123: Markets as Politics - Neil Fligstein - Talking About Organizations Podcast

Economic sociology was once dominated by the neoclassical view of economics where, as Neil Fligstein describes, “markets select efficient forms which, over time, converge to a single form.” This view presumed markets were driven rationally, where efficiency alone would be sufficient to determine dominant forms of organizations that would become institutionalized.
Fligstein’s 1996 article, “Markets as politics: A political-cultural approach to market institutions,” opens with a challenge to this view, bolstered by emerging research that showed how the neoclassical view did not explain market behaviors in practice all that well. And so, he argues an alternative, “political-cultural” model that suggested that the formation of markets was part of “state building” and that processes within markets reflected two types of “political projects: the internal firm power struggles and the power struggles across firms to control markets.” Thus, the creation of market institutions was a cultural project that was composed of particular social institutions – property rights, governance structures, conceptions of control, and rules of exchange – all that were embedded in the state. Thus, states play vital roles in constructing market institutions, and Fligstein offers various proposals or provocations (labeled as “propositions,” but used differently than in present-day qualitative papers) that compose the model.
Because some of the propositions attempt to explain behaviors of states adopting capitalism, it is clear that the paper’s inspiration drew from the early 1990s’ experiences of former communist and post-colonial states looking to join the West after the dissolution of the Soviet Union. For example, Proposition 1 says that newly capitalist states are pushed to develop the proper social institutions (property rights, etc.) in order to stabilize their markets as they convert from whatever previous economic model was exercised. As we find in our discussion, some propositions may have proven to be true, while others not so much. Which ones? We’ll let you, the listener, decide.
This article is but one of Fligstein’s major contributions to economic sociology. He has also published a book on field theory (note: a very different kind of field from what Kurt Lewin presented, per our discussion in Episode 55) that examines how actors create and maintain stable social arrangements and explains how collective action and institutional arrangements feed off each other.