Society and Economic Organization Theories
The field of sociology is constantly looking for ways to explain and predict behavior in society in a holistic way. This search has taken the form of many different theories and models which propose distinct ways of thinking about how and why human societies form, evolve, and survive. A large part of this endeavor is examining how societies organize themselves, particularly with regards to the economic organization of labor, resources, and production. In this paper, I will discuss two theories which seek to explain the development of economic organization in societies: the institutional theory and the theory of rational-economic behavior.
Institutional theory is a concept formed by sociologist Talcott Parsons and economists Kenneth Arrow and Ronald Coase; it suggests that societies are highly organized in terms of their economic activities, based on institutes, organizations, and norms. These institutes are highly specialized, hierarchical structures which guide the production, distribution, and consumption of resources. This theory explains that the form and structure of economic organizations depend on the way resources are allocated and utilized, and how the production process is coordinated. This coordination is facilitated by laws, regulations, and social norms, which together create a complex institutional network of economic organizations. Institutional theory implies that economic organizations arise because of their rational economic motives and behavior, and as such, should be studied from a “sociological-economic” perspective.
The second theory, rational-economic behavior, is a concept derived from economist Adam Smith and political theorist Karl Marx. This theory implies that economic activities are governed by rational economic motives and behavior. That is, individuals in societies may make decisions based on their own material interest, but the overall development of economic organizations is an outcome of the collective choices of individuals. This theory suggests that societies develop and sustain economic organizations because of their rational economic motives and behavior. This could include the desire to maximize benefits (prices, profits, wages, etc.) and minimize costs (taxes, materials, etc.). This theory suggests that the survival of existing economic organizations and socioeconomic structures is dependent on their ability to retain and increase their competitive edge, since competition will always be present in any market.
In conclusion, the theories discussed in this paper help us to understand the formation of economic organizations and the associated economic activities that take place within societies. Institutional theory suggests that an economic organization is the result of complex and specialized structures and institutions, which shape and direct the economic activities in a given society. Rational-economic behavior theory suggests that economic activities are a result of the collective decisions and rational economic motives of individuals. Both of these theories attempt to explain the formation of economic organizations and associated economic activities, as well as suggest possible ways forward for the development of future economic organizations. Overall, understanding both theories can help us to better understand the role of economic organizations in a society and the ways in which they contribute to the formation and sustainability of socioeconomic systems.
