| Chapter I |
| THE PROBLEM: CURRENT SOCIO-LOGICAL THEORY AND SOME CENTRAL CONCEPTS
OF ECONOMICS |
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| The Problem | 1 |
| The theoretical and empirical interdependence of economics and the other
social sciences | 1 |
| Several economic examples of this interdependence: economic instability,
market structure, and economic development | 2 |
| The resources of the general theory of social systems for exploration of
this interdependence | 4 |
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| The Programme | 5 |
| The general view of the economy as a differentiated sub-system of society
| 5 |
| The programme necessary to establish this view | 7 |
| The programme outlined chapter by chapter | 7 |
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| Some Congruences Between Economic and Sociological Theory |
8 |
| A. Between Categories | 8 |
| The general nature of the social system | 8 |
| Supply and demand as a special case of the performance-sanction schema | 9 |
| The goods-services classification as a special case of the classification
of physical vs. social objects and the classification of quality and performance
| 11 |
| The "mutual advantage" in economic exchange as a special case of performance-sanction
balancing | 13 |
| B. Between System Types | 13 |
| Economists' definitions of the scope of economics | 13 |
| The demonstration that the economy is a type of social system, not a collectivity
| 14 |
| The four general functional imperatives of any social system: latent pattern-maintenance
and tension-management, goal-attainment, adaptation, and integration | 16 |
| The economy as the adaptive sub-system of the society | 19 |
| Production of goods and services for the society as the goal of the economy
| 20 |
| Definition of utility, wealth and income in terms of the society, not the
individual | 21 |
| Capitalization as the adaptive function of the economy | 25 |
| "Land" as the latent pattern-maintenance function of the economy |
25 |
| Entrepreneurship as the integrative function of the economy | 26 |
| The factors of production and the shares of income as inputs and outputs,
respectively, over the economy's boundaries | 27 |
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| The Problem of Cost | 29 |
| The entire social system or some non-economic sub-system as point of reference
for the concept "real cost" | 29 |
| The economy as point of reference for the concept "money cost" | 30 |
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| The Problem of Welfare | 30 |
| Definitions and calculation of welfare as problems of system reference in
the general theory of social systems | 30 |
| Impossibility of a purely economic conception of welfare | 32 |
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| Technical Note: The Relationship between Functional Problems and Pattern-variables
| 33 |
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| Chapter II |
| THE ECONOMY AS A SOCIAL SYSTEM: ITS INTERNAL STRUCTURE AND EXTERNAL BOUNDARIES |
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| Introduction | 39 |
| Summary of preceding chapter | 39 |
| The special status of economic commitments as land factors in the economy
| 40 |
| Review of the goal-attainment, adaptive and integrative exigencies of the
economy | 42 |
| Functional differentiation distinguished from concrete structure of the economy |
43 |
| Adaptive exigencies to which the concrete units or subsystems of the economy
are subjected | 43 |
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| The Functional Differentiation of Society | 46 |
| The differentiation of society according to the four fundamental system exigencies
| 46 |
| The economy as the adaptive sub-system of society | 47 |
| The polity as the goal-attainment sub-system | 47 |
| The nature of the integrative sub-system of society | 48 |
| The nature of the latent pattern-maintenance and tension-management sub-system
of society | 49 |
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| The Boundaries Between the Sub-systems of Society | 51 |
| The case for specificity of boundary interchange among the four major cognate
sub-systems of society | 51 |
| The balancing of consumers' goods and labour services as the primary goal-output
exchange between the economy and the pattern-maintenance sub-system (AG-LG)
| 53 |
| The balancing of control of credit creation and productivity as the primary
adaptive interchange between the economy and the polity (AA-GA)
| 56 |
| The analytical consequences of this interchange in terms of the concrete
social structure, the concept of sewings, and the role of credit | 60 |
| The balancing of entrepreneurial services and new combinations of factors
of production as the primary integrative interchange between the economy and the
integrative sub-system (AI -II) | 65 |
| Summary of the major boundary processes within the society | 67 |
| The special case of the "cultural" boundary of the latency sub-system | 69 |
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| Double Interchanges at the Boundaries | 70 |
| An intermediary mechanism at each of the major boundary interchanges |
70 |
| The double-interchange at the AG-LG boundary: labour
services for wages and consumers' goods for consumer spending | 70 |
| The double interchange at the AA-GA boundary; credit
creation for "rights to intervene" and productivity for "encouragement to enterprise"
| 72 |
| The double-interchange at the AI-II boundary: entrepreneurial
services for profits and new output combinations for demand for new product combinations
| 75 |
| Summary: the relation between the functional categories and concrete social
structure in our own and other societies | 75 |
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| Some Economic Theories and the Boundary Processes of the Economy
| 85 |
| Schumpeter's model of the circular flow in the economy, and its assumptions
| 85 |
| Classical assumptions regarding the supply of labour | 86 |
| Keynesian modifications of the classical position | 87 |
| Contribution of our paradigm to the problem of labour supply | 88 |
| Schumpeter's conception of consumption and saving in the circular flow |
89 |
| The classical position on saving | 89 |
| Keynesian modifications | 90 |
| The classical position on lending | 91 |
| Keynesian modifications | 91 |
| Examples in the economic literature of the economy-polity balance between
productivity and "encouragement to enterprise" | 93 |
| Marshall and Schumpeter on the AI-II boundary interchange
| 95 |
| Formal parallels in the dynamics of the boundary processes | 97 |
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| Chapter III |
| THE INSTITUTIONAL STRUCTURE OF THE ECONOMY |
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| Introduction | 101 |
| Summary of argument of the preceding chapters | 101 |
| Task of this chapter: analysis of the institutional structure of the economy
and its relevance to economic theory | 102 |
| The concept of institutions as used in sociology | 102 |
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| Contract: The Central Economic Institution | 104 |
| The division of labour, exchange and contract | 104 |
| Definition of contract | 104 |
| Contract as the basis of organization | 105 |
| Contract, property and occupation | 106 |
| The general structure of the contractual relation (Specific terms sought;
Adaptation to organizational context; Diffuse symbolic attitudes; Value patterns)
| 107 |
| Application of the paradigm of contractual relations | 111 |
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| Labour, Occupation and the Contract of Employment | 114 |
| Organization and occupational roles | 114 |
| The contract of employment | 114 |
| The problem of classifying occupational roles | 118 |
| Levels of generality of labour as a factor | 119 |
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| Property, Ownership and the Contract of Investment | 123 |
| Definition of property and ownership | 123 |
| The contract of investment | 125 |
| Levels of generality of capital resources | 130 |
| The levels of generality and components of property law | 133 |
| The basic asymmetry between human and non-human resources | 134 |
| Economic consequences of this asymmetry | 135 |
| Summary of the institution of contract | 137 |
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| Factor Generalization and Economic Organization | 139 |
| Structural significance of the levels of generalization | 140 |
| The division of labour | 140 |
| Exchange | 140 |
| Measurement of value | 140 |
| Generalization of purchasing power | 141 |
| Interpenetration with non-economic structures | 142 |
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| The Institutional Structure of Markets | 143 |
| Theories of imperfect competition and the structure of markets | 144 |
| Omission of integrative and value-pattern components | 146 |
| Perfect market approximated only within the economy | 146 |
| Qualitative types of markets | 146 |
| The labour market (The characteristics of the contract; Labour unions and
collective bargaining; The market for executive services; The market for professional
services) | 146 |
| The consumers' market (Factors underlying the "one-price" system) | 156
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| The market for capital funds (Its contractual structure; Its resulting imperfections)
| 161 |
| The "market" for productivity | 169 |
| A tentative classification of types of market imperfection | 173 |
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| Institutionalization of Economic Values and the Motivation of Economic
Activity | 175 |
| Economic rationality as the economy's value system | 175 |
| Its internalization at the personality level and the role of sanctions | 178 |
| Earnings as a symbol | 179 |
| The success goal | 181 |
| Self-interest and the institutionalization of motivation | 181 |
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| Chapter IV |
| ECONOMIC PROCESSES IN THEIR SOCIAL SETTING |
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| Introduction | 185 |
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| Some Models of the Trade Cycle | 186 |
| Summary of the fluctuation models of Samuelson, Kalecki, and Hicks | 186 |
| Points of comparison and contrast among the models | 191 |
| Time lags, certain coefficients, and path of the cycle as areas of indeterminacy
in the economic models | 191 |
| Incipient controversies in economics relative to these areas of indeterminacy
| 194 |
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| The Internal Structure of the Economy | 196 |
| Principles of functional differentiation which apply to any social system
| 196 |
| Differentiation of the sub-system of production functions (AG)
| 197 |
| Differentiation of the investment-capitalisation sub-system (AA)
| 200 |
| Differentiation of the entrepreneurial sub-system (AI) |
203 |
| Differentiation of the sub-system of economic commitments (AL)
| 204 |
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| The Internal Boundary Relations of the Economy | 205 |
| The principles governing the internal boundary processes of the economy | 205 |
| Summary of the internal boundary relationships | 206 |
| The AGg - AIg exchange between new combinations and
profit | 207 |
| The AGi - ALi interchange between labour commitments
and quasi-rent | 210 |
| The AAa – AGa interchange between investment
funds and returns | 210 |
| The AAg – ALg interchange between capital goods
and the relevant rent factors | 213 |
| The adaptive significance of the AAa – AGa and
AAg – ALg boundaries for the economy | 213 |
| Classical and Keynesian treatment of the investment problem | 214 |
| The ALa – AIa interchange between risk capital
funds and differential supply of physical resources, information, invention, etc.
| 215 |
| The AAi – AIi interchange between venture capital
and long-term returns | 216 |
| The overall view of processes within the economy | 216 |
| Several specific examples of the relationship between the boundary processes
of the economy awl the concrete interacting units involved | 217 |
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| Restatement of the Trade Cycle | 219 |
| Boundaries relevant to the problem of short-term fluctuations | 219 |
| Restatement of the trade cycle in terms of boundary processes | 220 |
| Shortcomings of the restatement, and lines of attack on its areas of indeterminacy
| 221 |
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| The Consumption Function | 221 |
| The functional system exigencies facing the household as consuming unit | 222 |
| Outside limits thus set on the fluctuations of the consumption function | 223 |
| Derivation of a specific consumption function from the system-problem solutions
of the family as consuming unit | 224 |
| Implications of this consumption-function model for economic fluctuations
| 226 |
| Method/logical significance of the sociologically derived consumption function
| 226 |
| Comparison between the logic of a sociological derivation and the logic of
a "propensity" | 228 |
| Keynes' theory of consumption | 229 |
| Duesenberry's theory of consumption | 230 |
| Importance of psychological analysis for the consumption function |
232 |
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| The Investment Function | 233 |
| The relative insulation of the investor from diffuse collectivity commitments
in the highly differentiated case | 233 |
| The concentration of institutionalized risk and uncertainty at the AAa-AGa
boundary | 234 |
| Implications for the stability of the investment function | 236 |
| The investment market as a type case of the "unstructured situation" | 236 |
| Psychologically irrational mass phenomena and deviance as reactions to the
investment market | 237 |
| Mechanisms of social control to counteract these reactions | 238 |
| A note on imperfection in the capital goods market | 239 |
| Interpretation of the fluctuation of investment goods prices relative to
consumption goods prices | 239 |
| The relation between the market for investment funds and the market for liquid
funds | 240 |
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| A Note on Time Lags | 241 |
| The general nature of the time lag | 241 |
| Dependence of time lags upon degree of differentiation in any given economy
| 242 |
| The concept of "phase movement" as appropriate to the analysis of time lags
| 242 |
| A typical phase movement in farms relative to the output lag: adaptive, goal-attainment,
integrative and latency imperatives | 243 |
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| Chapter V |
| THE PROBLEMS OF GROWTH AND INSTITUTIONAL CHANGE IN THE ECONOMY |
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| The Nature of Change | 246 |
| Analytical economics, economic history and sociology | 246 |
| System process and structural change | 246 |
| Time-span, magnitude and structural change | 247 |
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| A Model of Economic Growth | 249 |
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| A Structural Change in the American Economy: The Separation of Ownership
and Control | 252 |
| Berle and Means and the disenfranchisement of stockholders | 252
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| Change in class structure | 254 |
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| A Model of Institutional Change | 255 |
| A. The Impetus to Change | 255 |
| Structural differentiation as the problem | 255 |
| Distinguished from segmentation | 256 |
| Equilibrium and its disturbance | 256 |
| Deficit of G-input and increment of A-input | 257 |
| G-deficit one of labour service | 258 |
| Capital increment | 259 |
| Empirical conditions of labour deficit and capital increment: Marshall and
Weber | 260 |
| B. Propagation of the Impetus to Change | 263 |
| Symptoms of disturbance: hostility, anxiety, utopianism | 263 |
| The encouragement of entrepreneurship | 264 |
| Putting new ideas into practice | 265 |
| Capitalization of innovation | 266 |
| C. The Process of Structural Differentiation | 267 |
| Conditions of the shift | 267 |
| Reorganisation | 268 |
| Consolidation of the new structure | 268 |
| D. Summary of the Model and its Application | 270 |
| Seven steps in a theoretical cycle of structural change | 270 |
| Empirical steps in separation of ownership and control | 271 |
| The relation of the steps of a cycle of structural change and the levels
of generality of the factors | 272 |
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| The Economic Growth Model and the Process of Institutional Change
| 274 |
| The labour function | 275 |
| The rate of investment | 276 |
| Technological progress | 276 |
| The relations between the institutional change model and technical economic
models | 278 |
| The "given data," "propensity" and "historical" approaches | 279 |
| The range of application of the model of structural change | 281 |
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| Some Historical and Theoretical Perspectives | 284 |
| "Capitalism," "socialism" and modem economics | 284 |
| Schumpeter on the inevitability of socialism | 285 |
| Early modem political and economic structures | 286 |
| Free enterprise and the growth of government | 288 |
| Kinship, class structure and the modem polity and economy | 289 |
| Durkheim and the alleged propensity to raise the standard of living | 290 |
| Weber's process of rationalization and the differentiation of social structures
| 291 |
| Theoretical status of the model of institutional change | 293 |
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| Chapter VI |
| CONCLUSION: ECONOMIC THEORY AND THE GENERAL THEORY OF SOCIAL SYSTEM |
| A Summary of the Analysis | 295 |
| Conclusions | 306 |
| Final Remarks | 308 |
| Bibliography | 311 |
| Index | 319 |
