A "New" Economics 101
In a recent New York Times op-ed, columnist David Brooks questions whether the old, “rational,” Keynesian model of economics is truly useful for trying to understand the current economic crisis. He suggests that while economists have traditionally built elegant economic models of efficient markets based on rational actors, the process of making economic decisions is actually much more complex. Brooks explains that these complexities, which are informed by actors’ various strategies, memories, and intuitions, are what influences economic decisions and ultimately markets. In other words, markets are not simply efficient manifestations of reasonable actions; they are confluences of decisions made by individuals who are deeply influenced by their historical, social, political, and cultural contexts. Sociologist Mark Granovetter has drawn from the ideas of economist Karl Polanyi in order to elaborate this very point.
Granovetter has developed a “new economic sociology,” a theoretical framework that suggests that interpretation and social interaction are at the crux of economic action. He sheds the view that economic markets are increasingly separate from the individuals who constitute them. Rather, he argues that economies are “embedded” in ongoing social interactions among individual actors. Economic action is therefore not just a matter of individual, rational decision-making; instead it is patterned along elaborate social networks and influenced by various culturally-defined goals and priorities. Perhaps once we begin to let go of our old assumptions about human nature, specifically that “man” is a rational barterer of economic goods and services, we may be better able to understand the complex causes and consequences of economic collapses, including the one currently in our midst.