Examining Capitalist Development through Evolutionary Approaches in Economic Sociology

Economic sociology aims to examine economic phenomena from a sociological perspective. In a book about economic sociology, Christoph Deutschmann discusses the need for economic sociology to reorient its concepts towards the phenomenon of development to better analyze the inherently dynamic nature of modern capitalism. After recapping the central theses of classical contributions by Marx, Schumpeter, and Weber to a theory of capitalist development, Deutschmann introduces two types of evolutionary approaches that can be applied to the study of capitalist dynamics. These are Hartmut Esser's Model of Sociological Explanation and path-theoretical models from evolutionary economics.

Karl Marx wanted to understand the historical significance of bourgeois institutions, including their socialist-communist criticism. Marx's analysis focused on the universalization of the commodity form by extending the commodity-money nexus to the reproduction conditions of society in contemporary capitalism, and the resulting reflexive relationship between money and labor. The category of labor or production developed by Marx is not only economic, but also the principle of historical self-reproduction of the human race. It’s the modern bourgeois society that has transformed human labor into a reflexive commodity, allowing for an understanding of its historical significance. Marx sees the modern capitalist system as a dynamic system with a continuous accumulation of capital. He attempts to decipher the laws of motion of bourgeois society by linking the dialectical concept of labor with the labor theory of value of classical political economy (Smith, Ricardo).

Joseph Schumpeter believed that entrepreneurs were the driving force behind economic growth, through their ability to innovate and create new combinations of goods and services. He also recognized that this process was not smooth, and was marked by cycles of booms and busts. Schumpeter emphasized the importance of the individual entrepreneur's ability to perceive new opportunities and take action, and he believed that the pursuit of profit was a key motivator for entrepreneurship. Schumpeter's perspective has some limitations, including his failure to account for the social context in which entrepreneurship occurs, and the collective nature of innovation.

Max Weber suggested that the Protestant work ethic, which emphasizes hard work and frugality, was a key factor in the development of modern capitalism.

Hartmut Esser's macro-micro model proposes that social phenomena should be explained by analyzing both macro-level structures and micro-level interactions.

Social macro-phenomena are - in the simplest case - explained by a three-step detour from the macro to the micro level and back:

1. The inference from the collective structure to the situation of the actors and their perception of the situation (logic of the situation)
2. The explanation of the actions of the actors in the given situation based on a theory (logic of selection)
3. The conclusion from the individual level to the collective level by analyzing the aggregate effects of individual actions (logic of aggregation).

Social processes can be understood as chains of this basic model, whereby two possibilities arise: 1. The functional reproduction of an action system (static), or 2. The aggregation of individual actions leads to a collective state that has changed compared to the initial position (evolution). The structural change can be due to external or internal causes (exogenous and endogenous change).

Capitalist development is a system-internal process, not caused by extra-social factors.

Two steps are necessary to clarify the logic of the situation:

1. The analysis of the structural context of action and
2. The analysis of the perception of the context of action by the actors.

In the economic system, payments are arranged in a way that maximizes the return of money, reflecting the importance of capital utilization in this system. The other societal subsystems are indirectly tied to capital utilization, as they also require money for their functioning but do not generate their own revenue. Institutionalized markets for labor and capital are necessary for the modern capitalist system to function and create a competitive environment for innovation. Cultural and institutional orders play a role in structuring the complexity of the capitalist system.

In our globalized world, each actor has its own tasks and strategies, and the social framework of economic activity under these conditions is complex and contradictory, offering considerable scope for innovative individual and corporate action. The institutional framework is important for achieving financial success. The logic of the situation is only clarified through the analysis of the actors' perception of the situation. If we see inconsistency of entrepreneurial intentions in the face of existing conditions, it may be wise to realize that existing conditions are not simply challenged but also questioned by entrepreneurial individuals and organizations.

 

Innovators and entrepreneurs not only focus on marketing new products and technologies, but also on communicating their design and cultural visions in which these innovations function. To achieve this goal, they use advertising, public relations, and product demonstrations. Innovative collaborations take many forms, from personal relationships between entrepreneurs, inventors, and financiers to organized and institutionalized forms that range from small businesses to large industrial research laboratories. These structures bring cooperation into the form of concrete reciprocal expectations and contractual obligations, regulating not only the collaboration between developers themselves but also between manufacturers and users. Innovative processes' organizational forms vary considerably, from small teams to large industrial and scholarly research bureaucracies. Innovative activities involve processes of differentiation, reflexive modernization, and transnational integration.

 

The most recent research agrees that network-like cooperation structures (communities of practice), play a crucial role in innovative projects' development. Lampel (2001) analyzed several case studies, including Edison's electric lighting system, the first diesel locomotive from Denver to Chicago, and the marketing of the NeXT computer by Steve Jobs in 1988. He shows that product demonstrations are especially important in the new technology's market launch phase, where the aim is to change the audience's attitude from that of a critical observer to that of a convinced supporter. The focus is not on factual information about the technology's current state, which is often insufficient but on spreading mythically enriched messages about its development potential. In this way, technology becomes not only a tool for performing a specific task but also a vehicle of social transformation capable of satisfying unmet desires and generating untold wealth.

Path dependence means that earlier decisions cannot be undone by later ones, and once a decision is made, it establishes a corridor for subsequent decisions. Some of these later decisions can determine future options, creating a bifurcation. The historical nature of path-dependent processes means that there is no single rule for optimizing decisions or finding an equilibrium solution.

Theories about a subject must also take into account the historical context in which they were developed. In the phase of path creation, ideas and utopias play a role, and entrepreneurs and inventors try to win support for their visions. In the path-dependent phase, self-reinforcement is the focus, and those who invest early often gain the most. In the final phase, the original invention is exhausted, and the market becomes saturated, with diminishing profits. But this phase may paradoxically lead to the emergence of entirely new ideas.

The social embedding concept has weaknesses in explaining capitalist dynamics. The evolutionary perspective involves the application of theoretical models that take into account the dynamic nature of social and economic processes. Symbolic consumption is a central concept in this perspective, as it involves not only the satisfaction of material needs but also the fulfillment of vague illusions of well-being through certain goods and services. The dynamics of consumer behavior are driven by the tension between the daydreams and desires of the consumer and the decisions that must be made in the real world. The modern hedonist is developed according to the formula of "Longing - Purchase - Use - Disillusionment - Renewed Longing".

So, the analysis of capitalist dynamics can be expanded beyond the traditional structuralist perspective by adopting an evolutionary approach that takes into account the creativity and transformative power of individual decisions.

 

Ref.

Deutschmann, C. (2009), Soziologische Erklärungen kapitalistischer Dynamik, (Sociological explanations of capitalist dynamics), in: Beckert & Deutschmann (eds.), Wirtschaftssoziologie, Wiesbaden: VS.