Key Thinkers in New Economic Sociology: Polanyi, Granovetter, Di Maggio, and Others

When economists talk about markets, they tend to picture rational actors making decisions based on prices and self-interest – as if human beings operate in a social vacuum. But economic sociologists see it very differently. They argue that economic behavior is deeply shaped by social relationships, institutions, culture, and power. This perspective didn’t emerge overnight. It was built, piece by piece, by a set of remarkable thinkers whose ideas collectively gave rise to what is now called New Economic Sociology (NES) – a field that re-examines the economy not as a self-contained machine, but as a social institution embedded in the fabric of human life. Here’s a look at the key scholars who shaped it.

The origins of new economic sociology 🔗

New Economic Sociology emerged in the 1980s as a direct challenge to mainstream economics. Classical economics had long treated economic actors as isolated, rational, and self-interested. Sociologists pushed back, arguing this view ignored how deeply social forces – networks, norms, trust, and institutions – shape economic outcomes. The field drew from older sociological traditions but sharpened its focus and developed new frameworks suited to understanding modern capitalist economies. While many contributed, five thinkers stand out as foundational: Karl Polanyi, Mark Granovetter, Paul DiMaggio, Neil Fligstein, and Richard Swedberg.

Karl Polanyi: the economy is always embedded in society 🔗

Any serious discussion of New Economic Sociology must begin with Karl Polanyi (1886-1964), the economic historian and social theorist whose ideas laid the conceptual groundwork for the entire field. His landmark 1944 book, The Great Transformation, challenged the idea that the market is a natural or universal institution.

Polanyi argued that individuals are primarily social beings rather than economic ones, and that because of this, the economy has always been – and must always be – embedded in social relations, cultural norms, and political institutions. In pre-industrial societies, economic activities like production and distribution were not governed by markets but were organized through kinship ties, religious obligations, and political authority.

The concept of embeddedness 🔗

Polanyi’s most influential contribution is the concept of embeddedness – the idea that economic activity is never truly separate from the social world. According to Polanyi, before the 19th century, the economic system was conceived as part of the broader society governed by social customs. It was only with the rise of industrial capitalism that an attempt was made to carve out an independent economic sphere governed purely by profit-maximizing logic.

He called this attempt to embed society within the market (rather than the market within society) a dangerous reversal – one that would inevitably produce social backlash. He described this dynamic as the double movement: a process in which market expansion triggers a counter-movement of social protection. Polanyi saw the rise of fascism and social welfare states in the 20th century as evidence of this very dynamic playing out historically.

Within the context of New Economic Sociology, Polanyi is almost universally considered the “father” of the concept of embeddedness, which became one of the field’s central organizing ideas.

Mark Granovetter: social networks and economic action 🔗

If Polanyi planted the seed, Mark Granovetter is widely credited with launching New Economic Sociology as a formal field. His 1985 article in the American Journal of Sociology, “Economic Action and Social Structure: The Problem of Embeddedness”, is considered the founding text of NES. In it, Granovetter argued that mainstream economics had gone too far in treating individuals as atomized, purely rational actors – a view he called undersocialized. But he was equally critical of approaches that reduced people to passive products of their social context – which he labeled oversocialized. His solution was to show that economic actors are embedded in concrete, ongoing networks of social relations.

The strength of weak ties 🔗

Granovetter’s intellectual reputation was cemented even earlier with his 1973 paper, “The Strength of Weak Ties,” which became one of the most cited works in the social sciences, with close to 80,000 citations. The central insight is counterintuitive: it is not your close friends and family (strong ties) who are most useful for finding new jobs or new information – it is your acquaintances (weak ties). Strong ties tend to share the same social circles and therefore carry overlapping information. Weak ties, by contrast, bridge different networks and carry non-redundant information – making them far more valuable for mobility and opportunity.

Research from MIT using LinkedIn data confirmed this theory in a large-scale real-world context, demonstrating that moderately weak ties had a greater positive impact on job mobility than stronger relationships. The findings underscore how profoundly social network structure shapes labor market outcomes.

Granovetter’s broader project, developed in his book Society and Economy (2017, Harvard University Press), argues that it is a fundamental mistake to build economic theory that ignores the deep interactions between the economy and the social world – including not just networks but also religious, scientific, political, and legal contexts.

Paul DiMaggio: institutions, culture, and organizational fields 🔗

Paul DiMaggio, currently the A. Barton Hepburn Professor of Sociology at Princeton University, brought a sharply institutional and cultural lens to economic sociology. His most influential contribution came from a landmark 1983 paper co-authored with Walter Powell: “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields.”

Institutional isomorphism: why organizations look alike 🔗

DiMaggio and Powell observed something puzzling about modern organizations: despite operating under very different conditions, firms, government agencies, universities, and other organizations within the same field tend to grow increasingly similar over time. They called this process institutional isomorphism – the tendency of organizations to adopt similar structures, practices, and norms not necessarily because it makes them more efficient, but because it confers legitimacy.

DiMaggio and Powell identified three mechanisms that drive this homogenization: coercive isomorphism, driven by government regulations and legal mandates; mimetic isomorphism, where organizations imitate successful peers under conditions of uncertainty; and normative isomorphism, driven by the spread of professional standards through training, associations, and credentials. This framework has been applied widely in research on organizational behavior, economic institutions, and the role of culture in shaping market structures.

DiMaggio’s work on culture and economy – including his chapter in The New Institutionalism in Organizational Analysis (1991) – further argued that economic action is not simply about individual self-interest or market dynamics, but is deeply shaped by the wider institutional and cultural environment in which actors are embedded.

Neil Fligstein: markets as political and social constructions 🔗

Neil Fligstein, Professor of Sociology at UC Berkeley, took the sociological study of markets to a new level of detail in his 2001 book The Architecture of Markets: An Economic Sociology of 21st Century Capitalist Societies. Where standard economics treats markets as natural outcomes of competition, Fligstein argued that markets are structured by ongoing social processes involving firms, regulators, state actors, and consumers.

Markets as politics 🔗

One of Fligstein’s most important claims is that markets are inherently unstable – they do not sustain themselves automatically. Instead, they require continuous effort and coordination to maintain. His earlier 1996 article, “Markets as Politics: A Political-Cultural Approach to Market Institutions,” argued that the most successful firms in any given market are those that develop stable “conceptions of control” – shared understandings among market participants about the rules of competition and the distribution of power.

Fligstein also challenged Granovetter’s embeddedness approach by highlighting the centrality of power relations within organizations and markets. According to Fligstein, the strategies of major firms are decided by their “conception of control” and not just by interpersonal networks – pointing to the importance of politics, state intervention, and organizational power in shaping market outcomes. His framework has been especially influential in studying corporate governance, the role of the state in market formation, and the dynamics of entrepreneurship.

Richard Swedberg: theoretical foundations of economic sociology 🔗

Richard Swedberg, Professor of Sociology at Cornell University, has played a distinctive role in New Economic Sociology – not as an empiricist advancing a single theory, but as a builder of the field’s intellectual architecture. More than perhaps any other figure, Swedberg has worked to define, systematize, and legitimize economic sociology as an academic discipline.

His co-edited volumes – particularly The Handbook of Economic Sociology (with Neil Smelser, 1994 and 2005) and The Sociology of Economic Life (with Granovetter) – became essential reference works that helped consolidate the field. Many of the core readers and frameworks shaping economic sociology in the 1990s were edited or co-edited by Swedberg, making him a key figure in the field’s institutionalization.

Economic action as inherently social 🔗

Swedberg has consistently argued that economic actions are not purely rational or self-interested but are rooted in cultural, historical, and political contexts. Drawing on classical sociologists – particularly Max Weber – his book Max Weber and the Idea of Economic Sociology helped recover and reintroduce Weberian economic sociology to modern audiences. In his Principles of Economic Sociology (Princeton University Press), he emphasizes that understanding the economy requires analyzing the social relations underlying economic transactions, including how trust, power, and social capital influence economic life.

What ties these thinkers together 🔗

Despite their different focuses, these scholars share a core conviction: economic behavior cannot be understood in isolation from the social world. Polanyi established that economies are always institutionally and socially embedded. Granovetter showed precisely how social networks shape individual economic outcomes. DiMaggio revealed how institutional pressures homogenize organizations regardless of efficiency. Fligstein demonstrated that markets are political constructions maintained through power and strategy. And Swedberg provided the theoretical vocabulary and textual infrastructure that made it possible to treat all of this as a coherent field of inquiry.

Together, their work dismantled the fiction of the self-regulating, socially neutral market – and replaced it with a far richer picture of how economies actually work. As a result, New Economic Sociology has grown into one of the most productive subfields in contemporary social science, with ongoing relevance for understanding everything from financial crises to labor markets to the social effects of digital platforms.

What do you think? If economic behavior is always shaped by social networks, cultural norms, and institutional pressures – as these scholars argue – does that mean free markets are more of a political achievement than a natural phenomenon? And which of these thinkers’ frameworks do you find most useful for understanding how today’s digital economies and platform markets operate?

References

1. https://www.britannica.com/topic/embeddedness
2. https://en.wikipedia.org/wiki/Embeddedness
3. https://www.researchgate.net/publication/216564523_Karl_Polanyi_and_the_New_Economic_Sociology_Notes_on_the_Concept_of_Disembeddedness
4. https://www.journals.uchicago.edu/doi/10.1086/225469
5. https://www.aapss.org/fellows/fellow/mark-granovetter/
6. https://news.mit.edu/2022/weak-ties-linkedin-employment-0915
7. https://news.stanford.edu/stories/2023/07/strength-weak-ties
8. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1504516
9. https://en.wikipedia.org/wiki/Isomorphism_(sociology)
10. https://press.uchicago.edu/ucp/books/book/chicago/N/bo3684488.html
11. https://www.encyclopedia.com/social-sciences/encyclopedias-almanacs-transcripts-and-maps/economic-sociology
12. https://www.egyankosh.ac.in/bitstream/123456789/76986/1/Unit-3.pdf
13. https://www.mpifg.de/788734/2017-02-interview-beckert