Granovetter, M. (1985). "Economic Action and Social Structure: The Problem of Embeddedness." American Journal of Sociology 91(3): 481-510.

A fruitful analysis of human action requires us to avoid the atomization implicit in the theoretical extremes of under- and oversocialized conceptions. Actors do not behave or decide as atoms outside a social context, nor do they adhere slavishly to a script written for them by the particular intersection of social categories that they happen to occupy. Their attempts at purposive action are instead embedded in concrete, ongoing systems of social relations (Pg. 487). Granovetter presents a thorough analysis of the limitations of classical economic analysis that are caused by a lack of consideration of socialization. He tackles the sociological problem of embeddedness: the argument that the behavior and institutions to be analyzed are so constrained by ongoing social relations that to construe them as independent is a grievous misunderstanding (p. 482). In particular, Granovetter argues that existing perspectives that attempt to include socialization tend to either under- or over-socialize individuals. Using empirical examples he argues for skepticism towards classical economic analysis, new institutionalist economics or substantivists ability account for the role of socialization in economic activity. Writing in the American Journal of Sociology the article rather predictably concludes that there is a greater role for the sociological study of economic behavior. In arguing the middle ground between two extremes of socialization, Granovetter critiques both without actually building a discrete approach of his own for how to incorporate social relations into economic analysis. This brief paper will summarize the main contributions of the article, and a critical reflection on Granovetters conclusion, namely, where to next for an embedded analysis? The article identifies two existing responses to classical economics treatment of individual behaviour as rational and self-interested. The first, in the sociological tradition of

Polanyi, presents economic behavior as embedded in, and subordinate to, social structures and norms. It rejects Adam Smiths presentation of economic market behavior as historical and natural to man. Instead, behaviours are understood to be driven by social norms and natures that pre-empt the market relations of classical economics. This approach aims at more than simply filling the gaps of economics models. It argues for respecting the primacy of society over the market and understanding human relations as fundamentally more social than selfinterest. An example of embeddedness is the general trust we have in one another to carryout basic interactions, like paying after eating at a restaurant. This approach, Granovetter argues risks over-socialization. All mans behavioral patterns have been internalized and ongoing social relations thus have only peripheral effects on behavior (pg. 485). In other words, the analysis becomes static, deterministic, and cannot be context-sensitive. The second approach is that of "new institutional economics", which have argued that behavior and institutions can be better understood as resulting from the pursuit of selfinterest by rational, more or less atomized individuals (pg. 482). In this approach, institutions are used to fill the gaps in classical economic analysis. They explain outcomes that require something more than individual self-interested actions. Rather than revert to the primacy of social relations, new institutional economics argues that rational actors agree to institutions that direct behavior to overall result in outcomes in the individuals self-interest, through apparently non-self-interested actions. Institutions in this approach can be thought of as agreements to overcome problems of collective action or preemptively solving prisoners dilemmas. The apparently irrational action is still driven by self-interest. This, Granovetter argues, is an undersocialization. While clearly fitting more closely as an amendment to classical economics, it is essentially another form of individual utility maximization that doesnt explain the

something more at work in many observed behaviours. New institutionalism is in one sense is a step better than embeddedness, by giving room for more dynamism in determining when and which institutionsand thus socializationexist. Granovetter uses empirical evidence to analyze two glaring holes in classical economics explanation of behavior: the question of trust and malfeasance in economic life and which transactions in modern capitalist society are carried out in the market, and which subsumed within hierarchically organized firms (pg. 483). Market relations alone cannot explain the lack of malfeasance in economic life, according to Granovetter. Individuals generally do not lie, steal or force their way, despite incentives and rationale to do so. An appeal to general morality fails to satisfactory capture the individuals freedom (and occasional decision) to go against social norms. Neither are all the displays of trust we see in situations amenable to institutionalization. Granovetter argues the middle path in this regard is that most behavior is closely embedded in networks of interpersonal relations (pg. 505, emphasis mine). Rather than a grand deterministic social structure, or larger institutional arrangement, interpersonal relations are a form of socialization on an individual scale that often contradict apparent self-interest.1 This element of interpersonal social relations is carried over to Granovetters analysis of business relations and hierarchies in firms. In fact, Granovetter finds that businesses often avoid market relations (such as contracting out) despite the fact that classical economic efficiency forces are assumed to be stronger in the market, in favour of the ties and give-and-

An argument, noted by Granovetter, can be made that this is just a different way of understanding the same rational self-interest, and can be incorporated into economic models. such behavior is rational or instrumental is more readily seen, moreover, if we note that it aims not only at economic goals but also at sociability, approval, status, and power (pg. 506). While there is not space to fully discuss herein, this is clearly not the classical approach to self-interest, and thus Granovetters approach does mark a divergence. Furthermore, a multidimensionality of self-interests and rationality is not supported by classical economic modeling.

take of familiar partners or internal relations. This case study of applying Granovetters approach to embeddedness to an empirical problem shows the explanatory power of considering different types and degrees of socialization. It should be noted that the article does not attempt to expunge the explanatory power of institutionalist or substantivist approaches to certain economic problems. Whether the problem chosen for empirical analysis in this article better fit Granovetters approach than other equally vexing problems is a potential limitation the reader must keep in mind. Like so many critiques of economic analysis, Granovetter identifies both critical limitations and outright failings. His use of empirical accounts of business behaviour provides for a particularly exacting critique of the institutionalist perspective as well as classical economics. But, like so many other critiques of economic analysis, he doesnt attempt to build a comprehensive alternative. The caveats and broadening he advocated, cannot fulfill the same role as classical economic models. Without a argument of when, where, to what extent and in which direction social relations will effect economic behavior (other than both more and less than we have expected to date) we are left with the same post-hoc descriptive analysis as any other social science. Forward-looking analysis, a major and unique contribution of economic modeling, is impossible. Thus Granovetters critique, if accepted, cannot be the supplementary or an amendment to economics as he seems suggests, but in fact demands a rejection of classical economics, and with it the modeling aims. Instead we must use a host of perspectives including varying degrees of socialization. Reading the critique to this end makes the article more powerful than the rather lukewarm conclusion upon which Granovetter ends, that economic behaviour is worthy of sociological study.