Economic sociology got its modern start by criticizing 1970s-era economics. And, to be fair, there was a lot to criticize – too much perfect markets, perfect competition, perfect information, consistent self-interested preferences, and all that jazz. I worry, though, that economic sociology still hasn’t updated enough to where economics is now. On the one hand, we have the rise of applied microeconomics which is barely indistinguishable from parts of quantitative sociology (compare, say, field experiments on discrimination in the two fields and tell me what’s really different). And on the other, all of those theoretical maneuvers sociologists rightly criticized have, at a minimum, been considered and modified here or there. Well economics of the 1970s may have been a target, I think economics now can and should be much more of a fellow traveler.
I was thinking about this as I read a retrospective with Tony Atkinson, an influential British economist known for his work on inequality who passed away recently. The Annual Review of Economics published an interview with him in its most recent issue. In that interview, Atkinson does a brief mea culpa along exactly the lines of economic sociologists’ criticisms when discussing a public economics textbook he wrote in 1980, and discusses how the revised edition started from very different premises:
Atkinson: Yes, which actually brings me to what you asked about public policy. First, a mea culpa, because Joe Stiglitz and I wrote this textbook on public economics (Atkinson & Stiglitz 1980), and in some ways, I think we probably set the wrong agenda. Because, under the influence of our early training, we were thinking of the starting point as being competitive general equilibrium, which, after all, was an innovation compared to, say, the old public finance literature, which was black-letter law and verbal reasoning. There was no formal theory, apart from a few notable exceptions, until Peter Diamond, Jim Mirrlees, and the rest of us began to take theory seriously in public economics. With a few exceptions, there wasn’t any proper theoretical discussion. Arnold Harberger did good work on general equilibrium tax incentives; that was an innovation, but one that, in retrospect, gives rise to the attitude you’ve just described: You start with a world in which the government can only make things worse.
Stern: It locked in a lot of the assumptions about perfectly functioning markets that should’ve been at the root of many discussions of policy itself.
Atkinson: Precisely. As we say in our new introduction to the book (Atkinson & Stiglitz 2015) … we wouldn’t start from there, we’d start from a world in which there’s monopolistic competition, imperfect information, search behavior, and all sorts of things, taking account of what’s happening in behavioral economics and several other things. I think that matters not just because each of them is important but because, when several of them are taken together, you then get to a very different position than if you just use one on its own.
Now, Atkinson is by no means representative of the field as a whole. But I think this brief discussion captures something very important about the transformation of the field, something that sociology especially needs to keep in mind as we consider our relationship to economics.