Risk and Uncertainty in the Economy: Historical, Sociological, and Anthropological Perspectives

Conference, June 19-22, 2011 | Villa Vigoni

Topic and Goal of the Conference

Economic action takes place in risky and uncertain environments. Be it medieval traders whose merchandise must be secured against burglars while it is transported or financial traders on Wall Street who must close deals in highly volatile financial markets, risk and uncertainty are universal features of economic activity. All economic activity involving the division of labor must succeed in integrating the plans of actors with often diverse interests who must make decisions in the face of incalculable future developments.

The uncertainties economic actors confront can be systematized in four categories:

Strategic uncertainty which refers to the dependence of economic success on the actions of other actors who follow their own interest. This problem of double contingency is pervasive in all contractual agreements that are incomplete, that is, which leave discretion to the exchange partners.
Uncertainty originating from contingent assessments of the value of goods in the market, depending on emerging processes in which qualities are established in collective interpretative activities. An example of this is the art market, where quality and price is the outcome of interpretation in the market.
Uncertainty with regard to product qualities emerging from incomplete or asymmetrically distributed information.
Uncertainty stemming from events occurring in the future that are unknown to present actors.

The question of how economic actors deal with these sources of risk and uncertainty provides a crucial entry point for the investigation of any economy. It can be assumed that these issues are relevant in all economic systems and throughout economic history. Capitalistic economies, however, are characterized by a specific tension between institutions reducing uncertainty and institutions creating uncertainty, especially markets. Uncertainty is a crucial source of opportunities for profits but also creates problems for the coordination of economic activities, and causes insecurity for actors. The position actors take with regard to the reduction or expansion of uncertainties in the economy hence depends also on their class situation (Max Weber).

Societies find widely differing answers to resolve the emerging problems which are reflected in the institutional and social structures of their economy as well as in the normative and cognitive orientations therein. One way to systematize the principle risks and uncertainties that actors face is to distinguish coordination problems they confront in the production and distribution of goods and services. Competition, valuation, and cooperation are such coordination problems that any economy reliant on the division of labor must solve.

The problem of competition refers to the risks to investments stemming from the activities of other market actors. Firms and states react to these risks by attempting to limit rivalry. These efforts can reach from the strictly enforced regulations of medieval guilds against competition, to import restrictions, the exclusion of specific social groups from market access, and forms of monopolistic competition through product differentiation.
The problem of valuation refers to the uncertainty associated with the quality of goods or services and the demand for them. The value of certain products is in many ways culturally contingent and dependent on the classification of goods. Whether or not money, salvation, or human beings are to be traded as commodities is highly contested. Moreover, the classification of products relies on technologies to measure quality that are themselves cultural artifacts.
The problem of cooperation refers to the risks emerging from the freedom of cooperation partners in exchange relations. Due to information asymmetries, all joint economic activity for both production and exchange involves trust, which can be broken. Economic organization must provide safeguards for the contract partners in order to instill willingness in them to engage in risky economic exchanges. Such safeguards can be social norms, institutions for the enforcement of property rights, and families or closed ethnic networks with high sanctioning power.

All three coordination problems are associated with risk evaluation, that is, the challenge of making decisions that depend on an uncertain future. How do economic actors deal with this uncertainty? How do they transform uncertainty into calculable risks? How do they avoid total blockades or the breakdown of markets? Risks have to be moderated, insured, or ignored to keep the economy functioning. The uncertainties of economic exchange, manifested in coordination problems, are resolved varyingly in different economic configurations. How depends on cultural influences, power structures, the shapes of social networks, and the systemic properties of the economic and political regime. What role do families and tightly knit networks of communities play in the reduction of uncertainty? How do formal institutions reduce the risks actors face? What are the conditions for personal trust among economic actors? Investigating economic activity as something embedded in cultural, social, and political configurations has been the principle starting point of recent approaches to the economy in history, anthropology, sociology, economics, political science, and ethnology.

The conference will bring together leading scholars from all these disciplines. One of its aims is to advance the exchange between disciplinary perspectives on the social, cultural and political structuration of the economy. Another goal is to contribute to a theory of the economy that sees economic action and the dynamics of economic structures as anchored in social, cultural, political, and historical contexts. On the one hand, emphasis will be on the different forms of social organization for the resolution of similar problems in different empirical settings. On the other hand, the conference will explore whether different forms of social organization can be systematically attributed to different economic systems. What distinguishes modern capitalism from traditional forms of the economy and their organization? Is it possible to identify common trends in the organization of economic activity?

The exchange among scholars who have new empirical insights from their ongoing research and colleagues who work at the cutting edge in the field of theory will enrich both the empirical and theoretical research, as these communities rarely interact intensively. Therefore, extended and detailed discussions will be the hallmark of this conference. There will be seventy-five minutes devoted to each paper. All papers will be made available to the participants six weeks in advance of the conference. The papers will be presented by the author for a maximum of thirty minutes, followed by a ten-minute commentary and a thirty-five minute discussion.

Organization

Jens Beckert

Hartmut Berghoff