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This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press. The crucial sentences in Schlicht's introduction to On Custom in the Economy are that the book intends to 'ideate custom as a comprehensive, if somewhat abstract phenomenon that materialises indifferent ways and may take different forms' and further '[I]ts variegated appearances will be traced to properties of the human mind, and to the ways in which individuals interact' (p. 12). For this reason the book concentrates on the cognitive side: how people perceive and signal customs. It concentrates on custom's properties, its specific features and attributes. I am not expert enough to assess this kind of analysis. However, I certainly welcome the book as a contribution to the field. Only too often economists blindly stick to their own toolkit while dismissing what approaches outside mainstream economics have to offer. One striking feature of this book is that economic theory, let alone its major proponents, is not even mentioned. This leaves the intriguing question of why. One interpretation is that Schlicht obviously wanted to write a complementary book. After having read the first part, I felt that I had learned everything that there could possibly be to be said about 'custom.' And yet I noticed that custom evaded my comprehension. It became a black box whose properties were exposed, but by this exposure the connection to individual behavior, let alone interaction, got lost. For example, the connection between perception, attitudes and behavior is not made explicit, with the result being that custom ultimately appears to be both over-defined and under-conceptualized at the same time. It is tempting to try to re-link custom to behavior, as Schlicht describes. I will focus on three points: the number game, the problem of consent and hierarchies in custom.

This paper presents to the English-speaking reader a sample of material contained only in Schumpeter's first German edition (1911) of Theorie der wirtschaftlichen Entwicklung, material subsequently omitted from later German editions and from the English translation. The newly-translated material, presented here for the first time in English, comprises a substantial part of the second chapter, only available in a completely rewritten version, and fully half of the famous seventh chapter, which has not been previously available at all in English. This material merits attention today because it contains remarkable and farsighted visions on economic theory that may inspire current efforts to devise models of economic and social evolution. In order to better appreciate the original text, we briefly introduce the 'background' to Theorie and its revisions, briefly describing the social and intellectual environment of the time. We then discuss how the entrepreneur evolved over the three editions of Theorie (from 1911 to 1934) in view of the shift in Schumpeter's personal and intellectual life and outline the most important implications raised by the first German edition of 1911. Finally, we use Schumpeter's own statements to settle the obstinate confusion on the publication year of Theorie in favour of the year 1911.

This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press. Social inquiry involves theorizing about mind and society and the interaction between the two. Ekkehart Schlicht's On Custom and the Economy is a perceptive and fruitful effort to plumb this interaction. There is always a strong temptation to reduce the one to the other, either by treating custom as derivative from interactions among maximizing minds or by treating the substantive content of mind as being determined by custom. Schlicht seeks to advance an analytical framework that allows causation to run in both directions. He does this by postulating autonomy of the mind in terms of certain universal and formal characteristics. Hence, the substantive details of custom that arise through human interaction are limited by the requirements of mind. The mind is not a tabula rasa, but comes preset or hard-wired in terms of some universal principles of operation. Custom emerges through interaction among people, though just what emerges through that interaction is constrained by the requirements of the mind. In reflecting on Schlicht's contribution, I was drawn to earlier contributions by Vilfredo Pareto (1935), Maffeo Pantaleoni (1911) and Walter Eucken (1952). I shall not attempt to summarize the work of those scholars here, as that would require far more pages than the Editor has made available for this symposium. Rather, I shall explore briefly a possible line of inquiry that links themes found in those works to some of the possible implications for the relation between custom and legislation in a manner that seems broadly congruent with Schlict's work.

This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press.

This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press.

This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press.

This comment is part at a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press. The chapter on the firm in Ekkehart Schlicht's On Custom and the Economy offers many valuable insights into the nature of the firm. The well-known recent views on the nature of the firm are clearly discussed, and Schlicht's innovative analysis makes an important contribution to the recent discussion on the firm. Below I address some issues concerning the conceptualization of the firm, the fuzziness of the concept, who should control the firm, what drives its evolution and what is the role of strategy.

This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Clarendon Press.

This comment is part of a symposium on Ekkehart Schlicht, On Custom in the Economy (1998) Oxford: Glarendon Press.

While at the start of systemic economic transformations in Eastern Europe, both indigenous reformers and Western observers tended to interpret the events as a rationally conceived and executed replacement of an economic system of inferior performance by another one whose superiority was proven, the developments that followed the disintegration of the Soviet polity did not support this view. Shortly after the former Soviet republics gained independence, they exhibited marked variations in speed and sometimes direction of market transformation that could not be satisfactorily explained within the framework of economic theories used by promoters of reforms. In this paper I compare the early stages of economic transformation in Belarus, where reforms were eventually abandoned, with the three Baltic states (Latvia, Lithuania, Estonia), which are the most successful emerging market economies among the former Soviet republics. In this comparison I will attempt to highlight non-economic factors that might have contri buted to this difference.

Classical political economy recognised that what needed analysing, explaining, and acting on was an economic system inextricably linked to the wider political and social systems. Smith and Ricardo, as well as Marx, saw class and the distribution of income as key. Neoclassical economics replaced these social and collective categories with the individual consumer and the marginal product of labour as the fundamental analytical categories--the 'political' having been discarded. Yet even one of the founders of neoclassical economics, Alfred Marshall, would barely recognise nor accept what is today presented as economic analysis, ignoring as it does the key industrial and organisational detail underlying production. The 'new political economy' claims to incorporate insights from other disciplines. But far from enriching economic analysis, these new strands of theory simply impose the assumptions and methods of neoclassical economics. We argue that this new economic imperialism needs to be replaced with a genuinely multidisciplinary and interdisciplinary approach to analysing economic issues.

The central aspect, which makes markets operate differently than governments, is the ability of market actors to 'exit' from future interactions. This point is applied to constitutional analysis, with an emphasis on the constitutional possibility of individuals or groups in a society 'exiting,' wholly or partly, from the political community or from specific institutions within such. Hobbesian and Lockean states-of-nature are sketched using a common framework of some simple games, and the Lockean solution to the danger of tyranny is formalized. This solution is compared to the typical interaction in a market economy, where the possibility of 'exit' from future interactions with disagreeable parties introduces severe restrictions on the possible exploitation. This analysis is extended to the political sphere, and it is argued in general terms that a constitutional set-up utilizing a semi-Lockean right to 'exit' (e.g., federal structures with rights of secession, voucher systems, etc.) could be an efficient guar antee against sub-optimal solutions and function so as to reduce redistributive conflicts and make welfare-increasing transactions possible. It is, indeed, true that the freedom to change what government you serve under will make it easier for you to better your lot. It is also true that this privilege will mean that governments, regardless of their formal structure, will find it necessary to pay considerable attention to the wishes of their citizenry. Gordon Tullock (Tullock 1985: 1080)

The neoclassical model of transition from a centrally-administered socialist economic system to a market-based economic system was implemented in Russia and Eastern Europe. The neoclassical process took the form of either shock therapy or gradualism. However, each approach actually involved a combination of shock therapy and gradualist policies, making the distinction between the two approaches unfounded. In addition, both approaches suffered by the innate inadequacies of neoclassical economic analysis as being politically/institutionally naked. Both shock therapy supporters and gradualist neoclassical economists did not provide a specific process of institutional development, favouring a gradual market-driven institutional outcome. With regard to the political structure, democracy was inconsistent with shock therapy, while active state intervention during transition was inconsistent with the ultimate goal of the gradualist neoclassical economists of competitive capitalism.

This paper explores the relationship of Max Weber's 'social economics' to the work of the Austrian School of Economics, and in particular the writings of Ludwig von Mises and F. A. Hayek. We argue that the Austrian school scholars complement and extend the work of Weber. The sophisticated form of methodological individualism found in Weber, Mises and Hayek overcomes the shortcomings of traditional economic and sociological analysis and could provide the analytical structure for a post-classical political economy.

...the private interests and prejudices of particular orders of men ... have given occasion to very different theories of political oeconomy... These theories have had a considerable influence, not only upon the opinions of men of learning, but upon the public conduct of princes and sovereign states. (Smith, Wealth of Nations [1776] 1976, p.11)

Economic policy is commonly treated as a vehicle for selecting among possible allocative outcomes within an economy. An economy, however, is a complex network of relationships whose patterns can be understood but whose details can be neither predicted nor controlled. Because of this complexity, allocative outcomes are not direct objects of choice. They are simply emergent consequences of human interaction that takes place within some framework of governing rules and conventions. All economic policy can do is modify some of the rules that govern this interaction. Economic policy is thus constitutive and not allocative in character, being centrally involved in shaping the character of the regime that governs our relationships with each other. Nearly any introduction to economics will point out, in one way or another, that an economy is a complex pattern of activities that no one could plan or organize in specific detail. Things work and life proceeds in a generally coordinated fashion, not because someone is in charge of assuring that this happens, but because no one is in charge. The complexity of an effort to produce that coordination directly would overwhelm any attempt to actually do so. The central concern of economic analysis has been to illuminate the workings of the 'invisible hand' processes of economic governance through which economic coordination emerges. Despite this emphasis on complexity, spontaneous order, and invisible hands, the treatment of economic policy has typically proceeded as if the economic process were inherently simple, and as if allocative outcomes were capable of being chosen directly through policy interventions. Recognition of the inherent complexity of the economic process, however, means that economic policy cannot choose allocative outcomes. All that economic policy can do is change some of the rules that govern economic interaction. The resulting allocative outcomes will be generated through the complex interactions among people that are set in motion by the policy, and even by its anticipated enactment. This means that economic policy is necessarily constitutional policy, in that it is principally involved in constituting the rules and conventions that govern economic relationships. The constitution of governance relationships, moreover, involves both positive and normative elements, as well as an interaction between those elements. Alternative governance relationships entail different patterns and frameworks for human interaction. While there is room for normative appraisal of different possible frameworks, not every imaginable norm is attainable, since reality places limits on what is attainable. Still, normative standards can be reinforced or extinguished to some extent, depending on the particular types of practice that are encouraged or discouraged within a particular framework of governing rules and conventions. This paper first contrasts interventionist and constitutive approaches to economic policy, and then explains how complexity converts all policy into constitutional policy. From there, the paper examines the relation between cognition and valuation as it pertains to governance. It then considers how a process of piecemeal policy drift can generate a transformation in the un derlying governance regime, and closes with a consideration of the Germanic tradition of ordnungspolitik that has particular relevance for the argument developed here.

Elections, often to a considerable degree, influence the fiscal policies of governments installed on the basis of their results. Yet, economists have tended to view politicians' behaviour either as being determined exogenously or as the result of a social planner's maximisation of a well-defined social-welfare function (subject to some appropriate technology and resource constraints). The latter approach- given (i) its inherent abstraction from important politico-economic interactions, (ii) the theoretical difficulty in deriving a non-contradictory 'collective utility function' (as demonstrated by Arrow), and (iii) the inability to estimate a stable relationship that could explain political preferences with economic variables--is viewed as being an unsatisfactory tool for the joint description of a country's economy and polity. On the basis of explicit micro-economic foundations and a democratically coordinated decision-making mechanism over the 'optimal' provision of public goods and the corresponding taxes required to finance them, this paper will introduce a simple economic model of politics that subjects individuals to a--two-tiered--political decision-making process over party membership and electoral participation, thereby endogenising the evolution of the competing parties' ideologies, households' electoral behaviour, and the key factors explaining the design of fiscal policies. Having the majority party's median delegate determine on the 'optimal' degree of income redistribution suggests that a country's wealth distribution is a crucial explanatory variable explaining its politico-economic development path.

In discussing the question, Fiscal sociology: What for? we shall first give a short sketch of the history of thought of the field. We will next identify main issues. In discussing the concept of the tax state, we emphasize issues in constitutional public finance. One of the fields in which fiscal sociology has been most important is taxation, and notably income taxation. In citing applications and issues, we identify an entire alphabet of fiscal sociological issues. We conclude by discussing the future of the field in both instruction and research.

The social network metaphor is widely used by sociologists to study socioeconomic behavior and processes. The use of social networks generally takes place within the ranks of sociology. However, a more complete social science would result by combining work being done on social networks within sociology with mainline economic theory. The insights from such a research agenda will help us better understand socioeconomic behavior. With this in mind, the main objective of this paper is to demonstrate the utility of the network metaphor to economists. This objective will be accomplished through developing four basic components of social networks, and using them to navigate through the existing literature in economic sociology. Furthermore, topics for future research in which social networks can provide contributions to the explanation of socioeconomic behavior are explored as well.

Previous theoretical and empirical research on economic sociology leaves much to be desired in terms of consistently defining the agenda and objectives of the discipline. As a result, economic sociology often appears to lack a clearly defined mission and purpose. This is epitomized by various failures to establish adequate epistemological relations of the proper realm of economic sociology with those of economics and sociology, and especially with the domain of rational choice theory. This failure is compounded by a misplaced distinction between the subject matter of economic sociology and that of sociological economics, or socioeconomics. And some recent works in the discipline (including the ambitious Handbook of Economic Sociology) have not helped to remedy this situation. In this paper, we try to address this situation by suggesting some reformulations of the subject matter of economic sociology in relation to those of related disciplines. In addition, we attempt to redefine the field of the sociology of the market which is seen as the focal specialty of economic sociology.

This paper relates to the emerging economics/sociology-nexus, in arguing that economists may have a lesson to learn from the work of the sociologist Alfred Schutz. The problem of coordination, which is the problem of theoretically demonstrating the possibility of spontaneous order in society, is discussed. While conventional economics and classical game-theory have not solved or even convincingly addressed this problem, it is explicitly addressed by Austrian and neo-institutional economics. It is argued that these two traditions in some important aspects dovetail with Schutzian insights, in that the Schutzian analysis of the structures of the life-world contains a number of pertinent insights into the coordination problem.

While liberal political theory tacitly governs the domestic policy concerning international trade advocated by influential analysts such as Professor Michael E. Porter of the Harvard Business School, libertarian political theory animates the international trading regime. This incongruity merits criticism in the context of world poverty as do the libertarian predicates upon which the global free market paradigm is based. The libertarian political philosophy inherent in the paradigm means that little significance is attached to disparity in economic resources, market opportunity, and bargaining power affecting even the poorest of countries. As a result, the global free market paradigm validates a strategy of reductionism, postponement, unsubstantiated meliorism and utter apathy in acknowledging the likely trading prospects of much of the world. Problems such as donor fatigue, political and bureaucratic corruption within a recipient country, as well as the failure of many past efforts to foster development suggest that no easy antidote exists for national destitution but this does not mean that the paradigm must carry the day in its most radical form. An easily taken first step is to replace the paradigm's more extreme libertarianism with the positive economic nationalism espoused by U.S. Labor Secretary Robert Reich.

Economic sociology covers the gray area between the disciplines of economics and sociology and brings scholars from both disciplines together to communicate over topics of interest. This communication provides debate that stimulates and strengthens social theory, which in turn, allows for better policy recommendations. A major area for concern in the development of economic sociology has been the presence of economic imperialism combined with economic hubris, the effects of which could suffocate economic sociology. These phenomena are examined along with the trends over the past twenty years in the development of economic sociology and the relative impact that 'economic sociologists' from both disciplines are having on their respective fields. Observing these trends will allow for an analysis of the developments in economic sociology and a assessment of where it is going in the future.

The editors of the symposium explain the origin of this interesting set of comments and the principal approach to the problem of custom offered by Ekkehart Schlicht.