Abstract

In "Polanyi and the Economic Method" I examine the work of the economic historian Karl Polanyi . Polanyi had the greatest impact on economic anthropology, where he is known for the belief that modern economic theory is inapplicable to primitive economics. Polanyi believed that modern economic theory is only applicable in a society organized around the institution of the market. I explore Polanyi's criticism of modern economic methods and try to determine what impact they have on the ability of economic theory to explain social life. ;I advance two theses. The first is that Polanyi's writings are more conducive to a rational choice interpretation than is usually believed. He clearly believes that people generally behave rationally. Where Polanyi disagrees with the economic method is in his view of the nature of people's utility functions. Where as economists generally understand people to be materialistically inclined, Polanyi understands them to be primarily concerned about social status. Both economists and Polanyi regard people to be basically rational and self-interested. ;The second thesis concerns the relationship between rational choice explanations and institutional structures. Polanyi stresses the importance of institutions in determining the preferences and motives of individuals. Recognizing institutions as an important influence on preferences provides a way to help specify why different motives operate in different circumstances. Applications of rational choice theory require auxiliary assumptions about what it is that actors will maximize. When different models make different assumptions about the nature of people's preferences, the theory becomes open to the charge of being ad hoc. Analyzing institutional structures provides a way of identifying which motives are important in which circumstances. Something like this is how Polanyi uses rational choice theory. Rational choice theory fills in the microfoundations of his institutional analysis