Max Weber’s Vision

of Economic Sociology

RICHARD SWEDBERC*
Stockholms Universitet

ABSTRACT: Max Weber’s economic sociology is usually associated with The Prot-
estant Ethic and the Spirit of Capitalism ( 1904- 1905), but in this paper 1 show that what
Weber himself called his “Wirtschuftssoziologie”, or economic sociology, looked quite
different and was something that he developed during the last year of his life, 1919-
1920. I present and outline Weber’s (later) economic sociology and pay particular atten-
tion to his ideas of “economic (social) action” and of the three different forms of capi-
talism (rational capitalism, political capitalism and traditional capitalism). I also show
that to Weber, economic sociology was part of a more genera1 science of economics that
he often referred to as “social economics” (“Sozialbkonomik”). The paper ends with a
comparison between the paradigm of economic sociology, which can be found in the
work of Max Weber, and the paradigm of what is known as New Economic Sociology.

Max Weber, as we know, died at a premature age; he was only 56 years old when
he succumbed to pneumonia, and never had the time to finish a number of his
projects.’ The Economic Ethics of the World Religions was, for example, never
completed and Weber never got the time to write his sociology of culture. Another
project that he left behind, half finished, was his economic sociology. We know the
general structure of Weber’s economic sociology, but it was never fully com-
pleted. Actors, to quickly outline its general structure, are basically driven by ideal
and material interests, with tradition and emotions playing roles as well. Material
interests naturally tend to predominate in the economic sphere, and the study of the
economy is divided between different social sciences, depending on what aspect is

*Direct all correspondence to: Richard Swedberg, Department of Sociology, Stockholms universitet, S-106 91
Stockholm, Sweden.

Journal of Socio-Economics, Volume 27, No. 4, pp. 53.5-5.55

Copyright 0 1998 by JAI Press, Inc.
All rights of reproduction in any form reserved.
ISSN: 1053-5357
536 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/l 998

to be studied, such as economic theory, economic history, and economic sociol-

ogy. Weber is very insistent that economic sociology does not have as its main task
the study economic actions per se; what it studies are instead “social economic
actions,” which are economic actions that are oriented to the behavior of other
actors. This is in line with Weber’s general approach to sociology, which, he says,
primarily studies what happens when actions are oriented to the behavior of other
actors. Economic actions predominate in certain areas of society, in what he some-
times calls the economic sphere. But they also influence, and are influenced by,
what goes on in other parts of society, such as the political sphere, the religious
sphere, and so on. And finally, as human society moves on, different values are
accentuated and hence economic sociology, as the cultural sciences in general, will
begin to study new topics while old topics fade away.
Such, in broad lines, is what Weber’s vision of economic sociology looks like;
and, as already said, Weber did not live long enough to work it out in detail. This
task, however, falls on us, to the extent that we find Weber’s view of economic
sociology worthwhile and important. I will be arguing that this is indeed the case,
and that Weber’s work can help us quite a bit to improve the type of economic
sociology that has been developed during the last ten to fifteen years and which is
sometimes referred to as “New Economic Sociology.” To further justify my case,
I want to point out that today’s economic sociologists, while often drawing on
many insights that originate with Weber’s work, have spent much too little effort
in exploring it. Indeed, the most important contributions to an understanding of
Weber’s economic sociology during the last decade or so has not come from eco-
nomic sociologists but from political scientists, historians, and sociologists who
are primarily interested in other themes in Weber’s work than the economy.2 This
is a pity, especially since Weber’s economic sociology was neglected to start out
with, that is, from 1921-1922 (when Economy and Society appeared) and
onwards.3 In this paper, I will first say something about the general evolution of
Weber’s thoughts on economics, including his attempt to develop an economic
sociology. I shall then discuss his most important contributions to economic soci-
ology, in his early work as well as in his later work. I will conclude by comparing
the general approach that can be found in Weber’s economic sociology to that
which is predominant in today’s economic sociology.

WEBER’S ANALYSIS OF THE ECONOMY

Weber’s economic sociology is part of, but not synonymous with, the more gen-
eral analysis of economic phenomena that can be found in Weber’s work. In 1904,
Weber published a programmatic statement on how to analyze economic phenom-
ena in general, and the term that he used for this general or overall science of eco-
nomics was “SozialGkonomik” (Weber, 1904/1949). Also, later in life, he thought
that the term “Sozialiikonomik” was “the best name for the (overall) discipline (of
Max Weber’s Vision 537

economics)“; that it was better, in other words, than the more popular German
terms for “political economy” and “economics” (Winkelmann, 1986, pp. 12, 25).
The basic idea behind Weber’s concept of “social economics” is the following:
not one, but several of the social sciences are needed to analyze economic phe-
nomena. All of these social sciences have their strengths and weaknesses, and the
one you choose depends on your purpose. If you want to look closely at a single
economic phenomena in the past, you use economic history; if you want to study a
typical set of economic actions, today or yesterday, then economic sociology; if
you want to lay bare the pure logic of interest-driven action during some period,
economic theory.
While Weber already knew by 1904 quite well what he meant by the notion of
“social economics” and how it differed from both theoretical economics of the
marginal utility school and the historically inspired analysis of Schmoller et al, it
was not until about a decade later that we, for the first time, find him using the term
“economic sociology.” The first recorded use of this term in Weber’s work, as far
as I have been able to establish, is from an essay published in 1916 in Archiv fir
Sozialwissenschaft und Sozialpolitik.4 And it was not until a few years later, in
1919- 1920, that Weber produced the only text he was ever to write exclusively in
economic sociology, namely “Sociological Categories of Economic Action,” or
Chapter 2 in Part 1 of Economy and Society. With some exaggeration, one could
say that if Weber had died in 19 18 rather than in 1920, he would never have pro-
duced a work in economic sociology. Or, more precisely, he would never have pro-
duced a work that he himself considered as exclusively falling into what he termed
“economic sociology” (“Wirtschafssoziologie”).
Many of us would, however, argue that Weber has indeed produced other works
in economic sociology besides Chapter 2 in Economy and Society, but the problem
then becomes how to distinguish between what we, in retrospect, think should be
given this label and what should not. It is possible to solve this problem in a rea-
sonable manner, but only if Weber’s relationship to economics is reexamined and
an effort is made to acquire a much better knowledge of Weber’s work on eco-
nomic topics than we currently possess. What I say in the next few pages is
intended as a beginning to such a reexamination; to expand our knowledge of
Weber and economics is something that has to be undertaken collectively and over
a period of years. I should also add that since the problem of reexamining Weber’s
relationship to economics is quite complex as well, and since I have very little
space at my disposal, what I say will no doubt be insufficient.
During his time as a student, Weber only took one single course in economics,
and this was in 1883 for Karl Knies, one of the founders of the German Historical
School of Economics. The course was called “General Economics (Theoretical
Economics)” and we know little about its content.” Presumably Knies covered the
same topics as in his popular textbook from these years; this means that he not only
lectured on economic phenomena per se, but also discussed the relationship of eco-
538 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

nomic phenomena to religion, to politics, and to law. In working on his two

dissertations, Weber became extremely well grounded in economic history and in
legal aspects of the economy, especially the history of commercial law. In a well-
known study of agricultural workers, published a short time after he had completed
his second dissertation, Weber also shows his skill in making a socio-economic
analysis of a contemporary problem. Not only does the economy affect society,
Weber argues, “the causal relationship [can also be] reversed” (Weber, 1892/1984,
pp. 920-921). He adds that “a purely economic standpoint” is “unrealistic”, and
that it should be complemented with other approaches (Weber in a related piece of
writing, as cited in Staff, 1989, pp. 27-28).
Scheduled for a career in law, which most likely would have ended up with
Weber getting a professorship in commercial law at the University of Berlin, he
nonetheless made a decision in 1894 to accept a position in economics at Freiburg
University. Weber’s formal title now became professor of economics and finance
(Nutionalti~~~~omie und Finanzwissenschuft). It was in Freiburg that Weber held
his famous inaugural lecture, which shocked many people through its strident,
nationalistic tone. A few years (and many publications ) later, Weber was pro-
moted to a chair in economics at the University of Heidelberg, replacing his one
and only teacher in economics, Karl Knies. Again, his title was professor in eco-
nomics and finance (Nutionuliikonomie und Finunzwissenschuft). Weber was to
work at Heidelberg until his nervous breakdown in the late 1890s and thereafter,
for some twenty years, as a private scholar. Financial difficulties forced him back
to the academic world just a few years before his death in 1920, first at the Univer-
sity of Vienna and then at the University of Munich. While his appointment in
Munich was still in economics, he did not want to teach economics and finance any
longer; instead he concentrated on economic history, economic sociology, and
sociology in general.
As a professor of economics and finance at the Universities of Freiburg and
Heidelberg, Weber lectured every year in his field between 1894 and 1899. During
this six year period, he taught circa 20 courses in economics and finance; I think it
is important to stress that Weber knew economics very well indeed and that eco-
nomics played an extremely important role during the early part of his scientific
career, more precisely, when he was in his early 30s. The titles of some of the
courses Weber taught are: “General Theoretical Economics,” “Finance,” “Money,
Banking, and the Stock Exchange, ” “The Stock Exchange and Its Legal Regula-
tion,” “Agrarian Policy,” and “The Social Question and the Labor Movement.”
Exactly what Weber said during these courses we, of course, do not know. He did,
however, publish a reading list to his general introductory course and also the
introductory part of his notes to this course, which were published under the title
Basic Outline of lectures on General (Theoretic) Economics (abbreviated, from
now on, as the Outline) a few years ago.
Max Weber’s Vision 539

The material on economics from this period is gradually becoming available

through the publication of Weber’s collected works that has been going on since
the early 1980s. Those who are interested in Weber’s economic sociology will, for
example, find much valuable information in a two volume-set which appeared a
few years ago and which contains not only Weber’s writings, but also accounts of
his public speeches on economic topics in the 1890s (Weber, 1993).
During the first couple of years after his recovery (usually set to circa 1903)
Weber produced a number of items on economic topics. There is, first and fore-
most, his provocative and brilliant thesis in The Protestant Ethic and the Spirit of
Capitalism (1904- 1905; revised 1920). Several of his methodological papers were
also written during this period, not only the one on objectivity from 1904 but also
an essay that historians of modern economic thought consider to be Weber’s only
real contribution to economic theory. This is an essay which appeared in 1908,
entitled “Marginal Utility Theory and ‘The Fundamental Law of Psychophysics”’
(Weber, 1908/1975). Weber here argues that marginal utility theory is based on
human experience of an everyday character and not on psychology. The same year
as this article appeared, Weber also published a long study of factory work (The
Psychophysics of Labor), and the next year a superb socio-economic history of
antiquity, which has been translated into English as The Agrarian Sociology of
Ancient Civilizations.
It was around 19 10 that Weber began to produce works that he explicitly termed
“sociological”, and it was also at this point that he decided to try to set sociology
on a sound conceptual foundation (cf. Bendix & Roth, 1971, p. 37). Weber’s two
giant projects from the 1910s the editing of a handbook in economics and the writ-
ing of a work on economic ethic and religion, are both of relevance to economic
sociology. According to Weber, the work on economic ethic primarily constitutes
a contribution to the sociology of religion, but also a minor contribution to eco-
nomic sociology. The handbook in economics is so central to Weber’s economic
sociology and represents such a complex project that it deserves a special discus-
sion.
In 1908, Weber accepted the position of editor for a huge handbook in econom-
ics, which was to replace another work of this type that had become oldfashioned
and out of date.6 Weber, it soon became clear, saw the handbook as an opportunity
to realize his vision of economics and drew up an extremely ambitious plan for
what it was to contain. The basic idea was to focus on modern capitalism and to
analyze this type of economy from a number of angles. Weber wanted to include
sections on the different branches of the capitalist economy, such as industry,
finance, agriculture, and mining, as well as on the relationship of the capitalist
economy to the state, the legal system, the geographic surroundings, and the like.
There were also to be theoretical contributions on the economy as well as on the
relationship of the economy to society, nature, technology, and similar topics. In
brief, not only was the handbook, entitled Grundriss der Soziuliikonomik, to cover
540 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

the economy, but also phenomena that influenced the economy, and phenomena
that were influenced by the economy.
Weber originally engaged some forty economists to carry out this project, and
he made an effort to include people from different schools of thought in econom-
ics: analytically oriented economists (such as Wieser and Schumpeter) as well as
historically oriented economists (such as Bticher and the great majority of the con-
tributors). Together, these economists produced something like 5,000 pages of text
in more than a dozen large volumes during the period 1914-1930. Weber signed
himself up for a large number of articles, for which he could not find any author,
and also for nearly all of a section entitled Economy and Society. According to the
plan from 1914, Weber’s part of Economy and Society was called “The Economy
and the Social Orders and Powers,” and it was to cover the relationship between
the economy and a number of social institutions, such as law, religious communi-
ties, and political communities.7
When Weber was just about finished with his work entitled “The Economy
and the Social Orders and Powers,” World War I broke out and Weber more or
less stopped working on the handbook. After the war, he decided that his earlier
texts from 1910-1914 needed to be totally rewritten. Weber now wanted the
whole thing to be “shorter” and “more textbook like,” but more importantly, he
now also wanted to add what he called a Wirtschuftssoziologie (Winkelmann,
1986, p. 46). By this, he meant that he wanted to write a sociological analysis of
the economy itself, and during 1919-1920, he did precisely this. The result was
Chapter 2 in Part 1 of what we today know as Economy and Society (although
its proper title, to repeat, is “The Economy and the Social Orders and Powers”);
it deserves to be pointed out that this chapter had not been part of the original
plan for the handbook. Just before his death, Weber had sent off Part 1 of his
contribution to the publisher, and this means that this particular section of Econ-
omy and Society looks exactly how Weber wanted it to look.8 What Weber
wanted the rest of his contribution to be, we do not know; the main bulk of
Economy and Society (in German as well as in English, Spanish, French, and so
on) simply consists of material that Weber’s different editors put together (under
an erroneous title) after his death. If you look at the current English edition of
Economy and Society, the first 300 pages are consequently bona fide material in
the sense that Weber had given his approval for publication (albeit under a dif-
ferent title); the remaining 1200 pages, however, consist of a mixture of early
manuscripts intended for the handbook plus perhaps some material that should
not be there at all. The bulk of these one thousand and plus pages would in all
likelihood have been rewritten, condensed, and included in The Economy and
the Social Orders and Powers; hence, they are of great interest to economic
sociology, even if they are not what Weber himself wanted to publish under
this title.
Max Weber's Vision 541

WEBER’S CONTRIBUTION TO ECONOMIC SOCIOLOGY

Early or Presociological Works (189Os-1910)

It should at this point be clear that the emphasis in my account of Weber’s eco-
nomic sociology is on his later works, more precisely, on what he accomplished in
this field between 1910 and 1920. Weber’s two most important contributions to
economic sociology, from this perspective, are consequently Economy and Socie~
and The Economic Ethics of the World Religions. To some extent, however, I am
exaggerating my point in order to put an end to the old, automatic habit of seeing
The Protestant Ethic as Weber’s key contribution to economic sociology, and the
equally questionable tendency to view Weber’s production as if it somehow
evolved naturally or according to some original plan from his dissertations and
onwards. This belittles Weber’s later accomplishments, and we would do well
today if we reversed the error and looked at Weber’s work before 1910 in the light
of what he accomplished later.
A thick volume could be written on Weber’s many and important contributions
to economic sociology before 1910, but the only two works that I would like to
comment on in this short essay are Weber’s Outline from the 1890s and his essay
on objectivity from 1904. Both of these have a generality to them, in so far as eco-
nomic analysis is concerned, which makes them quite special; there is furthermore
the fact that their potential contribution to economic sociology has been ignored.
Weber’s lecture notes have not been analyzed much in the secondary literature and
have usually been seen as an example of the dry and somewhat oldfashioned type
of scholarship that Weber was involved with until he let loose with The Protestant
Ethic. And the essay on objectivity has typically been viewed as an essay in the
methodology of the cultural sciences rather than as a programmatic statement
about economic analysis, which is primarily what it is.
Weber’s Outline from the 1890s is a dense and rich text, which deserves to be
read with great care and a scholarly magnifying glass, as it were. It contains in
embryo many of the key concepts that some twenty years later were to reemerge
Weber’s economic sociology in Chapter 2 of Economy and Society. Indeed, in all
of Weber’s writings, there is not one that is more similar to the crucial Chapter 2
(“Sociological Categories of Economic Action”) than the Outline. What differen-
tiates the Outline from this chapter is primarily that the concepts which can be
found in the former text have been given a distinct, sociological twist in the lat-
ter. It would appear, in other words, that when Weber wrote Chapter 2 in 1919-
1920, he used some of the notes he had prepared in the 1890s for his courses in
economics.
It may well be true that the Outline can make more of a contribution to our under-
standing of Weber’s economic sociology through its conceptual similarities to
Chapter 2 than through its sociological analysis. This text, however, also gives us
a sense for how well Weber understood economic theory and how he tried to bal-
542 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

ante the abstract insights of theoretical economics with insights based on empirical
material. Weber knew of the works of people like Jevons, Marshall and Walras;
terms such as marginal utility and elasticity can be found in his lectures. His descrip-
tion in the Outline of homo economicus is famous for its sharpness and accuracy;
and Weber deserves to get some of the praise that has been heaped on Frank Knight
for the very same accomplishment Knight carried out some twenty years later.9
As opposed to Knight, however, Weber also noted the historical dimension of
homo economicus and pointed out that this artificial figure is a product of Western
civilization at a certain stage of its development. Throughout the Outline, Weber
tries to balance what he calls “abstract theory” (economic theory, in today’s lan-
guage) against “realistic theory” (or what we can perhaps call empirically oriented
economics). Part of the Outline consists, for example, of lectures on economic his-
tory of such a universal sweep that they bring to mind Weber’s General Economic
History (1919-1920). Weber also introduces empirical facts into his discussion of
economic-theoretical problems, such as the formation of prices. The question of
price, he points out, can be discussed as a purely theoretical-economic problem,
but also as a practical-empirical problem (Weber, 1990, pp. 52-53). When “the
theoretical price” is decided, he says, what matters are the needs of the buyer,
ranked according to the principle of marginal utility. But when “the empirical
price” is determined, you also have to take into consideration such factors as the
economic struggle between different actors, imperfections in the market, and the
historical formation of needs.
When one compares the Outline from the 1890s to the objectivity essay from
1904, it is easy to see how much Weber’s thought had progressed during the few
years that separate the two works. In the Outline, Weber argues against an objec-
tivistic version of economics and notes at one point that “[tlhe human viewpoint is
decisive; economics is not the science of nature and its qualities, but of people and
their needs” (Weber, 1990, p. 32). In the objectivity essay, on the other hand,
Weber draws on his theory of the cultural sciences and states that people invest
what happens with some special meaning, depending on their “cognitive interest.”
He writes as follows:

The quality of an event as a ‘socio-economic’ event is not something which it possesses

‘objectively’. It is rather conditioned by the orientation of our cognitive interest, as it
arises from the specific cultural significance which we attribute to the particular event
in the special case (Weber, 1904/1949, p. 64).

A second point on which the objectivity essay shows theoretical progress, in

relation to the Outline, is when it comes to the problem of how to conceptualize
what topics economics should deal with. In the Outline, Weber says that the econ-
omist should study economic phenomena (which he defines very carefully) but
also, as he phrases it, “the relationship of the economy to other cultural phenom-
ena, especially the law and the state” (Weber, 1990, pp. 10-l 1). In the objectivity
Max Weber’s Vision 543

essay, Weber similarly argues that the economist should study a very broad area,
but he now also adds a useful terminology for how to conceptualize and divide up
the subject area of economics. The terms that Weber uses are “economicphenom-
ena, ” “economically conditioned phenomena,” and “economically relevant phe-
nomena” (Weber, 19040949, pp. 64-66). While the first of these categories is
easy enough to understand, “economically conditioned phenomena” is Weber’s
term for those phenomena which partly (but only partly) can be explained through
the influence of economic factors. Religious experiences, for example, are shaped
by the economic position of the believer. “Economically relevant phenomena” is
Weber’s term for phenomena which are not economic in themselves, but which
influence economic phenomena. The example that immediately comes to mind is
again from the area of religion, namely the way that ascetic Protestantism, accord-
ing to Weber, helped to form the mentality of modem capitalism during the 16th
and 17th centuries. Mentioning The Protestant Ethic also makes us realize the link
that exists between Weber’s famous study and the objectivity essay. Both were
written at the same time and draw on very similar ideas.
The objectivity essay also contains a very interesting discussion of economic
theory, which on some points goes beyond the material we can find in the Outline.
Economic theory can improve the more empirically oriented forms of economics,
Weber argues, through its insistence on the analytical element, especially the way
in which it constructs categories (“ideal types”). But Weber is also careful to point
out the limitations of economic theory and why it can only be an aide, not the
exclusive method, in analysis of economic phenomena. The image of the world
that one can find in economic theory is, for example, totally artificial and consists
of “a cosmos without contradictions” (Weber, 1904/1988, p. 89). Weber further-
more warns against seeing marginal utility theory as the solution to all problems in
economics, and jokingly suggests that this type of theory is itself “subsumable
under the ‘law of marginal utility”’ (Weber, 1904/1949, p. 89). Most importantly,
however, Weber insists that “the socio-economic science” has as its ultimate goal
to analyze empirical reality, not to construct abstract categories without any empir-
ical content. Social economics, in his famous phrase, should be a “science of real-
ity” (“Wirklichkeitswissenschaft”; Weber, 1904/1949, p. 72).

late or Sociological Works (191 O-1920)

Weber’s mature works in economic sociology consist of the material he put
together during the 1910s under the title Collected Essays in the Sociology of Reli-
gion and his own contribution to the handbook in economics, Economy and Soci-
ety. The former work includes a revised version of The Protestant Ethic, a
complementary essay on the Protestant sects, and, first and foremost, material
related to Weber’s project on the economic ethics of the world religions. The Col-
lected Essays in the Sociology of Religion is centered around Weber’s important
concept of “economic ethic” and contains a wealth of interesting ideas and analy-
544 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

ses in economic sociology. Since so little attention has been paid to The Economic
Ethics of the World Religions from the viewpoint of economic sociology, there
exist good reasons to analyze Weber’s work from this viewpoint. In this paper,
however, I shall instead concentrate on Economy and Society, and the main reason
for this is that it contains, as I see it, Weber’s most general statement about what
economic sociology should be studying and how it should go about its work. Econ-
omy and Society contains, in brief, a guide to the field of economic sociology and
how to analyze something from the perspective of economic sociology. Weber, to
recall, began his contribution to the handbook in economics by concentrating on
the relationship of the economy to what he called “the social orders and powers”
(“die gesellschaftlichen Ordnungen und Miichte”). What he meant by this expres-
sion we know reasonably well from his correspondence and the fairly detailed
plans for the handbook that he put together; it covers such phenomena as the law,
the state, religious communities, and so on (see e.g. Schluchter, 1981, pp. xxv-
xxvi; Schluchter, 1989, pp. 466-468; 1998). In 1919-1920 he then added, to repeat
once more, a sociological analysis of the economy itself, and decided to rewrite his
contribution in a more textbook fashion. The skeletal structure of Weber’s eco-
nomic sociology in Economy and Society, I suggest, looks like the following:

1. The Economy;
2. The Economy and Politics:
3. The Economy and Law;
4. The Economy and Religion; and
5. The Economy and Various Other Phenomena (Culture, Geography, Human
Biology, Population, and so on).

The advantage of depicting the structure of Weber’s economic sociology in

Economy and Society in this manner is, among other things, that it makes it easier
to get a handle on his work and to sort its various arguments into clear and distinct
categories. I will illustrate what one can accomplish by proceeding in this manner
by looking at the two first categories, I. The Economy, and 2. The Economy and
Politics. For a fuller accounts of these categories, as well as an account of the other
three categories, the reader is referred elsewhere.‘n
The analysis of the economy, as it can be found in Chapter 2 of Economy and
Society, is very systematic, and Weber begins by presenting the basic unit in eco-
nomic sociology: economic social action. Setting aside some terminological accu-
racy as well as some conceptual precision in order to summarize Weber’s
perspective in a few words, I suggest that Weber essentially views economic social
action as (1) action by an individual, which is (2) primarily driven by material
interests (but sometimes also by ideal interests) and to some extent by tradition and
sentiments. Economic social action is furthermore (3) aimed at utility, and (4)
other actors are always taken into account.
Max Weber’s Vision 545

A. Economic Theory
(economic action)

Interests
(mainly
material)

6. Sociology
(social action)
/ktor A
--------_______
-------..-s 0ther-n

habit inWe& emotions

(material
and ideal)

C. Economic Sociology
(economic sociel action)

Actor A
------_*______ > utlliity
-----___
---------_* tiera&=

To look at the differences between the approaches of economic sociology and

economic theory is instructive and helps show what is distinctive about the socio-
logical approach. In economic theory, the actor is exclusively driven by material
interests but his/her behavior is not necessarily oriented to the behavior of other
actors; tradition and emotions play no role either (see Figure 1). The only type of
actions that are analyzed in economic theory are consequently those that are purely
economic; the relationships of the economy to politics, to law, to religion, and so
546 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

by individuals

economic economic actions with

relationshios no mutual orientation

closed economic open economic

relationships relationships

economically oriented dosed economic relationships

OrganipltionS without enforcement by a staff

on are ignored. We can summarize Weber’s position in the following way. Eco-
nomic sociology, as opposed to economic theory, takes social structure into
account and also looks at the impact of tradition and emotions on economic
actions. It furthermore looks at economically relevant phenomena as well as eco-
nomically conditioned phenomena, not just at economic phenomena.
Using economic social action as his foundation, Weber then proceeds in a very
systematic fashion in Chapter 2 of Economy and Society to construct concepts for
more complicated economic phenomena than the actions of a single individual.
When two actors direct their economic social actions at each other, they produce
what Weber calls an economic social relationship. These relationships can be open
or closed. A certain type of economic relationship constitutes what Weber calls an
economic organization. These organizations can in their turn be divided up into a
number of categories (see Figure 2).
Max Weber’s Vision 547

Central to Weber’s economic sociology in Chapter 2 is also a concern with

capitalism. Weber essentially counterposes two types of economies against each
other: those that are static and aim at rent and wealth, and those that are
dynamic and aim at profit and capital. In the latter, the concept of opportunity
(“Chance”) is crucial; the profitmaking action is, in principle, a type of action
that is oriented to the exploitation of opportunities in the market. A very useful
typology for different kinds of capitalism is also presented: “rational capital-
ism,” “political capitalism,” and “traditional commercial capitalism.“’ ’ The last
of these three categories represents a kind of capitalism that has existed very far
back in history and which consists of fairly systematic forms of trade and
money change. Political capitalism essentially means profitmaking through
political contacts or under direct political protection, and it can be found in
antiquity as well as in the modem world. Rational capitalism is what we today
sometimes call free market capitalism. The main actor here is not the typical
merchant (as in traditional commercial capitalism) or the political-economic
operator (as in political capitalism), but the modem enterprise, led by an entre-
preneur (“the moving spirit”), and oriented to the exploitation of market oppor-
tunities (see Figure 3).
In discussing the relationship of the economy to politics, Weber touches on a
large number of topics, such as the economy and democracy, the economy and the
state, the economy and socialism, and the economy and political authority or dom-
ination. It is in analyzing the last of these topics, the relationship between the econ-
omy and political authority and domination, that Weber makes his most important
contributions to this type of analysis, and it is to this topic that he devotes a full
chapter in Part 1 of Economy and Society (“The Types of Legitimate Domination
[Herrschuft]“). As all students of Weber’s work know, Weber distinguished
between three different forms of domination: charismatic domination, traditional
domination, and legal domination. It is also well known that to each of these forms
there answers a different type of staff. The charismatic leader has a number of dis-
ciples or followers; the modem “legal” leader has a bureaucracy; the traditional
leader usually has to rely on a rather primitive and ad hoc kind of administration.
What is much less known is that according to Weber, there is also an economic
dimension to political domination. The different types of staff have, for example,
to be paid for, and the three main types of political domination all effect the econ-
omy in crucial ways.
Social phenomena characterized by charismatic domination are, in all brevity,
anti-economic and hostile to taking any economic considerations whatsoever
into account. Once they enter the process of routinization, however, they have to
make peace with the existing economic order. Followers or disciples of the char-
ismatic leader typically live by donations or booty. In its radical form, a charis-
matic movement is hostile to all forms of systematic economic activity. Once it
is routinized, it tends towards more traditional and conservative forms, in the
548 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/l 998

CAPITALISM

RATIONAL POULlCAL TRADITIONAL

CAPITAUSM CAPITAUSM COMMERCIAL
CAPITALISM

Figure 3. The Main Types of Capitalism and the Principal Modes

of Capitalist Orientation of Profit-Making, according to Weber
(931 in Chapter 2 of Economy and Society)

economy as well as in politics. Legal domination is typically served by a bureau-

cracy, in which the officials are each paid a salary and have a career. The
bureaucracy is paid for through taxation. Legal domination is the only form of
authority which is hospitable to rational capitalism. Traditional domination rep-
resents a more complex case than either charismatic domination or legal domina-
tion and there exists some important differences between its two major forms
(patrimonialism and feudalism). The ethos of feudalism is that of the warrior and
is consequently hostile to all forms of systematic moneymaking. The feudal ruler
typically wants to expand his empire through war and is not interested in trade
or industry. The patrimonial ruler, on the other hand, needs a treasure from
which to pay his staff and may therefore encourage political capitalism or tradi-
tional commercial capitalism in order to raise some money. The arbitrary ele-
ment in patrimonialism, however, makes it incompatible with rational
capitalism (see Figure 4).
Max Weber’s Vision 549

CliARlSMATlC
TRAOITIONAL AND TRADITIONAL
LEGAL CHAAlSMATlC DOMINATION: DOMINATION:
WMINAIlCN DOMINATION PATHlMONlALlSM FEUDAUSM

NATURE OF obsdience is obedience is obedience is due contract of fealty

LEGITIMATION to the law inspired by the to me senctfty of between lord and
and to rules, extraordinary tradition; there is vassal; a mixture
not to character of a corresponding of traditional and
persons me leader loyalty to the charismattc
leader elements

TYPE OF bureaucracy; followers from house- small-scale

ADMINISTRATION the official is and disciples hold staff to administration,
trained and who later more advanced similar to
has a career become more officials with patrimonial staff
and a sense like normal mostly ad hoc but with a
of duty offtcials as and stereotyped distinct status
a result of tasks element to it;
routinization the vassal has
especially military
duties

MEANS To PAY taxation; booty, donations, from me rulers’ tributes and

FOR ME the offtcial and the like own resources services from
ADMlNISTRATlON gets a salary pay for me or treasury: the subjects:
AN0 TO and possibly needs of the me official fiefs to me
COMPENSATE a pension ‘officials” first eats at the vassals, while
THE OFFICIALS before routiniration ruler’s table, the minor officials
leads to other then gets a get paid as in
forms of benefice patrimonialism
compensation

EFFECT ON THE indispensable initialty hostile hostile to the ethos of

ECONOMY, to rationaf to all forms of rational captalism feudalism
ESPECIALLY ON capitalism systematic because of its goes against all
THE RISE OF through its economic actfvity: arbitrary element types of
RATIONAL predictability: when routinizad. positive to captalism:
CAPlTAUSM hostile to usually a economic deeply conservative
political conservative traditionalism effect on the
capitalism force and to political economy
capitalism
550 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

WEBER’S ECONOMIC SOCIOLOGY TODAY

It is now time to address the question, what can Weber’s economic sociology teach
us today? In my opinion, some of the typologies that have been presented in this
paper were innovative in Weber’s days and are still very useful today. Many more
concepts and typologies of a similar nature can be located in Weber’s work as well.
But there also exist some other and more general qualities to Weber’s economic
sociology, which are very interesting, and I shall try to bring these out by compar-
ing Weber’s approach to the one that can be found in today’s economic sociology.
(For a schematic version of the argument, see Tables 1 and 2).
One difference between today’s economic sociology (or New Economic Sociol-
ogy) and Weber’s economic sociology is that the role of interest is accentuated in
the latter, but not in the former. This becomes clear in a comparison of the basic
unit of analysis in the two approaches. Weber, as we know, uses a modified version
of interest theory, and the basic unit in his economic sociology is interest-driven
action, aimed at utility and oriented to other actors. The facts that other actors are
taken into account, that tradition and sentiments may influence the action and that
interests can be material as well as ideal, all help to modify the interest approach
and make Weber’s approach flexible and sophisticated.
The basic unit of analysis in New Economic Sociology, in contrast, is that eco-
nomic action has to be “embedded.” To embed economic action means to explain
it. Much of the popularity of this approach comes from Mark Granovetter’s excel-
lent article from 1985 entitled “Economic Action and Social Structure: The Prob-
lem of Embdeddedness.” The way Granovetter carries out the analysis is
exemplary; and to him, embeddedness means something very precise, namely that
economic action is structured through the networks to which the actor belongs.
Granovetter refers explicitly to Weber in his article, and in his hand the Weberian
project and that of New Economic Sociology become virtually one and the same.
Very often when the term embeddedness is used in today’s economic sociology,
however, it is not very clear what it means, except that it somehow has to do with
“society” and the “social.” Attention is drawn away from economic action per se-
that is, from interest-driven action-and directed at the embedding, which now
becomes the most important part of the analysis. When this happens, the result is
often unsatisfactory and the Weberian approach, according to which economic
action is shaped by interest (but not exclusively so), constitutes a more effective
tool of analysis and yields a more realistic explanation.
Something similar, it can be added, tends to happen when another favorite
concept in New Economic Sociology is used, namely “the social construction of
the economy.” Again, when this type of analysis is carried out in a stringent man-
ner, and where the link to interest is made explicit, there is nothing to criticize.
However, the role of interest is often neglected, and one gets the impression that
anything economical can be “socially constructed” whichever way the actors
want. This, of course, is wrong. Even though it may be true that people socially
Max Weber’s Vision 551

Table 1. The Weberian Approach to Economic Sociology: Basic Principles

The basic unit ofanalysisis economic action, defined as action which is oriented to the behavior of
others.
The analysis starts in principle with the individual (methodological individualism) who takes the
behavior of others into account; and from here more complex forms of social (economic) actions
are constructed.

Economic action is presumed to be rational, until otherwise proven.

Economic action, which is social, is assumed to be driven by interests, which are ideal as well as
material. When empirical reality does not fit the rational model, another type of explanation is
sought, based e.g. on traditional or affectual action.

Struggle and domination are endemic to economic life.

Struggle pervades economic life, and one reason for thisis that actors are driven by their interests in
a situation of scarcity. Domination characterizes most economic organizations and also the political
system within which the capitalist economy exists.

Not on/y economic behavior should be analyzed, but also behavior which is economical/y relevant and
economically conditioned.
Economic sociology looks not only at economic phenomena but also at the way that these are influ-
enced by non-economic phenomena (“economically relevant phenomena”) and how non-eco-
nomic phenomena are influenced by economic phenomena (“economically conditioned
phenomena”). What should be at the center of economic sociology is the development of capital-
ism-in the West and elsewhere.

Economic sociology should cooperate with economic theory, economic history and other dpproaches-
within the framework of social economics.
Economic phenomena can only be analyzed in an exhaustive manner by a combination of different
approdches in the so&l sciences, each of which has its place to fill (primarily economic theory, eco-
nomic history, and economic sociology).

construct their economies, they are not free to construct them in whatever way
they want. If someone, for example, engages in the wrong type of economic
action, “the men with the spiked helmets” (as Weber used to call them) will
appear. Or, if the state tries to forbid certain economic actions, black markets will
soon appear.
New Economic Sociology and Weberian economic sociology also differ in their
attitude to rationality. Contemporary sociologists often despair at the way that
economists use this concept, with rationality meaning that the actors maximize
profit (or utility) and also have perfect information, and draw the conclusion from
this that the concept of rationality is not of much use in an analysis. Weber had a
very different approach and argued for what I view as a non-dogmatic use of ratio-
nality in sociology. In analyzing any economic event, Weber says in Economy and
Society, we should start with the assumption of rational action (Weber, 192 l- 1922/
1978, pp. 6-7). If it then turns out that what happens in reality deviates from the
552 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

Table 2. The Approach of Contemporary Economic Sociology:

Basic Principles

I. konomic behavior is a/ways embedded in social structure.

It is essential to embed or reinsert economic behavior into its original social context and thereby to
explain it. The concept of cmbeddedness comes from the work of Karl Polanyi and was popularized
by Mark Cranovetter in a programmatic article from 1985 in The American louma/ ofSociology.
II. The economy and its basic institutions can be conceptualized as a form of sooal construction.
The notion of social construction comes from a well-known work in the sociology of knowledge by
Peter Berger and Thomas Luckmann, The Social Construction of Reality (1966), and has become
popular in many branches of contemporary sociology, including economic sociology. The economy
can be socially constructed via networks (Cranovetter), but also via other types of social structures.

III, Rationality is not suitable as a point of departure in economic socio/ogy since it makes totd//y unredkstic
assumptions.
Rational choice analysis is built on utterly unrealistic assumptions; the actors are, for example, iso-
lated from one another dnd have perfect information. Social structure needs to be introduced into
economic analysis.

IV. The main thrust of economic sociology should be to analyze economic phenomena, not so much phe-
nomena at the mtersection of the economy and other parts of society.
In deliberate opposition to yesterday’s economic sociology, it is argued thdt economic sociology
should address the same problems as the economists, namely those problems which are situated at
the very center of the economy, such as prices, investments decisions, and the like.

V. Little cooperation is envkoned with mainstream economists, while economic hktory is largely ignored.
A few developments in mainstream economics are followed with interest, such as transaction cost
analysis and New Institutional Economics in general; more sympathy is probably felt for traditional
economic history which, however, is not followed very closely.

rational model, we have to introduce something else into the analysis to account
for the discrepancy. Sociology, after all, is a Wirklichkeitswissenschaft.
I would be inclined to support Weber’s position on this point and defend his
non-dogmatic use of the rationality assumption. To assume that the actor is rational
means to me, and perhaps to Weber as well, not so much that the actor has perfect
information, but that the actor typically attempts to realize his or her interests. Note
again that these interests can be ideal or material (or, which is roughly the same
thing, that the action can be value rational or instrumentally rational). The actions
of other actors have to be taken into account. Also of great importance is that if the
model of rational action is not found to agree with empirical reality, it has to be
modified or rejected.
A third item on which New Economic Sociology and Weberian economic soci-
ology disagree, if only to some degree, has to do with the subject area of economic
sociology. There is a certain tendency in New Economic Sociology to focus on the
core of the economy and to downplay the relationship of the economy to the other
spheres in society (probably in reaction to the older forms of economic sociology
in which the economy itself was often ignored and where the task of economic
Max Weber’s Vision 553

sociology was seen as accounting for what went on at the intersection of the econ-
omy and society). This problem does not exist for Weberian economic sociology,
as we know from the objectivity essay from 1904 and from Economy and Society.
Economic sociology, in Weber’s version, deals not only with economic phenom-
ena, but also with economically conditioned phenomena and economically rele-
vant phenomena.
It should also be noticed that Weber’s main concern was always with capitalism
and that he became increasingly concerned with understanding what happened
outside the West. In New Economic Sociology, on the other hand, there is less con-
cern with the evolution of capitalism per se, and this represents something of a
weakness in my mind. There also seems to exist little interest to follow what is
happening outside of the United States, Europe, and a few other quickly growing
economies. If Weber was ahead of his time by virtue of his deep interest in non-
Western economies, it would seem that New Economic Sociology is behind its
time and that we still have to wait for a truly global economic sociology.
By pointing to areas where I think that Weber’s type of economic sociology is
ahead of, or preferable to New Economic Sociology, I do not mean to intimate that
we should replace one with the other. The advances that New Economic Sociology
has made during its ten to fifteen years of existence are outstanding, especially in
the areas of networks, economic organizations, and the cultural dimension of the
economy (see e.g. Swedberg, 1997b). Nonetheless, Weber’s work represents the
richest heritage that we have in economic sociology, and it is clear that more of an
effort should be made to benefit from its riches. To end with a bit of a firebrand, I
also think that Weber’s general approach, which I would characterize as an effort
to meld social analysis with interest analysis, is what economic sociology should
be primarily (but not exclusively) all about. It is precisely by introducing the social
into economic analysis that sociology can make a truly important and creative con-
tribution to the general science of economics or to Sozialiikonomik, as Weber liked
to call it.

NOTES

1. The following paper was presented at the Portuguese Conference on Economic Sociology,
March 4-6, 1998 in Lisbon, Portugal. I am grateful for comments to Cecilia Swedberg, Patrik
Aspers, and Rafael Marquez. Many of the ideas can also be found in my book MUX Weber and
fhe Idea of Economic Sociology (1998a).
2. See e.g. Bruhns (1996), Tribe (1989, 1995), Eisermann (1993), Mommsen (1993), Nau ( 1997).
and Schluchter (1988). Exceptions (economic sociologists interested in Weber) include e.g.
Holten and Turner (1989), and Gislain and Steiner (1995). For more references relating to
Weber’s economic sociology as well as a bibliographical guide to this kind of literature, see
Swedberg (1998b).
3. For documentation on this point, as well as a much fuller argument on many of the points in this
paper, see Richard Swedberg, Max Weber and the Idea of Economic Sociology (I 998a).
554 THE JOURNAL OF SOCIO-ECONOMICS Vol. 27/No. 4/1998

4. “Wirtschafts-Soziologie”-Weber, “Die Wirtschaftsethik der Weltreligionen. Religionssoziol-

ogische Skizzen. Einleitung,” Archiv fir Sozialwissenschaft und Sozialpolitik 4 (19 15 19 16) p.
1 (note 1).
5. “Allgemeine Volkswirtschaftslehre (theoretische Nationalokonomie).”
6. The history of this handbook has not been written. In the meantime, see, however, Swedberg
(1997a). The two best accounts for the coming into being of Economy and Society (which was
one part of the handbook) are Winkelmann (1986) and Schluchter (1998).
7. “Die Wirtschaft und die gesellschaftlichen Ordnungen und Machte,” translated in the current
edition of Economy and Society as “The Economy and The Arena of the Normative and De
Facto Powers.”
8. The correct title, to repeat, would have been The Economy and the Social Order ofPowers. In
1947, Talcott Parsons published translation of Part 1 of Economy and Society under the title The
Theory of Social and Economic Organization. The person who took the initiative to have that
translation made was Friedrich von Hayek.
9. See the famous section on homo economicus in Frank Knight (192 J/197 1, pp. 7679).
10. My book Max Weber and the Idea of Economic Sociology is structured in the manner just pre-
sented, starting with Weber’s analysis of the economy and ending with his analysis of the rela-
tionship between the economy, on the one hand, and geography, human biology, science and so
on, on the other.
11. Weber does not have a term for the activities I here term “traditional commercial capitalism.”
For more details, see Figure 3.

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