rational

351

COMMENTS pt is "aso­ roeconomic of individu­ :oods. Con­ ket concept lriables that ch variables oney. How­ nonmaterial status, and the concept about such arriage and and 1974b); ide (Hamer­ (1975), for which she ; utility from :ommodities good which . Childness good that is ted" to social >mics deals >cial market ed upon the is simply a , may have I goods and le notion of ) obtain an cellent mea­ en used in lay in which . For exam­ ;ommitment natives A is tain interac­ ,vith rational c and Emer­ I with social e concept of i!ek only to 'espective of ners develop mitments to 1978:728). " mality is not ather, it is a of theories. :iOslated into lomic theory !rtain choice one point in iame choice ons at sub­ :e itself may 'y common may choose

to date a man who beats her rather than date another man-but the choice is considered "rational" within the economic framework, if it is consistent over time. Thus, Cook and Emerson are incorrect in their conclusion that the assumption of rationality in economic theory precludes the study of social interac­ tions involving commitments between actors. We are not saying that the Cook and Emer­ son article is unimportant. We think it is very important. However, should social power and equity researchers abandon the use of eco­ nomic theory, as Cook and Emerson would have us do, we feel a serious mistake will be made. It is not that microeconomic theory is fully developed for all our interests (it is not) but, rather, that some of its concepts can yield great theoretical flexibility for sociological theory. Michael W. Martin Jane Sell

microeconomic theory. They make two basic claims, that: (1) our formulation (while it does "advance important notions involved in sociological exchange theory and equity theory") does not "solve problems heretofore unsolvable by microeconomic theory"; and (2) we imply that "economic theory should be dis­ regarded." Before dealing with the specific issue of indeterminacy in a bilateral monopoly, let us deal with their second claim. Should exchange theorists "abandon" eco­ nomic theory? Our discussion of bilateral

Political Economy 81:813-46. 1974a "A theory of marriage: part II." Journal of Political Economy 82:11-26. 1974b "A theory of social interactions." Journal of Political Economy 82: 1063-93.

monopoly was included in order to clarify how our work articulates with and builds upon eco­ "nomic conceptions of exchange. We believe Martin and Sell's claims (1) that we imply in our analysis economic theory should be dis­ regarded" and (2) that power and equity re­ searchers should "abandon the use of eco­ nomic theory" are gross misrepresentations of our position. In our article we state: "There is in Economics a well developed science of ex­ change. Therefore, if 'social' exchange theorists are going to build another science of exchange, it is incumbent upon them to relate their work to economic theory" (Cook and Emerson, 1978: 721-2, fn. 3; emphasis added). Our article represents our attempt to relate the two bodies of theory and to develop further social exchange· theory grounded upon eco­ nomic theory.

Bowley, A. L. 1928 "On bilateral monopoly." Economic Journal

Is microeconomic theory indeterminate in the case of bilateral monopoly? Martin and

Texas A&M University REFERENCES Becker, Gary S. . 1973 "A theory of marriage: part I." Journal of

38:651-9.

Coddington, Alan 1968 Theories of the Bargaining Process. Chicago: Aldine. Cook, Karen A. and R. M. Emerson 1978 "Power, equity and commitment in ex­ change networks." American Sociological Review 43:721-39. Gramm, Wendy Lee 1975 "Household utility maximization and the working wife." American Journal of Eco­ nomics 65:90-100. Hamermesh, Daniel S. and Neal M. Soss 1974 "An economic theory of suicide." Journal of Political Economy 82:83-98. Schwartz, Robert A. 1970 Personal philanthropic contributions." Journal of Political Economy 78:1264-91. ••

DOES MICROECONOMIC THEORY NEED A DEFENSE? (A REPLY TO MARTIN AND SELL)·

Martin and Sell in their comment on "Power, Equity and Commitment in Exchange Networks" take issue with our treatment of • Direct all communications to: Karen S. Cook: Department of Sociology; University of Washington; Seattle, WA 98195.

••

Sell also take issue with our statement that "conventional microeconomic theory is inde­ terminate" in regard to the outcomes' of ex­ changes in a bilateral monopoly. They argue that economic theory is not indeterminate in this case. Many economists would disagree with Martin and Sell. For example, Fellner (1959: 10) concludes: "after the establishment of a range of possible values, a different appa­ ratus (i.e.; something other than economic theory) should be employed in the discussion of what is likely to happen within that range" (emphasis added). That "different apparatus" in our article is social exchange theory. Essentially, Martin and Sell argue that microeconomic theory can solve the problem of indeterminacy in a bilateral monopoly by including additional assumptions and variables in the theory, such as information on bargain­ ing expectations, bargaining skill, consistency in decision making, and so forth. That the in­ corporation of additional information (either sociological variables or extra assumptions) re­ solves the indeterminacy problem is hardly s u r p r i s i n g to e i t h e r s o c i o l og i s t s o r economists. I Coddington (1968: 11) agrees with I

If we are satisfied with making an arbitrary set of

352

AMERICAN SOCIOLOGICAL REVIEW

us on this point: "The existence of indetenni­ nacy seems to imply that we cannot achieve a proper understanding of bilateral monopoly without introducing further concepts into the theoretical framework." This is precisely the point we make in our article; if additional as­ sumptions regarding power and equity are specified for two-party exchanges, the problem of indeterminacy is resolved. That is, with the addition of assumptions based upon power­ dependence theory and equity theory within sociology, derivations can be made regarding the exchange outcomes in what economists refer to as a bilateral monopoly. Economists Ferguson and Gould (1975:288) state that "the information the economist has' is not sufficient to determine_the precise mar­ ket solution . .. the solution is based on bar­ gaining skills and other personal characteristics anterior to the realm of economic analysis" (emphasis added). What is defined by some economists as "anterior" to the realm of eco­ nomics has in fact been the subject of extensive examination within sociology (i.e., social ex­ change theory, bargaining theory within social psychology, power-dependence theory and equity theory). That economists like Becker (1974) have recently "rediscovered" social interaction is a credit to the field of economics. As Becker (1974: 1091) explains it: Probably the main explanation for the neglect of social interaction by economists ... [is due to] excessive attention to formal developments during the last 70 years. As a consequence, even concepts considered to be important by earlier economists, such as social interactions, have been shunted aside.

Economic vs. Social Exchange Theory Concerning the scope of economic and social exchange theory, Martin and Sell fail to make a distinction between theory and concrete reality or between analytical distinctions and concrete differences. As Cook (1979) points out in her discussion of social vs. economic exchange theory, economists and sociologists tend to use different theoretical assumptions in their analysis of the same phenomenon. The dif­ ference resides in the nature of the theories being applied and not in the object of study.

assumptions, as Bowley' (1928) did, we can easily resolve the indeterminacy: For example, if we as­ sume that one party can determine both price and quantity (Why not assume this?), of course there's no indeterminacy. What we aim to do, however, is not to select arbitrarily a set of assumptions that are enough to solve the problem but to test the validity of these assumptions and to specify the conditions under which these assumptions hold.

For example, economists tend to focus upon single transactions, abstracted to a large de­ gree from the social context in which they occur in order to arrive at empirical estimates of important parameters such as price. Eco­ nomic actors are typically buyers and sellers isolated in theory (i.e., the perfectly competi­ tive market) from organizational contexts and continuing social relations. In contrast, social exchange theory, as formulated by Emerson (1972a; 1972b) and others, treats the exchange relation as the primary unit of analysis, where the exchange relation is defined as a series of interrelated transactions over time. Thus sociological theory focuses upon relatively en­ during exchange relations among actors which lead to other social processes of theoretical interest (e.g., for Blau, 1964, social differentia­ t ion among e x change p a r t n e r s ; or f o r Malinowski, 1922 and Ekeh, 1974, social sol­ idarity and societal integration). The emphasis upon enduring social relations led us to extend social exchange theory beyond the dyad to ex­ change networks in order to allow for the analysis of exchange principles in networks of social relations. Martin and Sell seem to have overlooked completely the primary purpose and the empirical work reported in our article which analyzes four-party exchange networks, not dyadic exchanges.

change reI analysis i treated as lations or assumptiOJ this persp cillary to 1 the motiv not that inJ behavior c help expla assuming t time expla attempts t( exchange one fashio we refer t( or not. OUI empiricall} is exercise exchange (degree of an import: which com partners (n such coml tional").

The "Asocial" Market, Rationality and Commitment Martin and Sell infer an erroneous conclu­ sion from the following statement in our arti­ cle: "Conventional microeconomic theory . . . is a theory organized around individual deci­

sion making in an asocial market composed of many traders." They infer that we believe economic theory is restricted to the analysis of material goods. Nowhere in the article do we make this claim. Martin and Sell equate asocial with material goods; we do not. In fact, as Cook (1979) has argued, the primary distinction between eco­ nomic theory and social exchange theory does not reside in the nature of the actors (i.e., ra­ tional or not), the nature of the resources (material or social), or the nature of the mar­ kets (perfect vs. imperfect) involved. Further, as Emerson (1976; 1980) and Cook (1979) have argued, the issue of the "rational actor" is fundamentally a question of the psychology of the actors involved and is not a question often dealt with empirically by either economists or sociologists. The notion is usually included in the theory as a "simplifying assumption," as Martin and Sell correctly point out. Emerson's (1972a; 1972b; 1976; 1980) position that the ex­

Becker, Gar 1974 "A of 1

*

Richard

COMMENTS focus upon a large de­ which they \1 estimates price. Eco­ and sellers ly competi­ )ntexts and trast, social 'y Emerson le exchange ysis, where

a series of ime. Thus

,

latively en­ ctors which theoretical differentia­ r s ; or for , social sol­ Ie emphasis lS to extend dyad to ex­ ow for the networks of em to have Lry purpose lour article ,e networks,

I

change relation should be the primary unit of analysis implies that "rationality" can be treated as a variable attribute of exchange re­ lations or exchange structures and not as an assumption about individual motives. From this perspective, motives, per se, become an­ cillary to the theory, and debates concerning the motives of the exchange participants are not that informative. Describing consistency in behavior over time as "rational" does not help explain the consistency at all; nor does assuming that people behave consistently over time explain why people do so. Our research attempts to specify the conditions under which exchange actors will behave consistently in one fashion or another regardless of whether we refer to their behavior patterns as rational or not. Our experiment is an attempt to specify empirically the conditions under which power is exercised and commitments emerge within exchange networks. The network structure (degree of power imbalance) can be viewed as an important determinant of the extent to which commitments emerge between exchange partners (regardless of whether or not we view such commitments as "rational" or "irra­ tional"). Karen S. Cook Mary R. Gillmore Toshio Yamagishi*

University of Washington

and

:ous conclu­ in our arti­ theory ... vidual deci­ ;omposed of omic theory :erial goods. e this claim. 'ith material k (1979) has etween eco­ theory does ors (i.e., ra­ e resources of the mar­ ed. Further, : (1979) have al actor" is iychology of lestion often ;;onomists or f included in lmption," as t. Emerson's 1 that the ex­

REFERENCES Becker, Gary S. 1974 "A theory of social interactions." Journal of Political Economy 82: 1063-93.

*

Richard M. Emerson is currently on leave.

353

Blau, Peter M. 1964

Exchange and Power in Social Life. New York: Wiley.

Bowley, A. L. 1928 "On bilateral monopoly." Economic Jour­ nal 38:651-9. Coddington, A. 1968 The ories of the Bar gaining Process. Chicago: Aldine. Cook, Karen S. 1979 "Exchange power and equity." Presented at the American Sociological Association Meeting, Boston, August, 1979. Cook, Karen S. and R. M. Emerson 1978 "Power, equity and commitment in ex­ change networks." American Sociological Review 43:721-39. Ekeh, Peter P. 1974 .Social Exchange Theory: The Two Tradi­ tions. Cambridge: Harvard University Press. Emerson, R. M. 1972a "Exchange theory, part I: a psychological basis for social exchange." Pp. 38-57 in J. Berger, M. Zelditch, Jr., and B. Anderson (eds.), Sociological Theories in Progress, Vol. 2. Boston: Houghton-Miftlin. 1972b "Exchange theory, part II: exchange rela­ tions and networks." Pp. 58-87 in J. Ber­ ger, M. Zelditch, Jr., and B. Anderson (eds.), Sociological Theories in Progress, Boston: Houghton-Miftlin. 1976 "Social exchange theory." Pp. 335-62 in A. Inkeles, J. Coleman, and N. Smelser (eds.). Annual Review of Sociology, Vol. 2. 1980 "Social exchange." In M. Rosenberg (ed.), Sociological Perspectives in Social Psy­ chology. Fellner, W. J. 1959 Competition Among the Few. New York: Knopf. Ferguson, C. E. and J. P. Gould 1975 M i c r o e c o n o m i c T h e o r y ( 4 t h e d . ) . Homewood, Ill.: Irwin. Malinowski, B. 1922 Argonauts of the Western Pacific. London: Routledge and Kegan Paul.