Rational Choice. Pba Dab. Imbalance (read Pab is greater than Pba and Dba is greater than Dab) V V

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1 Rational Choice George Homans Social Behavior as Exchange Exchange theory as alternative to Parsons grand theory. Base sociology on economics and behaviorist psychology (don t worry about the inside, meaning, intention, and all that). Held you could build a sociology on the psychological reductionism of punishment and reward. Richard M. Emerson Power Dependence Relations Pioneer in doing sociology in laboratory settings. Power as reciprocal social relation. A has power over B because B depends on A for something. Dependence and Power Prop 1. How much one depends on another is related to (1) how much you want things the other controls and (2) how available these things are through other means. Def 2. How much power A has over B is how much resistance by B A can overcome. Compare this to Weber s definition: power is capacity to get what you want despite other s resistance. Reciprocity/Symmetry Pab=Dba Pba=Dab Prop: Cost reduction will function to deepen/stabilize relations over and above balance Balance (the equals arrow indicates that the power derives from the dependence) Pab Dba Pba Dab Imbalance (read Pab is greater than Pba and Dba is greater than Dab) Pab Dba V V Pba Dab Recalling that the dependence comes from wanting something and not having alternative sources, there are four ways to bring this situation into balance: B can want what A provides less. Weaker member changes values, accepts situation, etc. B can find other ways to get what she wants. Weaker member branches out socially. A can want more what B provides Emerson: giving status to A. Hmmm. Not sure about this one.

2 A can lose access to other ways to get what she wants. Coalitions and group formation. Bs of the world unite! Example Pab Dba Pab Dba V V Pba Dab Pba Dab OPERATION 1: WITHDRAWAL Denial of dependency. Change your values to get away from disappointment and dependence. OPERATION 2: EXTENTION OF POWER NETWORK Diffuse dependency to new relationships. Form new B-C relation or add a D to the mix. OPERATION 4: COALITION FORMATION Different from 2 because it involves collapse of relation into group, corporate actor. Yields group norms (expectations of all) and role expectations (expectations of some). Authority emerges whenever one member reminds another of what the group expectations are. She speaks for the group not for herself. Only legitimate claims can be made. OPERATION 3: EMERGENCE OF STATUS Test Case? Can we apply this to why young girls become unmotivated (so to speak) regarding science and math? Peter Blau Formulation of Exchange Theory Coleman, James S. Human Capital and Social Capital Physical capital tools, machines, equipment. When raw materials and labor is added, these allow the production of value, wealth, etc. They help to multiply/expand the value of the other factors added to them. Human capital changing people so they have skills and capabilities that allow them to be productive

3 Loïc story. Hechter, Michael The Emergence of Cooperative Social Institutions Background Notes Questions Based on intro paragraphs, what IS an institution? Where do institutions come from? How do they come into being? From other institutions. But in state of nature? Yes, that s the problem. We want an endogamous solution. What are the two approaches or types of explanations that have been offered to problem of where institutions come from? invisible hand solidarity Explain, briefly, each. At 326a2 he says the invisible hand approach explains social institutions by saying they are Pareto efficient and that therefore no one has incentive to change them. I don t think he has it quite right. An advantage of this approach is that explanation is endogenous no need to invoke a force outside the system. Parsimony too. Fewer assumptions. Other approach says institutions are not spontaneous emergents from individual action but rather grow out of solidarity. Hechter says solidarity requires sharing common end. He then explains where common end comes from in rational choice terms. Two ways to go with solidaristic explanation, one interesting, one not. Not is imposed solidarity. Interesting is voluntaristic solidarity among relative equals. A cousin of social contract here. Invisible hand theorists often rely on repeated game theory but this only explains conventions not cooperative institutions. What are they? practice serving non-kin that enables them to reap surplus by agreeing to joint maximizing strategy otherwise unavailable because of absence or inappropriateness of markets (326b3). Hechter: difference is conventions don t deal with free-rider problem. Why doesn t repeated game theory do it? (contrary to Axlerod, Hardin, Taylor) Multiple equilibria. Unique solutions rest on assumption of perfect monitoring. Solidaristic explanations should be considered even though more assumptions. What are these assumptions?

4 Agreement on common end. Acceptance of corporate (group) obligations Establishment of social controls Can these three things be explained using simple assumptions of RCT? Hechter thinks so. How? First of all, depends on two individual capacities: Individuals want to provide themselves with jointly produced private goods Control: dissuade others from free-riding; assure others they are not shirking. What sorts of things are we talking about? A general term he uses is positive externalities what does this mean? Externality is a cost or benefit that falls to someone beyond the actor making a decision or taking an action. One category includes all manner of things you can t produce for yourself such as sharing risk through insurance, joining together for common defense, returns to scale through division of labor and the like, etc. There are lots of situations that throw up demand for joint goods. Production of public goods is a central problem in rational choice theory. Explain what this means. Private goods things you need for yourself will be produced or traded for by selfish individuals. Public goods things you cannot prevent others from partaking in, whether or not they contribute to their production are less easily guaranteed to a group. What is key feature that determines whether a good is public or private? Excludability can you control access to it? What is a free-rider problem? A good is collectively produced and its consumption is collective too. Three tiered free-rider problem. Decision-making, Initial constitution, Implementation. 1. Needs to be a plan showing what needs doing if the joint good is to be produced. But who will produce the design? Hechter smuggles in assumptions here when he says that getting over the hump of who ll design? is hard because person could always do something else. Solution: entrepreneurial behavior. Somebody takes a chance figuring they ll own the intellectual property. 2. Individuals have to choose a design. Rational individuals will want to pick the most promising design. Serious handwaving here. Very unsatisfactory.

5 3. Rational actors free-ride, but contingent cooperators those who will help if assured that others will (the assurance problem) may join if there s a way to deter free-riders. Suboptimal production of group goods leads to group unraveling. So, monitoring and sanctioning rules have to be adopted. But this is a collective action problem all its own. Hechter: key is visibility of production and distribution of joint good. Production Visibility Distribution Visibility Positive Externality. Where from? Larger pie from which individuals can take piece (328b8). Or existence of different kind of pie. Examples Hunters pool resources and efforts and produce more meat. Rotating credit associations. rational to set up controls. Hechter then describes this as a sort of unintended consequence: inadvertently provided themselves with a collective good (329a9). He says no free rider problem here but I don t think he is right. Who will really do what it takes to be vigilant? If everyone has to do it, don t we lose the value (or at least a good bit of it) of joining together in the first place? In any case, rational individuals will only invest in control up to the level of the benefit they expect to receive. Thus, expect no institutions for little stuff? Also omitted here is the fact that the individuals are engaged in lots and lots of these things at the same time. Limits on one s own monitoring capacities. Ostracism as ultimate sanction. Advantage of already organized groups. Prior investment in social capital creates structure that can be used. Big conclusion at 330a4: Changes in environment or demographics can heighten demand for joint goods and hence favor emergence of institutions. Examples Groups forming in drought times Second conclusion : Visibility necessary to prevent free-rider problems. visible the good cooperative institutions Examples Might expect bulky goods to be more associated with cooperative behaviors. DJR: Very little here that we don t get from Mancur Olson. But Hechter says it s different: focusing on selective incentives, he says these too are collective goods. How do you bootstrap the system? DJR: I say that formal controls and selective incentives are likely identical constructs mathematically.

6 Game Theory See attached.

7 Selected Rational Choice Concepts Capital stuff that let s a person produce more than she otherwise could Human capital know-how, skill Social capital relationships, trust, connections, favors owed, norms of reciprocity Physical capital plant, tools, equipment Cultural capital knowledge of styles, customs, valued symbols Game Theory study of how strategic interaction among rational players produce outcomes (Ross 2003), study of interactions with formalized incentive structures (Wikipedia 2004), study of how players make decisions when outcomes also depend on other players making independent decisions Two person game game with 2 players N-person game game with 3 or more players (non)zero-sum game zero sum game is one in which what one player wins the other loses. Non-zero sum games are those in which the size of the pot can change depending on the joint behavior of the players. Dominant strategy a strategy a rational player would follow regardless of what the opponent were to do. Equilibrium State of a system when the players have all completed their maximizing behavior it s a situation in which change is not likely to happen on the basis of anyone trying to further maximize. Nash equilibrium in game theory, an optimum strategy for all players in a game, in the sense that no one player can benefit by changing his strategy while all other players keep theirs the same. invisible hand originally from Adam Smith. The magic of order arising from uncoordinated individuals pursuing self-interest. Here one of two perspectives on rational choice Free Rider Problem a free rider is a person who benefits from a public good without making any contribution to its production. Example: those who listen to public radio but do not contribute. Public vs. Private Good. Is the product something that non-contributors can be prevented from consuming? If so it is excludable and a private good. The other case is non-excludable public goods. Exogenous caused by agent or factors outside the system. Here a theory contains ~ factors when its explanations rely on something outside the realm of the theory as when a rational choice theory depends on trust but cannot explain trust. Endogenous caused by agent or factors inside the system Externality An externality occurs in economics when a decision (for example, to pollute the atmosphere) causes costs or benefits to individuals or groups other than the person making the decision. In other words, the decision-maker does not bear all of the costs or reap all of

8 the gains from his action. [ Positive externalities, Negative externalities Pareto efficient equilibrium state of system from which all changes from the current setup would make at least one person worse off. A situation is Pareto-optimal if by reallocation you cannot make someone better off without making someone else worse off [ "We will say that the members of a collectivity enjoy maximium ophelimity in a certain position when it is impossible to find a way of moving from that position very slightly in such a manner that the ophelimity enjoyed by each of the individuals of that collectivity increases or decreases. That is to say, any small displacement in departing from that position necessarily has the effect of increasing the ophelimity which certain individuals enjoy, and decreasing that which others enjoy, of being agreeable to some, and disagreeable to others." (V. Pareto, 1906: p.261). A situation is not Pareto-optimal, then, if you can make someone better off without making anyone else worse off. Clearly, as a concept of "efficiency", Pareto-optimality may seem quite adequate, but as a concept of "optimal", in any ethical sense, it is definitely not sufficient. As Amartya Sen (1970) notes, an economy can be Pareto-optimal, yet still "perfectly disgusting" by any ethical standards. It is thus of crucial importance to recall that Pareto-optimality, then, is merely a descriptive term, a property of an allocation, and that, at least a priori, there are no ethical propositions about the desirability of such allocations inherent within that notion. Thus, there is nothing inherent in Pareto-optimality that implies the maximization of social welfare (which shall be dealt with later). A second important note to recall is that Pareto-optimality is a general equilibrium notion and thus quite dependent on what we wish to include. For instance, two particular countries may have Pareto-optimal allocations within themselves, but when allowance is made for the trading opportunities that exist between both countries, the general allocation is no longer Pareto-optimal. [