Who will win the Nobel Prize in economics in 2014? No one knows. But a recent Thomson Reuters analysis predicts five leading contenders for the top honour in economics this year: Philippe M. Aghion and Peter W. Howitt for their contributions to growth theory, William J. Baumol and Israel M. Kirzner for their study of entrepreneurship, and Mark S. Granovetter for his pioneering research in economic sociology.

The first four names are well known in economics while the fifth is not actually an economist. Granovetter is a sociologist but his research appears to be the most interesting among that of the five contenders listed by Reuters. The caveat here is that the Reuters list is merely indicative, based on a quantitative analysis of the number of citations of each scholar in the discipline. The Nobel committee is unlikely to be influenced by quantitative metrics alone though the Reuters analysis claims that most scholars it has identified have eventually ended up winning the Prize.

Granovetter’s research on social network effects, which have now become quite a rage in academic economics, demonstrated for the first time that ties people shared with mere acquaintances could often have more material impact on our economy and polity than the ties that people shared with close friends and associates. Granovetter distinguished between the two, and called the former weak ties as opposed to strong ties one shared with family, relatives, friends and close associates at work. In his seminal research paper, The Strength of Weak Ties published in the American Journal of Sociology in 1973, Granovetter pointed out that weak ties often have a far greater impact on our lives than we tend to acknowledge.

For instance, Granovetter’s survey of the labour market showed that an overwhelming majority of those who reported getting a job through contacts had limited social interaction with the contacts who had tipped them about the job, or had introduced them to their prospective employers. Granovetter concluded that acquaintances are more helpful in providing useful career leads rather than close friends and associates because they move in different social circles, and hence have access to information which we, or our friends lack.

The power of weak ties can also explain whether a community can mobilize itself for organized political action or not, Granovetter argued. Granovetter noted that his findings challenged the typical economist’s conception of the so-called perfect labour market, and showed that the generally accepted view that cohesive communities are most capable of organized action may not be entirely true. Weak ties, which were hitherto thought to be indicative of alienation, were indispensable to individuals’ opportunities and to their integration into communities, Granovetter showed.

Granovetter’s research on how behaviour and institutions are affected by social relations has tended to weave a middle ground between the under-socialized accounts of economists and the over-socialized accounts of sociologists. In his widely cited 1985 study, Economic Action and Social Structure: The Problem of Embeddedness, Granovetter posited that social relations and trust played a significant role in economic decision making, which under-socialized narratives of rational choice under perfect information ignore. In the real world, information is imperfect, and the transactions between buyers and sellers are dependent as much on their rational interests as on their respective histories. Trust in economic interaction is based not on abstract faith in market determined prices but on specific knowledge about those whom we are dealing with, Granovetter argued.

At the same time, Granovetter criticized the over-socialized view of the world which allowed individuals little autonomy and held that social norms and values are dominant determinants of economic decisions. Granovetter further argued that new institutional economists such as the Nobel laureate Oliver Williamson, who recognize the impact of social norms and networks in their work have tended to ignore analysis of social structure of institutions, and have instead laboured to show how those institutions arose as the efficient solutions to economic problems. According to Granovetter, a more appropriate approach would be to accept that all economic behaviour is embedded in inter-personal relations.

“What looks to the analyst as non-rational behaviour may be quite sensible when situational constraints are fully appreciated… That such behaviour is rational or instrumental is more readily seen, moreover, if we note that it aims not only at economic goals but also at sociability, approval, status, and power," wrote Granovetter.

A Nobel prize for Granovetter will be a powerful signal to the economics profession that it needs to revisit its priors and embrace a more realistic view on economic choices. After the financial crisis of 2008 gave a rude shock to mainstream economics, many experts have identified the insularity of the discipline as its bane. While other social sciences have absorbed insights from economics in their research, the economics profession has been slow to open up and learn from other disciplines. There are some economists who are beginning to challenge the status quo, and a Nobel prize to a virtual outsider will only help catalyze change within the discipline.

There are earlier precedents when the Nobel committee has chosen persons outside economics departments for the prize, although a sociologist has never won it till date. The political scientist Elinor Ostrom, who shared the Nobel in 2009 with Williamson, is the most recent example. Ostrom challenged conventional wisdom by showing that common property resources can be managed successfully by user associations.

Will it be Granovetter’s turn this time? We will know on 13 October.

Economics Express runs weekly, and features interesting reading from the world of economics and finance.

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