Economic institutions depend on personal networks that generate trust and enforce norms

Evidence

Granovetter first criticizes much of the new institutional economics as crudely functionalist because the existence of an economic institution is often explained merely by the functions it performs for the economic system. He argues that, even in the new institutional economics, there is a failure to recognize the importance of concrete personal relations and networks of relations-what he calls “embeddedness”-in generating trust, in establishing expectations, and in creating and enforcing norms. — Coleman, SocialCapitalCreation-1988, 28

Granovetter (1985) has engaged in a broad attack on the “undersocialized concept of man” that characterizes economists’ analysis of economic activity. Granovetter first criticizes much of the new institutional economics as crudely functionalist because the existence of an economic institution is often explained merely by the functions it performs for the economic system. He argues that, even in the new institutional economics, there is a failure to recognize the importance of concrete personal relations and networks of relations-what he calls “embeddedness”-in generating trust, in establishing expectations, and in creating and enforcing norms. — Coleman, SocialCapitalCreation-1988, 28

Categorization

• DEFINE: Defines Granovetter’s concept of embeddedness in the context of a critique of functionalist institutional economics.
• XREF: Embeddedness as the counterpoint to the reader’s network-closure question: Granovetter supplies the sociological frame that Coleman’s social capital concept works within and against. — connects to: Institutions substitute for the need to trust in risky interactions; Institutions substitute for trust by securing trustworthiness coercively.; Trust is a small-scale phenomenon that institutions must replace to enable large-scale cooperation (+18 more)
• corroborated: 2 independent passages support this claim — Coleman, SocialCapitalCreation-1988, 28

Related

• Economic transactions are governed by their embeddedness in social networks (similarity 0.85)
• Social relations are sufficient but not necessary conditions for trust in economic life. (similarity 0.84)
• Trust in economic life arises from social relations rather than morality or institutions alone. (similarity 0.83)
• Social networks themselves constitute capital with measurable productive value (similarity 0.80)
• Trust can arise even when transactions are not embedded in social relations. (similarity 0.79)
• Social structures carry history and continuity that independently affect economic systems (similarity 0.79)
• Social institutions function through trust only at the individual micro level (similarity 0.79)

Broader Connections

• Rotating-credit associations depend on social trust to function. #exemplifies (0.85) — Coleman, SocialCapitalCreation-1988, 85
• Institutions substitute for the need to trust in risky interactions #contradicts (0.80)
• Institutions substitute for trust by securing trustworthiness coercively. #contradicts (0.78)
• Trust is a small-scale phenomenon that institutions must replace to enable large-scale cooperation #contradicts (0.75)
• Institutional and legal constraints give people strong external incentives to be trustworthy #contradicts (0.75)
• Urban network membership makes trust relationship-specific and withdrawal its sanction #exemplifies (0.72)
• Social norms make people present stable identities that others can trust #expands (0.72)
• Institutionalized money trust replaces countless individual acts of personal trust #contradicts (0.72)
• Social capital consists of networks, not the trust they generate #qualifies (0.70)