Short Definition on Economic Sociology

1. Economic Sociology is the sociological study of economic life. Social networks and institutions are the central of economic life.



2. The spirit of capitalism, essentially is rationalism. The rationalization is the process whereby an increasing number of social actions and interactions become based on consideration of efficiency and calculation, rather than motivations from custom, tradition, or emotion.
   
   The spirit of capitalism works as inner world calling, and an obligation to fulfill the will of God. In doing so, one may have certain degree of security of being saved. That inner motivations lead to a man to work hard, reject unnecessary spending, greedy (for the covet has no place in the kingdom of God) and instant gratification; to minimize the cost and increase production turnover; to book keeping in all transaction, not only to be accountable in front of men but of God; to serve customer's needs and increase marketing efforts.
   
   Weber shows that the Protestant ethic is the core element of cultural belief that gave rise to Western capitalism, not capital as Marx argued, but the spirit of capitalism mattered.


3. Embeddedness of economic action: Granovetter criticizes the assumption of atomized individuals as economic actors, instead people are embedded in networks of social relations which shape economic action and institutional outcome. Networks provide timely and reliable information and personal ties provide a basis of trust and credible commitment.



4. Social exchange: George Homens extends Adam Smith's economic exchange concept. He thinks exchanges is one of basis characteristics of human interaction and follow the utilitarian laws.



5. Social norms: implicit contracts binding members of any given society and social groups. Norms are maintained by members of society and followed to conformity. Social norms not only constrain member's behaviors but also enable and motivate collective action in networks and close-knit communities.



6. Transaction cost: refers to cost incurred in making an economic exchange. It includes cost of searching and finding information; cost of negotiation and cost of monitoring and enforcement.



7. Social capital-refers to resources grounded in durable exchanged based networks of persons. Bourdieu defines "social capital" as the sum of resources, actual or virtual, that accrue to an individuals or a group by virtue of possessing a durable network of more or less institutionalised relationships of mutual acquaintance and recognition. Network closure and structure hole are two mechanism in explaining social capital



8. Cultural capital: familiarity with and a configuration of knowledge, attitude and social skills that place one at a distinct advantage in the school setting. It includes linguistic styles, aesthetic preference and style of social interaction.



9. Firm: economists define firm as "the system of relationship which comes into existence when the direction of resources is dependent on the entrepreneur, it is the autonomous unit that maximizes on profits; firm is exist only when production cost is lower than transaction cost.";
   Economic sociologists define firm as "a congealed network." which embedded with social network.



10. Cliques refer to network ties between two or more people maintained to realize gain from cooperation. Dalton shows in his study of firm that the real power structure in the firm is organized around cliques of managers and employees. Cliques form the basic stable power in the firm. Like social norms, cliques operate through implicit contract binding the members, the implicit contracts are welfare maximizing norms for member of cliques.
    
    Cliques also have negative effects, for example, business cliques can lobby government to secure redistribution of resources to themselves; within firms, cliques of executives can collude to plunder the firm, as in Enron and Tyco, and NKF in Singapore. The horizontal clique of corporate board members can collude to reward themselves with huge compensation for CEO and top management, as reviewed in recent financial credit crunch.
    
    Under transaction cost theory, CEO makes independent decision to minimize transaction cost; under clique theory, clique will influence decision making in order to maximize their own benefits.



11. Institutions are humanly constructed constraints that structure political, economic and social interactions, are the rules of games; are a system of interrelated informal and formal elements including formal(law and legislation) and informal rules (custom, belief and convention etc. Institutions are dominant form of social orders which provide a conduit for social and collective actions by facilitating and structuring the interests of actors and enforcing principle and agent relationships.



12. Where does institution come from? Avner Greif thinks from cultural beliefs. In individualist society, impersonal, formal institutions laws in commerce and trade become well-developed overtime to resolve any conflicts arise; while in collectivist society, personal relationships and networks are often used in resolving conflicts, formal institutions are not well developed.
    



13. Entrepreneurship: an innovation in carrying out of new combination of 1) new goods and service; 2) new method of production; 3) new market;4) new raw materials; 5)new organization of industry.
    
    Entrepreneurship is an activity that involves the discovery, evaluation and exploitation of opportunities to introduce news goods and services, ways of organizing, market, raw materials and way to productions.

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