Download The Rational Choice Generalization of Neoclassical Economics

The Rational Choice Generalization of Neoclassical Economics
Reconsidered: Any Theoretical Legitimation
for Economic Imperialism?*
Milan Zafirovski
University of North Texas
The article reconsiders the generalization of neoclassical economics by modern rational choice theory. Hence, it reexamines the possible theoretical grounds or lack thereof
within neoclassical economics for economic imperialism implied in much of rational
choice theory. Some indicative instances of rational choice theory’s generalization of
neoclassical economics are reviewed. The main portion of the article addresses the
question as to whether neoclassical economics allows its generalization in rational
choice theory and thus legitimizes economic imperialism. Presented are a number of
pertinent theoretical reasons why neoclassical economics does not fully justify its generalization into rational choice as a general social theory, particularly into an overarching economic approach to social action and society. Also discussed are some
theoretical implications of the rational choice generalization of neoclassical economics. The main contribution of the article is to detect lack of a strong theoretical rationale in much of neoclassical economics for rational choice theory’s manifest or latent
economic imperialism.
This article reconsiders the current uses of classical and neoclassical traditions in economics to legitimize a certain approach, such as rational choice, in contemporary sociological
theory and elsewhere ~political science, for example!. With the rise of sociological rational
choice theory ~Hechter and Kanazawa 1997; Kiser and Hechter 1998!, or rational action
theory for sociology ~Goldthorpe 1998!, as one of the “most influential theoretical developments of our time” ~Somers 1998!, many of its advocates believe that they make a
“rational choice of theory” ~Abell 1992! by adopting and applying with slight modifications the basic notions of the economic approach to human behavior ~Becker 1976!, as
putatively rooted in neo-classical economics. Such notions include atomistic individuals
free from complex interdependencies, the pursuit of pure self-interest ~construed as happiness!, farsighted rationality and accurate cost-benefit calculation, market equilibrium
and/or ~the Pareto! optimum, parametric individual preferences/values, technologies, social
institutions and cultures, consistent maximization of profit ~producers! and utility ~consumers!, free and perfect competition, a laissez-faire government, full knowledge and
complete information, etc.
Arguably, the outcome has been sociological rational choice theory’s generalization of
neoclassical economics 1 ~Rambo 1999! beyond the original realm of the market into nonmarket domains. This represents a generalization and extension of the basic assumptions
and concepts of neoclassical economics from the economy to society. Specifically, such
*The author thanks three anonymous referees for helpful comments on an earlier version of this manuscript.
The author is grateful to Professor Jonathan Turner for editorial guidance and advice. Direct correspondence to:
Milan Zafirovski, Department of Sociology, University of North Texas, Denton, TX 76203. E-mail: milanzafir@
yahoo.com.
1
Rambo ~1999! specifically refers to “Coleman’s generalization of neoclassical economics.” In retrospect, it
was Veblen ~1898! who at the turn of the century coined the term neoclassical economics to stress the theoretical
continuity of marginalism with classical political economy.
Sociological Theory 18:3 November 2000
© American Sociological Association. 1307 New York Avenue NW, Washington, DC 20005-4701
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
449
generalization seeks to embrace the noneconomic components or subsystems of society
such as the polity ~public and social choice theory!, group behavior ~the economic logic of
collective action!, religious beliefs ~the economics of religion!, ideology, morals, education and other culture, the family, social interaction ~exchange theory!, etc. For instance,
according to its key advocates, the “exchange approach in sociology @is# the economic
analysis of noneconomic social situations” ~Emerson 1976: 336!. Hence, social exchange
theory has become an extension of neoclassical economics and its utilitarian theorizing
~Turner 1987!, especially of the orthodox economic theory of market exchange ~catallaxy!.
The same seems to apply to sociological rational choice theory 2 , of which the exchange
approach in sociology is a special case, as argued by some advocates ~Coleman 1990!, and
yet denied in part by those of the later ~Blau 1994!, albeit most rational choice sociologists see their theory as more than a mere offspring of its “neoclassical cousin” ~Kiser and
Hechter 1998!.
In any event, as a result of such ~admitted or denied! generalization of neoclassical economics, much of contemporary rational choice theory in sociology and economics often appears as a theory of everything ~Hodgson 1998: 168!, thus becoming “an inclusive and
universally applicable construct that simultaneously explains everything and therefore nothing” 3 ~Smelser 1992: 403!. Characterizing rational choice as the virtually universal economic approach to human action ~Becker 1976! or the most promising general theory ~Kiser
and Hechter 1998! is explicitly or implicitly indicative of this neoclassical generalization.
The question can arise as to the soundness of this generalization of neoclassical economics by rational choice theory in sociology as well as in contemporary economics and
political science ~public choice theory!. Focusing on sociological rational choice theory in
the U.S. and Europe, this question can be pertinent to sociologists insofar as for many
sociologists, contemporary neoclassical economics, especially in America, is based on a
wrong or very limited theory at best ~Turner 1998!. Hence, to generalize such a limited if
not wrong theory to virtually all social phenomena would seem to be dubious in the eyes
of many sociologists other than rational choice adherents ~including in part exchange
theorists!. In this connection, it appears problematic how to generalize to society a theory
that is limited even in regard to the economy ~e.g., the market sphere!, i.e., how to create
a right general theory of the first from a largely wrong or limited theory of the second.
In addition to the issue of the ~in!adequacy and ~un!limited scope of neoclassical economic theory, one can ask if the latter really seeks, allows, or implies its generalization in
the form of sociological rational choice theory ~and, for that matter, the economic approach
to human behavior in economics and public choice in political science!. Thus, the question
is the following: Is sociological rational choice theory’s generalization of neoclassical
economics just a logical extension and elaboration of the latter or perhaps a misreading
and misapplication of it? It is on addressing this question that the remainder of this article
centers. In addressing this question, the focus is on the presence or absence of theoretical
foundations in neoclassical economics for its possible generalization in rational choice as
the most promising general social theory rather than on the issue of the soundness of either.
At stake primarily is whether or not neoclassical economics can be generalized in rational
choice sociology, and only secondarily whether each is right or wrong ~as a matter of
empirical research!.
2
According to Somers ~1998!, the main epistemological foundations of rational choice theory in sociology as
well as economics include seventeenth-century rationalism, eighteenth- and nineteenth-century utilitarianism
and classical political economy, and ninteenth- and twentieth-century neoclassical economics.
3
Smelser ~1992: 402! observes that attempts at extending the neoclassical rational choice model to extraeconomic, nonmaterial, and nonfungible phenomena can result in theoretical indeterminacy and reduce if not eliminate the model’s rigor and falsifiability.
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In reconsidering the rational choice generalization of neoclassical economics, this article can serve for sociological theory a useful function in exploring the theoretical grounds
~or lack thereof ! within neoclassical economics of uncritical economic imperialism which
contemporary hard-core economists practice with some kind of rational addiction, and
which has seduced 4 ~Hirsch, Michels, and Friedman 1987! many rational choice sociologists ~and a fortiori public-choice political scientists!. The remainder of the article proceeds as follows. A first section comprises some indicative suggestions for and attempts
at generalization of neoclassical economics by current rational choice theory. A second
section reexamines the issue of whether or not neoclassical economics permits or implies
generalization in rational choice theory and thereby legitimizes economic imperialism.
In a third section we discuss some theoretical implications of the rational choice generalization of neoclassical economics. Finally, we offer some concluding and qualifying
remarks.
GENERALIZING NEOCLASSICAL ECONOMICS:
FROM THE ECONOMIC TO THE SOCIAL
In their manifest or latent attempts at extending neoclassical microeconomic models ~Macy
1995: 73! from economic to social noneconomic phenomena, including social exchange,
no doubt rational choice theorists in sociology attach different meanings to the notion of
economic@s#.5 Some of them by economic@s# understand using a theory of human action
where incentives, especially wealth ~Hechter 1994; Kiser and Hechter 1998!, cost-benefit
ratios ~Boudon 1998!, and other instrumental goals, induce behavior rather than internalized rules and immanent values. Based on this understanding of economic, some sociologists derive what they term the typical value, behavioral, or motivational assumption of
rational choice theory in sociology, which states that agents “are motivated to attain private and instrumental goods such as wealth @most commonly#” ~Hechter 1994: 318!. Needless to say, this assumption has a canonical ~Hechter 1990! status in the economic version
of rational choice as well as in orthodox economics, which incidentally can cast doubts on
rational choice sociologists’ claims about how different is their theory from its neoclassical counterpart ~Kiser and Hechter 1998!.
Next, other rational choice sociologists refer to economic to indicate actor reliance on
forward-looking ~Coleman 1990; Elster 1979!—as distinguished from backward-looking—
behavior and rationality. Still other rational choice ~and exchange! sociologists seem to
confine the notion of economic to exchange or transaction ~Blau 1994; Coleman 1990;
Homans 1990!, a notion that is then used to ground social action on market principles
~Coleman 1990!. Relatedly, some of them characterize the neoclassical economic notion
of rationality as a narrow conception which they nevertheless explicitly adopt and apply in
their sociological version of rational choice, viz. utility optimization ~Coleman 1990; Coleman and Fararo 1992! and/or wealth maximization ~Hechter 1994; Kiser and Hechter
1998!. In turn, by contrast to pure modern economists, relatively few rational choice sociologists resort to the neoclassical assumption of economic equilibrium and/or optimum
~yet with some exceptions, e.g., Coleman 1990; Coleman and Fararo 1992; Fararo 1993;
also Rambo 1995!.
4
A recent indicative instance of such “seduction” is perhaps the proposal by some rational choice sociologists
~e.g., Hedstrom and Swedberg 1998! for extending the neoclassical “analytical approach” into social theory by
using the notion of social mechanisms, e.g., self-seeking, maximization of utility/profit, automatic markets,
equilibrium, optimum, etc., as the main explanatory principle of both micro- and macrolevel social phenomena.
5
Thanks go to an anonymous referee for alerting the author to these differences within rational choice sociology.
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
451
Notably, rational choice sociologists, with some exceptions ~e.g., Boudon 1998!, seek to
contrast their own use of and emphasis on the notion of economic with what is seen as traditional sociology’s insufficient attention to this and related notions, e.g., rationality, selfinterest, maximization, etc. ~Coleman 1986!.Alternatively, most of them tend to embrace and
generalize the probably prevalent definition of economic as the problem of ~rational! choice
between alternative courses or limited means of action, given a multiplicity of ends ~Robbins 1952!, within contemporary neoclassical economics. Still, some rational choice ~and other!
theorists are more critical of neoclassical economics ~e.g., Kiser and Hechter 1998; Willer
1992! as well as of traditional sociology ~e.g.,Abell 1992; Coleman 1990; Elster 1979; Homans
1990! than others ~e.g., Boudon 1996, 1998; Lindenberg 1996!, stressing or rejecting different aspects of both. Overall, there are numerous and important differences between rational choice sociologists in their use of economic and in their attitudes toward neoclassical
economics ~as well as classical sociology!, so to do justice to them we reconsider only those
sociological versions of rational choice that explicitly or tacitly seek to adopt and generalize
neoclassical assumptions beyond their initial limited scope of application.
Keeping these more or less important differences in mind, one notes that many rational
choice sociologists and a fortiori economists subscribe to the view that economic or rational
choice approach to human behavior “is not new, even outside the market sector” ~Becker 1976:
3!, but it was introduced by, for example, Smith, Bentham, Mill, and other ~neo!classical economists. In this view, the rational choice approach has been developed and refined during the
past two centuries ~Becker 1991: ix–x!. Furthermore, for rational choice sociologists “one
of the few general theories applied ~particularly by Smith and Hume! is the rational choice
model, the ‘economic model of man’, or ‘utilitarian theory’” ~Opp 1989: 2!.Admittedly, even
sociological rational choice theory is grounded on a “paradigm of rational action borrowed
from economics” ~Coleman 1986:10!, viz. on the “expected utility models imported from microeconomics” ~Macy 1995!, though no doubt most of its advocates perceive—or perhaps
misperceive, as implied by critics ~e.g. Frank 1996; Hodgson 1998!—their theory as different from the economic version of rational choice.
Sociological rational choice theory generalizes the economic paradigm of rational action
to the effect that “just as a free market can be conceived in economic exchange, a similar
model of pure competition can be conceived in collective decisions” ~Coleman 1986: 33!.
Specifically, the sociological version of rational choice, though seen as not fully equivalent to its economic variant, adopts and generalizes four ingredients from neoclassical
economics: methodological individualism, the principle of actor maximization, the concept of a social optimum, and the notion of system equilibrium ~Coleman 1994: 166!.
Notably, rational choice sociologists suggest that a more exact concept notion is needed
than purposive action, namely, the “conception of rationality that forms the basis of the
rational actor in economic theory, @or# the narrow conception of rationality given by the
principle of maximization of utility” ~Coleman 1990: 13!.
Relatedly, rational choice sociologists, including exchange theorists, seek to rehabilitate “economic man” ~Homans 1961: 79! and thus to construe the modern social actor as
a generalized embodiment of the old, good fellow homo economicus. Such an actor is
described in the following way: “an image of man as wholly free: unsocialized, entirely
self-interested, not constrained by norms but only rationally calculating to further his own
self-interest” ~Coleman 1986: 15!. In other words, this is a social actor motivated by
utilitarian-economic reasons in the style of rational choice model ~Boudon 1996! in economics, i.e., cost-benefit calculi, thus having exclusively private tastes and seeking private
goods ~Coleman 1984: 88!.
Hence, to some ~though not all! of its key advocates much of rational choice theory in
sociology is a further development and application of orthodox economic concepts and
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tools ~Coleman 1966: 1122! yet in the realm of non-economic social phenomena, including politics and collective decisions ~e.g. voting!. Thus, for them rational choice theory,
including the conception of collective decisions or public choice, is “consistent with the
framework of economic markets” ~Coleman 1966: 1119! found in neoclassical economics.
Consequently, they generalize such a framework of exchange in a free market ~Coleman
1966: 1120! to analyzing nonmarket or extraeconomic phenomena—e.g., social interaction conceived as an exchange transaction—initially outside the scope of this framework. Further, they argue their case for generalizing neoclassical economics into rational
choice theory, including exchange theory in sociology and public choice in political science, on the grounds that social and political action “can be viewed as a generalization of
market behavior” ~Coleman 1966: 1122 @italics added#!.
In terms of scope, the rational choice approach is a “comprehensive one that is applicable to all human behavior” ~Becker 1976: 3!. As the presumed best aspirant for unified
social theory ~Kiser and Hechter 1998!, rational choice would deserve Paradigmatic Privilege ~Abell 1992!. Some founding 6 rational choice sociologists seemed to believe that the
standard assumptions and principles of neoclassical economics “could also be used to
account for social phenomena under conditions into which the classical economic variables, money, prices, and quantities did not enter @for# rational choice provided an adequate general theory of social behavior” ~Homans 1990: 85!. Although modern rational
choice sociologists have somewhat mitigated this belief as of late ~Goldthorpe 1998; Hechter
and Kanazawa 1997; Kiser and Hechter 1998!, with some almost losing the faith ~e.g.,
Boudon 1998; Elster 1998; Lindenberg 1996!, most of them would certainly concur with
the argument that the application of the rational choice model beyond neoclassical economics is the most hopeful development in contemporary social science ~Homans 1990:
85!. Moreover, recently some rational choice sociologists ~Hedstrom and Swedberg 1998!
have suggested importing from economics into sociology the analytical ~economic! approach
to social theory predicated upon social mechanisms, viz. the rational pursuit of selfinterest, consistent maximization of utility, profit, or wealth, or accurate cost-benefit calculation at the microlevel and automatic markets, perfect competition, economic equilibrium,
and ~the Pareto! optimum at the macrolevel. This suggestion is made on the grounds that
neoclassical “economists’ talents in thinking in terms of mechanisms often only become
clear when they go beyond the traditional boundaries of the discipline @sic!#” ~Hedstrom
and Swedberg 1998: 4!.
In sum, the perceived “rigor, parsimony, and analytic power of rational choice has
prompted sociologists to extend the theory beyond market transactions to exchanges of
symbolic and nonfungible resources such as social approval, security, and even love @though#
these extensions invite considerable skepticism” ~Macy 1995: 73!. Next, subjected to scrutiny are such rational choice sociologists’ attempts at generalizing and extending the neoclassical microeconomic model of market exchanges ~catallactics! to extraeconomic
exchange ~Macy 1995: 73! and other social phenomena not initially covered by this model.
The main question to be addressed is whether or not neoclassical ~micro!economic permits
or implies its generalization/extension in an all-inclusive and omniscient rational choice
theory that seeks to explain “everything and therefore nothing” ~Smelser 1992: 402!. Hence,
at issue is the degree to which neoclassical economics legitimizes economic imperialism
implied in such rational choice extensions.
6
According to Coleman and Lindenberg ~1989; also Turner 1986!, it was Homans who ~re!introduced rational
choice, especially social exchange, theory into sociology in the early 1960s. One of the theoretically most
relevant analyses of Homans’ rational choice conception, especially his social-exchange utilitarianism and behaviorism, in contemporary sociology can be found in Turner ~1986: 249–53!.
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453
NEOCLASSICAL ECONOMICS, ITS RATIONAL CHOICE GENERALIZATION,
AND ECONOMIC IMPERIALISM
Before proceeding further, a caveat is in order.7 Two lines of argument should be distinguished here. First, insofar as rational choice theorists claim, as it were, that the legitimacy
and comparative advantage of their theory firmly rest on the neoclassical economic tradition, then a valid argument can be that much of this tradition does not corroborate the
presumptive legitimation and generalization. Such an argument can be demonstrated through
examining the assumptions and scope of neoclassical economics in relation to modern
rational choice theory.
However, to say that the model of rational choice as originated in neoclassical economics can or cannot fruitfully be generalized to explain the nature and operation of noneconomic social phenomena is a completely different argument, the validity of which can
ultimately be decided on empirical grounds. In the rest of the article the first argument
only is advanced ~for the second argument see recent discussions in Boudon 1998; Hechter
and Kanazawa 1997; Kiser and Hechter 1998; Lindenberg 1996; Macy 1995; Rambo 1999;
and Somers 1998!. Here our attention centers on sociology’s formulation of rational choice
as the presumed best candidate for a general social paradigm, i.e., on sociological rational
choice theory or rational action theory for sociology. In the ensuing the question to be
addressed is whether neoclassical economics contains a theoretical rationale for its generalization and extension in rational choice sociology. First and foremost, we suspect that
rational choice sociology’s generalization of neoclassical economics might be mostly dubious and misguided. The following are some pertinent reasons why rational choice theory’s
generalization of and/or grounding in neoclassical economics seems prima facie dubious.
The Neoclassical Realization of the Distinctiveness
of Social Non-Economic Phenomena
~Neo!classical economics seeks to be a rather narrow conception of market behavior and
the economy based on the realization that the former is different from social action, and the
latter from society. Alternatively, it realizes that social behavior and society have sui generis properties in relation to market exchange and the economy. Compare this realization
with the rational choice conception of human, including purposive, action as utility optimization ~Coleman 1990; Coleman and Fararo 1992!, wealth maximization ~Hechter 1994;
Kiser and Hechter 1998!, cost-benefit calculus ~Boudon 1998! or market-like exchange
~Homans 1990!, and of social structures as markets ~as noted by Willer 1992!, i.e., of
society as a super marketplace. Consequently, in contrast with its rational choice extension, most of neoclassical economics does not claim that its assumptions and propositions
apply to all human behavior and the social system, but rather to market modes of action
and the economic system.
Further, much of neoclassical economics, influenced to some degree by classical sociology, recognizes that market-economic behavior is just a special case of social action, and
the economy is a particular integral element of society. At the minimum, most classical
and neoclassical economists recognize the existence of “disturbing causes” ~Mill 1974:
150–1! of a social noneconomic nature and their distinctiveness in comparison to economic factors, including wealth, profit, prices, commodities, etc.
To illustrate their acknowledgment of the distinctive character of noneconomic phenomena relative to their economic forms, most neoclassical economists usually make a
coherent distinction between economic welfare or wealth and social well-being, viewing
7
I thank an anonymous referee for this remark.
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SOCIOLOGICAL THEORY
the first as an element of the second. For instance, some ~Marshall 1961: 1! define economic welfare as the material prerequisites of well-being, i.e. as that “part of social welfare which can be brought in relation to the measuring rod of money” ~Pigou 1960: 11!.
Apparently, these neoclassical economists treat social welfare as more than just material
well-being, economic wealth, or instrumental value, in contrast to the presumed equivalence or substitutability between the two in much of rational choice theory. Thus defined,
for these neoclassical authors economic, rather than all social ~including noneconomic!,
welfare represents the subject matter of economics ~Pigou 1960: 11!.
To be sure, in neoclassical economics, pursuing economic welfare or wealth is the most
common and prolific force ~Menger 1963: 87!. However, most neoclassical writers avoid
including noninstrumental values—what modern rational choice theorists call shadow prices
imputed to noneconomic invaluable goods ~Arrow 1997! ~including spouses and children!
in implicit markets—in objects of economizing, rationalizing, or optimizing, thus placing
them outside the scope of rational choice. As some leading neoclassical economists state,
noneconomic goods are not objects of actors’ economy or rational choice, and “must not
be regarded as parts of @their# wealth” ~Menger 1950: 109!. Alternatively, in this view,
wealth “is never an absolute measure of welfare” ~ibid.: 110!. In connection with its recognition of the distinctive character of social welfare versus economic well-being, much of
neoclassical economics acknowledges the existence of complex and infinite ~Cairnes 1965:
56! noneconomic motives or intrinsic motivation—i.e., simply acting not just for money
and wealth ~Frey 1997!—in relation to economic incentives or extrinsic motivation. Notably, some neoclassical economists find the mainspring force of economic activity, including entrepreneurship as a presumed exemplar of rationality, in such intrinsic—and thus
economically irrational—motivation as the “joyful power to create” for the primary purpose of creation and only secondarily for ordinary economic gains ~Wieser 1967: 324;
cf. also Schumpeter 1949!.
Another example of the neoclassical appreciation of the specificity of noneconomic
phenomena vis-à-vis economic ones involves the relations of social and economic equilibrium. If most modern economists and some leading rational choice sociologists ~e.g.,
Coleman 1990! tend to conceptualize social equilibrium or optimum mostly in terms of
economic equilibria or optima, many neoclassical authors view the second as but an aspect
of the first on the general grounds that the social system incorporates the economy as its
integral part. For instance, some neoclassical economists suggest that the equilibrium states
of the economic system “may be regarded as particular cases of the general states of the
sociological system” ~Pareto 1963: 1439– 40!. In this view, the “sociological system is
much more complicated” ~ibid.: 1442! than the market-economic system, with the latter
being the integral part of the former rather than all society being construed as a universal,
including political, marketplace postulated by the rational choice model of politics ~Coleman 1986!.
Specifically, for some leading neoclassical economists economic equilibrium is typically the result of the “opposition between tastes and the obstacles for their satisfaction”
~Pareto 1927: 150!, i.e., between wants, demand, consumption, and utility on the one
hand, and resources, supply, scarcity, and production on the other. For instance, the ~neo!
classical law of markets postulates attaining spontaneous equilibrium between aggregate
supply/production and aggregate demand/consumption through the presumed creation ~in
the long run! of the latter by the former ~Say 1964!. However, many neoclassical authors
realize that social equilibrium is broader and more complicated than its economic counterpart by virtue of the former’s incorporation of nonrational and/or noneconomic variables in addition to economic-rational ones solely included in the latter. Thus in a Paretian
framework, social equilibrium entails nonrational conduct driven by sentiments ~residues!
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
455
and rationalizations ~derivations!, alongside rational behavior motivated by material interests. In Weberian terms, social equilibrium combines instrumentally-rational with valuerational, emotional and traditional action, formal ~calculative! and substantive ~noneconomic!
rationality, i.e., calculable and noncalculable behavior ~cf. also Mises 1966!, as well as
material and ideal ends, including material and nonmaterial welfare and the like. Notably,
for neoclassical economists and classical sociologists alike, the greater complexity of social
than economic equilibrium results from the fact the total social system is more complex
than the economic system as its subsystem.
Hence even within a neoclassical frame of reference, it would be inadequate or insufficient to evaluate social equilibrium or optimum at a macrolevel—just as with human
happiness ~individual equilibrium! on a microlevel—solely in terms of economic equilibrium or optimum, viz. optimization of wealth, profit, utility, and the like. Most contemporary economists routinely approach the matter exactly in this manner on the implicit
assumption of folk wisdom ~as pointed out by Somers 1998! that agents know the market
price of everything and the noneconomic value of nothing, as do occasionally those few
rational choice sociologists using the equilibrium concept. While the ~in!validity of such
an approach ~and assumption! remains to be ascertained in light of empirical evidence or
lack thereof, the above suggest that neoclassical economics’ treatment of social and economic equilibria/systems can hardly be used to theoretically legitimize this approach and
thus its underlying economic imperialism. Ostensibly, if social equilibrium/system is but
an extension of the economic, all social science is just a generalization of economics, but
this is not what enlightened ~neo!classical economics argues or implies.
The Neoclassical Delimitation of the Economic Rationality Principle
Neoclassical economics tends to conceive the human actor as being rational in economic
terms ~homo economicus! mostly in the market realm, often just in producer behavior and
entrepreneurial, not in all social domains. The underlying neoclassical assumption seems
to be that “rational orientation is primarily significant for ‘managerial action’” ~Weber
1968: 69!, rather than for any economic conduct, let alone for all human social behavior.
Admittedly, ~neo!classical economics observed homo economicus “only as a man engaged
in business, not as a consumer of economic goods ~Mises 1960: 180!, and a fortiori not as
an agent engaged in activities beyond the production and consumption of such goods.
Thus, much of neoclassical economics views the actor as being nonrational or even irrational outside the market and economy, i.e., in politics, religion and other culture, private
social life, etc. In other words, for neoclassical economics in the sphere of social action
and society the human agent behaves more as homo sociologicus, for example as what
some neoclassical economists call homo religiosus, homo eroticus ~Schumpeter 1990: 336!,
and other emanations of economic irrationality, rather than as homo economicus.
Hence, neoclassical economics does not seem to provide justification or legitimization
for rational choice theory’s manifest or latent extension of homo economicus—including
its evolutionary mutants such as “Restricted, Resourceful, Expecting, Evaluating, Maximizing Man” 8 ~Lindenberg 1992!, rational man ~Coleman 1986!, rational egoists ~Hechter
1990!, etc.—to any modes of social action and all society. Moreover, much of modern
rational choice theory in economics and sociology undergoes some sort of rebirth and even
8
A referee commented that the model of “Restricted, Resourceful, Expecting, Evaluating, Maximizing Man” is
broader than the conventional notion of homo economicus, and thus some kind of “homo socio-economicus”
~Lindenberg 1990!. This is a valid objection insofar as such a model does not travel along the “beaten path”
~Lindenberg 1991! of wealth maximization, but this may be too charitable an interpretation if the element of
“maximizing” is retained.
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revenge of homo economicus ~Bowles and Gintis 1993!. In retrospect, this revival appears
as paradoxical given that homo economicus was almost presumed dead by many neoclassical and heterodox economists alike ~cf. Clark 1918; Knight 1964; Veblen 1898!. In this
connection, rational choice theory has followed or been seduced ~Hirsch et al. 1987! by
the dominant trend in modern mainstream economics, especially since the 1970s, toward
resurrecting the dead hand ~Harrod 1956! of homo economicus with a vengeance ~Bowles
and Gintis 1993!. Following modern economics, that we are all highly trained economists
~Buchanan 1991: 62–3!, entrepreneurs, speculators, and similar embodiments of homo
economicus is assumed in much ~though not all! of rational choice theory.
Further, most classical and neoclassical economists consider homo economicus not an
actual agent in the historical-empirical sense but rather a complete abstraction ~Seligman
1918: 4!. Admittedly, if homo economicus denotes an actor exclusively or mostly driven
by economic motives or instrumental goals, as the typical value assumption ~wealth maximization! of rational choice theory suggests, then “in reality, such @an actor# does not
exist” ~Seligman 1918: 4!. Even in a charitable application of the charity principle of
rationality ~Elster 1979; Goldthorpe 1998; Hechter and Kanazawa 1997! by assuming that
such a rational agent exists and operates in the real world, homo economicus “need not be
conceived as a pure egoist” ~Keynes 1955: 128!.
The neoclassical conception of the economic agent as not being equivalent to an egoist
thus contrasts with the typical rational choice construction of all social actors as rational
egoists. At this juncture, a supreme paradox arises insofar as some sociological versions of
rational choice appear as more egoistic/economistic in their assumptions or implications
than orthodox economics. In other words, the paradox is that the thick- or rather thinrational picture of humans as “members of the species Homo economicus, while supposedly hypothetical even in economics textbooks, is, in the practice of rational choice theory,
taken for granted as an obvious truth” ~Friedman 1995: 3!. Also, the nonequivalence between
economic agents and pure egoists hints at or adumbrates some insider critiques and broader
reformulations ~Boudon 1998; Lindenberg and Frey 1993! of the admittedly narrow conception ~Coleman 1990! of human rationality as egoistic wealth maximization ~Hechter
1994! or utility optimization as a criterion at all points ~Coleman and Fararo 1992! in
rational choice theory.
The Discovery of the Non-Rational: The Neoclassical Path from Rational
Epistemology to Irrational Ontology
Furthermore, even in the market economy neoclassical economics, while starting from a
rational paradigm, e.g., rationalistic method ~Weber 1968: 6!, often comes to eventually
realize that human life “is ontologically irrational” ~Schumpeter 1990: 337!. Thus, through
some kind of serendipitous discovery, much of neoclassical economics traverses the curious path from an initial rationalist epistemology to an underlying nonrationalist ontology
in the market-economic sphere. No doubt, most neoclassical economists embark on their
theoretical journey with the good old fellow homo economicus, and yet many of them end
the journey with his nemesis in the face of homo sociologicus, including what has been
referred to above as homo religiosus, homo eroticus, and so on ~Pareto 1963; Schumpeter
1990!. At least, in the neoclassical framework—and a fortiori in heterodox, including
Veblenian institutional, economics—the original unmitigated homo economicus evolves
into some homo sociologicus economicus ~Tillman 1997!, as a “combination of all those
hominess” ~Schumpeter 1990: 337!. Much of rational choice theory adopts and extends,
via the charity principle of rational interpretation of social behavior, the rationalist epistemology of some sort of homo economicus, viz. plain economic man ~Homans 1961!,
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
457
rational man ~Coleman 1986!, maximizing man ~Lindenberg 1992!, rational egoist ~Hechter
1990!, etc. Yet, the theory usually fails to discover or acknowledge a nonrationalist ontology even outside the market sphere by presuming universal rationality in economic and
noneconomic behavior alike. The above neoclassical path from epistemological rationality
to ontological irrationality in economic behavior highlights rational choice theory’s inability or unwillingness to discern such ontology even in the noneconomic sphere and thus
casts doubts on the universal rationality presumption.
For instance, even Bentham, the presumed archetype of rational choice theorist, while
starting with a rationalist epistemology, viz. consistent utility seeking, to some degree
recognizes its ontological ~empirical! irrelevance or rarity and, alternatively, the prevalence of a nonrational ontology. Specifically, unexpectedly for a principled rationalist
utilitarian ~Schumpeter 1990: 333!, Bentham ~1970: 5! acknowledges that in reality the
“rarest of all human qualities is consistency @and thus rationality#,” as the latter is implicitly understood in terms of consistency in seeking utility. ~Also, rational, especially social,
choice theory formally defines rationality as consistency in utility/profit optimization suggesting that individual and organizational behavior “should meet some criteria of consistency or rationality” @Coleman 1990: 374–5; also Coleman 1966#.! In terms of modern
rational choice theory, no doubt, Bentham begins with a charity principle of presumed
universal rationality qua consistency in utility optimization only to realize eventually that
such a presumption does not fully fit the real world. By contrast, most modern rational
choice theorists have not yet reached the threshold of such ontological realization, but
rather, even in the face of an often reportedly non- or at least quasi-rational ~Thaler 1994!
social-economic world, further amplify and extend the presumption of rationality. In any
event, Bentham’s realization that rationality cum consistency is the rarest human attribute
is just one instance, though unexpected, of the neoclassical serendipitous path from rationalist epistemology to nonrational ontology.
Another instance includes the neoclassical conception of entrepreneurial or capitalist
behavior. To be sure, many neoclassical economists begin with a notion of rational entrepreneurial activity based on abstinence ~Senior 1951! or waiting ~Marshall 1961!, viz.
long-term orientation ~i.e., a low discount rate of the future!, capital accumulation, saving, efficient investment decisions, and accurate profit-loss computations. While commencing with such rationalist assumptions, many of them come to realize that real-life
economic agents, including entrepreneurs, also engage in excessive unproductive consumption and other economically nonrational activities, thus casting doubt on these assumptions. Excessive nonproductive consumption is, from the stance of capital accumulation
or production as the essence of abstinence ~Senior 1951: 54!, nonrational activity squandering scarce resources in nonproductive rather productive uses, i.e., profitable investment. While it is economically irrational, such unproductive consumption can, even for
some orthodox economists, be to some degree normal behavior because “to abstain from
enjoyment which is in our power, or seek distant rather than immediate results, are amongst
the most painful exertions of the human will” ~Senior 1951: 54, 60!. In other words, such
consumption involves high opportunity costs ~Davenport 1964: 87–8! in that it irrationally foregoes such alternative uses. This and related economically nonrational behavior
simply fails to pick up the proverbial ~one-hundred-!dollar bills lying on the sidewalk.
Yet modern rational choice theorists’ ~Olson 1996! lamentations over this fact in conjunction with their urging—and sometimes decreeing ~Alexander 1982; Hodgson 1998!—
individuals and societies to do the opposite only unwittingly highlights the neoclassical
realization that the presumably most rational forms of economic behavior, such as entrepreneurship and stock-market investment ~cf. Bakshi and Chen 1996!, are often nonrational in the real life.
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In Marx’s terms, the neoclassical trajectory from epistemological rationality as epitomized in the assumption of rational behavior to ontological irrationality, i.e., the reality of
non- or pseudorational conduct, expresses the Faustian conflict of economic agents, including entrepreneurs or capitalists themselves. This is in essence a conflict between consistent
capital accumulation or wealth maximization as an exemplar of rationality ~abstinence!
and unproductive, including Veblenian conspicuous, consumption as an instance of economic irrationality ~the original sin!. Moreover, in a modern market economy the second
type of behavior tends to become increasingly frequent and salient in relation to the first.
In Marx’s description, the “original sin is at work everywhere. As capitalist production,
accumulation and wealth become developed, the capitalist ceases to be the mere incarnation of capital. He has a fellow feeling for his own Adam and gradually smile@s# at the rage
of asceticism as a mere prejudice of the old-fashioned miser. While the capitalist of the
classical type brands individual consumption as a sin against his function, and as ‘abstinence’ from accumulating, the modernised capitalist is capable of looking upon accumulation as ‘abstinence’ from pleasure. ‘Two souls, alas, do dwell within his breast; the one
is ever parting from the other’” ~Marx 1967: 597–8!.
In retrospect, this is one of the most vivid depictions of the actual complexity and ~at
least partial! nonrationality of economic ~and human! agents, but most broad neo-classical
economists and a fortiori their critics ~e.g., Veblen!, not to mention classical sociologists,
including Weber’s portrayal of the typical entrepreneur, also paint similar pictures. In
many neoclassical pictures, the economic actor ~entrepreneur! is painted as induced not by
instrumental or hedonistic motives but rather by “another @motivation# of a non-hedonist
character” ~Schumpeter 1949: 92!. Specifically, such a motivation includes the following:
~a! the “dream and will to found a private kingdom,” ~b! the “will to conquer: the impulse
to fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of the
success, but of success itself,” and ~c! the “joy of creating, getting things done, or simply
by exercising one’s energy and ingenuity” ~ibid.: 93!. In short, the “impulse which drives
@entrepreneurs# forward is the joyful power to create @for its own sake#” ~Wieser 1967:
323!.
In this connection, one may remark that the above implies some single model of the
economic ~and human! actor, though this is evidently different, especially more complex,
than that of rational choice. Presumably, if what is at stake, as rational choice theorists
argue, is a unified model of action, then the question can arise: Why not adopt a single
model of the economic agent based on, say, the “joy of creation” and other nonhedonistic
motivation, and then generalize it to the human actor in general? For a general model
premised upon this and generally any one factor other than utility or profit optimizing
would be as theoretically or methodologically legitimate as that based on the latter, though
their empirical validity can differ in light of ~dis!confirming evidence. This sheds light on
rational choice theorists’ insistence on a unified model of human behavior and against
having two or more different models for the same actor, because to them it seems as if this
had to be their own model or otherwise it is not unified, and thus only theirs is general
social theory ~Somers 1998!.
In any event, the previous depictions of economic agents exemplify what has been
referred to as the serendipitous trajectory commencing from a rationalist epistemology and
eventuating in realization or revelation of a non- or pseudorational ontology within much
of neoclassical economics. It remains to be seen whether modern rational choice advocates
will attain such a rediscovery for noneconomic actors as well ~Boudon 1996, 1998; Elster
1998; Jasso and Opp 1997; Lindenberg 1996; Lindenberg and Frey 1993; Macy 1995!. The
alternative is the conventional road of maximization ~Lindenberg 1991! by continuing to
operate with often head-in-sand ~Frank 1996: 122! assumptions and models derived from
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
459
neoclassical economics’ rationalist epistemology extended to all the social world and yet
overlooking neoclassical nonrational ontology in economic life itself. The question is whether
rational choice theorists will, via the extension of the charity rationality principle, eventually reach the conclusion of many neoclassical economists applying the same epistemological principle to economic behavior, that social life may be non- or pseudorational in
the ontological sense. Incidentally, a ~post!modern society that is reportedly increasingly
permeated and even dominated by postmaterialistic—and to that extent economically nonor quasi-rational—tendencies ~Abramson and Inglehart 1995! would make this conclusion
both inevitable and sensible. Yet, the ultimate consequence of such a conclusion would be
making rational choice theory an irrational rather than rational ~Abell 1992! choice of
general social theory ~Kiser and Hechter 1998!. Apparently, at the present ~cf. Boudon
1998; also Macy 1995! there admittedly seem to be no easy solutions and perfect times for
rational choice theory’s generalization of neoclassical economics.
Neoclassical Economics as a Limited Theory of the Market Economy
In consequence of the above three reasons, neoclassical economics represents in essence a
well-delimited theory of market behavior ~price or micro theory! and the economy ~macro
theory!, not one of all social action and society as a whole. Hence, neoclassical economics
represents a relatively narrow conceptual framework, dominated by a market-exchange
theory or catallactics ~Mises 1966!, rather than an overarching economic approach to
human behavior or rational choice, including social-exchange, theory. Specifically, ~neo!
classical economics represents an “investigation of the laws of production and distribution
of wealth” ~Ricardo 1975: 33!, or simply the “production of wealth and its distribution”
~Mill 1884: 249!. Hence, economics “considers mankind as occupied solely in acquiring
and consuming wealth” ~Mill 1974: 138!.
Further, much of neoclassical economics precludes or cautions against generalization
of such a framework beyond its initial realm of the market economy into noneconomic
markets. This would make dubious rational choice theory’s explicit or implicit generalization of neoclassical economics as a way to legitimize, via a presumed Kuhnian-type exemplar, e.g., the paradigm of a generalized calculus of utility-optimizing behavior ~Stigler
and Becker 1977!, what is a putative cure-all in the form of an economic-utilitarian conception of human action and social structure. Yet, critics may add that, given its likely
serious side effects for sociological theory ~Boudon 1998; Smelser 1992!, such a cure may
well belong to the “species of remedy which cures the disease by killing the patient”
~Keynes 1960: 324!.
At any rate, for most classical and postclassical authors, economic science—denoted
political economy until the 1870s and ~neoclassical! economics thereafter—constitutes no
more than an exploration into the “Nature, Production and Distribution of Wealth” ~Senior
1951: 6!. In this connection, for many of these authors economics or political economy in
the old meaning represents a special branch of what some classical economists named the
science of social economy defined as a broader investigation into the “laws of society” and
the “conduct or condition of man in society” ~Mill 1974: 136–9!. Thus understood, the
science of social economy appears as coterminous to economic sociology and even to
general sociology in the Comtean sense, thus probably reflecting the influence of sociology’s founder on some leading classical economists, such as Stuart Mill ~Hayek 1950: 17!
and even on some marginalists ~e.g., directly on Wicksteed and indirectly, probably through
Spencer, on Jevons!.
Hence, classical political economy and neoclassical economics are usually more limited than the science of social economy in that they deal only or mostly with market-
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SOCIOLOGICAL THEORY
economic modes of human behavior, i.e., the rational pursuit of wealth on the part of
individuals ~micro theory! and collectivities, including societies ~macro theory!. No wonder the probably most influential early systematic work in economics explicitly referred to
the Wealth of Nations ~and Individuals! as its main subject.
In essence, classical as well as neoclassical economics “did not aspire to be a universal
social science” ~Lewin 1996: 1298! and thus did not use an economic approach to all
human behavior. As some of its leading representatives admonished, such an approach to
noneconomic phenomena would not be very illuminating, since estimating the “comparative efficacy of means for attaining that end” ~Mill 1974: 137!, such as wealth or profit,
occurs largely within the confines of markets and economic behavior. While limiting the
operation of the profit motive and rational behavior to the market realm, they recognize a
wide range of noneconomic motivational forces inducing human action within the larger
society.
Further, leading traditional economists warn that “with respect to those parts of human
conduct of which wealth is not the principal object, to those political economy @rational
choice theory proper# does not pretend that its conclusions are applicable” ~Mill 1974:
140!. One can remark that to pretend this—as do some sociological versions of rational
choice and virtually all of its economic counterparts—is one thing. Despite the above
classical warning, such claims are not necessarily illegitimate or wrong per se insofar as
the degree of their soundness is an empirical issue. Yet, it is another and apparently not
very sound procedure to use ~neo!classical economics to theoretically legitimize such
claims, through reading its history as a prelude to or foundation for modern rational choice
theory.
Neoclassical Economics’ Need for Economic Sociology
Next, rather than extensively applying its basic principles and concepts to all human behavior and society as a whole, neoclassical economics often qualifies and mitigates these
principles by combining and supplementing them with sociological elements. As a result,
what much of neoclassical economics purports to build is social economy, economic sociology, or sociological economics, as a societal conception of the economy, complementing
~though not supplanting! pure economics ~market catallaxy!, rather than some overarching
rational choice theory as its ~non!logical generalization.
For instance, Smithian economic theory can be characterized as sociological economics
~Reisman 1987!, including deontological socioeconomics ~Etzioni 1988! or moral economy, and Smith as a sociological economist ~Reisman 1998!, rather than the economic
approach to all social action—and even mere catallactics or pure market theory—despite
some rational choice theorists’ opposite interpretations ~e.g., Becker 1976; also Boudon
1998; Opp 1989!. In other words, elements of the economic sociology of Adam Smith
~Schumpeter 1949: 60! seem to be more pertinent ~Etzioni 1988! than those of rational
choice theory—and, for that matter, simple market catallaxy ~cf. Reisman 1998!—that is
in turn of a broader axiological-cognitive, quasi-rational rather than a narrow cost-benefit
type ~cf. Boudon 1998, who does not even call the first type a rational choice model in the
strict sense!. More specifically, the social and technical division of labor, the societal roots
and underpinnings of property, increasing social control over nature, economic, political,
and other liberties, laws and legal security, contract, etc. are the “most important elements
constituting the economic sociology of Adam Smith @for# they clearly relate to the social
framework of the economic course of events” ~Schumpeter 1949: 60!.
Next, even some pure neoclassical ~read utilitarian and marginalist! economists stress
the need for economic sociology as a legitimate and important branch of economic sci-
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
461
ence. Moreover, some of them hoped that “it is only by subdivision, by recognising a
branch of Economic Sociology . . . , that we can rescue @sic!# our @economic# science from
its confused state” ~Jevons 1965: 20–1!. Then it comes as no surprise that it was a neoclassical ~more precisely, marginalist! economist such as Jevons ~in the 1879 second edition of Theory of Political Economy, originally published in 1871! who probably first
coined the term economic sociology ~Swedberg 1998!. Jevons’ ~1965: 20! clear embrace of
Spencer’s conception of general sociology as the Science of the Evolution of Social Relations implied some notion of the nature and domain of economic sociology. This is the
notion of economic sociology as the science of the evolution of economic relations within
the overall process of the evolution of social relations. Thus, Jevons’ proposal for economic sociology and its inclusion in economic science was directly affected by Spencerian
evolutionary sociology as well as indirectly by Comtean positivist sociology. As to the
latter, Jevons’ successor Wicksteed ~1933! even used a citation from Comte’s Course of
Positive Philosophy as the prologue of his major work ~The Common Sense of Political
Economy!.
Alternatively, whereas Jevons’ conception and taxonomy of economic science incorporated economic sociology, alongside pure economic theory, for example, it contained no
provision for some overarching rational choice paradigm. In short, this taxonomy envisioned a complementary social perspective on economic phenomena, but not an overarching economic approach to human social behavior and society.
Similarly, another well-known neoclassical taxonomy of economic disciplines comprises economic sociology understood as analysis of the social, especially the institutional
structure, of economic behavior ~Schumpeter 1954: 9–22!, but not a comprehensive rational choice approach. In passing, in addition to economic sociology, this taxonomy includes
pure economic theory, political economy, applied economics, economic history, and economic statistics in the corpus of economic analysis. As in the previous ~Jevons’! taxonomy,
here the underlying idea seems to be that what a broadly conceived economics needs is an
analysis of the social context of economic processes as the subject of economic sociology,
rather ~or more! than applying standard economic assumptions to noneconomic phenomena. To be sure, most modern economists probably hold the opposite idea on this issue, as
suggested by their manifest or latent economic imperialism, but this does not change the
aforesaid unless they reinterpret their neoclassical predecessors through some backwardreading of intellectual history, thus committing a form of the fallacy of the latest word
~Merton 1984!.
Economics as Part of Sociology and Neoclassical Economists’
Evolution into Sociologists
For many neoclassical economists, economic science is no more than a special, though
most developed, branch of sociology rather than the latter being a version of the economic
approach as assumed by many contemporary rational choice theorists. Since many neoclassical authors see economic theory as only one phase of sociological theory or the
“main body of the theory of society” ~Wieser 1967: 152!, it seems implausible to extend
neoclassical economic conception to a putatively universal social theory of the rational
choice type ~Smelser 1992!.
Perhaps oddly for most advocates of the economic approach to human behavior, many
~neo!classical economists, especially those broad and multifaceted thinkers ~e.g., Smith,
Mill, Marshall according to Blaug 1996!, view economics as a specialty of a more comprehensive social discipline, viz. praxeology ~Mises 1966!, the science of the statesman
~Smith 1937!, the science of social economy ~Mill 1974!, a complete theory of society ~Wies-
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SOCIOLOGICAL THEORY
er 1967!, or simply sociology. Thus, some classical economists incorporate economics or original political economy as the relatively narrow study of wealth ~Senior 1951!, into a broader
social science of the laws of society ~Mill 1974: 136–9!. Even some marginalists consider
economics “only a branch @though the most elaborated one# of a more comprehensive science @sociology#, which extends over its domain, but showing the same logical character”
~Mises 1960: 69!, or simply an “advance guard of sociology” ~Wieser 1967: 152!.
Moreover, leading neoclassical economists suggest that economics—heaven forbid!—
“must be a handmaid of sociology” ~Wicksteed 1933: 783! in the Comtean sense of a
general social science. Such suggestions imply that the only social science to which economics “could be subjected is sociology” ~Weiller and Homme 1958: 374!. Particularly,
some neoclassical authors specify that the theory of economic development or progress—
and thus, by implication, macroeconomics—is more subordinate than are other portions of
economic science to general sociology ~Keynes 1955: 145–8!. The ontological justification for this epistemological subordination lies in that in many cases the “economic problem is subordinate to the sociological problem” ~Pareto 1963: 1406!. Thus, even in analyzing
economic problems, economists shall, it is suggested, “consider not just the economic
phenomenon taken by itself but also the whole social situation, of which the economic
situation is only a phase” ~ibid.: 1415!.
Now, such enlightened suggestions or admissions by many neoclassical economists
seem to be an anathema for modern rational choice economists/sociologists who imply
exactly the opposite, viz. that sociology—and virtually every social science—is part of a
comprehensive economic approach or a general theory of rationality. Compare these suggestions of neoclassical economists with those of some leading rational choice sociologists
for universal application of the key assumptions of the economic approach, such as utility
optimization, in social theory. Arguably, what sociological rational choice theory does is to
enforce the hard discipline of applying utility optimization as some kind of universal
criterion for explanation, prediction, and evaluation of individual behaviors and systemic
outcomes alike ~Coleman and Fararo 1992: ix–xii!.
Furthermore, early neoclassical economists not only regarded economics as part of
sociology as an overarching social science, but also often made original contributions to
other disciplines without resorting to the logic and approach of orthodox economics at all.
These contributions include, just to mention a few examples, Mill’s writings in political
science—and in a sense, Smith’s earlier theory of morality and society—Pareto’s project
of general, political, and psycho-sociology, Wieser’s sociological analysis of power and
his social economics, Schumpeter’s ~see on these pages Dahms 1995! comparative economic sociology, viz. sociology of enterprise and development, business cycles, imperialism, capitalism and socialism, etc., as well as Hayek’s theory of social rules and institutions,
and others.
Related and concomitant to the status of economics as part of sociology is the frequent
evolution of neoclassical multifaceted economists into some kind of sociologists. Namely,
in the process, some leading neoclassical economists ~e.g., Pareto! virtually abandoned
pure economics and became sociologists by adopting a sociological conception of the
economy rather than extending their standard box of tools beyond the initial domain, as
modern economists seek to do and rational choice sociologists subscribe to. Admittedly,
many neoclassical and other economists ~e.g., J. S. Mill, Marx, Pareto, Weber, Schmoller,
Sombart, Veblen, Ross, Wieser, Schumpeter, Myrdal, Polanyi, Parsons, etc.! evolved into
some kind of sociologists precisely because of the necessity of embedding economic phenomena in a societal framework and, alternatively, because of the perceived unfeasibility
or implausibility of generalizing and applying their box of tools beyond what they saw as
the limited domain ~the market!.
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463
In turn, most classical sociologists, including to some degree Weber ~on his economic
sociology cf. Parsons 1947; Swedberg 1998!, did not seem to find much merit in generalizing neoclassical analytical tools from the market to all human behavior and society as a
whole. Moreover, Weber ~1968: 68! suggests that the sociology of economic action or
economic sociology proceeds differently from standard economic theory and devises its
own theoretical constructs. Notably, for Weber ~1968: 341! phenomena that are taken as
constants or parametric in economic theory, such as social institutions, tastes and values,
technologies, etc., are usually subject to significant structural variations from a sociological perspective. In the Weberian framework the theoretical constructs of orthodox economic were deemed particularly inadequate or insufficient to deal with the economically
nonrational types of social action, e.g., value-rational ~wertrational !, traditional, and emotional actions. In this context, the main reason for such inadequacy of neoclassical constructs in explaining noneconomic phenomena is that the modes of social action “follow
‘laws of their own’, and even apart from this fact, they may always be co-determined by
other than economic causes” ~ibid.: 341!.
In a similar vein, Pareto 9 holds that standard neoclassical tools cannot plausibly be
applied to economically nonlogical or nonrational conduct at the microlevel and to the
sociological system and social equilibrium at the macrolevel. In this view, such an application of neoclassical assumptions to sociological theory would have “little or no contact
with reality—it would be a sociology like a non-Euclidean geometry” ~Pareto 1963: 1315!.
By contrast, most contemporary rational choice sociologists view the application and generalization of the neoclassical tools of economic analysis ~Coleman 1966! as the most
promising, even the only possible ~as objected by Somers 1998!, path to constructing a
general sociological theory. And while rational choice sociologists usually dismiss most of
traditional sociology ~especially Comte, Marx, Durkheim, and Pareto! as anti-individualistic
and/or nonrationalist, they often ~mis!interpret some classical sociological ideas ~especially those of Weber and partly Spencer! as a prelude to or a foundation of their theory ~a
more detailed discussion of the theoretical relations between classical sociology and rational choice theory is beyond this paper’s scope!.
DISCUSSION
As shown in the preceding, much of neoclassical economics does not intend, attempt, or
permit its broad generalization from a limited theory of price determination in the market
~Walras 1926: xi! into a general social theory of all human behavior. More particularly,
this applies to generalizing the relatively narrow theory of market exchange ~catallactics!
into a comprehensive theory of human behavior construed as a set of quasi-economic
transactions ~social exchange theory in sociology!. To that extent, contemporary rational
choice sociologists and economists could not use neoclassical economics in the aim of
legitimizing their peculiar approach through the reconstruction of intellectual traditions in
hindsight by finding into the past what one finds in the present. In such dubious reconstruction, neoclassical economics would be but an introduction to or a progenitor of rational choice in modern sociological and economic theory.
Instead, for contemporary rational choice sociologists and economists it may be revealing
and useful to realize that many neoclassical economists ~from Smith to Mill to Pareto to
Schumpeter! whom they praise as fathers of their theory had serious reservations about
9
As some contemporary economists note, Pareto “argued that people’s social actions are not necessarily rational, but driven by emotion and impulse, and sometimes even self-destructive @and# for that reason the line of
thought of the kind used in economics, which lays down axiomatic ways of thinking, could not be adopted in
sociology”~Morishima 1998: xxiv–v!.
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SOCIOLOGICAL THEORY
some of their basic assumptions and concepts, including that of a perfectly rational economic actor ~homo economicus!. Hence, contemporary rational choice sociologists and
economists should perhaps carefully look at such reservations about basic ~neo!classical
notions, including the very concept of rational action, before adopting or applying any one
of these in their own theory. At this juncture, a supreme paradox is that while leading
economists, including Smith, Ricardo, Marx, Keynes, and Hayek, “all failed to incorporate
the standard picture of ‘rational economic man’ in their writings, or expressed profound
misgivings about his behavior much of sociology has now embraced rational choice” ~Hodgson 1998: 189!.
In this connection, some leading rational choice sociologists ~Boudon 1998; cf. also
Opp 1989! call, for example, Adam Smith the spiritual father of rational choice theory,
though they characterize Smith’s as a broad ~cognitive-axiological! rather than a narrow
~cost-benefit! model ~a similar interpretation is proposed by Lindenberg 1989!. Thus, in
this view ~Boudon 1998: 824! Smith addressed most issues by using some kind of cognitiveaxiological model involving beliefs and values, rather than a narrow rational choice model
operating with economic costs and benefits only. Admittedly, even in the Wealth of Nations,
as a presumed work in conventional economics, Smith used a cognitivist rather than a
rational choice model ~Boudon 1996!. Further, such a cognitivist model incorporates the
rational choice model ~Boudon 1998!, including social exchange theory ~Boudon 1996!,
as its particular case. Arguably, the cognitivist model is derived from rational choice by
dropping its core assumption that the reasons or values ~Hechter 1994! of social actors are
of the cost-benefit or instrumental type ~Boudon 1996!. As such, a broader 10 cognitivist
model would be more useful in many cases by involving all good reasons for action unlike
the rational choice model that incorporates only utilitarian reasons ~Boudon 1996!.
Now, if utilitarian or instrumental reasons and actions are admittedly limited rather than
universal, and if their noninstrumental counterparts cannot readily be converted into or
substituted by them ~Hechter 1994; also Elster 1998; Kiser and Hechter 1998!, then, as
some of its moderate theorists admonish, rational choice “cannot claim to be a general
theory of action” ~Boudon 1998: 817!. Yet, many of its adherents, while realizing such
character and relations of instrumental and noninstrumental values/actions, reach the opposite conclusion that rational choice is the best, virtually the only candidate for general
social theory. Here the question of logical ~in!consistency arises, but this is beyond the
scope of this paper.
To do justice to them, most leading rational choice sociologists ~e.g., Coleman 1994;
Coleman and Fararo 1992; Fararo 1993; Hechter and Kanazawa 1997; Kiser and Hechter
1998; Macy 1995! vigorously defend their theory as essentially different from its neoclassical progenitor. Thus, some of its leading advocates ~Kiser and Hechter 1998! maintain
that sociological rational choice theory is different from its “neoclassical cousin.” For
them ~Kiser and Hechter 1998!, most of the faults that critics find in rational choice theory
derive from timeworn critiques of neoclassical economics, so these critiques are irrelevant
to the arguably much different form of the theory in recent sociology. In this view, the hard
core of rational choice sociology is the assumption of rationality, i.e., that action is purposive, intentional, and involves means-ends calculations ~Kiser and Hechter 1998!. In
turn, the pursuit of self-interest and wealth maximization are common auxiliary assump10
Some other rational choice sociologists have also proposed broader formulations of their theory ~Fararo
1993; Hechter 1994; Jasso and Opp 1997; Lindenberg and Frey 1993; Lindenberg 1991, 1996; Macy 1995!. For
illustration, some of them ~Lindenberg 1991! advance a theory of revolution that purports to deviate from what
is called the “beaten path of wealth maximizing rational choice analysis.” More generally and radically, they
~Lindenberg 1996! even suggest abandoning a rational “choice-centred approach in favour of a subject-centred
approach” to social theory.
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
465
tions used in many, but not all, rational choice applications ~Kiser and Hechter 1998!.
Now, one can wonder how much really different rational choice sociology is from its
“neoclassical cousin,” given that these core and auxiliary assumptions have been apparently imported ~Macy 1995! from the latter and then admittedly applied to phenomena not
initially covered by these assumptions. Even if rational choice sociology were much different from its “neoclassical cousin,” its core and auxiliary assumptions are often questioned by critics as almost trivial by reflecting the conventional wisdom of folk psychology
or common-sense causal unities ~Somers 1998!, viz. people have goals and intents, pursue
self-interest, maximize utility or profit, etc.
Then, it is perhaps not surprising that even some contemporary economists ~e.g., Frank
1996; Hodgson 1998! critique leading rational choice sociologists like Coleman for becoming too devoted to neoclassical assumptions, e.g., conceiving social actors as selfish monads
embodying rational economic man, and the like. Yet, to be fair to these sociologists, they
~e.g., Coleman 1984: 86! occasionally advise contemporary economists to introduce “sociological structure into economic analysis by taking social organization explicitly into
account.” Here what is proposed is using the viewpoint of economic sociology in approaching markets and economic agents ~firms!, albeit typically rational choice sociologists suggest applying neoclassical assumptions to noneconomic phenomena, rather than the
sociological perspective on economic behavior. Though admittedly Coleman ~cf. 1986!,
for example, is more a rational choice sociologist than an economic sociologist, to his
credit, Coleman has a clear notion of economic sociology as distinct from rational choice
sociology, thus avoiding the frequent conflation between the two, i.e., between analyzing
economic behavior in social terms and applying rational choice to non-economic conduct.
Next, in microsocial terms, as some leading economic sociologists ~White 1992: 301! describe, current rational choice theory is premised on an “underlying ontology of spirits,” i.e.,
“disembodied and independent,” “inertial and isolate” entities—“angels in short.” As other
sociologists ~Somers 1998! put it, such a world of invariance inhabited by angels or saints
can be parsimonious and convenient to theoretically model, but evidently “we’re no angels.” In other words, such rational choice ontology boils down to a counterutopian Brave
New World as a gigantic open prison populated by monads qua happy slaves that are permitted, stimulated, and subtly enforced to engage in consistent and persistent utility ~soma!
maximization or commodification, and yet increasingly denied their individual liberties, nonrational ~e.g., intimate! choices and human rights. Such a world thus constitutes a paradoxical fusion of abundance and anarchy—i.e., the license to be licentious at least for the business
elite—in Economy with Leviathan or pseudotyranny in Polity ~Buchanan 1975!, as well as
social overcontrol ~Heckathorn 1990! over ~civic! Society, including private life.11
Finally, a brief digression on ~mis!using the concept of mechanisms in sociological
theory is perhaps in order. This is prompted by the recent suggestions of some rational
choice sociologists ~Hedstrom and Swedberg 1998! for importing from economics into
sociology the analytical approach to social theory predicated upon social mechanisms, viz.
the pursuit of self-interest, utility maximization, automatic markets, the mechanism of free
competition, equilibrium, optimum, etc. Moreover, these rational choice sociologists argue
that neoclassical economists’ talent in explaining economic phenomena in terms of mechanisms only becomes manifest when extending their approach outside the proper domain
of their discipline ~Hedstrom and Swedberg 1998: 4!.
Now, even from the viewpoint of ~neo!classical economics, the above seems to be a
rather curious argument given that, for one, most economic theory using mechanical anal11
En passant, analysts of modern mass society may remark that late American society tends to reach or approximate this seemingly paradoxical world.
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ogies ~Fisher 1965: 85! and metaphors, e.g., Walras’ ~1926! celestial mechanics, has been
largely discredited in much of contemporary neoclassical economics with its parallel tendency against mechanisms ~Mirowski 1988!. Even some neoclassical economists warn
that the static conception of mechanisms, e.g., equilibrium, “threatens to introduce the
methods of mathematical physics which are not suited to the subject-matter of economics”
~Wieser 1967: 52!. Others clearly reject the idea that economic behavior, let alone all
social action, can be accounted for in terms of mechanisms by stating that the laws of
economics, “being the laws of human conduct, are psychical @social#, not physical @or
mechanical#” ~Wicksteed 1933: 783!. Then, some modern mainstream economists ~Solow
1990! admonish that the notion of economics as a branch of mechanics or physics is less
admissible than that as sociological economics, in light of the strong impact of social
institutions on economic behavior. Further, in a postmechanistic and postdeterministic
social world, neoclassical economics premised on mechanisms “must appear atavistic, if
not irrelevant” ~Mirowski 1989: 401!.
Hence, one wonders how productive is to extend to all social theory the largely compromised conception of economic phenomena as mechanisms and of economics as an
application of mechanics. For instance, some neoclassical, especially Austrian, economists
~Mises 1966; Wieser 1967! reject the concept of the market or competition as an automatic
equilibrating mechanism in favor of that as a social market process ~cf. Kirzner 1992!.
More generally, “no economist of the first rank has ever been a devotee of the pure mechanism of the market” ~Knight 1958: 17!. In sum, the reiterated warning of leading contemporary economists ~Samuelson 1993! on the important differences between genetic or
biological and economic or sociological processes can be taken to apply a fortiori to those
between the latter and physical or mechanical processes.
Relatedly, from a sociological viewpoint, the following objections can be leveled against
reintroducing the social mechanisms approach into sociology. First, by sociological assumption, human social behavior cannot properly be explained in terms of mechanisms, be they
at micro- ~utility optimization! or macro- ~market! levels. Needless to say, human agents
are no, or are not driven by, mechanisms, and their behavior is not simply mechanic even
in the sense of the ~Walras-Fisher! version of neoclassical economics cum a misguided and
naïve application of mechanics, let alone in the sense of physics. Further, even those
presumed mechanisms driving human behavior, such micro-mechanisms as the pursuit of
self-interest or utility/profit maximization, and macro-mechanisms like markets, are far
from operating in a fully automatic manner, and thus cannot be considered mechanisms in
the strict sense, just as the law of supply and demand cannot be deemed equivalent to the
law of gravitation, despite many economists’ claims to the opposite. The same applies to
mesolevel social mechanisms such as organizations, including firms. Admittedly, economic organizations are social institutions, especially governance structures, rather than
mere production functions as technical constructions or mechanisms ~Williamson 1998:
76–7!. Hence, human, including even economic or organizational, behavior would be
more adequately conceived in terms of social institutions and practices, rather than in
those of invariant mechanisms” such as microlevel mechanical optimizing, mesolevel technical constructions, and macrolevel automatic markets.
Second, as hinted above, the very mechanisms proposed as prime movers in human
behavior and society at large are actually governed by institutional rules and arrangements,
and thereby become institutionalized. For example, even free markets are based on certain
institutional rules of the game, as are organizations. To that extent, markets manifest themselves more as social institutions and generally social structures ~Swedberg 1994!, including status orders ~Podolny 1993! and political arrangements ~Fligstein 1996!, than as
automatic mechanisms of free competition. The same can be said of organizations or firms
RATIONAL CHOICE GENERALIZATION OF NEOCLASSICAL ECONOMICS
467
understood as specific social systems, e.g., power hierarchies or governance structures,
rather than technical constructs or mechanisms. Further, even the celebrated mechanism of
automatic utility-, profit- or wealth-optimization often appears as no more than a peculiar
facet of institutional motivation rather than an expression of some ingrained propensity to
exchange, maximize, and calculate or selfish genes of a “natural born” homo economicus.
Simply, the mechanism of utility optimizing or rational choice is a variable or empirical
problem to be explained in mostly social terms, not a constant, universal assumption or
self-evident axiom ~Smelser and Swedberg 1994!. Generally, the mechanism of utilitarian
individualism ~Etzioni 1988! represents in fact institutionalized individualism by reflecting the operation of institutional and other social forces.
Lastly, the very neoclassical suggestions ~Solow 1990; Wicksteed 1933; Wieser 1967!
for abandoning the idea of economics as an emulation of mechanics in favor of some
notion of sociological economics recognizing the economic role of institutions poses a big
dilemma for the analytical approach to social theory relying on social mechanisms. Insofar
as such suggestions imply replacing the concept of mechanisms by that of institutions,
reintroducing the first from economics into all social theory may not be prima facie sensible or fruitful. Paradoxically, such rehabilitation of social mechanisms would actually
make a virtue for social theory what has increasingly been a vice in one of its segments
~economic theory!.
CONCLUDING ~AND QUALIFYING! REMARKS
The preceding suggests lack of a compelling theoretical foundation and justification, within
much of neoclassical economics, for a universal economic approach employed by modern
rational choice theorists and thus for economic imperialism implied in this approach. The
main ~perhaps surprising! finding of this consideration is that neoclassical economics
usually does not view all human action as a generalization of market behavior and hence
does not allow or entail generalizing its narrow analytical framework into sociological
rational choice, including social exchange, theory. To that extent, economic imperialism
pursued by many rational choice theorists could not be legitimized by or derived from
neoclassical economics, as done by most economists and even some sociologists.
To be sure, the argument that most leading neoclassical, especially broadly minded and
multifaceted, economists carefully delimited their simplifying assumptions to the marketeconomic realm and cautioned against extending them to the entire society may well be
incomplete. A pertinent epistemological moment is that many of them, while being fully
aware of the empirical validity ~non-realism! of such assumptions, are reluctant to render
them more complex and empirically valid ~realistic! because of the resulting loss of parsimony or deductive tractability. Consequently, for some neoclassical economists, their
assumptions and concepts do not invariably apply even to actual economic behavior, let
alone to all social action. To them the epistemological rationale for such simplistic assumptions resides in the desirability of clear and consistent deductive theorizing despite the risk
of substantial loss in realism, as shown by modern game theory.12 More generally, some
~Lindenberg 1991!, suggesting a broader view, tacitly chastise their rational choice colleagues for traveling the beaten path of wealth-maximization paved by neoclassical economics, as do others ~Boudon 1996, 1998! for their implausible reduction of the reasons
for social action to the economic notion of cost and benefits. At this juncture, an implied
target seems to be the admittedly typical value or behavioral assumption of sociological
rational choice theory, that actors seek to realize wealth and related private and instrumen12
Yet, somewhat unusually for rational choice theorists, some of them ~Hechter 1992a! criticize game theory
for what is seen as its insufficiency for resolving real-world collective action problems.
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tal goals ~Hechter 1994: 318!. Since such an assumption is undoubtedly the hallmark of
the economic model of rational choice as well, again the question arises as to sociological
rational choice theory’s presumed difference from its brother-in-arms in economics.
No doubt, not much is gained by reiterating the argument of many neoclassical economists as well as classical sociologists that economic theory is a branch of broader sociological theory, without specifying how such arguments can be conducive toward improving
social theory. For instance, the old dichotomy, found within both neoclassical economics
and classical sociology, between rational/economic and nonrational/noneconomic action
may be obsolete, naïve, or inadequate. In this connection, the question may arise as to the
theoretical implications of operating with two different models of the actor, viz. homo
economicus in the marketplace and homo sociologicus elsewhere. Neoclassical economics
and classical sociology alike tried to resolve this problem by simply dividing the subject—
the market or economy to the first, and culture or society to the second.
Now, from the rational choice perspective such a solution might appear as spurious,
partial, and naïve given its underlying assumption of the unity, constancy, and consistency
of human behavior. Thus, in recent years many rational choice and other sociologists have
addressed the above issues in this journal ~e.g., Fararo 1993; Hechter 1992b; Rambo 1995;
cf. also Dahms 1995! and elsewhere. More particularly, the most recent and advanced
works in rational choice sociology have attempted to cope with such questions ~e.g., Boudon 1998; Coleman 1994; Elster 1998; Hechter 1994; Hechter and Kanazawa 1997; Kiser
and Hechter 1998; Lindenberg 1996; Macy 1995!. Notably, many of them have sought to
revise or even depart from the conventional wisdom of wealth optimization ~Lindenberg
1991! as an admittedly typical value assumption of sociological rational choice theory
~Hechter 1994! and thus an expression of the latter’s attempts at generalization of neoclassical economics predicated on this very assumption. It remains to be seen whether this
alternative tendency within the most recent rational choice theory will continue and
strengthen, as recently suggested and anticipated ~Kiser and Hechter 1998!, or will be
overwhelmed by that toward extension of neoclassical economic-utilitarian theorizing to
ever-new realms.
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