The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies.

• Author: Voss, Thomas
• Position: Book Review

The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies By Neil Fligstein Princeton, N.J.: Princeton University Press, 2001. Pp. xiv, 274. $70.00 cloth, $17.95 paperback.

In the past two decades, economic sociologists have contributed programmatic essays and numerous empirical studies to an analysis of the social and institutional context of markets. The scope and approach of economic sociology are in some respects similar or parallel to the scope and approach of institutional economics. However, many economic sociologists point out the differences between institutional economics and sociology: economics is based on methodological individualism and the assumption of rational choice (or, at least, boundedly rational behavior), whereas much of sociology is not. Sociologists stress the impact of informal social norms, networks, culture, ideology, and power on economic behavior and economic institutions, whereas institutional economists focus more on the formal institutional arrangements that surround economic exchange. Economists tend to argue that changes of institutional arrangements can be explained by efficiency gains. For example, transaction-cost analysis points out the efficiency consequences of institutional alternatives and argues that economic agents choose among institutional alternatives in order to optimize with respect to transaction costs. Sociologists, in contrast, depict institutional change as in large part independent of efficiency considerations.

In light of more recent ideas in economics and rational-choice theory, the contrast between economic sociology and institutional economics may be overstated. Economists increasingly use game theory to analyze institutional change. Repeated games are especially useful models for describing features of informal social relationships among rational agents. They can be applied, for example, to "relational" contracting. Game theory in general and repeated games in particular do not necessarily imply that efficient outcomes will be realized. Folk theorems of repeated-game theory demonstrate that an extensive set of outcomes, many of them "inefficient" equilibria, is possible in a repeated game. Economic historian Aver Greif ("Cultural Beliefs and the Organization of Society," Journal of Political Economy 102 [1994]: 912-50) coined the term cultural beliefs to emphasize that equilibrium selection will be deeply dependent on history and therefore path...