9 economics 222 contibution to economy 23 embeddedness of economy in 23-32 markeng and 1967 21 7-1 8 economizaton 326 Edgar C 156 164 Edwards 180 182 183 Edison Thomas 150 151 152 153 168n eciency 89 185 1867 in Japanese management 90-3 105 of market 247 Electric Club 153 Electcal Testing Laboratoy 156 164 eleciciy industry history of in USA 149 15069 electronic banking 656 Emerson H. 186 emotional contol 72-3 Engle N H 229 entanglement 19 39 43 anhropology of 390 money and 34-5 entitlement 62 64 Equilbey N 208 establishing value 75 ehnography in market settings 7883 84 experimentation 29 extension of the market 3 32
extealities 1 6-18 244-8 263 267n existence of 2560
recombinant poperty 1 1 8-1 9 1 239 hybrid forms 30 260 263
factory accounting in 1 859 Federal Trade Cossion 225 228 229 232 233 Ferguson L 156 169n Fetter A 31 228-30 238-9 Fligstein N 41-2 focal point 7 Ford Foundaon 2 1 1 Fox R 36 fragmentation 190 framing 15-19 20-1 25 27 38 250-5 of conroversial siuations 260 266 of interactions 248-50 see also overows freight absorption 226 228 230 Fredberg E 252 friendships and industy development 152 153 159 163 1645 1668 functions of marketing 2001 futre currencies 656 futres trading 25 74
industry sociology of 14750 indusy boundaries 151-3 stabilization of 153-9 industry development in electricity industy 1567 159-64 innovation 989 102 in Easte Europe 1 17 18 institutonalization of Japanese manage ment 101-2 106 107 Insull Samuel 153 155 156 158 164 165 interacions framing 248-50 263 reframing 6 25960 interdependencies 489 interenteprise ownership 122-3 124 interests 176 177 inteal labour market 90 intepersonal relationships 2501 nterstate and Foreign Commerce Cottee 231 intuive judgment 76 investments 245 246 25960 22 265
Gbor I 118 Garcia M 20 22 Garin D A 184 Genera Council of Labour (Japan) 100 General Council of Trade Unions (Japan 100 General Elecric 155 gif money as 6 2 gift giving 12-16 53n globalization 33 Goman E 248-50 Goron R 2 1 1 Granovetter M. 8 9 10 97 252 253 Great Depression 2 07 cement industy in 227 growth dynamic appoach 1567 Guattar 39 Guesnere R 3 Hamlton G. 10 1 Hayes R H 184 Headuarters of Pductivity 97 99 100 higher education 19 8 Hirschman A 101 Hodgson G. M. 10 Howell J. 2 11 Hoyle L. 37 Hoyt C W 204 Hungary 47 liability management 129-32 property transformations 1 20-9
Japan 5 economy of 90-1 transformaton of management in 86107 Japan Cotee of Economic Development 88 96 Japan Federation of Employers Associations 88 Johnson R. N. 236 Joual ofMarketing 203 206 ustication 134 Kasparov Gary 456 knowledge of marketing 1 96 2001 21 0 producton of 262 266 Kohei K 97 labour policy in Japan 93 95 98 labour relations in Japan 88-9 94 96-7 100 103 Lave J 65 law economic analysis and 237-40 liabilities cenalized management of 12932 Lieb J 156 164 lifetime employment 87 89 104 107 limted liability companies 123-7 128 Lindberg L N., 10 1
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