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Economic Determinism

ECONOMIC DETERMINISM

note:Although the following article has not been revised for this edition of the Encyclopedia, the substantive coverage is currently appropriate. The editors have provided a list of recent works at the end of the article to facilitate research and exploration of the topic.

Economic determinism refers to a kind of causality in which an economic variable x causes a condition of behavior y. This statement of direct causality contains very little actual economic determinism. But in stating that economic condition x is the most determining factor in causing behavior y, we have a model for economic determinism that is quite common in economics and sociology. This model appears in Weber's (1979) Economy and Society; in his discussion of domination he states:

Nor does domination utilize in every case economic power for its foundation and maintenance. But in the vast majority of cases, and indeed in the most important ones, this is just what happens in one way or another and often to such an extent that the mode of applying economic means for the purpose of maintaining domination, in turn exercises a determining influence on the structure of domina tion. (p. 942)

The same model of economic determinism appears in Louis Althusser's (1970) For Marx, where the social formation has multiple determinants, but "the economy is determinant in the last instance" (p. 113). Neither model has the economic as a monocausal determinant of society, but economic categories, such as the economic market for Weber, clearly are part of a central structuring determination for society.

This model predates both Weber and Althusser and has its origins in eighteenth-century free market liberalism. In The Federalist Papers, James Madison assumes economic interests as the chief motivation of the people. In The Wealth of Nations, for Adam Smith it is "that in commercial society every man thus lives by exchanging, or becomes in some measure, a merchant" (1976, p. 26). For Smith people are buyers and sellers involved in production and consumption, and human behavior is an unending series of economic exchanges. Individuals pursue their own self-interest in rational ways, and their own self-interest consists of profit, which is regulated by competition in a predominantly self-regulating free market. In the pursuit of economic self-interest the individual promotes the social good, "led by an invisible hand to promote an end which was no part of his intention" (p. 477). In Smith's model an individual's pursuit of economic profit automatically structures the good for all of society.

Smith assumes an economic person who is always acting to optimize economic advantages. People here are determined by economic motives, that is, to increase profits and decrease losses. Modern neoclassical economists, such as Milton Friedman and Gary Becker, have continued the tradition of Adam Smith. For them the only limitation on the free market model is the amount of information to which a rational actor has access. Since information is not perfect, mistakes can occur. But in the pursuit of profit a rational actor learns even from mistakes; mistakes therefore increase the amount of information that a rational actor acquires, thus increasing the chances of making correct choices in the future. Thus, the free market not only structures human behavior but determines the inevitability that these actors, in rationally pursuing profit, will acquire the information needed to produce profits continuously for themselves and to mold—even if unintentionally—the social good.

The model of economic determinism offers sociology an easily quantifiable object, a phenomenon that can be subjected to scientific procedures—observed, measured, tested, and verified. As a positivist social science, sociology requires a transhistorical and universal phenomenon such as the physical sciences have, and economic determinism provides it in economic concepts such as the market, money, the circulation of capital, and so forth. It allows sociologists to speak the language of science and to reduce all social phenomena to mathematical formulas.

All positivist social sciences use mathematical representations of social reality to understand society, and economic determinism is but one attempt at creating a scientific sociology. Still, the model has offered sociology a formula that possesses broad powers for explaining social factors and avoids problems of indeterminate multiple causes. This is what science traditionally means by lawfulness. These lawlike social categories are representations of social reality and provide a framework in which the aggregate behavior of individuals can be structured in terms of economic interests. This behavior is patterned and can be studied and subjected to scientific procedures. Thus, the model of economic determinism informs sociological analysis and research.

Exchange theory provides an example of a positivist methodology that is based on the model of economic determinism. In exchange theory, economic exchange is the determinant principle of behavior. George C. Homans, the originator of this form of analysis, combines this economic model with a behaviorist psychology, but the economic is the determining structure. In Social Behavior: Its Elementary Forms, Homans states, "Human behavior as a function of its payoff: in amount and kind it depends on the amount and kind of reward and punishment it fetches" (1961, p. 13). Human relations have been reduced to the exchange and circulation of commodities. Homans assumes that a social actor is an economic person existing in a free market where individuals make rational choices to maximize profits and reduce costs. This is stated partly in the language of behavioral psychology, but the conditions of economic exchange are dominant. Thus, Homans sounds more like Adam Smith than like B. F. Skinner when he writes "we define psychic profits as rewards less costs, and we argue that no exchange continues unless both parties are making a profit" (1961, p. 61).

This model allows Homans to analyze individuals who live in a group, make numerous rational choices, and yet live a stable, patterned life. Individuals calculating their possibilities and making rational choices are led by something like Smith's "invisible hand" to maintain group life in "practical equilibrium."

Homans believed that his analysis was a value-neutral attempt to expand the scope of a scientifically valid sociology of human behavior. But, while exchanges are an important aspect of human interaction, the reduction of all human behavior to elementary exchanges is problematic. Homans has universalized the relations of individuals in the capitalist marketplace, relations that are historically specific and not the basis of a universal psychology of human behavior. Homans's exchange theory is a conservative sociological theory in which pecuniary relations structure human behavior.

Another form of sociological analysis that uses the model of economic determinism is Marxist sociology. In Weber's The Protestant Ethic and the Spirit of Capitalism, Marx's analysis is called a "onesided materialistic" interpretation (1958, p. 183). Marx provides evidence for Weber's contention when he argues that the economic base determines the ideological superstructure. In the preface to A Contribution to the Critique of Political Economy, Marx writes that "the totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness" (1970, p. 20). This famous passage, containing what is known as the base-superstructure model, became the hallmark statement for economic determinist Marxists from the Second International (Marxist Workers Congress) in 1889 to the present.

But Marx himself was not an economic determinist, even though many of his followers were. Marx theorized about a world in which human relations were subsumed under capitalist relations of production. His central concern was revolutionary change, which depended on the formation of a revolutionary class that could wage war against the dominant classes. But for Marx, class was determined not by economic conditions alone but by community and cultural conditions as well. Thus, he writes in The Eighteenth Brumaire of Louis Bonaparte on whether "small holding peasants" are or are not a class:

In so far as millions of families live under economic conditions of existence that separate their mode of life, their interests and their culture from those of other classes and put them in hostile opposition to the latter, they form a class. In so far as there is merely interconnection among these small holding peasants, and the identity of their interests begets no community, no national bond and no political organization among them, they do not form a class. (Marx 1963, p. 124)

This is not "economics in the last instance" but a multivalent fitting together of a series of necessary conditions. Economic conditions are insufficient, and class formation and class struggle do not occur unless community occurs as well.

Later Marxists differ from Marx on a number of issues. First, many understand the base-super-structure model as a determinant condition of class. That is, class depends exclusively on the economic base for its formation. For Marx, however, it was an insufficient condition and a "moment" in his analysis of capitalism. Furthermore, economic determinist Marxists view class struggle as a secondary phenomenon, even though it is important. Finally, many Marxists have critiqued Marx's concept of class for its inability to predict revolutionary change with scientific accuracy. Erik Olin Wright, for instance, calls Marx's concept of class "vague" and "random"; it is much too relativistic for use as a neat, lawlike scientific formula. In his important book Classes, Wright preserves the Marxian tradition of the Second International and attempts to erect a positivist Marxist sociology whose propositions can be empirically verified. It is upon the base-superstructure model that Wright builds this science. As in exchange theory, Wright's model suggests that in capitalism rational actors make rational choices in pursuing their economic advantages. But Wright also attempts to build a scientific base for an analysis of class struggle, and in Classes he provides the causal link between capitalist exploitation and the actions of individuals in society. He does this by demonstrating that class structure is determined by property relations, a central determinant in modern society:

Class structure is of pervasive importance in contemporary social life. The control over society's productive assets determines the fundamental material interests of actors and heavily shapes the capacities of both individuals and collectivities to pursue their interests. The fact that a substantial portion of the population may be relatively comfortable materially does not negate the fact that their capacities and interests remain bound up with property relations and the associated processes of exploitation. (Wright 1985, pp. 285–286)

Economic factors are crucial for understanding the social world. But society is not reducible to economic determinants; it is too complex to be reduced to a set of economic propositions, or any single determinant set of propositions, that imply unilinear causality. Still, economic determinism is seductive because it offers a theory that has broad explanatory powers, is easily quantifiable, and can be reduced to simple mathematical formulas. Thus, it is not surprising to see it continue and expand, seemingly unaware of its limitations. For instance, George Gilder writes in Wealth and Poverty, "The man's earnings, unlike the woman's, will determine not only his standard of living but also his possibilities for marriage and children—whether he can be a sexual man" (1981, p. 109). The reduction of sex and marriage to economic determinants is highly problematic, both as science and as common sense. Yet generalizations about social life wholly based on economic causes persist, under the names of both science and myth. One can restate Max Weber's warning against monocausal theories in the social sciences:

But it is, of course, not my aim to substitute for a one-sided materialistic an equally one-sided spiritualistic causal interpretation of culture and of history. Each is equally possible, but each if it does not serve as the preparation, but as the conclusion of an investigation accomplishes equally little in the interest of historical truth. (1958, p. 183)


(see also: Capitalism; Economic Sociology; Marxist Sociology)


references

Albritton, Robert 1995 "Political Economy in the Making: A Response." Rethinking Marxism 8:125–129.

Aronowitz, Stanley 1988 Science as Power: Discourse and Ideology in Modern Society. Minneapolis: University of Minnesota Press.

Dahms, Harry F. 1997 "Theory in Weberian Marxism: Patterns of Critical Social Theory in Lukacs and Habermas." Sociological Theory 15:181–214.

Feenberg, Andrew 1992 "Subversive Rationalization: Technology, Power, and Democracy." Inquiry 35:3–4.

Gilder, George 1982 Wealth and Poverty. New York: Bantam.

Hodgson, Geoffrey M. 1995 "Varieties of Capitalism from the Perspectives of Veblen and Marx." Journal of Economic Issues 29:575–584.

Kennedy, Paul M., Andrew Levine, Elliott Sober, and Erik-Olin Wright 1987 The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000. New York: Random House.

Homans, George C. 1961 Social Behavior: Its Elementary Forms. New York: Harcourt, Brace, and World.

Marx, Karl (1859) 1970 A Contribution to the Critique of Political Economy.

——(1852) 1963 The Eighteenth Brumaire of Louis Bonaparte. New York: International.

Rammert, Werner 1997 "New Rules of Sociological Method: Rethinking Technology Studies." British Journal of Sociology 48:171–191.

Resnick, Stephen A., and Richard D. Wolff 1987 Knowledge and Class: A Marxian Critique of Political Economy. Chicago: University of Chicago Press.

Sherman, Howard J. 1998. "Critique of the Critique: Analysis of Hodgson on Marx on Evolution." Review of Social Economy 56:47–58.

Smith, Adam 1976 An Inquiry into the Nature and Causes of the Wealth of Nations. Chicago: University of Chicago Press.

Weber, Max (1947) 1979 Economy and Society: An Outline of Interpretive Sociology. Guenther Roth and Claus Wittich, eds. and trans. Berkeley: University of California Press.

Wright Erik, O., Andrew Levine, and Elliott Sober 1992 Reconstructing Marxism: Essays on Explanation and the Theory of History. New York: Verso.

——1994 "Historical Materialism: Theory and Methodology." Science and Society 58:53–60.

——(1904–1905) 1958 The Protestant Ethic and the Spirit of Capitalism. New York: Scribners.

Wright, Erik Olin 1985 Classes. London: Verso.


William DiFazio

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