Economists and Sociologists: Can’t We All Just Get Along?

20 October 2007 at 5:54 pm 6 comments

| Peter Klein |

I haven’t blogged much on the Comparative Organizations conference hosted by Dave Whetten, Teppo Felin, and Brayden King. It was a terrific conference and I enjoyed myself very much but, as the lone economist in a group dominated by sociologists, I found the experience a little disorienting. Teppo, Brayden, and Gordon Smith — another non-sociologist participant-observer — have posted their reflections and, when Teppo sent this picture of Gordon and me (riding the chairlift at Sundance and no doubt engaged in deep, philosophical conversation), I remembered that I wanted to write something. So here goes.

gordon_and_peter.jpg

1. Organizational economists and organizational sociologists are generally interested in the same phenomena. What are the characteristics and performance attributes of various forms of organization? How do social and market conditions, formal institutions, government policy, culture, and the like affect organizations? How do organizations change through time?

2. We differ profoundly, however, in how we try to answer these questions. Phenomena that sociologists and social psychologists take as explanans economists take as explanandum. For example, Anne Tsui gave a nice presentation on culture. There are two types of studies on culture, she explained, one type in which culture has a direct affect on organizational performance, and another type in which culture is modeled as having a moderating effect on other independent variables. I asked her later, what about studies with culture as the dependent variable, e.g., evolutionary game-theoretic models of the emergence of norms? These aren’t really discussed within social psychology, she said.

3. The participants largely agreed that reliance on cross-sectional, OLS regressions is a poor way to study effects of the institutional environment on organizations. Not because of endogeneity, the economist’s usual worry, but because the proxies are too crude and the complex interactions are not easily captured. (There was quite a lot of enthusiasm for small-n, in-depth, ethnographic investigations.) Fine, I asked at one point, but what about using instrumental variables, panel-data models with fixed effects, natural experiments and differences-in-differences, and other modern quantitative approaches? This didn’t seem to get anyone excited (though, as I recall, Omar of all people agreed with me that these deserved more attention).

4. Speaking of endogeneity, my sense is that economists tend to endogenize many variables sociologists treat as exogenous. One example is firm growth, or the progression from one stage to another. Gordon and I duked it out with Howard Aldrich and Art Stinchcombe in one breakout session on the “life stages” of the firm. I tried to argue — without much success, I think — that generalized life-stages models may give the entrepreneur and management team too small a role in deciding when to move to the next stage. An acorn doesn’t choose whether to become a tree but entrepreneurs do choose if and when to seek additional capital, to add partners, to take the firm public, to make acquisitions, and so on. Biological analogies, after all, must be used with caution. Aldrich and Stinchcombe agreed with me later, in private correspondence, that the modal trowth path varies tremendously from industry to industry. What, then, is the value-added of generalized life-stages models? Anyway, perhaps the problem is that sociologists (except for the rational-choice types) are uncomfortable with methodological individualism and want to give cohort and period effects a stronger role than we economists are comfortable with.

5. Here are three things the modal academic sociologist does not think very highly of: capitalism, economics, business schools.

6. Did I mention that Sundance is unbelievably beautiful in October?

7. Finally, despite being surrounded by these guys, I emerged not only unscathed, but also better educated, challenged, and encouraged.

Entry filed under: - Klein -, Management Theory, Methods/Methodology/Theory of Science. Tags: .

Podcasts with the Big Boys Nobel Nugget of the Day

6 Comments Add your own

  • 1. brayden  |  21 October 2007 at 12:12 am

    Peter, I’m really glad you were able to come to the conference and that you enjoyed it. I think the success of the conference was mostly due to wonderful group of people who attended.

    Re your third point: I don’t think this issue was discussed in depth because the kinds of sophisticated modeling you’re talking about are fairly common in organizational sociology. Most panel level studies use fixed-effects or at least random effects. It’s common to account for endogeneity with econometric models, like two-stage least squares. None of this stuff is new, nor is it seen as controversial. Ethnography and fuzzy sets modeling are both much more controversial but possibly very illuminating in helping us to understand static and dynamic differences between organizations and their contexts. That said, I heard several people, including Howard Aldrich, calling for the use of even more sophisticated modeling. By that, I think he meant moving beyond even the simple fixed-effects models to open up the black box and figure out the causes of variance within the dummies.

  • 2. Meh  |  21 October 2007 at 3:51 am

    Not that you will stop and consider this, but the problem with the game-theoretic models of the evolution of norms is that they remain somewhat crude tools.

    That is to say, the kind of behaviours you can fit into game-theoretic models aren’t really the bit of “culture” that people have trouble modeling. There’s hundreds (at least) of economists grazing wild and free on game-theoretic norms of behaviour within the firm, but none of them have provided much explanatory power for behaviours which don’t fit into a rigid economic model. That’s because once transactions are difficult to measure (i.e. the economic value is difficult to estimate) then the major error factor in your game theoretic model is mapping between the behaviour and the model.

    It’s also true that there are a lot of social psychologists who spend a lot of time repeating studies of relatively simple economic behaviour issues, which is regrettable, but most of the rest of organisation studies has moved on to worry about the bits that don’t fit easily into existing game-theoretic models.

  • 3. Meh  |  21 October 2007 at 3:53 am

    As for point four, you can argue that it is sunshine that makes the decision when an acorn becomes a tree (or frost or other climate issues.) As such, entrepeneurs may decide to take on capital, but at the same time the “capital market” decides whether or not to supply it.

    The reality is that both sides need to be more two-factor about their approach…

  • 4. Brian Pitt  |  21 October 2007 at 10:27 am

    Dr. Klein,

    You get no argument from me on your point #5 (at least your points about capitalism and economics). The first problem, here, and with your point about game theory, is that (non-rational choice) sociologists love DATA; and tend to eschew “clean” (or rational) social theory. And I must note, I and most sociologists find most instrumental variables pretty UNDERwhelming (for the reasons you stated); if not outright tautological. Moreover, and I might get beaten up for this, but economists have done a better job of explaining capitalism. And mostly because capitalism cannot be seen exclusively through the lens of the social milieu.

    The second problem, and you are in a good position to change this, is that sociologists assume networks, social relationships, and other ontological considerations. While economists are more interested in the emergence of such networks (or the instrumental action that gives rise to them). And if one is inclined to assume, e.g., networks and social norms, there is really no time for explaining purposive or instrumental action. Also, the game-theoretic models of the emergence of norms simply takes a utility-maximizing individual, and over-socializes her into her environment. And in so doing, neglecting the ontology of how people come to act “purposefully” or “rationally.”

    Getting along demands that scholars take a hard look at rationality and ontology.

  • 5. Steve Phelan  |  21 October 2007 at 1:11 pm

    Lesson from Austrian economics – you have more freedom than you thought
    Lesson from Sociology – you have more constraints than you thought

  • [...] 25, 2009 · Leave a Comment Back in 2007, economist Peter Klein asked Economists and Sociologists: Can’t We All Just Get Along?  Dr. Klein says, sans rational choicers, most sociologists are uncomfortable with methodological [...]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authors

Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts

Guests

Former Guests | posts

Networking

Recent Posts

Categories

Feeds

Our Recent Books

Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

Follow

Get every new post delivered to your Inbox.

Join 260 other followers