The Research Program

Since its foundation in 1985 the Max Planck Institute for the Study of Societies has gone through three program periods, each concerned with the governance of contemporary societies from a different perspective. Shifts in the program have reflected the results of research and theorizing, as well as real-world changes in economic and political organization that led to new research questions.
The first program, from 1986 to 1995, featured historically and internationally comparative studies of the interaction between political-administrative intervention and societal self-organization in selected sectors "close to the state" (staatsnahe Sektoren). Special attention was paid to health care systems, organized research and science, and large technical infrastructures, in particular telecommunications. The objective was to develop a realistic, practically useful social science-based theory of the governance of modern societies by an interventionist state in cooperation with an organized society.
The second period, from 1996 to 2005, responded to the growing importance of markets and competition even in sectors that had formerly been protected and controlled by state authority. Telecommunications, for instance, which until the mid-1990s had been a state monopoly, was privatized and deregulated. That markets played a growing role in the 1990s may in part have been due to changes in ideologies and in public perceptions of reality. But it was also a result of new constraints on the regulative capacities of the nation-state caused by internationalization, including European integration, and international regime competition. Subsequently, newly developing forms of multi-level governance and the consequences of economic liberalization for states and governments became main subjects of research at the MPIfG.
Today, the continuing shift from state regulation to market-driven forms of social order requires paying even more attention to the working of the economy and its interaction with the polity and other societal subsystems. Thus current research investigates the social, cultural, and political preconditions for the operation of markets, which have become dominant institutions governing production and distribution. Projects explore how markets and business organizations are embedded in historical, institutional, political, and cultural frameworks, as well as the social and political processes that shape economic relations over time. Rather than a prescriptive theory of state intervention, the objective is an empirically based understanding of the social and political foundations, or the "constitution," of modern economies and of the interrelations between social, political, and economic action.
That the economy has become the main subject of interest at a research institute devoted to Gesellschaftsforschung – i.e., "the study of societies" – reflects the ongoing transformation of the postwar socio-economic order of "embedded liberalism." As long as this order was intact, modern capitalism was amenable to supportive political intervention with respect to both economic efficiency and social peace. Today it appears that the capitalist economy has largely emancipated itself from the tutelage of politics and the state, and has in turn begun to impose its terms on the political system. In the midst of a historical process of worldwide liberalization, it seems that now more than ever, and certainly more than in the postwar period, capitalist markets determine the conditions under which other social spheres operate. The financial and economic crisis that has been unraveling since 2008 reflects this development. In particular, the bailout policies demonstrate the extent to which the state has become the hostage of the markets rather than reestablishing political control over the economy.
Understanding the operation of the economy thus becomes a precondition for understanding other areas of social life, including politics and the state, which seem to be increasingly driven by what presents itself as a self-driven process of market expansion. Political economy in particular can no longer afford to treat the economy as a neutral entity separate from society operating under distinct and invariable "laws" of cause and effect, to be strategically utilized by policy-makers for the common good. As the economy ceases to function as a machine for the creation of material well-being, it becomes imperative for political-economic theory to crack open its "black box" and re-include its inner workings in the world of social action, much in the manner of classical political economy before the disciplinary peace settlement between sociology on the one hand and economics on the other.
Thus, although the current program moves the economy to the center of the institute's research agenda, this does not mean that work at the MPIfG will replicate economics as an academic discipline. Unlike standard neo-classical economics, and in an attempt to return to some of the roots of sociological and economic theory, projects at the MPIfG study the contemporary capitalist economy as a historical social order with real actors in unique historical contexts. Doing so requires a revival of traditions of economic sociology and political economy as theories of society. While recovery of a social theory of the economy cannot at present be more than a program, previous and ongoing research suggests several directions in which to go:
A theory of the economy as a social order needs to be based on empirical-historical rather than theoretically stylized actor preferences. In other words, it requires a theory of action that is capable of understanding preference formation as shaped by the identities and interest perceptions of actors in historical social contexts. This is a categorically different approach from theories of "rational choice," even though instrumental rationality may in specific contexts be a pragmatically useful assumption or a correct empirical observation, just as rational-egoistic utility maximization may be and indeed is a powerful, socially sanctioned actor disposition in specific circumstances and social contexts. In dealing with empirical preferences, the inevitable limitations on the cognitive and predictive capacities of human actors must be taken seriously, in the sense that they must be treated as essential rather than ephemeral elements of human action. To endogenize actor preferences and overcome the manifold limitations of rational choice modeling ("homo oeconomicus"), research at the MPIfG looks to sociological theories of action and cultural evolution, as opposed to psychological-naturalistic approaches that assume preferences and behavior to be "hard-wired" products of natural, i.e. evolutionary-biological history.
Explaining how the economy functions in society requires an empirical-analytical rather than a functionalist and efficiency-theoretical, prescriptive approach. Unlike most of contemporary economics, a theory of the social and political constitution of the economy cannot be content with analyzing economic processes in terms of the extent to which they maximize, or fail to maximize, the "efficient" use of resources. Instead it must try to understand how actors in specific social contexts define economic efficiency and how and why they act, or do not act, in its pursuit. This makes it necessary to include in the analysis cultural frames and meanings attached to economics and the economy, paying attention to their evolution over time.
A central subject of any social theory of the economy must be the social preconditions needed for markets to become stable arenas of social interaction in production and exchange. These include but are not limited to firmly enshrined property rights, reliable legal protection, especially from predatory government, and non-confiscatory regimes of taxation. Generally for market exchange to take place, actors need to be able to form stable expectations regarding the outcomes of risky decisions. At the same time, stable conditions on competitive markets are continuously undermined by actors trying to secure better outcomes for themselves by changing the rules of the game in their favor. Research and theory have identified three coordination problems faced by market actors: the value problem; the problem of competition; and the problem of cooperation. Typically these are studied from a micro perspective, looking at economic exchange from the viewpoint of actors, while explaining the solutions found with reference to the social macrostructures in which actors are embedded, which include institutions, social networks, and cognitive framings. From the perspective of society as a whole, the latter also limit the reach of markets and commodification, protecting zones of social stability from the volatility of self-regulating relative prices, which typically takes place in conflict with the progress of market expansion.
A social theory of the economy recognizes that societies and social structures cannot ultimately be explained as results of economic rationalization, nor can they be entirely reorganized in the service of economic efficiency. Even in contemporary capitalism, efficient allocation of resources is only one social value among others, with some of which it is in continuous and irresolvable conflict. For example, pressures to "economize" may violate interests in the predictability of social relations and the stability of social structures, subjecting social life to a degree of volatility that sections of society may, for various and again potentially conflicting reasons, find unacceptable. Expanding markets may therefore, and typically do, cause deep divisions in societies about what limits to set to the commodification of labor, capital, nature, and other "fictitious commodities." Such divisions, in turn, may give rise to social countermovements to marketization, trying to exempt specific spheres of social life from economic rationalization. "Market struggles" of this sort are typically fought as political conflicts over redistributive policies, the nature and extent of the modern welfare state, or the proper role of political democracy in relation to a capitalist economy. Their fundamental significance for modern societies derives from the fact that utility-maximizing rational-economic action as a variant of social action seems to depend on the presence of social relations and institutions that are based on trust, reciprocity, equity, and the like – institutions, in other words, that also support and contain economic action. This raises the possibility that rational-egoistic economic action may undermine social conditions that it requires for its continued viability – and that, paradoxically and unintentionally, social countermovements against market expansion may ensure that rational utility maximization, where it is socially licensed, remains socially and technically viable. Economic sociology and political economy need to develop a sufficiently complex conceptual toolkit to enable themselves to tackle these central issues of contemporary sociology and political economy.
A social theory of the economy must not conceive of its object in the abstract, but rather in the concrete historical forms that it takes. The predominant form today is modern capitalism. The themes this points to include the processes of "globalization" and liberalization and the way they transform the postwar political-economic order, in Europe and beyond, as well as rapid technological change, including change in the needs and rewards for different kinds of work skills. While research at the MPIfG has made important contributions to the study of the "varieties of capitalism," it must be equally concerned with the commonalities of capitalism, i.e., the common evolutionary trends to which national capitalist economies are currently subject.
Studying "the economy" as a social order in the historical form of modern capitalism suggests an institutionalist approach that investigates the structure and development of the collectively sanctioned social norms that govern economic action as a category of social action. Institutional analysis has a long and well-established tradition at the MPIfG, where it was always assumed that "institutions matter," as both constraints and opportunities. Institutionalism at the MPIfG is not efficiency-theoretical (neither in the prescriptive nor in the functionalist sense) but empirical-analytical. Unlike standard neo-classical economics or rational choice political economy, which explain economic action and economic institutions as the outcome of pressures for, or in relation to ideal conditions of, maximal "efficiency," research at the MPIfG draws on the interests and objectives of real actors acting on and within social institutions.
Economic sociology and political economy at the MPIfG share the growing discontent of advanced contemporary economics with the discipline's established rational actor models ("homo oeconomicus"). Unlike behavioral economics, however, and in competition with the biological naturalism that it offers as an alternative, research at the MPIfG proposes to invest in a theory of social action as the most promising approach to a deeper understanding and an improved theorization of the economy as a socially and politically constituted system of action. This does not mean that research and theory at the MPIfG will be ignorant of important new developments under way at some of the frontiers of economics as a discipline. In particular, close attention will be paid to efforts to give disequilibrium and change the prominent place they deserve; to the work of economic historians recognizing and trying to account for the stability over time of "inefficient" institutional arrangements; to attempts to come to terms with temporality and periodicity in economic processes and economic development; to evolutionary economics of a Schumpeterian or another kind; to efforts to account for ("endogenize") actor preferences, instead of treating them as given or unproblematic; and to economic theories that take uncertainty seriously and recognize the significance of the openness of the future for economic action.
Institutionalist social and political analysis deals with both formal and informal institutions. Political economy studies the origin, change, operation, interaction, and effects of the formal political and legal institutions that govern economic action in modern societies. Economic sociology, by contrast, also looks at informal institutions, social networks, and cultural frames that regulate economic action without necessarily being part of the political-legal complex. That distinction, however, is far from categoric. Moreover, the way the different types of social macrostructures interact in the real world is of great systematic interest, given that political institutions, like social ones, are embedded in cultural contexts and social networks, while the latter are often profoundly shaped by political and legal intervention. Working side by side at the MPIfG, economic sociology and political economy have a unique opportunity to overcome their respective traditional (self-)limitations: whereas economic sociology often underestimates the role of political-legal institutions in economic life, political economy sometimes overlooks the cultural and "moral" dimension of the economy.
An important issue that is often neglected in political economy while being central to economic sociology is the cultural and moral dimension of economic social action. For example, economic growth depends on expanding demand, which in turn depends on needs created and stabilized by social processes of preference formation. In advanced capitalist economies in particular, continuing accumulation depends on cultural mechanisms that devalue existing levels of need satisfaction and create demand for new, "improved" means of consumption. Generally, economic and social policies are shaped by ideas and public discourses whose significance for political economy is as yet only incompletely understood. Furthermore, debates in advanced capitalist countries on the appropriate market behavior of firms and individuals and the legitimate purposes of social policies are saturated with competing conceptions of fairness and "social justice" that exercise effective but still largely unexplored influence on the operation of the economy.
Institutionalism at the MPIfG, especially in the political economy tradition, has increasingly tended to be historical institutionalism. Historical institutionalism recognizes the importance of historical legacies for the "paths" along which institutions and social orders change. It also allows for the possibility of the principles governing economic life differing between historical periods ("periodicity"). Many of the research projects at the institute today assume a dynamic perspective, studying political-economic institutions in historical context and explaining them not by their implied efficiency effects, but as moments in processes of – endogenous or exogenous – institutional change. In fact institutional change has become one of the MPIfG's core subjects of empirical study and theory-building. Understanding it has turned out to be essential for studies at the micro-level of the emergence of stable exchange structures. At the same time, taking account of how markets are integrated in patterns of social action appears indispensable for understanding the operation of the macroeconomy and the functioning of the society as a whole.
Studying the contemporary capitalist economy as a society and a polity can only be done in international and transnational perspective. The defining element in contemporary capitalist development is the rapid and universal expansion of markets across national borders. As the capitalist economy finally turns into a world system, regulatory institutions and embedding social structures follow only slowly. While this offers market actors an unprecedented wealth of new strategic options, institution-building across borders has become a fundamental concern in national societies trying to adjust to the constraints and opportunities inherent in a new and powerful wave of economic internationalization and "globalization." Even more than in the past, research at the MPIfG on institution-building and institutional change must consider the evolving relationship between international market expansion and a social order that is still largely national.
In sum, research at the MPIfG in its third program period undertakes to explain economic structures and processes with reference to the social and institutional structures in which economic action is embedded. It proceeds on the assumption that not only social but also economic phenomena cannot be adequately accounted for in terms of general theories of "rational choice," but must be related to historically specific social, cultural, and political contexts. Ultimately this would seem to require a micro-foundation of institutional analysis in a theory of social action that considers not just the constraints and opportunities offered by social institutions, but also the cultural meanings actors assign to social structures and to themselves ("action-based institutionalism"). By recognizing the historical and cultural embeddedness of economic action, research at the MPIfG tries to explain contemporary phenomena by reviving traditions of classical sociology and political economy that treated economic action as social action, and economic relations as social relations, to be analyzed in the same way and by the same means as any other social phenomena.

The MPIfG considers international cooperation to be the most promising organizational form of comparative research. Many visiting researchers make valuable contributions to its research program.
The MPIfG is part of a worldwide network of research institutions and researchers working in the social sciences. It cooperates closely with several research institutes abroad.


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MPIfG - The Research Program | [Last updated 2017-06-07]