ECONOMIC SOCIOLOGY – CONCEPTS TO BE KNOWN LIST (BASED ON SLIDES)

CHAPTER 1: SOCIOLOGY'S STATUS

Science: 4 dimensions: internal consistency, evidence, reduction of error, social organization.

Scientific cycle: theory -> deduction -> evidence -> induction.

Induction: drawing general conclusions from specific observations (“bottom-up approach”).

Deduction: drawing specific conclusions from general observations (“top-down approach”).

Reduction of error: science should have a direction of reduction of errors, not about making no
mistakes. No validity in the age of an idea.

Experiment: systematically manipulating one or more independent variables to observe their effect
on a dependent variable, under controlled conditions, to establish cause-and-effect relationships.

Quasi-experiment: comparing groups that are not randomly distributed.

Natural experiment: “accidental” experiment from real world, without intervention.

OXO-model: framework for experimental design. 3 elements: randomized 2 groups (experimental vs

control); former gets a treatment, latter not; observation (measurement) before and after stimulus.

Experimental group: receiving treatment.

Control group: not receiving treatment.

Solomon experiment: a method that controls for the effects of pre-testing by using four groups: one
with pre-test and treatment, one with treatment only, one with pre-test only, and one with neither.

Placebo: treatment given to the control group that has no therapeutic effect, used to measure the
true effect of the experimental treatment.

Spurious correlation: no certainty about the causal status of correlates.

Common causation: two variables appear related, but a third variable explains both.

Reverse causality: inferring from a relation that A causes B, while it is the reverse.

Action: behaviour that is meaningfully oriented and involves intentional decision-making or purpose

Social action: behaviour that considers the actions and reactions of other individuals, influencing or
being influenced by societal interactions.

Instrumentally rational action: behaviour driven by goals or ends, where individuals weigh costs and
benefits to achieve a specific objective efficiently.

Value rational action: behaviour guided by a conscious belief in the inherent value of a certain
behaviour or goal, regardless of its outcomes.

Affectual action: behaviour motivated by emotional responses or feelings rather than rational
deliberation or strategic goals.

Traditional action: behaviour guided by established customs, habits, or routines, where behaviour is
performed because it is customary or has always been done that way.
written by Barnabás Polgár

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CHAPTER 2: SOCIAL CONSTRUCTION

Social construction: society collectively creates and defines concepts, norms, and roles, shaping
reality through shared understanding and interactions.

Hedonic reversal: phenomenon where initially negative or painful experiences are later perceived as
positive or pleasurable, often through processes like nostalgia or personal growth.

World-openness: people can become all different beings regardless of the same genetic code.

(Social) role: what is expected from certain structured positions in life.

The sick role: in general people are expected to work. Exceptions: unemployed, sick, certain
conditions. 4 characteristics: ‘Normal’ expectations suspended (if legitimised by medical doctor);
Innocence; Duty to see sickness as undesired; Duty to seek competent professional help.

Thomas theorem: “If men define situations as real, they are real in their consequences”. Behaviour is
based on our interpretations of reality, not on reality itself.

Virgin cleansing myth: belief that sexual intercourse with a (young) virgin heals you from HIV
infection, or from other STI’s.

Externalization: individuals project their internal thoughts, feelings, and actions into the social world,
shaping external reality through interaction and expression.

Internalization: individuals absorb and integrate societal norms, values, and roles into their own
beliefs and behaviour, making them part of their internal world.

Objectivation: stage in the social construction process where abstract concepts and subjective
experiences become perceived as objective, external realities, often solidifying as social facts.

‘Looking glass self’: learning is process of mirroring how we think the others perceive us.

Deviance: behaviours, beliefs, or conditions that violate societal norms and expectations, often
resulting in social disapproval or sanction.

Cultural goals: objectives that a society values and encourages its members to pursue.

Institutionalized means: the accepted ways prescribed by society for achieving cultural goals.

Type of adaptation Cultural goals Inst. means

Conformity + +
Innovation + -
Ritualism - +
Retreatism - -
Rebellion +/- +/-

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CHAPTER 3: SOCIAL CHANGE

Modernization: long term process that creates a contemporary society, which differs fundamentally
compared to a ‘traditional’ one. The social consequences of an increase in the ratio of inanimate to
animate power.

Modernization ratio: 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑏𝑦 𝑖𝑛𝑎𝑛𝑖𝑚𝑎𝑡𝑒 𝑝𝑜𝑤𝑒𝑟/𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝑏𝑦 𝑎𝑛𝑖𝑚𝑎𝑡𝑒 𝑝𝑜𝑤𝑒𝑟

Specialization (individual): division of labour. Tasks, people who perform them become more
specialized.

Chain of interdependence: mutual reliance among individuals or groups within a society.

Specialization (institutional): differentiation. The institutions of society have become more

specialized, clustered in social systems.

Differentiation: social structures and roles become more complex and distinct, allowing for
specialized functions and institutions to emerge and coexist within a society.

Social role: what is expected from certain structured positions in life.

Egalitarianism: idea that people had intrinsically the same (“equal”) rights.

Literacy: ability to read and write at a sufficient level.

Class: system of social stratification based on economic status, wealth, occupation, and social
relations, shaping individuals' access to resources, opportunities, and power within society.

Bourgeoisie: owners of the means of production.

Proletariat: those who had to sell their labour.

EGP class scheme: today is used. Distinction between service class, working class and self-employed,
and more fine-grained class distinctions.

Violence monopoly: the state is the entity to use force solely and legitimately.

Sovereignty: supreme authority of a state to govern itself without external interference.

Imagined communities: socially constructed nations or groups that exist in the collective imagination
of their members.

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CHAPTER 4: INTRODUCTION: ECONOMIC ORGANISATION
(only sections 1-2 are exam materials)

Economic organization: firms and other organized forms. OR the organization of the whole economy.

Capitalism: the pursuit of profit, forever renewed profit.

Redistribution: reallocation of resources and wealth within a society, to reduce inequality.

Reciprocity: mutual exchange of goods.

Exchange: process of trading.

Rational capitalism: markets for some sectors, co-existence with autarkic systems.

Political capitalism: predatory political profits, profit through force/domination, unusual deals with
political authorities.

Traditional capitalism: free market trade and production, speculation, and finance.

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CHAPTER 5: IDEAL TYPICAL MARKETS AND THE GENESIS OF CAPITALISM

Market expansion: process by which businesses or economic activities extend their reach into new
geographic areas, demographic groups, or sectors, often increasing their influence and scale within
the economy. Markets give rise to superordinate and subordinate markets.

Superordinate market: higher order markets, “trade in trade”.

➢ provide an illustration: politics and warfare markets or status goods. warfare leads to
growth of production markets at a lower level.

Subordinate market: dependent markets, operates within the constraints and influences of a
superordinate market.

➢ provide an illustration: example: organic food market is a subordinate to the larger

grocery market.

Status goods: goods of distinction.

➢ provide an illustration: example: a luxury watch (Rolex e.g.) is not just a timekeeping
device, but a symbol of wealth.

Kinship markets: alliances through intermarriage. Property form: women.

Sexual property: rights over sexual access and relationships, like marriage

Slave markets: slavery is a form of exchange, not production. Property form: people (slaves).

Agrarian-coercive markets: society based upon agricultural production and a militarized state.

Rent coercion: use of power or force to extract economic rent from individuals.

Tax coercion: compulsory extraction of taxes by a governing authority.

Potlatch: distribution or destruction of wealth to assert status, redistribute resources.

Corporate religious capitalism: religious organizations engage in economic activities similar to

corporations, while maintaining religious objectives and identities.

Socialist autarky: the socialist state aims for self-sufficiency, minimizing dependence on external
trade and focusing on internal production and distribution.

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CHAPTER 6: REPUTATION MECHANISMS

Asymmetrical society: inequalities in power, wealth, or status, leading to imbalanced social

structures and interactions.

Embeddedness: economic activities and decisions are deeply rooted in and influenced by social
relationships, networks, and institutions, rather than being purely driven by individual rationality or
market mechanisms.

➢ network: interconnected, information passed to third parties, ability to punish through

reduced opportunities with 3rd parties.
➢ social: societal norms, information about past exchanges, ability to punish later.

Institutional regulation: rules of the game: legal action, but also other agreements how to settle
disputes.

➢ exogenous: laws and courts.

➢ endogenous: self-organized institutions, e.g. by means of commitment (rent deposits).

Shadow of the future (repeated exchange): cooperation more often arises if agents are aware of
trustworthiness to pay off in future transactions.

Shadow of the past (reputational incentives): information about the perceived and rated activities of
a person/organization (trustee) with third parties.

Trust: the trustor’s belief regarding the trustee’s trustworthiness.

Trustee: entrusted by trustor.

Trustor: taking the risk.

Trust problem: uncertainty for the truster.

Unintended consequences: downside of a reputation system, outcomes of actions that were not
intended. E.g. testing at school -> avoiding less favoured students.

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CHAPTER 7: THE ECONOMIC SOCIOLOGY OF POVERTY

Experimental poverty research: randomized experiments (with treated/control groups) that

investigate which policies are effective in reducing poverty in low-income countries (Banerjee &
Duflo: Microfinancing in Indian slums).

Human capital: education, skills.

Poverty: not having enough income to spend on basic needs such as food, clothing, and shelter. OR
having too few resources or capabilities to participate fully in a society.

Poverty measure: identifying poverty line expressed in resources and allowing for differentiation.

➢ Absolute: fixed definition of needs.

USA: families with an annual cash income below a fixed threshold based on food needs.
➢ Relative: reflects changes in the overall standard of living of the society in terms of wages
and prices.
EU: incomes below 60% of the median income.
➢ Consumption-based: household consumption could be a better proxy for the family’s
permanent income or command over resources. It can account for savings usage, access to
anti-poverty programs and ownership of durable goods.
E.g. agriculture countries, measuring income is difficult.
➢ Subjective: impressions of individuals regarding their own economic position or well-being,
relative to some norm (Leyden School approach).
E.g. survey.
➢ Self-reliance: not having the capability to be independent in a market economy.
E.g. net earning capacity of a household.
➢ Multidimensional: reflects several aspects of personal well-being besides income.
E.g. Measures of material deprivation as “social exclusion”; UN’s aggregated
multidimensional poverty index.

Poverty concerns: “Why should we care about poverty?”

➢ Instrumental: consequences and costs that poverty, even when not personally experienced,
can have on society as a whole. For example, poor people are more likely to develop health
problems and their frequent reliance on the healthcare system incurs costs to other
contributors and government spending.
➢ Normative: a social justice (fairness) and moral obligations. John Rawls: in a just society,
individuals are part of an egalitarian economic system, while humanitarian views see poverty
as something to care about because of the suffering it causes.

Poverty line: minimum level of well-being.

Poverty rate: the percentage of people living in poverty.

Poverty trap: societal mechanisms that push them into poverty and prevent them from escaping it.

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CHAPTER 8: NORMS, VALUES, AND MORAL ECONOMY

Rational egoism: optimal outcomes are based on people’s pursuit of self-interest (Adam Smith).

Norm: a principles people acknowledge, and sometimes follow, about the proper, appropriate, or
“moral” way to conduct themselves, and these are socially shared and enforced informally by others.

Value: referring to the good life and good society. It is more general, from which the more specific
and situationally oriented norms are inferred.

Ultimatum games: P1 dividing the attributed money, and P2 accepts (both get the agreed sum) or
rejects (nobody gets money).
Prediction (P2 accepts if sum>0) is mostly wrong.
Modal offers 50%, mean 40-45%. P2 often rejects offers <20-30%.

Dictator games: P1 is given a fixed amount of money and told to decide how much is shared with P2.
Prediction (selfishness axiom is that no sharing takes place) is wrong.
Modal offer is often 0, means are usually 20-30%.

Community of practice: occupational groups may harbour identity and norm-building

Code of ethics: set of formal guidelines and principles that outline acceptable behaviours.

Keiretsu: (JP) informal business groups with interlocking companies (tied by networks, rituals, and
symbols)

Market integration: the extent to which people depend on market transactions for their livelihood.

Payoffs to cooperation: the degree to which economic life depends on cooperation with non-kin.

The Panglossian principle: Ellickson: “Members of a close-knit group develop and maintain norms
whose content serves to maximise the aggregate welfare that members obtain in their workaday
affairs with one another”.

Moral economy: Thompson: historically formed and shared norms about fair prices and supply are
based on traditional rights and customs, giving local communities prior rights to local production.
These norms guide collective action. A struggle was put up between this view and the 18th century
emerging reality of market-centred institutions and ideologies. Food riots are an outcome of these
struggle.
Mau: “The collectively validated beliefs about just distribution and exchanges rooted in both the
community and the past.”

Reference transactions: standard interactions that establish expectations for fairness and norms.

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CHAPTER 9: SOCIAL TRUST IN THE ECONOMY

Trustor: taking the risk.

Trustee: entrusted by trustor.

Generalised trust (GST): larger circle of “others” in society, trust in others over a wide array of
contexts and relations.

Particularised trust (PST): primary groups or other strong ties with others; a specific domain or type
of relations wherein trust exists.

Social learning: socialisation, both early life experiences and later in life create the GST propensity.

Radius of trust: extent of social circles within which individuals place their trust.

Trust object: entity, person, group, or system in which trust is placed, serving as the recipient of trust.

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CHAPTER 10: MORALS AND MARKETS
(section 2c is not exam material)

Utopian: idealized vision of society where social, political, and economic structures creates perfect
harmony and equality.

Dystopian: theoretical society characterized by oppressive, dehumanizing, or totalitarian conditions.

The ‘liberal dream’: markets have a positive moral impact on individuals and societies.

Rational egoist: idea that individuals maximize wealth for themselves.

Spillover: a state/event in one context creates a similar state/event in a seemingly unrelated context.

‘Doux commerce’ thesis: engagement in trade creates spillovers into action and interaction styles in
the whole of society.

Signalling: actions or behaviours that communicate information about an individual's qualities,

intentions, or social status to others, often to gain approval, trust, or social advantage.

Creative destruction: innovations and technologies replace outdated industries and economic
practices, but often causing short-term disruption and job losses.

The ‘commodified nightmare’: dystopian view of marketization: market expansion fosters greed,
exploitation, and a monetized worldview.

Coercion: inequality and economic necessity destroy freedom in market exchange.

Conspicuousness: lavish consumption in order to impress.

Perversity thesis: attempts to improve social or economic conditions often backfire, producing the
opposite effects.

Commodity fetishism: the idea that a commodity is a thing, autonomous from its producer.

Populism: a political doctrine or communicative style.

Market populism: central feature is the contrast in interests between the common people (the
audience for whom the populist message is intended) and the elite.

Census suffrage: a voting system where the right to vote is restricted based on certain criteria, such
as property ownership, income level, or tax payments, rather than universal suffrage.

Realist view: some cultures enable, others inhibit the development of market society.

Principal-agent problem: one party (the agent) is tasked with making decisions on behalf of another
party (the principal), but their interests may not align.

Voluntarist view: one can implement institutional elements promoting markets anywhere.

CHAPTER 11: INTRODUCTION: THE STATE AND THE ECONOMY

(Chapter 11 is not exam material)

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CHAPTER 12: SOCIOLOGY OF TAXATION

Tax state: a government that primarily relies on the taxation as its main source of revenue.

Patrimonialism: a no distinction between private and public property.

Gini-index: measure of inequality, easy to understand, mainly sensitive to changes in middle-class.

Labour supply elasticity: measures the responsiveness of the amount of labour to changes in wages.

➢ provide an illustration: in case of high labour supply elasticity, top income earners would
respond to rate cuts by working harder.

Rent-seeking: behaviour that improves the welfare of the agent at the expense of the welfare of
someone else.

➢ provide an illustration: protection rackets; theft; management putting effort in increasing

their share of turnover/profit, but not the total volume.

Tax credit: amount subtracted directly from the total tax owed, reducing the overall tax liability.

Negative income tax: transfer cash payment to persons with a low income based on income tax
declarations, avoiding social stigma.

Stigma: individuals or groups are devalued or discriminated against based on certain characteristics
or conditions, leading to marginalization and negative social identity.

Pre-tax income: market income, gross revenues earned by market transaction.

Post-tax income: income after deduction of taxes and adding negative tax.

➢ provide an illustration: earn $30k (pre-tax income), pay $10k taxes, post-tax income is $20k.

Post-transfer income: available income after deduction of taxes and adding all benefits.

➢ provide an illustration: post-tax income is $20k, receives $5k benefits, post-transfer is $25k.

Transfers: payments or benefits provided by the government to individuals or households.

➢ provide an illustration: social security checks, unemployment benefits, or food assistance.

Proportionate tax: tax liability and income grow in equal proportion.

Progressive tax: rise in income with 1 point → tax liability rises >1 point.

Regressive tax: opposite of progressive tax.

Means-tested benefits: available only to individuals or families who fall below a certain threshold.

➢ provide an illustration: receive transfers only if the household income is below X.

Universal benefits: available all individuals or families, without means-testing.

➢ provide an illustration: universal healthcare systems provide medical services to all citizens

Implicit tax: acquiring an income situation that exceeds the threshold, leads to a lower increase in
realized income.

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(Quasi)-public good: generally available to all but may have some restrictions or diminish in
availability as more people use it.

➢ provide an illustration: Public parks are accessible to everyone, but overuse can lead to
congestion, reducing their enjoyment for others.

Cost-benefit model of the state: analytical approach that evaluates government policies and actions
by comparing the expected benefits to society against the associated costs, guiding decision-making
towards maximizing social welfare.

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CHAPTER 13: THE INFORMAL ECONOMY

Informal economy: economic actions not regulated nor protected by the state at large

➢ provide an illustration: street vendor selling food without license or not paying taxes.

Unrecorded economy: activities that are not recorded by governmental statistical agencies; all the
added value that is not comprised directly in national accounts.

➢ provide an illustration: unpaid household work, volunteer work, community transactions.

Illegal (or criminal) economy: production and distribution of legally prohibited commodities.

➢ provide an illustration: selling drugs.

Unreported economy: informal activities that circumvent fiscal rules.

➢ provide an illustration: underreporting sales to evade taxes.

Survival/subsistence: poverty driven subsistence work.

Dependent exploitation: cost reduction through (partial) reliance on informal work.

Growth: advantage through efficient organization.

Embeddedness: economic activities are deeply integrated within and influenced by social
relationships, institutions, and cultural norms.

Regulatory control: enforcement of rules and standards by authorities to oversee and manage
economic activities.

➢ provide an illustration: health inspectors checking restaurants meet food safety regulations.

Enforcement: authorities implement and ensure adherence to laws and regulations.

➢ provide an illustration: police issuing fines for traffic violations to enforce road safety laws.

Deterrence: discouraging undesirable behaviour by instilling fear of consequences or penalties.

➢ provide an illustration: presence of surveillance cameras in stores to deter shoplifting.

Social capital: networks, relationships, and norms that facilitate cooperation and mutual support
within a community.

➢ provide an illustration: neighbours forming a watch group to enhance local safety.

Indirect indicator approach: estimating the proportion of population performing informal activity.

The macroeconomic discrepancy approach: depict the underground economy as proportion of GDP.

The currency ratio approach: discrepancy between monetary mass and currency in circulation.

The direct approach: direct survey of consumers: the purchases of the household.

Social desirability bias: people lie about their informal activities because they fear prosecution.

Unit nonresponse: people refuse to cooperate to the survey about informal activities.

Item nonresponse: people refrain from answering the question about informal activities.

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