Download Theoretical problem

Individual and household financial strategies:
theoretical and operational definitions
Olga Kuzina
National research University
Higher School of Economics
Moscow, 2012
Higher School of Economics , Moscow, 2012
www.hse.ru
Research problem
Theoretical problem
The concept of ‘strategy’ in sociology was introduced to avoid both
extremes: structural determinism and excessive voluntarism in photo
explanation of human behaviour.
Even though sociologists agree about the ambition of this concept, the
way this concept is defined and operationalized for empirical research is
still at issue.
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Practical reason
Short horizon of financial planning, lack of retirement savings, lack of
savings and consumption smoothing in Russia.
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Higher School of Economics , Moscow, 2012
Discussion points in theory
• Between action and structure
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• Social (dis)embededdness of rationality
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Higher School of Economics , Moscow, 2012
Between action and structure
How in the structurally determined situations people are able to exercise
initiative?
Between excessive voluntarism and structural determinism rather
than
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between action and structure – action perspective as a solution.
voluntarism
determinism
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NOT
action
structure
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Higher School of Economics , Moscow, 2012
Between action and structure
Action theories have never asserted that people are entirely free
in their actions – relative not full autonomy
Mead (1934) – “I” and “Me”
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Goffman (1959) – dramaturgical approach, scripts, actors vs.
puppets
Beckert (2010) - the concept of ‘non-teleological
interpretation of intentionality’ - people develop a photo
notion of
what kind of strategies are reasonable through interaction. They
are not looking for global or local optima, but rather for the safe
(problem-free) ways of doing something.
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Higher School of Economics , Moscow, 2012
Social disembededdness of rationality in
Economics
Should strategic behavior be conceptualised as rational in economic sense
or it can go beyond the assumption of rationality?
Rationality in Economics - an explanatory framework - individuals
photoact
consistently according to their independent preferences, are able to seek
and process necessary information and maximize their utility (analogy with
the law of conservation of energy in physics)
Rationality in the presence of uncertainty – more complicated:
1) converting uncertainty into risk,
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2) developing institutions which reduce uncertainty (like the state
insurance systems of people deposits in banks), framing (Esser 1993,
Lindernberg, 1993).
3) applying bounded rationality which economises costs on searching
for
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the information.
Higher School of Economics , Moscow, 2012
Social embededdness of rationality in Sociology
1) Rationality is not considered as an overall framework within which
all behavior is explained and understood.
a) Different types of rationality (Weber)
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b) Social embededdness of rationality (Polanyi, Granovetter) rational behavior is not an in-born quality of human nature but
rather a competence acquired in the presence of the particular
type of social institutions – denial of universal explanations
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c) Economic rationality not as optimizing behavior but
as ‘the
construction of the meaning of rational economic action’
(Beckert)
2) Rational financial strategies of individuals or households are
conditioned on the nature of financial institutions. An implication
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for policy makers - financial literacy problem - more information or
more regulation of financial markets and consumer protection?
Higher School of Economics , Moscow, 2012
The concept of strategy – theoretical definition
In sociology there is a number of different definitions of the concept
‘strategy’
• Crow (1989) - a strategy is a conscious, purposeful and longphoto
term action.
• Knights and Morgan (1990) - strategic thinking and acting are
conditioned by power.
• Anderson et al. (1994) - ‘strategy’ must be distinguished from
‘behaviour’ - systems of rationally grounded decisions leading to
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desired medium- to long-term goals’
In all mentioned definitions, it is emphasised that a strategic action is
marked as a long-term, goal-oriented, conscious, innovative,
resourceful and powerful action.
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Higher School of Economics , Moscow, 2012
The concept of financial strategies
To base our conceptual enterprise on some sort of empirical basis, we use the
data collected during focus group discussions (11).
October 2010
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6 focus-group discussions with the middle class urban residents
November 2011
3 focus-group with the middle class urban residents
2 focus-group discussions with the low class urban residents
The aim of these focus groups:
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• to find out how people themselves define what financial strategy
is,
• what people consider to be the main elements of financial strategies,
• how they distinguish between strategic and non-strategic types of financial
behavior,
• which factors they think can facilitate the implementation of financial
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strategies, and which ones constrain them and force them to behave nonstrategically.
Higher School of Economics , Moscow, 2012
Financial strategies as they are perceived by
focus-groups participants (1)
Financial strategies are characterised by existence of
• goals (not dreams) and plans how to achieve them, achievement
attitude
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…What characterises a person with a strategy - (s)he sets up goals in life,
thinks in advance, do not live for the moment… (St. Petersburg)
… Strategic thinking implies active stand in life, not live it
up…(Ekaterinburg)
• means or resources
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…to be able to strategise you need resources: money, knowledge,
understanding… (Saratov)
• willpower
…One needs consistency in actions, ability to control impulsive
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behaviour… (Moscow)
Higher School of Economics , Moscow, 2012
Financial strategies as they are perceived by
focus-groups participants (2)
• alternative thinking, situational decision-making, forward-looking longterm planning may not be possible because of uncertain environment
…I do not like the word ‘planning’ , the process of achieving the goals should
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be flexible, one has to have alternatives if something will go wrong…
(Moscow)
…Long-term planning is just not possible in our country. Rules of the game
are constantly changing in major aspects…. (Ekaterinburg)
• personal responsibility for both successes and failures
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…Before I thought that somebody has to help me, advice me what I should
do, now I understand that if I take the decision, I am responsible for it…
(Moscow)
• aiming high at development, improvement of situation
…To understand if a person has a strategy is possible by looking
at his or
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her results. There should be the improvement in his or her
life…(Ekaterinburg)
Higher School of Economics , Moscow, 2012
Factors of financial strategies as they are
perceived by focus-groups participants (1)
• actual state of affaires in the economy
… Strategies are conditional on the state of the economy in
Russia…(Voronezh)
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• employment and stability in the sector
…I work for a beer company. People have been drinking beer for ages,
they will never stop doing that. If one restaurant will be closed, the other
two will be open…(Ekaterinburg)
…For a civil servant there always be a place to work… (Ekaterinburg)
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… I have been married for a long time. My husband has been
always
working. I feel myself stable…(Moscow)
… I am a doctor, people will never stop being ill…(Krasnoyarsk)
… I am a policeman, it seems to be stable… (Moscow)
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Higher School of Economics , Moscow, 2012
Factors of financial strategies as they are
perceived by focus-groups participants (2)
• reputation of a good employee
… I am professional, I work properly, my bosses recognise this and
respect me…(Ekaterinburg)
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• the stage in the life cycle
… When you are young you are likely not to have a strategy because you
think that you have a lot of possibilities. When you turn 40 – you
understand that you must have a strategy. And this strategy is to preper for
your retirement… (Voronezh)
… I feel that in my age it is late to look forward. In our country
if you are
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not young you may loose your job and will not be able to find another, in
this situation it is not possible to have a strategy … (Ekaterinburg)
… When you are young you must have got an education. So you must
have a strategy for that… (St. Petersburg)
• situation in the family
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…Individual strategy is not possible if you have a family. Your family may
not support your strategy… (Voronezh)
Higher School of Economics , Moscow, 2012
Survey findings, November 2010
Have such a
goal,
% of N
1600
Have the
strategy to
achieve
photo this
goal, % of N
1600
Do not have any strategic goal
53
-
Difficult to say
3
-
Have at least one strategic goal, i.e.
44
N of all respondents in the survey
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26
To improve their housing conditions
31
15
To get education
26
11
To open their own business
21
4
To financially prepare for the retirement
20
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Higher School of Economics , Moscow, 2012
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