In previous posts (here and here) I put forward the concept of economic molecules: the idea that the basic decision-making unit in markets is not the single human actor and, but instead a cluster of people, machines and procedures. However, I was asked, is a molecule the right term here?

Saying that we should be thinking about economic molecules implies that mainstream economics assigns agency to individuals (the ‘atoms’). But is this really the case? It was commented to me that mainstream micro-economics’ basic building blocks are households and firms. Well (the argument may continue), these concepts (households and firms) are clusters, made up of individuals and procedures and so are ‘economic molecules’. What is the difference, then? The difference lies in what one does with the concepts. Economics uses the concepts of households and firms to apply a simple taxonomy to economies. That is, once a decision-making unit was defined as a household or a firm, the discussion about the nature of that unit is over. Different households may have different utility curves and different firms may have different production schedules, but they all belong to one of those mutually exclusive categories. In contrast, the notion of the economic molecule stresses that fact there is a large variety in the makeup of the clusters and thus there may be many types of animals in the economic jungle. For example, small hedge funds do not think and act like proprietary trading rooms (in fact, even within those trading room there are different ‘species’).

This still leaves open the issue of the physical metaphor. As Daniel mentions in a post, and as was commented to me elsewhere, referring to social actions in terms of physical interactions alludes to the early days of sociology, to the days of ‘social physics’. Do we really want to go back there? Also, atoms have long stopped being the most fundamental unit of matter. So, what is the point in referring, even implicitly, to atoms? These last points are important since relative intellectual positioning is important in the academic world. But, this still leaves us with the question that Daniel asks: we have an interesting, and a potentially useful concept, but how do we capture it?

Brayden King refers to the topic of market design in a post in Orgtheory. I completely agree with Brayden that the question of are (or to what extent) markets ‘designed’ or are they the outcome of ‘organic’, unintended growth is central to economic sociologists. After all, the question of how markets come about has been echoing in sociology since Polanyi.

Nevertheless, I think that juxtaposing ‘design’ and ‘organic growth’ as if they were counterparts in a zero-sum game is a bit misleading. Yes, there are many actors who would like to affect the structure of markets – financial regulators, accountants, trading firms, to name but a few – and given the opportunity these actors would be happy to design markets so that they would fit their needs optimally. Of course, such ambitions remain unfulfilled, and this is because markets are networks of heterogeneous actors. Regulators and traders, for example, do not necessarily hold similar, or even compatible, worldviews. Consequently, the different actors promote very different, sometimes conflicting agendas. So, the overall result in the market ecosystem is of organic growth. However, this does not mean that design attempts are diminished there. On the contrary, the overall effect is a result of constant interaction among actors, many of whom try as best as they can to design the market.

A similar situation can be found in markets whose evolution was affected by performativity. The fact that actors took into consideration economic theories and as a result those theories became an inherent part of the market does not mean that performativity equals design (of course, Brayden does not claim so). Nevertheless, reckoning the force of performativity can help us to shed more light on the tension between agents’ ambitions and actions (‘design’) and the outcome of those actions (the ‘organic growth’). When the market’s heterogeneous network includes actors who promote, or serve as conduits for expert knowledge (e.g. economists, management accountants, risk managers, computer systems designers) it is possible that other actors would adopt the knowledge and practice it, even when they do not agree with the underlying agenda of the actors presenting that knowledge. So, in such markets the interaction among the actors would be affected, (maybe even mediated) by those limited areas of acceptance in the midst of an otherwise competitive and conflict-ridden environment. Hence, performativity-affected markets may look more ‘designed’ than ‘organically grown’…

Reacting to a previous post by Peter Levin:

My own impulse is to take on how and why these particular atoms glom into these particular molecules to begin with […] the circumstances and conditions of the atoms-to-molecules transformations.

This is a legitimate agenda, of course, but it somewhat misses the radical message of the EM (or that of Agencement, as presented by Callon and Muniesa). Let me state the claim again: the Economic Molecule is the basic economic unit of agency. That is, only the economic molecule is capable of making decisions and carrying out in a meaningful way. Hence, talking about how the molecules are created is fine, as long as we understand that when we do so, we talk about the very creation of economic agents.

[W]hy stop at finance theory and software as prostheses? It quickly becomes everything, […] but then at some point it gives less rather than more empirical traction on markets and economic sociology.

Yes. We see such molecules, or such humns-mahchines-procedures clusters in many areas. This makes the claim more relevant as the multiple occurrences show us how deeply ingrained is the illusion of individual agency. In fact, there are a few areas where notion of individual agency is more critical than economics: the discipline of law and the legal arena, for example.  So, why focus on Economic Molecules? This relates to the agenda of economic sociology and its struggle with the dominant discipline of economics. Economics is based on assigning agency to individuals and then analysing the aggregate effect of the actions of those ‘agents’. Hence, questioning the nature of that agent and offering an alternative is central to economic sociology.

One of the more interesting developments in the Social Studies of Finance is the extensions of its methods and approaches to other business phenomena. Just as SSF examines the practice, technology and content of the financial value claims, a growing literature is addresses with similar questions in marketing, strategy, etc.

An interesting panel session, organized by Catelijne Coopmans and Elena Simakova at the 2007 Academy of Management meeting in Philadelphia is concerned with this question. The meeting, part of the Professional Development Workshop programs is titled, “Does STS Mean Business? Interdisciplinary engagement as a source of theoretical innovation” and will have the presence of Raghu Garud, Peter Groenewegen, Peter Karnoe, Christian Licoppe, Eamonn Molloy, Wanda Orlikowski, Marc Ventresca and Ragna Zeiss (as well as myself, Daniel Beunza).

According to the organizers

This workshop addresses the opportunities and challenges arising from the interaction between organization and management studies on the one hand, and science and technology studies (STS) on the other. Taking up the theme of this year’s conference, we observe that STS concepts and scholars are arguably ‘doing well’ in the management arena, but what does it mean for them to do ‘good’? The contributions to this workshop offer various perspectives on (1) what a valuable engagement between organization and management studies and STS looks like, and (2) what such an engagement contributes to existing knowledge and ways of doing research. Potential tensions between being useful and being critical are thereby high on the agenda. The workshop also addresses possible implications of how the engagement between management studies and STS is being framed.

It will take place on Saturday August 4 2007, 9am-12pm at Philadelphia Marriott in Franklin 3. No registration required. For a detailed program, click on: Does STS Mean Business? Program

A few weeks ago I mentioned in a post the concept of Economic Molecule. This notion argues that in contrast with mainstream economics, which employs an atomistic view that sees the individual as its basic unit of analysis, it would be beneficial if economic sociology would use a different unit of analysis. That unit of analysis, the single Economic Molecule, is the cluster of people, machines and procedures that together make up the most basic meaningful node in markets: these molecules, and not the ‘naked’ individuals, make decisions and bring about changes in the structure and nature of markets.

Peter Levin wrote a reaction to this notion:

You suggested in your earlier post that the argument made by the performativity crowd puts front-and-center a new conception of the economic actor. The ANT emphasis on calculative agencies implies a subject whose very subjectivity intersects with the tools at her disposal. I guess I think about Doctor Octopus from Spiderman 2 (or Spiderman himself, for that matter). The prosthetics don’t need to be self-aware to be, in an important sociological sense, a part of you. (I mean, Heather Mills McCartney has a prosthetic leg, on which she danced well into the running of Dancing with the Stars. When we think about her, her prosthetic leg is actually a part of her – we can argue about ‘real’ or ‘fake’, internal or external, but in a sociological sense Ms. Mills encompasses the natural and artificial).

This is a differences of degree rather than kind, goes the argument, from say, your eyeglasses, or a telephone. Nothing new here, an over-generalization of Latour and Callon, among others. But applied to traders, it becomes interesting.

We could study black-box trading systems, or electronic trading more broadly, as a similar ‘molecule’ (3 atoms of human brain, 1 atom of finance theory, 2 atoms of hardware/software). What was once just ‘cognition’ becomes immediately and irrevocably contextualized. You literally can’t make sense of a rational economic trader without his finance theory, his screens, charts, formulae, software, colleagues, telephones. I myself would want to disentangle the theories, the technology, the networks, but nevertheless, we could learn quite a bit more from starting at this point and seeing how variability in context/tools/theories change how we ‘do’ markets.

But there is a second avenue of research here. My own impulse is to take on how and why these particular atoms glom into these particular molecules to begin with – the constellation of priors that give rise to what we think of as the economic actor. I guess I incline towards doing physics rather than chemistry (please excuse the reproduction of this distinction, I mean it without its usual hierarchy and status claims). Hence my interest in information, gender, discretion. I want to know not so much the effects of the molecules on markets, but the circumstances and conditions of the atoms-to-molecules transformations.

I’m not sure how new this is, frankly. I think it sounds a lot like H. Becker’s attempts to shift form artist as individual genius to artist as focal node in art worlds. And I also think there is something too expansive about the ‘molecule’ notion – I mean, why stop at finance theory and software as prostheses? It quickly becomes everything, from the high-tech wireless handhelds traders use to trade, to learning mathematics in grade school. Which is fine, but then at some point it gives less rather than more empirical traction on markets and economic sociology.

But this is an important line of reasoning nevertheless.