Heterodox Economics

from the

post-autistic economics review
Issue no. 34, 30 October 2005

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Pluralist Integration in the Economic and Social Sciences:
The Economy of Conventions

François Eymard-Duvernay, Olivier Favereau, André Orléan, Robert Salais, and Laurent Thévenot (l’université Paris X, l’université Paris X, l’École Polytechnique, l'Ecole

Normale Supérieure de Cachan, Ecole des Hautes Etudes en Sciences Sociales)

The Economy of Conventions [EC] programme incorporates, in a new perspective, three issues that have been dissociated by a century and a half of economic thinking: the characterization of the agent and his/her reasons for acting; the modalities of the coordination of actions; and the role of values and common goods (for former discussions of the programme, see Dupuy et al., 1989, Orléan, 1994, Salais, Thévenot, 1986). Standard economic theory was built on strict compartmentalization between the two issues of rationality and coordination that were axiomatized separately, the former by decision-making theory and the latter by general equilibrium theory (Favereau, 1997). These two issues were in turn isolated from the third, which concerns value judgments and normative considerations. In contrast, the frameworks of analysis that we have constructed propose an articulation between these three issues. If we agree that the coordination of human actions is problematical and not the result of laws of nature or constraints, we can understand that human rationality is above all interpretative and not only or immediately calculative. The agent first has to apply conventional frameworks to understand others’ situations and actions before he/she can coordinate him/herself. This understanding is not only cognitive but also evaluative, with the form of evaluation determining the importance of what the agent grasps and takes into account. This is where we recognize the role, in coordination, of collective values and common goods that cannot be reduced to individual preferences but provide the framework for the most legitimate coordination conventions. This is also where language plays a part as a key component of institutions. EC aims for an integration that concerns the economic, social and political sciences equally. In this way, they should be brought closer together, rather than each one expanding separately at the expense of the others.

In the first part, we note that the economic and social sciences are confronting each other today as both try to expand and conquer ground in the rival discipline’s domain. This effort at generalization is of interest to us. Yet it reveals the limits encountered when extensions retain a core of hypotheses that do not incorporate all the dimensions of coordinated human action. In the second part, we revert to these core hypotheses in order to highlight the shifts effected by EC. The uncertainty weighing on coordination is no longer only a question of the distribution of information; it is contained by the interpretative rationality of agents and limited by the common frameworks of evaluation that qualify the relevant elements of the situation. These conventional frameworks of coordination are plural without necessarily leading to relativism. The third part reveals a ‘horizontal’ pluralism of conventions of qualification that correspond to the same grammar and all present the highest degree of generality and justification. This initial pluralism enables us to analyse the complexity and diversity of markets and economic organization without reducing them to a calculation about contracts or transactions. We are thus better equipped to study business enterprises and the particularity of the labour and finance markets. In the fourth part, we introduce another pluralism, a ‘vertical’ one this time, where the degree of generality or publicity of conventions of coordination is varied. This second pluralism allows for the differentiation of the generic notion of convention by distinguishing modes of coordination and information formats of more local types. But it also enables us to refine the analysis of political and moral evaluations. It accounts for the tensions between fairness, based on equivalence, and assessments which rely on closer interactions. Finally, the shift from micro to macro is thus rendered twice as complex, once by the intrinsic variety of ways of generalizing, and a second time by a deepening of the local/general relationship.

1. Confrontation or Efforts to Integrate the Economic and Social Sciences

We need to pay serious attention to the aspiration to generalization currently apparent in both economics and sociology, in the form of an attempted extension into the other discipline’s preferred domain. This leads to an interesting situation in which there is no longer a clear-cut division between territories, and in which we can compare approaches in the overlapping advances of the two disciplines.

Based on a diagnosis of the extension observed on both sides, we are going to plead in favour of the theory of conventions approach grounded in a reflexive attention to each of the two disciplines. Rather than a pluri- or multi-disciplinary approach that would simply combine the contributions of different disciplines, our perspective seeks to cross the boundaries between economics and sociology in order to uncover their common foundations, and to re-examine them. The idea is not, however, to ignore the original contributions of each discipline, or to confuse them. Reconsidering the common foundations of these two disciplines is particularly urgent, for politics (the role of the State and intermediate authorities; creation of a general interest; individual engagement in the public sphere) is currently being profoundly reshaped by the construction of Europe and the search for international regulations within the new context of globalization. In so far as it is occupied to a large extent by themes borrowed from economics (governance, rational action, strategic manipulation, etc.), political science offers no original adequate resources for reconstructing politics.

From a Science of Market Exchange to a General Science of Human Relations

The economy is spreading to non-commercial relations through such mechanisms as ‘contracts’ and ‘games’ which are more transactional than the picture formerly painted of general market equilibrium, and which depart in that respect from the first extensions (in G. Becker’s style, in particular). The New Institutional Economics is typical of such extensions. The areas affected are the family, power, politics, organizations; the market goods exchanged in commercial trade are no longer the mainstay of coordination. There remains a notion of generalized preference that extends to the modes of interaction with others. Formerly closely articulated within the sphere of commercial goods and services, this notion of preference is becoming more important – as seen, in particular, in the extreme case of game theory. Goods are replaced by strategies directly concerned with the relation of preference.

This extension raises several questions:

1. It is intended to cover all human behaviours and to turn economics into a universal social science occupying all the ground of the other sciences of society, both social and political. But how can its coherence with the initial core of economic theory and its required unity be maintained? The link with the core of market relations, maintained by reference to competition and incentives, stems from the fact that, despite its apparent reference to legal contractual forms, the notion of a ‘contract’ is above all an extension of that of ‘equilibrium’, a balance between interests that have nothing in common and are often even antagonistic. To allow this extension, new notions of equilibrium are introduced (J. Nash).

2. By trying to link all the ‘equilibriums’ of behaviors to the original core of competitive market coordination, the extension opens only superficially onto a variety of contractual devices or modes of transaction. The core excludes recognition of an interpretative rationality, of an ethical judgement and a reference to collective objects and beings. Yet these notions are fundamental elements of a grammar common to the multiple modes of coordination analysed in the conventionalist programme. Without such recognition, the variety of contractual devices taken into consideration is limited by the single mould of Nash equilibrium or refined versions of it. There is, indeed, a very close link between standard rationality in situations of interaction and Nash’s concept of equilibrium, as many authors have noted, from L. Johansen to D. Kreps.

The Social Embeddedness of Economics and the Social Construction of Markets

Economic sociology offers a counter-attack to these extensions and is intended to reduce economics to a field equivalent to the other social actions in which it specializes. The advantage of this opposing extension consists in inscribing so-called economic relations in a far wider space by highlighting their entanglement with social actions. With the common aim of denaturalizing economic relations, a rich body of research on ‘the social construction of markets’ has emerged.

Sociology encompasses a far wider range of social actions than the one allowed by the specifications of the economic theory of contracts (whose limitations are intended for a conceptual economy). Consequently, the reduction effected by sociology when it expands into the economic domain is not as radical as the symmetrical reduction. Certain extensions are, moreover, facilitated for sociologies of actions motivated by self-interest or strategic goals, inspired by the models of economic action, that can thus form certain alliances with a Becker-type economics.

This extension of sociology nevertheless raises questions comparable to those generated by the enlargement of the domain of economics. The models of social action, even when they more or less metaphorically employ the language of markets and interests, imply modes of coordination that are profoundly different because they are based on social groups, social representations, social practices, a sense of the social, and social intercomprehension. They fail to characterize the specificity of frames of action and coordination involving market objects. Despite its fecundity, the notion of the embeddedness of economic transactions in social relations attests to this reduction to models of social links.

A Non-Reductive Integration

Our undertaking is different from these efforts at extension based on a core of hypotheses of standard economics or classical sociology. It takes into account the effort of integration motivating the preceding two movements, but it also recognizes that each disciplinary tradition highlights different aspects and different modes of coordination which can hardly be assimilated into the other disciplinary frame in its present state. For this reason, we have constructed a framework of analysis devoted to an issue common to both traditions, one that can be used to identify the matrix underlying a plurality of modes of coordination to which the different heritages of the disciplines bear witness.

2. Underlying the Social and Economic Sciences, a Common Issue: Problematical Coordination of Actions

An Issue Common to the Social and Economic Sciences

The limitations of the two types of extension referred to above lie in the reductions they effect with respect to the notions of action and elementary coordination peculiar to each discipline, whether economic or social. Yet if we go back to more fundamental questions, we recognize an issue common to both sociology and economics: the problematical coordination of human actions. Each discipline has concentrated on different specifications of this coordination. We would like to preserve the resulting pluralism, without however reducing it to differences between disciplines or remaining at the stage of relativism.

Renewed Frameworks for Analyzing the Uncertainty of Coordinations

How are we equipped in terms of agents or devices (dispositifs), to account for coordinated actions? The answer obviously depends on our interpretation of the word coordination. As indicated in the introduction, EC is not confined to the definition of coordination that economists base on the assumed methodological individualism in the neo-classical currents and transaction cost economics. The notion of coordination developed by EC highlights the role of collective forms of evaluation. The most public forms subject coordination to the demand for justification; modes of coordination with a less extended scope imply forms of evaluation that correspond to more limited goods. Moreover, the notion of coordination thus extended is not opposed to the idea of conflict. Coordination is put to the test and achieved against a background of failure and particularly of conflict and criticism.

‘Classical’ authors in both economics and sociology have remained close to the reference models of the natural sciences and have developed economic and social physics that highlight equilibriums, orders and structures of social reproduction. Coordination is systematically guaranteed there by powerful forces embedded in agents and in external constraints. More recent developments have highlighted the uncertain nature of coordination, which implies that we need to pay more attention to the modes of transactions and interactions.

For interactionist sociologists, uncertainty remains part of the idea of an ‘order of interaction’, even if it is ‘negotiated’ locally in the situation. Order is particularly doubtful for ethnomethodologists who, in this respect, differ from ‘classical’ sociologists. But they assume that actors actively strive to maintain a common sense, at all costs, in the particular context of the situation, through ‘ethnomethods’. More broadly, the notion of intercomprehension extends the idea of an agreement through meaning, to which sociologists, unlike economists, are very attached. For sociologists of actors’ networks (some authors prefer to use the term ‘actant networks’), coordination is reduced to the unique form of ‘association’ and ‘interest’, without further specification of the plurality of modes of engagement.

For economists, the problem is concentrated on notions of uncertainty and information. Standard theory, even extended to problems of bounded rationality, has not called into question its model of action. Paradoxically, disorder remains highly calibrated while leaving the path open to opportunism. One of the most significant certainties stems from the idea of the space of options, even though it transcends the space of objects traded (‘hypothesis of nomenclature’: see C. Benetti, J. Cartelier, 1980) to become a space of actions in game theory. Common knowledge remains a heroic hypothesis as long as the ways in which it emerges and is observed within coordination have not been studied (Dupuy, 1989). This implies that we take seriously the material, social and institutional conditions that allow those who coordinate to engage in action. It also implies that we open the black box of rational action to seek reflexivity and reason, both perspectives that economics basically refuses, despite the repeated plea of leading authors.

How to Improve? Qualifying Uncertainty on the Basis of a Form of Evaluation that Allows for Coordination

The above-mentioned currents take into account an uncertainty weighing over the coordination of behaviours, whether that uncertainty is conceived on the basis of an asymmetry of information or on that of the particular context of a situation. How can we do better? By differentiating forms of uncertainty and thus of information, and then relating them to different forms of evaluation, for evaluation is at the centre of coordination.

With the notions of ‘incompleteness’ or of ‘radical’ or ‘critical’ uncertainty, we attempt to go further back than the formatting of the information on which the calculations of contract economists are based. We distinguish the operations through which doubt is channelled and treated in keeping with various formats of knowledge and information, the relevance of which is related to a mode of coordination. In this way, we are able to understand how forms of non-market coordination appeal to other formats of knowledge, even though they are frequently reduced by the economist to terms of inequality of information primarily concerning the essential qualities of market goods and services (Favereau, 2001; Thévenot, 1984, 2002a).

In all coordination, whether it occurs in the market, the enterprise, or is intended to achieve political agreement, there is no regularity at the start of the action that can be considered as a sure support. In this sense, uncertainty exists for everyone (including for the theoretician who tries to understand and not only to explain the course of events from the outside, afterwards). In its ordinary singularity, any coordination is uncertain in so far as it brings into play heterogeneous actors, takes place over time, and focuses on a product (or service) that is never entirely predefined.

Overcoming that uncertainty requires the conventional construction of products, services and expectations that are the media of the commercial interaction and productive activity of firms. The notion of a convention enables us to characterize this moment of common construction. Note that overcoming uncertainty is a feature of daily life in society. Observation shows that the actors often succeed in doing so, at least to a certain degree. It suggests that this conventional construction is a permanent individual and collective activity, incorporated into the action itself.

Conventions channel uncertainty on the basis of a common form of evaluation that qualifies objects for coordination. Thus, we distinguish market conventions of qualification, in the limited sense of a competitive consumer good market, from other conventions of qualification that, at the cost of a sharp departure from the dominant paradigm, make it possible to cover a broader range of transactions – which satisfies the current ambitions of the economic and social sciences. Recognition of a plurality of such conventions is a response to the critique of an excessive extension of the market to all interactions, without transferring non-market relations to a ‘social frame’ of the market. Apart from the plurality of modes of coordination and the resulting discontinuities, it is therefore necessary to account for a frame common to these different modes of coordination, without which the agents’ switching from one to the other would be incomprehensible.

Qualifying uncertainty, or specifying conventions that allow the qualification of the objects of the transaction, result in a recognition that the relevance of a format of knowledge depends on a form of evaluation. Evaluation is at the centre of coordination; it is not an argument, among others, of the individual function of utility, an invisible bedrock – sub-contracted for analysis to other disciplines – of the individual function of utility, or a value added to rationality to complete or correct it.

3. The First Pluralism of General Modes of Coordination: What Legitimacy and What Integration?

Legitimate forms of evaluation support institutions. By recognizing that the most general modes of coordination are based on such forms, we take the demands for justice and democracy that weigh on organizations seriously, along with the sense of fairness, public good or common good expected from the actors engaged in such coordination. The importance of these expectations, which lie at the core of political philosophy, has been diminished considerably in prevailing economic and sociological approaches. Either they reduce all evaluations to individual preferences incorporated into prices, or they limit them to arbitrary social values in their diversity. The fact of taking the legitimacy of these forms of evaluation and their pluralism seriously modifies our understanding of both actors and organizations.

Politics, justice, democracy

If we recognize a pluralism of legitimate modes of coordination, can we integrate them into the government of organizations or States? Can we avoid relativism that the social and economic sciences commonly associate with the plurality of values?

A positive answer was formulated by analysing relations between the most legitimate modes of coordination and the sense of just and unjust. Instead of stopping at a typology of values, or Weberian ideal types such as those that differentiate modes of domination, we have shown that different orders of qualification that confer their legitimacy on general modes of coordination correspond to the same grammar of just and unjust (Boltanski, Thévenot, 1991, 1999, 2000). Forms of evaluation, test procedures that lead to judgment, and relations between orders of evaluation are all denounced as unjust if they fail to satisfy a set of conditions described in a model common to a plurality of orders of worth. We have identified certain convergences between these conditions and two contemporary theories of just and unjust: Rawls’ and Walzer’s. The fact remains that the pragmatic entry via coordination of actions rather than directly via the distribution of goods leads away from these authors. It enables us to specify the procedures of the coordination test and its basis of qualified objects, as well as the relation between procedures and substantial goods, that are often ignored, especially in the opposition between fair and good as radicalized by the liberal grammars. EC benefited from a large amount of previous research on statistical information (Desrosières, 1998), ‘investments in forms’ which are needed to formalize such information (Thévenot, 1984) and different forms and principles of evaluation. This last equipment, which is used for ranking policies and evaluating their effectuation, is taking an increasing place in the governance of the European Community. There is a risk that the procedures for evaluating ‘good practices’ rely mainly on closed expertise instead of remaining open to a democratic debate about the plurality of principles of justice which are implied in these policies. By analysing coordination devices on the basis of these grammars of fairness, their democratic openness and its limits can be assessed. This assessment concerns various loci such as the State, public policies relayed by associations, standardization committees, regulatory authorities, conferences and forums, etc., without being limited to an opposition between the State and civil society. Civic order illuminates an essential demand in any democratic policy, because it qualifies a quest for equality and solidarity and relies on regulatory objects equipped by the law. The clear distinction with a market order makes it possible to avoid the confusion resulting from possible compromises between liberal political grammars and the convention of market coordination, compromises which are often covered by the expansion towards the politics of an economics focused too sharply on market relations.

Agents in Different States for Evaluating

In the economic model, evaluation by agents is concentrated in the utility function that is assumed to be either stable or subjected to exogenous variations. Several research currents try to endogenize preferences, either by likening them to routines selected by the environment, or by introducing an order into preferences: metapreferences.

Each of these strands of research has its appeal. We are trying, however, to go beyond that by relating evaluation to a state of individuals that depends on their engagement in their coordination environment. We thus relate routine conditions not to basic automatic regularities but to one of these modes of engagement in which habituation to a familiar environment means that evaluation is carried out at the level of local adjustment. We also relate the ethic content of metapreferences to an engagement at a very different level, in which the collective underpinning of evaluation is essential.

Unlike the extended standard theory that tries to view the problem of coordination or cooperation by confining the cost/benefit calculation of homo œconomicus to the level of the individual self, social psychologists (H. Tajfel, J. Turner) have highlighted the complementary role of two other levels, that of social selves (through membership in groups) and that of the self as a human person. In this way, the shift from one level to another can be understood.

Compared to sociologies that assume the existence of stable determinants of social behaviours, the fact of taking into account a plurality of states of evaluation leaves room for different engagements and introduces movement into people’s dispositions. Moreover, this EC approach relates these movements to modifications of the settings in which actions take place, and which offer external support for evaluation. This type of analysis does not prevent us from considering relations between these dispositions and social affiliations; it authorizes their movement, as observed among members of societies in which everyone has to accept diverse modes of evaluation.

Constituent Conventions of the Market and Firms…

Markets are above all places where the quality of goods is tested and evaluated. Their organization is contingent on activities that prepare those tests and format them: activities of codification, measurement, certification, regulation, etc. These are activities that are situated upstream or downstream from markets, although linked to them. The State is present, as either prescriber or guarantor.

The state of persons that has occupied economists most is that of actors in a market. Clearly, the fact of reducing what happens in a market to the laws of supply and demand is regrettable. First, actors are identified only as buyers and sellers, whereas ‘behind’ that identification consumers and producers are equally if not more important. Consumers and producers have conventional expectations regarding the traded object that cannot be made to coincide simply by means of a mechanical adjustment in supply and demand. Each has an essential prerogative. Consumers are the sole parties who determine the quality of what they buy and their decisions to do so. Producers alone determine the rules of their production of products and services. These two prerogatives form the starting point of agreements on the quality of goods in a market and make them possible. Effective competition in each type of market will depend on the type of test and evaluation that predominates within it. Operations of evaluation differ, depending on the market and on the nature of the objects of the transaction: products and services of various kinds and destinations, labour, securities. As shown below, in all these markets a plurality of principles of evaluation exist, which has to be integrated into theoretical analysis.

The collective form of the state of persons, their qualification, is induced by the constraints of coordination. For a common evaluation to emerge, a procedure of composition of individual evaluations is required. The consumer in the market is not an independent individual, unattached to anything, as hasty critiques of the market assume. He/she has access to all the goods in the market provided he/she is solvent and puts him/herself into the state of a consumer, which involves certain rights and duties. In particular, he/she must agree to the supply of goods and the market price. Under these conditions, an aggregated demand can be constituted. We have constraints here that are similar to those impinging on the counting of votes in politics. The state of a consumer is based on devices, especially market goods, that establish a format of knowledge in relations. More local approaches emphasize behaviours that move away from this general state: the price may be negotiated, adjustments may be made to the objectives of the transaction, etc. This leads to a second pluralism introduced in the following section.

…And Those of Other Legitimate Modes of Coordination

We can introduce other modes of coordination by varying the state of agents governing their evaluation as to what a good is. The term ‘a good’ is obviously ambiguous in economics since it can denote either the appropriated thing or that which, more generally, guides an evaluation. It is not only a source of misunderstanding, for we try to relate the good that is the object of the transaction to plural possibilities of evaluation, not reduced to market evaluation. In this pluralistic approach, the concept of a good is very open and enables us to move away from the market good. The classical distinction between good and service, reduced by the extensive frame of the market, has a profound meaning: it already suggests states of the object of the transaction that open onto different forms of knowledge and evaluation. The extended concept of a good can then cover an equally broad range of modes of coordination as those that are recognized in economics and modern society, without reducing them to a single form.

Various strategies exist to introduce different coordinations of the market (Favereau, Biencourt and Eymard-Duvernay, 2002). They share the fact of defining states of evaluation that differ from that of the consumer. We can thus more satisfactorily analyse productive activities, work that bring into play evaluations of goods whose format of knowledge differs entirely from that of the consumer. The function of production is the economist’s way of modelling these forms of coordination, but by reducing them to technical constraints, so as to safeguard the sovereignty of the market. This tension between several coordinations has been from the origins of economics, through the debate between labour value and use value. It is currently apparent in interest in the analysis of firms, but contract theory is inadequate as a tool for studying it. The fact that H. Simon developed an alternative paradigm of rationality by focusing primarily on organizations is significant.

Once we have recognized the pluralism of evaluations, we see the limits of the information economy more clearly: asymmetry of information between agents is most often a problem of the distribution of the ability to evaluate and the mode of evaluation. For example, in a doctor’s relationship with his/her patient, we can refer to asymmetry of information in so far as the doctor has more information than his/her client. He/she could take advantage of that to deceive the patient by putting less effort into treating an old person, for example, who will nevertheless still pay the same price for the service delivered. This stems from a capacity for evaluation that, if present only in the doctor, leads to an abuse of power since the patient cannot participate in this mode of evaluating the effectiveness of treatment. The positive side of the asymmetry, which stems from this capacity, is ignored in the purely negative approach to contracts. The plurality of forms of evaluation is reduced to an ordered asymmetry. As a result, the economy of information neglects the decisive operations of the production of formats of information (categories of knowledge and evaluation) that will become relevant and will be considered common knowledge.

The plurality of coordinations does not correspond to the boundaries of organized or instituted categories of activity. A given economic activity, even finely divided up, can concern several forms of coordination which are not the same for each firm. The problem of coordination in such pluralistic worlds is that of the encounter between several principles of evaluation, or of the distribution of power of evaluation between the different states of persons (Table I.2.1).

To incorporate this plurality into a common framework of analysis, it is necessary to review the question of equilibrium. Equilibrium between supplies and demands enabled economic theory to extend the market model. This was followed by a new extension by Nash equilibrium. These equilibriums are based on the agents and objects of transaction that have been put into the state of the market, or of a pseudo contract market. If this concept is retained in a pluralistic context, ‘equilibrium’ will relate to the stability of that state, prior to the contextual regulation of prices (or of other references for coordination). Disequilibrium exists when the principles of evaluation that qualify the state of persons and things are called into question, especially by relying on alternative coordinations. H. White’s modeling of consumer markets is a particularly stimulating way of formalizing this renewed notion of equilibrium, in a pluralistic context. Equilibrium, that is the renewal of the quality convention, then concerns a dispersion rather than a central tendency.

Table I.2.1 Orders of worth	Inspired	Innovation, creativeness	Emotional	Emotionally invested body or object: artistic, religious	Passion	Creative	Disrupted	In the presence
	Civic	Collective interest	Formal	Regulation, right	Solidarity	Representative	<