by Jens Beckert. Princeton: Princeton University Press. 2002. ISBN: 0691049076, $39.95. 368 pages.
The book critiques orthodox economic theory, arguing that rational choices do not necessarily lead to optimum outcomes. The problem lies in the deficiencies in how economists model choice. "[T]he achievement of efficient results of economic action requires the 'social embeddedness' of actors, which either leads to deviation from the pursuit of rational individual strategies or actually enables actors to act in extremely complex or novel situations" (p. 9). Sociology offers a framework to make up those deficiencies.
In the author's view, "[t]he function of economic theory consists of informing actors about optimal strategies" (p. 12). The function of economic sociology is to help people make better choices: "[T]he task of economic sociology [is] ... developing theoretical concepts and carrying out empirical studies that explain ... how intentionally rational actors make decisions when they do not know which is the optimal alternative and, on the other hand, to show how actors oriented toward their own self-interest can overcome inefficient equilibria that emerge from the pursuit of individually rational strategies" (p. 18).
The book is divided into three parts. Part 1 criticizes neoclassical theory, focusing on the limitations of economic rationality. Part 2 explores the ideas of various sociologists to help overcome these limitations. Part 3 offers a brief summation.
Part 1 identifies three areas where the rationality leads to suboptimal outcomes: cooperation, uncertainty, and innovation. The author's discussion of cooperation is limited to exchange. He mistakenly dismisses production as "an expedient treatment of nature, which does not initially demand the cooperation of several individuals" (p. 19). In doing so, the author dismisses anthropological and economic theories that treat production as an inherently social activity.
Cooperation in exchange is characterized by a lack of information. Each party runs the risk that the other party will deceive or renege; each has an interest to do so. Hence, cooperation in exchange is best illustrated by the prisoner's dilemma. The author offers three solutions: an internal solution in which individuals cooperate; an external solution imposed by a government or some outside organization; and a functionalist solution involving a norm or a tradition, the existence of which proves its rationality.