James Coleman's Foundations of Social Theory

American Economic Association

Melding Sociology and Economics: James Coleman's Foundations of Social TheoryAuthor(s): Robert H. FrankReviewed work(s):Source: Journal of Economic Literature, Vol. 30, No. 1 (Mar., 1992), pp. 147-170Published by: American Economic AssociationStable URL: http://www.jstor.org/stable/2727881 .Accessed: 23/04/2012 13:58

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Journal of Economic Literature Vol. XXX (March 1992), pp. 147-170

Melding Sociology and Economics: James Coleman's Foundations of

Social Theory*

By ROBERT H. FRANK Cornell University

I thank Ronald Breiger, Philip Cook, John Freeman, Thomas Gilo- vich, and an anonymous referee for helpful comments on an earlier draft.

Introduction

JHEN PUBLISHERS receive copies of reviews of their books, they quickly scan them

for possible quotes for use in promotional mate- rials. They are often frustrated to discover that a reviewer really liked the book, yet never man- aged to say so in a clear, unequivocal way. The people at Harvard University Press will experience no such frustration with this essay on James Coleman's application of rational choice theory to the classical issues of sociology. Pro- fessor Coleman's Foundations of Social Theory is a masterwork. Epic in scope, it is clear, en- gaging, and forcefully argued. Traditional sociologists will be unable to ignore its bold new agenda for their discipline. And the book will have a lasting impact on economics, political science, psychology, and other disciplines concerned with human behavior.

Having issued this ringing endorsement of the work as a whole, I hasten to add that there are many points on which I find myself in substantial disagreement with Coleman. On some occasions, he pushes the rational choice theory

too far; on others, not nearly far enough. But one of his great virtues is his remarkable willingness to articulate clear theories and commit himself to their predictions. In the process, he leaves himself open to being proved wrong, and indeed he sometimes is wrong. Yet how much more satisfying is his approach than the familiar alternative of constructing vague ad hoc explanations to fit known fact patterns.

Foundations of Social Theory is organized into five parts. Part I, Elementary Actions and Relations, introduces the basic building blocks of the theory-actors, resources, interests, individual rights, and relatonships involving authority and trust. Part II's focus is the "micro-to- macro transition"; it applies the theory of rational individual behavior to the units developed in Part I to deduce how systems of actors will behave. Here, Coleman is concerned with social exchange, crowd behavior, and the emergence of social norms. In Part III, Coleman constructs a theory in which the principal actor is not the individual but the corporation. His aim is to explain how and why individuals em- power formal organizations to act on their behalf, and the means whereby such authority can be revoked. Part IV, entitled Modern Soci- ety, employs the theories developed earlier to shed light on developments in contemporary social and economic life. Coleman devotes Part

* James S. Coleman. Foundations of Social The- ory. Cambridge, Mass. and London: Harvard Uni- versity Press, Belknap Press, 1990. Pp. xvi, 993. ISBN 0-674-312250-2.

147

148 Journal of Economic Literature, Vol. XXX (March 1992)

V, his final segment, to a mathematical formalization of many of the theories developed earlier.

Unlike most sociologists, Coleman is an un- apologetic rational choice theorist, and there is no essential difference between his concept of rationality and the one used by most economists: "We say that we understand the 'reasons' why the person acted in a certain way, implying that we understand the intended goal and how the actions were seen by the actor to contribute to that goal" (p. 13). How, then, do Coleman's theories of behavior differ from the ones familiar to neoclassical economists?

One important difference lies in the constraints imposed on, the respective theories by their different mediums of exchange: "as much as any single difference, it is the absence of money that sets off noneconomic exchanges from economic ones" (p. 119). Coleman likens many forms of social exchange to the kinds of economic transactions that took place in primitive societies under the barter system. Before an exchange could occur in such societies, there had to be a "double coincidence of desires." That is, each person had to want a good pos- sessed by the other, and each in turn had to be willing to give up his own good in order to acquire possession of the other's. As goods exchange developed in market economies, this constraint was largely eliminated by the introduction of money. In social exchange, by contrast, the constraint remains prominent, for there is no similarly well developed common currency. The need for double-coincident desires in social exchange can be eliminated only by indirect means-through the use of "social capital." Social capital is akin to what Tom Wolfe called "the favor bank" in his novel, The Bonfire of the Vanities. A does a favor for B, who reciprocates by spending some of his own social capital to induce C to do something for A.

Through much of Foundations of Social The- ory, Coleman's attempt to explain social behavior focuses on an analysis of networks of social capital. In social environments that lack such networks, he argues, social exchange tends to be inefficient in the same ways that barter economies lead to inefficient allocations of goods.

A second difference between Coleman's theories and conventional economic theories is the

emphasis Coleman places on interactions and feedback effects between individuals:

There is a broadly perpetrated fiction in modern society, which is compatible with the development of the political philosophy of natural rights, with classical and neoclassical economic theory, and with many of the intellectual developments (and the social changes which gener- ated them) that have occurred since the seven- teenth century. This fiction is that society consists of a set of independent individuals, each of whom acts to achieve goals that are independently arrived at, and that the functioning of the social system consists of the combina- tion of these actions of independent individuals. This fiction is expressed in the economic theory of perfect competition in a market, most graphi- cally in Adam Smith's imagery of an "invisible hand." (p. 300)

Coleman's point-that the behavior of aggregate systems is often very different from the behavior of representative agents-has not been neglected completely by economists. In- deed, Coleman's brand of methodological individualism has much the same flavor as the one developed so successfully by Thomas Schelling in his 1978 book, Micromotives and Macro- behavior.' Yet despite the growing influence of Schelling's work, a large proportion of economists, and perhaps an even larger proportion of sociologists, continue to model aggregate behavior as an inflated version of the representative agent's behavior. So there is still much for both fields to learn from Coleman's analysis of how interactions and feedback affect behavior.

Social Norms

As sociology sought to establish itself as a discipline at the turn of this century, its most pressing need was for a distinctive patch of intellectual turf, a set of issues and methodological perspectives not yet appropriated by existing disciplines. The rational choice approach was the undisputed territory of economics, and sociology wanted no part of it. Whereas econo-

1 Coleman's intellectual agenda in Foundations is, if not a clone of Schelling's, then at least its fraternal twin. Yet, curiously, Foundations makes no mention of Micromotives, or of any of Schelling's other work on related topics.

Frank: Revtew of James Coleman's Foundations of Social Theory 149

mists chose the purposeful individual actor as the unit of analysis, sociologists instead focused on groups.2 Sociology did not deny the existence of individuals, of course; rather, it saw their behavior as driven not by self-interest but by group norms and other macro forces.

One of the most fruitful applications of Cole- man's approach, with perhaps the greatest potential to inform economists, is his account of the emergence of social norms. Economists have largely ignored the existence of such norms; and when they have addressed them specifically, it has usually been to assert that rational agents would never follow them.3 Soci- ologists, by contrast, often seem to believe that social norms are the only important determi- nant of human behavior.

Coleman's approach embodies at least an implied criticism of economists, for he acknowledges the obvious importance of social norms. But he is quite explicitly critical of his fellow sociologists for having failed to address the ori- gins of such norms:

For many social theorists norms are starting points of theory. The image of man demanded by a theory that begins at the level of social systems is homo sociologicus, a socialized element of a social system. The questions of moral and political philosophy which address the fundamental strain between man and society cannot be raised. With this image of man as a socialized element of a social system, it becomes impossible, within the framework of social theory, to evaluate the actions of a social system or a social organization. Germany under Hitler or Russia under Stalin is indistinguishable as a nation-state from Switzerland in any evaluative sense, and Charles Manson's and Jim Jones's communes, which were directed toward death, are morally indistinguishable from an Is- raeli kibbutz, which is directed toward life. (pp. 4, 5)

Coleman insists that group norms and other macro-level forces must be understood as having resulted from the purposive actions of rational individuals. His account begins with the assertion that the demand for a norm arises because of externalities:

The condition under which interests in a norm, and thus demands for a norm, arise is that an action has similar externalities for a set of others, yet markets in rights of control of the action cannot easily be established, and no single actor can profitably engage in an exchange to gain rights of control. (p. 251)

Thus, for example, the fact that many of the costs of a poorly maintained lawn are external to individual homeowners might help explain the demand for a social norm that encourages homeowners to mow their lawns regularly.4

The notion that norms might help internalize such externalities is not novel with Coleman. Edna Ullmann-Margalit (1977), for example, proposed a version of this idea in a book published almost 15 years ago. Coleman's contribution is the additional observation that the mere fact that a norm might be nice to have is by no means sufficient to bring about its existence. The demand for norms arises from externalities, yet there are many externalities for which there are no corresponding norms. Exactly what gov- erns the supply of norms?

Coleman recognizes that the critical problem on the supply side is how to overcome the free- rider problem inherent in providing sanctions against violators. To do this effectively, we need "connectedness" (closely linked networks of personal relationships), social capital, and the like. Using a sequence of carefully crafted examples of simple, multiperson public goods problems, Coleman shows how relationships between actors sometimes provide mutual incentives to impose sanctions on noncontribu- tors. Thus, for example, the citizens of small communities, who interact with one another regularly, are better able to mount effective sanctions against norm violators than are the citizens of large urban areas.

Yet even people who live in cities are sometimes able to sustain effective norms. To illustrate, Coleman offers these examples:

A three-year-old child, walking with its mother on a sidewalk in Berlin, unwraps a small piece of candy and drops the cellophane on the sidewalk. An older woman who is passing by scolds the child for dropping the cellophane and ad-

2 For a discussion, see Mark Granovetter 1990. 3 For an exception, see Heinz Hollander 1990. See

also Robert Sugden 1989.

4Cooperatives, condominiums, and other residen- tial collectivities solve the same problem through formal contractual means.


monishes the mother for not disciplining the child. A three-year-old child, walking with its mother on a sidewalk in New York City, unwraps a piece of cellophane and drops the paper on the sidewalk. An older woman is passing by but says nothing, not even noticing the action of the child. (p. 245)

It is easy to see that the New York City environment might be deficient in connectedness and social capital, and that it might thus be difficult for New Yorkers to enforce an anti-litter norm. But Berlin is also a large city. Why is the norm effective there? Coleman offers these thoughts:

the sanctioner may have been able to bring up the event in subsequent discussion with others who share the same opinion or feeling about the event and would provide encouraging comments . . . One difference between the older woman in Berlin and the older woman in New York City may have been that the former spent evenings with others like herself, with whom she could discuss the shortcomings of the youn- ger generation's child-rearing practices and arrive at consensus about what is right, and the latter spent evenings in an apartment alone. (p. 283)

This account is troublesome on several grounds. First, even New Yorkers live in local neighborhoods, have friends, belong to organizations, and so on. We thus have no reason to think it more likely that the New York woman spent evenings alone than that the Berlin woman did. More important, Coleman's account implies that Berliners who do spend a lot of time alone would have been unlikely to chastise the mother of the offending child. But does Coleman really believe that the Berliner who chastised the child experienced an immediate deficit in satisfaction that was not replen- ished until later that evening when supported by her friends? As someone who has been chastised by elderly Berliners on several occasions for jaywalking on the Kurfurstendamm, my own sense is precisely to the contrary: the chastisers would experience an immediate decline in satisfaction if they witnessed an offense and failed to speak out.

External rewards for sanctioning offenders undoubtedly do sometimes exist. But Coleman pushes the rational choice model too far when he suggests that such rewards are the only im-

portant motive for not free riding. After all, if external rewards were all that counted, then we could abstain from sanctioning and later re- port falsely to friends that we had sanctioned, thereby gaining their support for free. And this possibility suggests a further difficulty: if people cared only about external rewards, why would a person's friends even believe her statement that she had incurred costs to sanction a viola- tor?

On the adherence side of the norm market, there are similar contradictions, for we know that people often follow norms even when external sanctions are not a credible threat. For example, the norm to tip in restaurants is almost impossible to enforce by external sanctions in the case of people who eat at restaurants along interstate highways. Those who leave tips under these circumstances are almost certainly responding to internal, rather than external, incentives.

Yet if people respond to internal, nonmaterial rewards, we seem forced to abandon the purposive rational actor model, a difficulty that Cole- man clearly recognizes:

To examine the process whereby norms are internalized is to enter waters that are treacher- ous for a theory grounded on rational choice. Asking the question of how individuals come to have the interests they exhibit is ordinarily not possible in constructing such a theory. (p. 292)5

Despite his misgivings, Coleman forges ahead. He notes that internalization may be accomplished by parental training and specu- lates on the nature of the process. Parents clearly benefit, he argues, if they can teach their children to obey their rules. And it benefits the child to be receptive to such training, he continues, because the parent is in a position to mete out punishment to those who are not. But Coleman's account leaves a central question unanswered: Why don't parents just teach their children to be cooperative only toward family members, and opportunistic toward people outside the family?

Some of the more detailed features of Cole-

'Some economists have addressed the issue of preference formation. See, for example, Jack Hirsh- leifer 1987; George Akerlof 1983; and Robert Frank 1987.

Frank: Review of James Coleman's Foundations of Social Theory 151

man's account of internalization are also problematic. He predicts, for example, that parents in cultures where children leave home early will invest less in teaching norms because there will be less time for them to reap the benefits of their children having internalized them (p. 297). But this argument is shaky even if we accept all the premises of the narrow cost-benefit calculus on which it is based. In Coleman's account, parents weigh the cost of instilling norms, which is incurred during early child- hood, against the present value of the stream of benefits from sharing living quarters with more considerate offspring. The difficulty is that if parents discount future benefits at the market rate of interest, then the size of this present value stream will not be very sensitive to differences in the age at which children leave home. And as Coleman is well aware, there is much evidence that people often discount future benefits at rates much higher than the market rate of interest.6 (Even Milton Friedman, when con- fronted with data on how people spend windfall income, conceded a planning horizon of only three years.) Coleman weakens his case here by trying to extract much more from the rational choice model than it can possibly hope to deliver.7

Coleman's explanation of the internalization of norms is unsatisfying on other grounds. In particular, most parents would be puzzled by its implicit assumption that their primary motive for teaching their children honesty was to prevent theft within the family. Indeed, most parents would be mortified to learn that their adult children were stealing from outsiders, even if they could be assured that their children would never be caught and punished. It seems more descriptive to say that a parent's proxi- mate motive for instilling norms is to produce

children who will ultimately assume the role of responsible citizens. The difficulty with this assumption, from Coleman's perspective, is that it leaves unexplained why parents might hold such a motive, which, after all, seems to conflict with the family's ability to acquire material resources.

On the subject of intrinsic motivation, Cole- man has erred not only in pushing the rational choice framework too far, but also in not pushing it far enough. For once we recognize that intrinsic motives play an instrumental role in a person's ability to achieve material rewards, the rational choice model provides a straighifor- ward framework within which to inquire "how persons come to acquire the interests they exhibit." Elsewhere (Frank 1987, 1988), I have argued that being motivated by various internal, psychological rewards often helps people achieve what would otherwise be unattainable material objectives. The argument in brief is that people thus motivated are, in perhaps sub- tle ways, observably,different from others, and also much more attractive as partners in prisoner's dilemmas and other ventures that require trust and commitment. If a genuinely trustworthy person is observably different from an op- portunist, even if only in a statistical sense, then such persons can interact selectively with one another and reap the benefits of cooperation in prisoner's dilemmas. And this fact provides self-interested parents with a perfectly intelligible motive for socializing their children to be trustworthy.8

As Coleman makes clear, social norms are of tremendous importance in the task of explain- ing behavior, and economists can ill afford to ignore this message. Coleman is also on target in criticizing his fellow sociologists for treating social norms as exogenously given. And he has shown that a narrow cost-benefit calculus can help explain the supply of and demand for social norms. Yet contrary to what Coleman suggests, many of the free-rider problems we encounter, especially those related to the sanctioning of violators of social norms, simply cannot be overcome by purposeful rearrangement of material incentives. To explain why people do not free ride in these circumstances, we have no alterna-

6 See, for example, Jerry Hausman 1979. 7A more likely explanation for the reduced effort

devoted to instilling norms is that with two-generation families, the cost of instilling norms is higher than in three-generation families. Coleman also notes that high status families invest more in instilling norms than do low status families, and argues that this is because the high status families have more to lose from the actions of a wayward family member (p. 298). Fair enough, but perhaps a more important reason is that instilling norms requires diligence, pa- tience, and skill, qualities that help explain which families achieve high status in the first place.

8 See also Akerlof 1983 and Hirshleifer 1987, for further elaborations on this argument.


tive other than to invoke internal motives. But these motives need not remain mysterious from the perspective of rational choice theory.

Trust

Trust and, more generally, cooperative behavior of many different sorts have found an increasingly prominent place on the social science agenda in recent years. As in the case of social norms, Coleman pursues these issues in his characteristic hard-nosed way, and, here, too much of what he says will be of immediate interest and appeal to most economists.

In defining trust, Coleman says that "Situa- tions involving trust constitute a subclass of those involving risk. They are situations in which the risk one takes depends on the performance of another actor" (p. 91). As with other issues, Coleman takes a cost-benefit approach to the decision whether to trust someone: "individuals will rationally place trust if the ratio of the probability that the trustee will keep the trust to the probability that he will not is greater than the ratio of the potential loss to the potential gain . . ." (p. 104).

The reasons that affect the likelihood of trustworthy behavior in Coleman's framework thus rest largely on the familiar logic of incentives in repeated prisoner's dilemmas. With these incentives in mind, Coleman notes that bilat- eral trust relationships tend to be more stable and productive than unilateral ones. The reason is that if each party not only trusts, but is also trusted by, the other, then possibilities for mutual sanctions are much greater.

Perhaps less familiar to some economists will be Coleman's emphasis on the importance of intermediaries and other network effects in the establishment of relationships involving trust:

The importance of the relation of employee or debtor in establishing intermediaries in trust is apparent from the very widespread use-in job applications, in applications for credit, in applications for a telephone or a lease on an apartment, and in other areas-of both employment references and credit standings (credit cards held, loans outstanding and from what institutions, and so forth). The result is a skewed distribution of trust placement in persons, by other persons and by corporate actors. Certain persons, such as those employed in managerial positions in large respected organi-

zations, find that trust of all sorts is readily placed in them. Their path in life is cleared of the kinds of obstacles that can be removed through the placement of trust by others. In contrast, there is a large set of other persons for whom this is not true: young persons, persons who are out of work, women who do not work outside the home, self-employed persons such as writers and artists, and retired persons. All these persons have more difficulty in carry- ing out even the everyday activities of life which require some trust on the part of others. (p. 185)

Note here the potential for even small initial differences to be self-reinforcing through time: Someone who occupies a favorable initial position, perhaps by virtue of her affiliation with .a respected employer, has an easier time secur- ing her first loan, credit cards, and the like. These make possible the establishment of a favorable credit history, which in turn provides access to larger loans, lines of credit, and so on.

The potential for instability in such processes is evident. Coleman cites the vivid example of how faculty members form opinions of graduate students. A's opinion of G is influenced by B's, which is influenced by C's which in turn depends solely on D's. If D changes his mind about G for some reason, the entire department is likely to follow suit.

Much of the appeal of Coleman's book stems from his frequent attempts to enlist his theories to help explain the puzzling observations of everyday life. For example, he asks, "When a person meets someone new who might become a friend, why is it generally said that it takes some time to develop trust? Why should the initial estimate of trustworthiness be an under- estimate of the true probability rather than an overestimate?" (p. 104). The answer, Coleman suggests, follows directly from the cost-benefit calculus:

A possible solution to this puzzle may lie in the values of the potential loss and the potential gain. Assuming that a person has a standard estimate of the probability of trustworthiness, p*, for the average person he meets, based on past experience, then when in a situation calling for placement of trust in someone new, he will place trust if p*/(l - p*) is greater than LIG [where L is the potential loss, G the potential gain]. When it is said that a person must come


to develop trust in another, however, the context is ordinarily that of a relatively close relationship; in which the potential loss from taking another into one's confidence or exposing one's weaknesses is especially great. . . . (p. 104)

In this situation, it seems more parsimonious to say that the initial estimate is not an underes- timate at all, but rather an estimate with higher variance. In the process of getting to know others, we tend to discard those who reveal themselves to be untrustworthy. Thus, as time passes, the average trustworthiness found in surviving relationships rises. Also, the growth of mutual sympathy and other emotional bonds causes trustworthiness to rise over time for a given relationship. Coleman is right that in close friendships people often reveal information that would be very costly if it were made public. But the fact that we reveal such information under these circumstances seems more likely the result of our having arrived at a confi- dent assessment of high trustworthiness than the cause of an initially mistakenly low estimate of trustworthiness.

As in his treatment of social norms, Cole- man's discussion of trust sometimes demands more from the narrow cost-benefit calculus than it can reasonably deliver. Consider, for example, his use of the logic of continuing relationships to explain the following case:

a young man in military service was hitchhiking home to spend his leave with his family. An- other hitchhiker, also a serviceman but from another base, got a ride in the same car. When the first serviceman got out because his route diverged, the second asked if he could borrow a dollar. The first made the loan; the second took his name and address and said he would certainly repay the dollar. When the first serviceman arrived home and mentioned the inci- dent to his father, the father said, "Forget the loan, and be happy it was so small. It is likely you will never see it again." The mother chided the father, telling him he had no faith in human nature. The father replied that it was precisely his knowledge of human nature that led to his prediction. The second serviceman, having nothing to gain in the future by remembering the loan, would never be reminded of it, however honorable his intentions, and it would fade into oblivion. (p. 109)

Coleman's sympathy lies clearly with the serviceman's father here, and while both may feel

that the boy's mother's heart is in the right place, both view her as hopelessly naive in her beliefs about human nature. Assessments of this sort, which are common among rational choice theorists, have led to justified skepticism about the rational choice model's ability to predict human behavior. For while various empirical studies confirm that there is often less coopera- tiveness in transitory relationships than in continuing ones, there is also overwhelming evidence of substantial levels of cooperation in even purely anonymous relationships. The sociologist Harvey Hornstein (1976), for example, planted hundreds of "lost" wallets on the side- walks of New York City to see whether people would return them. Each wallet contained a small amount of cash and various identification cards with the "owner's" name and address. More than half the wallets were returned with the cash intact. Similarly, tens of millions of Americans donate anonymously to private char- ities and vote in presidential elections. Such evidence obviously provides no guarantee that the hitchhiker in Coleman's fable will repay the one-dollar loan. But if a shrewd gambler had to bet, he would almost surely bet against Coleman.

Coleman's discussion of trust has much in common with the political scientist Robert Ax- elrod's discussion of cooperation (1984) and the sociobiologist Robert Trivers's discussion of reciprocal altruism (1971). In each case, the author describes cooperation in repeated games as "trustworthy"; yet because of the material incentives created by the possibility of retalia- tion in repeated games, such behavior seems more aptly described as "prudent." Defection is more likely in one-shot prisoner's dilemmas than in repeated prisoner's dilemmas, but contrary to the apparent belief of many rational choice theorists, it is far from assured.

Corporate Behavior

The Principal-Agent Problem

For much of its history as a discipline, economics has viewed the firm as a black box, something that did whatever had to be done to maximize profit. More recently, however, economists have begun to grapple with the fact that managers and other employees have inter-


ests of their own, and that owners are unable to perfectly monitor and control their agents. Coleman devotes long sections of Foundations to discussion of the principal-agent problem, about which he offers many interesting and novel insights. He then applies these insights to a variety of issues related to the behavior of corporations and their optimal institutional design.

Coleman begins with an illuminating survey of the history of the common law of agency relations:

This class of social transactions is fundamental, for it provides a means by which interests can be pursued far beyond the capacities of the orig- inal interested party. It is not the only such means, but it is frequently used when an actor with interests to pursue has a sufficient quantity of resources, but not those of the appropriate kind to realize the interests (for example, has money but not the appropriate skills). He may then wish to use those resources to provide a kind of extension of self. (p. 146)

Following Richard Posner (1972), Coleman claims that common law is a more useful model for social theory than is statutory law: "Statutory law, consisting of legislative statutes, is much less useful than common law for the development of social theory. The latter, proceeding through the process of case resolutions, contin- ually evolves incrementally toward internal consistency. Statutes undergo such an evolution in jumps" (p. 147). Yet common law courts may find it difficult to act when circumstances dictate a bold departure from the status quo. It is difficult, for example, to imagine FDR's New Deal having emerged from piecemeal decisions in common law.

Under two common law principles-"that the agent must not allow his interests to affect actions covered by the agency relation, and that the principal, not the agent, is liable for actions undertaken by the agent in the course of agency . . . the principal agent pair becomes a single corporate actor in relation to the outside world, an actor with augmented resources but a single set of interests" (p. 151). As useful as this common law principle may be as a matter of legal and social policy, it does much to obscure the fact that there are many conflicting sets of interests within any organization. Coleman argues that sociologists have been wrong to follow Max

Weber in modeling organizational behavior as if these conflicting interests simply did not exist: "The fact that the persons who are employed to fill the positions in the organization are purposive actors as well is overlooked" (p. 423).

In general, Coleman's explanation of system behavior requires that the interests of individual actors be taken explicitly into account. His approach involves three components: a theory of rational action at the individual level; the micro-to-macro transition, whereby each individual's behavior is aggregated; and the macro- to-micro transition, whereby information re- garding the state of the system is transmitted to individuals, who may then modify their behavior in the light of that information. The functioning of the principal-agent relationship provides a good illustration of these three components:

Rational action at the micro level is the principal's maximization of utility and the agent's maximization of utility. The micro-to-macro transition comes about through the quantity of product produced by these actions and the distribution of income between the principal and agent. The macro-to-micro transition is the feedback process through which the quantity of product and the distribution of income (and other conditions in any practical application) enter into the utility functions of the principal and the agent and affect their actions. (p. 153)

A voluminous economic literature takes up the question of how to design the macro-to- micro transition so as to bring worker performance maximally in line with the interests of owners. The familiar piece-rate pay scheme is often cited as an example of a macro-to-micro transition with many attractive features from this perspective.

Coleman joins many economists in criticizing piece-rates on grounds that it is often impractical to monitor quality (p. 154).9 But Coleman parts company from traditional economic views on principal-agent problems when he discusses having the agent "identify with" the principal as a means of controlling the agent's behavior. He notes that the benefit of such a relationship

9But even where quality is easily measurable, workers often reject piece rate schemes, possibly because of their desire to limit interpersonal competition. See Frank 1985, ch. 5.


to the principal is clear. But why, he asks, should an agent identify himself with the principal? Coleman's answer is that the agent gets more utility (or less disutility) from his work if he can adopt the principal's interests as his own (p. 161). But this is like saying that we could be happier if we developed a taste for cheap. food and housing. Maybe so, but surely there are limits to such bootstrap methods of aug- menting happiness. Perhaps a more plausible explanation here is that a principal is simply willing to pay more for an agent who can dem- onstrate that he shares the principal's interests.

Coleman mentions two classes of cases in which an agent will cede control of his actions to the principal: "In the first class one actor vests authority in another because the first actor believes that he will be better off by following the other's leadership. He vests rights of control unilaterally, without extrinsic compensation. In the second class the actor transfers rights of control without holding this belief, but in return for some extrinsic compensation" (p. 72). Cole- man calls relationships of the first type "conjoint," and cites as an example the case of people who voluntarily join a commune to follow a charismatic leader. Relationship of the second type he calls "disjoint," and by base these he has in mind the relationship between the worker and the owners of a corporation.

Coleman continues:

In both cases the subordinate's interests lead, in the absence of special correctives, to reduced levels of performance. But other aspects of the behavior differ markedly. In conjoint authority structures the subordinates' interests lead to public support of norms encouraging high performance, even though private behavior may not accord with those norms; in disjoint authority structures subordinates' interests lead to no such norms, except in the presence of special incentive structures, such as group piece rates. (p. 80)

People who choose to follow a leader without monetary compensation do indeed seem more likely than paid corporate employees to respond to norms of the sort Coleman has in mind. But surely Coleman goes too far when he says that there are no such norms in disjoint authority structures. It is not uncommon for economists to ignore concepts like "professionalism" and "corporate culture" in their study of corporate

behavior, but Coleman must be nearly alone among sociologists in adopting this position. To be sure, the fact that paid workers in organizations are responsive to such nonmonetary forms of control is a challenge to the simplest versions of the rational choice model. Elsewhere in his book Coleman boldly attempts to explain such apparent anomalies. Here he seems content simply to ignore them.

Institutional Design Features

Primarily in response to competitive pressures to exploit economies of scale, there has been a trend toward ever larger corporate structures since the earliest days of the industrial revolution. As organizations have increased in size, the problems of maintaining effective control have multiplied.

Throughout this process, basic features of corporate institutional design have undergone a parallel evolution. A critically important part of this evolutionary process, Coleman argues, has focused on the basic mode of maintaining economic viability in organizations. Coleman identifies three such modes:

1. Reciprocal viability: each pairwise interac- tion produces benefits for both partici- pants.

2. Independent viability: each employee produces net benefits for the corporation and benefits from remaining with it.

3. Global viability: each employee finds it worthwhile to stay and the corporation has a nonnegative operating balance.

The move from reciprocal to independent viability provides a rationale, essentially similar to the ones discussed by Ronald Coase (1937) and Oliver Williamson (1975), for organizing production within firms. As corporate actors have grown larger and more complex, there has been a movement from independent viability toward global viability.

Coleman warns of a danger in the trend toward global viability, despite the greater flexibility it affords: those who are paid less than the values of their respective marginal products will be bid away by competitors, leaving the corporation with a workforce that can not sustain a nonnegative operating balance. The solution, in principle, is to pay each worker the value of his marginal product (VMP), thus re-


storing independent viability. But this, Cole- man says, is impractical for three reasons:

First, not all compensation in disjoint authority structures is in the form of money wages. . Second, because of the interdependence of activities and because many employees' activities consist primarily of overseeing a production process, it is often difficult to separate out the marginal contribution of each actor. And third, because of collective bargaining agreements (and other social constraints), the firm is power- less to pay each employee an amount equal to his marginal contribution. (p. 430)

How serious are these problems? First, the fact that not all compensation comes in the form of money creates no difficulty. To retain its ablest employees, all the firm has to do is assure that the total value of their monetary and nonmonetary compensation is as great as their respective VMPs. If competitors can pay more, then the employees should move. Second, the practical difficulty of identifying individual VMPs confronts not only the firm but its potential competitors as well. If anything, these potential competitors are in a handicapped position to bid for the firm's best employees because they know even less about their productivity than the firm itself does. Finally, collective bargaining can cause a problem only if the incumbent firm is subject to it while potential entrants are not. In such situations, the union and the firm have a common interest in seeing to it that the firm remains viable. Moreover, the social capital implicit in the union's activities may increase productivity for the incumbent firm, an advantage that can compensate for the firm losing its best employees to nonunion rivals. 10

Coleman goes on to note that payment according to individual productivity is also made difficult "by the fact that workers evaluate their wages relative to others in the same location. This would prevent incentive payments from approximating the wage that corresponds to marginal productivity" (p. 431). But this too does not hamper the firm in its efforts to retain its most able employees. Part of every employee's wage is a compensating differential reflect-

ing his or her position in the wage distribution of the firm. The ablest employees are paid less than their respective VMPs, true enough. But this does not confront potential entrants with a profit opportunity, for their wage payments must also include compensating differentials for internal position. 1

In sum, the dangers Coleman sees in the trend toward global viability seem a bit off target. Yet he is clearly on the mark in seeing that institutional arrangements within the firm often affect its ability to survive.

As one specific step to make corporate production more efficient, Coleman suggests the possibility of returning to reciprocal viability in some instances. "In a hotel, for example, the restaurant manager, the barbershop manager, and the manager of the valet service may not be employees of the hotel but independent operators" (p. 433). By following this route, Coleman notes, "the benefits of weakening the requirement of reciprocal viability to that of independent viability are missing, but the drawbacks of global viability are also avoided" (p. 434)

There are indeed often telling efficiencies in franchise arrangements of the sort he describes. But it is less clear that such arrangements involve any real sacrifice of the flexibility inherent in the global viability standard. The hotel manager, for example, can offer whatever terms she sees fit to attract the services of a restaurant franchise. If she views having a restaurant on the premises as essential to the success of her overall mission, she can subsidize the operation of the restaurant should that prove necessary. If we ignore whatever indirect benefits moti- vate this type of subsidy, the hotel appears to be operating under the global viability criterion. But if we take these indirect benefits into account, it is back under the independent viability criterion. And if we take as given that the hotel manager and franchisee would not continue their relationship unless it was mutually advantageous, the hotel may also be seen to be operating under reciprocal viability with respect to its franchise relationships. In such relationships, there appear to be no important distinctions between Coleman's concepts of

10 See Richard Freeman and James Medoff 1984, for a discussion of how unions might increase productivity.

" For an extended discussion of this point, see Frank 1985, ch. 3.


reciprocal, independent, and global viability. Coleman employs his viability concepts to

draw parallels between capitalist corporations and socialist nation-states:

A capitalist corporation which operates according to global viability and a socialist state are similar. A principal difference is that the state has monopoly control over population and land and can therefore survive even though it might not be viable without this monopoly power. A corporation is disciplined by the market, even if it does not extend that discipline internally, and cannot survive if it fails to maintain its global viability. (p. 435)

This distinction seems increasingly tenuous, however, in the light of recent developments in Eastern Europe and the Soviet Union.

According to Coleman, states, like corporations, have been moving from independent to global viability, often with similar ill effects:

Perhaps the best example is the state's replacing the family as the major social welfare institution of society. . . . the criterion of independent viability of the family is being replaced by the criterion of global viability, and the interest of the family as a corporate actor in maintaining independent viability through support and care for its unproductive members, is being eliminated. (p. 435)

As in the case of the private firm, the remedy, Coleman suggests, is to return to the criterion of independent viability, "applied not to each individual but to small subunits in the society which have the possibility of continuous viability (for example, extended families may have continuous viability, whereas individual persons and nuclear families do not, because of age, infirmity, or incapacity)" (p. 435).

Coleman offers several other observations about how corporate institutions might be rear- ranged to enhance efficiency. He notes, for example, a generalized lack of group enthusiasm for ideas that originated outside the group (the "Not-Invented-Here," or "NIH," syndrome). Coleman's conclusion is that the firm should let the group that comes up with an idea or innovation be responsible for its development and implementation. Now, it is hard to quarrel with the claim that a manager or group will pursue its own ideas with greater energy than it will pursue the ideas of others. Yet it surely

does not follow that the best strategy for an organization is to entrust all employees with the implementation of their own ideas. After all, the tendency of employees to behave ener- getically in implementing their good ideas is just as powerful when they are given a chance to implement their bad ones. Moreover, there are many employees who are quite adept at coming up with useful new ideas, yet hopelessly incompetent when it comes to implementing them. Thus there will always be limits to the firm's ability to avoid the NIH syndrome. The mere fact that such a syndrome is observed is not by itself evidence that corporate institutions are designed suboptimally.

These quibbles aside, there is no question that Coleman does a real service by his attempt to enrich the Weberian model of the corporate actor. Individuals within organizations clearly do have, and attempt to pursue, interests of their own, and theories that ignore this fact are bound to give misleading accounts of organizational behavior.

Collective Behavior

The power of Coleman's approach-rational individual behavior, the micro-to-macro transition, the macro-to-micro transition-is nowhere more apparent than in his analysis of collective behavior (a term he uses to describe crowd behavior and kindred phenomena):

The eclecticism-or, one might say, the intellectual disarray-of the microfoundation of sociological theory is evident from a comparison of the received wisdom about bureaucratic authority and the received wisdom about collective behavior (that is, phenomena such as riots, mobs, panics, crowd behavior, fads, and fashions). The ideal type of bureaucracy is envisioned as having a single purposive actor at the top of the hierarchical structure, with the re- mainder of the structure occupied by entities that differ little from the parts of a machine. Their purposes or interests never play a role in the classical theory of organizational functioning. . . . Max Weber's plaintive cry about bureaucratic man . . . is not really about modern man but about Weber's conception of modern man-a robot in the employ of the bureaucracy. Yet these "robots" are the same persons con- cerning whom observers of collective behavior


have a wholly different conception. They are described as "excitable," "emotional," or "sug- gestive"; their behavior exhibits "contagion"; they are subject to "hypnotic effects of the crowd." That is, they are irrational, disorderly, unpredictable, and spontaneous, close to the opposite pole from the bureaucratic man Weber envisioned as the typical man of the future.

Such an intellectual disarray is one that sociologists have learned to live with. Social theory has too often taken the easy path of creating, conceptually, exactly the kind of creature at the micro level that by simple aggregation will produce the observed systemic behavior-whether that systemic behavior is the orderly and mun- dane functioning of a bureaucracy or the spontaneous and emotional outbursts of a crowd. The correct path for social theory is a more difficult one: to maintain a single conception of what individuals are like and to generate the varying systemic functioning not from different kinds of creatures, but from different structures of relations within which these creatures find themselves. (p. 197)

Coleman uses the rational model with the linkages and feedback loops that generate micro-to-macro and macro-to-micro transitions to analyze such phenomena as fire panics, bank runs, fads, fashions, etc. He also applies the model to the subject of revolution. Coleman complains that most scholars who study revolution focus on the wrong question: "the precise question researchers are examining is not 'For which social systems will revolutions occur?' but rather 'in those social systems in which a revolution does occur, what are changes that lead to its occurrence?'" (p. 469). This orientation, Coleman argues, has caused other scholars to overlook the role played by democratic institutions in determining whether revolution oc- curs. For example, Aquino in the Philippines and Allende in Chile both ascended to power by democratic means, making violent revolution unnecessary.

The paradox of revolution is that it is not most likely when material conditions are at their worst. If, anything, the opposite is true: "When general impoverishment has increased, the population appears to have sunk into an increased passivity" (p. 471). Quoting Tocque- ville, Coleman notes that "when a people which has put up with an oppressive rule over a long period without protest suddenly finds the gov-

ernment releasing its pressure, it takes up arms against it" (p. 471).

Coleman notes the challenge that this pattern seems to pose to rational choice theory. Schol- ars who have addressed this challenge have generally framed theories that involve frustration. For often unspecified reasons, expectations often rise more rapidly than actual conditions once things start to improve, creating a gap that leads to revolution. The problem with explanations of this sort, Coleman argues, is that they have nothing to say about how frustration at the level of the individual translates into the often highly organized, purposive activity we observe in actual revolutions. In short, there is no micro-to-macro transition in these theories.

Coleman's alternative explanation is a "power" theory of revolution. "If revolutionary activity and support for the revolutionary activity of others are regarded as rational actions, it becomes evident that such activity will be more likely to occur as those who have an interest in seeing the authority system replaced come to have a belief that they will succeed" (p. 480). As people dissatisfied with the current regime come, for whatever reason, to think that their chances of overthrowing the regime have increased, this can explain their sense of frustration that the regime is still in power. "But this frustration will be only an epiphenomenon, an incidental consequence of the opponents' increased belief in their own capabilities" (p. 484). This is clear thinking and there is a lot more of it in Foundations of Social Theory.

Social Choice

No theory of social behavior is complete without some means for dealing with the question of how groups make decisions. Coleman believes that sociologists have given far too little attention to social choice, a topic about which he has many things to say that should interest not only sociologists, but also economists, political scientists, and philosophers.

Coleman begins by noting that an ideal social choice mechanism should have at least the following four properties: 1) consistency; 2) veridi- cality (reflects well the interests of members); 3) action potential; and 4) nondivisiveness (p. 375). He then surveys the well-known literature


that demonstrates how and why even the most widely used social choice mechanisms fail to satisfy all these criteria. This material will be familiar to most economists.

Coleman breaks new ground, however, with a provocative discussion in which he argues that analogues of many of the imperfections in social choice mechanisms are also found at the individual choice level. Consider, for example, the problem of independence from irrelevant alternatives, which is familiar at the macro level. There were initially two candidates in the 1983 Chicago Democratic mayoral primary, Jane Byrne and Harold Washington. In pre-election polls, Byrne came out well ahead. Then Richard Daley entered the race. And when voters went to the polls, Harold Washington emerged the winner, Byrne second, and Daley third. At the macro level this result seems paradoxical. But there is a simple explanation for it at the micro level: Washington's win was widely attributed to Daley's entry having split the white vote.

So far no surprises. But now Coleman points out that even at the micro level we often see decisions influenced by the introduction of irrelevant alternatives. Consider the following example based on the work of Joel Huber et al.: A group of students is first asked to choose between two apartments, A, which is close to campus but expensive; and B, which is farther from campus but cheaper than A. The distance and rent parameters are calibrated so that students split roughly 50-50 between A and B. A second group of students is then asked to chose from a set of three apartments-A, B, and C, where A and B are as before and C is slightly farther away and more expensive than B. As expected, no students in the new group choose C, which, after all, is dominated by B. But the addition of C to the choice set dramatically increases the proportion of students who choose B.'2 Coleman concludes that "if the apparent

irrationality or incoherence that is found at the corporate level is also found at the individual level, the fault may lie not with the social-choice procedures but with the axiom itself" (p. 399).

Coleman's own favored social choice mechanism is a procedure he calls Borda elimination, which works as follows. First, each person ranks each of N alternatives under consideration. Next, the alternative with the least support over all,pairwise contests is eliminated. People then rank the remaining N-1 alternatives. The alternative with the least support over all pairwise contests among these N-1 is then eliminated, and the process continues until there is only one remaining alternative (p. 411).

Coleman argues that Borda elimination has numerous desirable properties, but laments the fact that its implementation might be impractical in large systems. With modern information pIrocessing equipment, however, this problem could be solved. A potentially much more serious difficulty is that Borda elimination, like other ranking schemes, is also subject to strate- gic manipulation. People have incentives to misrepresent their rankings in early rounds in order to eliminate the most powerful competitors to the alternative they most prefer.

Coleman follows the lead of economic theorists in looking for social choice mechanisms that, like Borda elimination, are based only on ordinal rankings of alternatives. One obvious flaw in all such mechanisms is that they make no allowance for differences in intensity of preference.'3 Suppose, for example, that nonsmokers constitute 45 percent of the population, smokers the remaining 55 percent, and that nonsmokers would be willing to pay $100 each to have smoking prohibited in public buildings, smokers only $10 each to avoid the prohibition. Any decision rule based on ordinal rank will retain smoking rights in public buildings. Yet clearly the nonsmokers could be com- pensated for ceding these rights.

So why not just use cost-benefit analysis? 12 See Huber, Payne, and Puto 1982. The authors

explain that subjects often find A and B hard to com- pare and therefore find it difficult to choose between them. With the addition of C to the choice set, subjects now have one pair of alternatives for which choice is easy, because B is superior to C along both of the relevant dimensions. B's easy victory in its contest with C apparently endows B with a "halo effect" that makes it more attractive in the choice between A and B.

13 Coleman refers briefly to point voting schemes, in which each person is given an equal allocation of points, which she can then use to vote for various policy alternatives. But whereas votes based on actual wealth holdings can be shown to produce Pareto- optimal allocations, votes based on arbitrary point allocations will in general leave room for mutually beneficial gains from exchange.


Coleman and other analysts are quick to reject the Kaldor-Hicks criterion on the grounds that the compensation payments are never actually carried out. On this view, there are two problems: 1) that an uncompensated loss is unjust; and 2) that policies chosen under the K-H criterion would be systematically biased in favor of wealthier citizens. Others complain of anomalous cases in which the K-H criterion would approve of not only a move from policy A to policy B, but also the reverse move.

Such objections, however, do not withstand close scrutiny. First, it is a mistake to evaluate the efficacy of cost-benefit analysis in terms of its effects on specific individuals in a single case. If the cost-benefit criterion is employed as a policy for resolving large numbers of social decisions, what is relevant is the pattern of decisions it produces. Though a person may suffer an uncompensated loss from many policy changes that pass a cost-benefit test, he will also reap an unencumbered benefit from many others. What matters is the net effect of the policies implemented under a cost-benefit criterion as compared with the corresponding figure for the most favorable alternative social choice mechanism.

It is probably true, as critics of cost-benefit analysis complain, that the willingness-to-pay criterion systematically favors the interests of the rich. For example, to the extent that income elasticities of demand for parkland, environmental cleanliness, and other social amenities exceed one, the rich will tend to favor spending a larger share of national output on such items than will the poor. But even if the interests of the rich and poor never coincide, it is wasteful and inefficient to respond by adopting social choice mechanisms that assign equal weight to the interests of rich and poor. If a rich citizen would pay $100 for the policy she favors, and a poor person would pay only $10 to avoid the same policy, it is in the interest of rich and poor alike that the policy be implemented, with a compensation payment between $10 and $90 flowing from rich to poor. Critics miss the point when they complain that such compensation payments would be impractical on a case-by- case basis, for compensation need not be made on a case-by case basis. If the use of cost-benefit criteria is found, on the average, to be biased in favor of the rich, the poor can be compen-

sated by simply lowering their tax rates. 14

Nor do anomalous cases in which cost-benefit criteria support botb the adoption of a policy and its abolition constitute a compelling reason for switching to social choice mechanisms based only on ordinal rankings. Such cases arise only when wealth effects implicit in a change from the status quo are large. Yet most social policy decisions involve only very small changes in individual wealth. More important, the effect of employing the cost-benefit criterion is to maximize wealth over the long run. It makes no sense to abandon this criterion because it can be linked to anomalous reversals in individual cases.

Coleman has joined the many esconomists and other social choice theorists who have invested their energies in the search for a social choice mechanism that is based only on ordinal rankings. This search has arisen out of a misguided focus on the effects of individual policy decisions and the impracticality of making compensation payments on a case-by-case basis. Once we focus on finding a general policy for making large numbers of social decisions and recognize that compensation for general biases is possible through the tax system, it becomes clear that we have had a perfectly good social choice mechanism all along, namely the cost-benefit criterion. 15

Constitutions and the Power of Corporate Actors

Historically, most economic analysis of organizational behavior has focused on profit-seek- ing firms. In recent decades, however, there has been growing attention by economists to the behavior of nonprofit firms, clubs, and even governments, which have long captured the interest of sociologists. What motivates the forma-

14 It would hardly make sense to avoid the cost- benefit criterion on the grounds that the political system would not make the requried adjustment in taxes for the poor. After all, failure to strike such a bargain would result in an outcome that is worse for rich and poor alike.

15 More precisely, my claim is only that the cost- benefit mechanism does a better job of aggregating individual preferences than do alternative mechanisms based only on ordinal rankings. Whether existing social institutions cause individual preferences to develop in optimal ways is of course a completely separate question.


tion of organizations whose primary function is something other than to make money? Cole- man responds that "It is when the social structure will not support a norm that is sufficiently effective to satisfy the interests of the potential beneficiaries of the norm that the question arises of constructing an explicit corporate en- tity having greater powers than does a norm or set of norms" (p. 327). Coleman offers a positive theory of the development not only of corporate structures but also the nation-state itself.

When a group's constitution is drafted, how will rights be allocated among members? In Coleman's view, the answer depends on the initial distribution of power among the actors. The power of an individual actor "resides in his control of valuable events. The value of an event lies in the interests powerful actors have in that event" (p. 133). 16 No sentimentalist, Coleman asserts that those with the most power when a constitution is drafted tend to allocate rights in the way that most benefits them per- sonally: "although one can conceive of a social contract among rational individuals resulting in an optimal constitution, the existence of hetero- geneity among individuals with respect to power and with respect to the mix of beneficiary and target interests will almost certainly lead to an excess of rights being transferred to the corporate actor" (p. 348).

This is obviously not an empty claim. Yet what about the role of ideals in the formation of constitutions? Jane Mansbridge, Steven Kel- man, and others have argued persuasively that political decisions often differ significantly from the dictates of narrow self-interest, and that political ideals like equality and public service appear to play a major role in the process.17

Coleman discusses various criteria for opti-

mality of constitutions, and many of his fellow sociologists are likely to take issue with some of what he says here, if only because they mis- construe it. For example, Coleman says that "A constitution is optimal if in the system that results, rights for each class of actions are allocated in accordance with the interests of those who, postconstitutionally, have power- weighted interests that are stronger than the opposing power interests" (p. 355). With its casual use of the term power, this formulation sounds much more threatening than the usual descriptions of market optimality. Yet all Cole- man is saying here is that a constitution is optimal if it is not possible to reallocate rights to create Pareto improvements.'8

Coleman discusses various ways in which power comes to be transferred to corporate actors who then use it to pursue ends incompati- ble with individual interests. The shareholder's interest is that more products be sold, and one way to serve this interest is to entice customers into saving less. by the use of advertisements. We might all agree that we would be better off if none of us were thus tempted. But there is a collective action problem. It is not in the interest of any single group of shareholders not to advertise.

In discussing the threat posed by corporate actors, Coleman sometimes invokes the asym- metry in power between the large corporation and the individual actor: "A transaction between a large corporate actor and a person is extremely asymmetric because of the asymme- try in size and power" (p. 553). Here he is on shaky ground, for the relative size of the two actors has very little to do with the balance of power between them. We may grant, for example, that the University of Chicago is a large, powerful corporate actor, but this does not mean it has the ability to dictate the terms of employment to its individual faculty members.

16 Coleman notes the apparent circularity of these definitions: "Although this pair of definitions is circu- lar, the concepts of value and power thus defined are not empty of content" (p. 133). It is not clear why Coleman believes that the value of an event lies only in the interests powerful actors have in it, for the interests of other actors surely matter as well. Thus, for example, an event in which many unpower- ful people are interested can also have high value. If interests may be taken as given, this modification in the definition of value makes Coleman's definitions lose even the appearance of circularity.

17 For a collection of essays on this general theme, see Jane Mansbridge 1990.

18 Other parts of Coleman's discussion of optimal constitutions are less easily interpreted. For instance, one of the criteria he describes for an optimal constitution he calls "individual optimality," about which he has this to say: "If an allocation of rights is individually optimal, every actor is either better off with that allocation or at least as well off as he would be with another allocation" (p. 353). But how can there possibly be a system in which the allocation of rights poses no distributional conflict between individuals?


Indeed, in the case of certain faculty members, the reverse is more likely the case. For instance, the prospect of James Coleman's leaving for a post at another university constitutes a significant threat to the University of Chicago. Coleman's own professional well being, by contrast, would be very little diminished by the prospect of having to leave the University of Chicago. In general, it is the competitive balance between actors, not their relative size, that generates power asymmetries. Being big is far from the same as being a monopsonist. And as I will argue in the next section, Cole- man's failure to appreciate this distinction has also led him down the wrong path in his analysis of how modern corporate structures have affected family life.

Current Social trends

Two centuries ago, most men and nearly all women did the bulk of their work at home. Today, almost all men and a large and growing proportion of women work outside the home. The implications of this change have been the subject of much attention by modern social commentators, Coleman among them. Indeed, of all the subjects he treats in his book, none seems to engage his energies more fully than this one.

The problem, as he sees it, is that the needs of modern corporate actors are strongly in ten- sion with the needs of the family. With fewer and fewer parents present in the neighborhoods during working hours, networks of social capital decay or disappear, no longer able to serve the needs of children. As this happens, the care of children is increasingly relegated to television and hired outsiders, both of which Cole- man sees as problematic. The difficulty with television, he explains, is that its programming is designed for a single purpose, namely, to get the child's attention so she can be shown commercial messages. Only by accident will such programming happen to be best also for the child's development as an integrated person. And there is considerable evidence that the content of much commercial television programming is positively harmful to development. The difficulty with hiring outsiders to care for your children is the familiar principal- agent problem. If both parents are away at

work, it is difficult to monitor the performance of caregivers.

These observations will strike a resonant chord in many readers, but they also raise this troubling question: Why do parents settle for this state of affairs? Why don't they switch to part-time employment or take turns staying home with the children, thereby to provide the more nurturing environment children need? The response we are accustomed to hearing from parents themselves is that they can't afford to, but this raises even more troubling questions, as Coleman implicitly recognizes. Pro- duction per capita in the U.S. has not grown rapidly in recent years, but it is nevertheless dramatically higher than it was in the 1950s, when parents spent significantly more time nurturing their families. Given that we are richer now, why can't we afford to devote as much attention to our children as before? Coleman's response is that parents rationally choose to in- 'vest less in their children now both because children leave home earlier and because children are no longer a major source of support during parents' old age: "The shift of responsibility for the care of the dependent aged changes, of course, the incentives for the first stage of the relation of mutual dependency in the family. If children are no longer an investment in one's future, their upbringing and education is no longer an investment irn one's future" (p. 585).

This account has problems. One is the fact that children are not a major source of support for elderly parents is hardly a new development. Contrary to popular impressions, the net transfer of wealth has always run strongly from parents to offspring throughout the life cycle, even in primitive societies.19 Even more troubling, this explanation of the difficulties of the modern family raises the question of why current conditions are regarded as problematic in the first place. If parents deliberately choose to invest less in their children because they stand less to gain from such investments, on what grounds can they then complain about the diminished performance of their children? On Coleman's explanation, parents could have had better children had they wanted to, but

19 For evidence on this point, see Paul Turke 1989. But for a contrary view, see J. C. Caldwell 1983.


simply chose to deploy their resources in other, more satisfying, ways.

There is an alternative explanation of the de- terioration of family social capital, one completely faithful to Coleman's methodological approach, but that does not require his two problematic assumptions. To begin, suppose parents act purposively, and that their goal is to launch their children as successfully as they can. As Coleman says, in preindustrial society, this goal was served by both parents working in or near home, for there were really no practical alternatives. This arrangement, Coleman suggests, was of obvious value for the task of nurturing children. With the origin of corporate actors and more formally organized work, the possibility arose for one parent, usually the father, to accept higher paying employment outside the home. But at that time the need to perform daily chores without modern appliances was a practical barrier that prevented both parents from working outside the home.

The next stage in the evolution of the family is still playing itself out. With the advent of electrical appliances and other labor-saving de- vices, it has become possible for both parents to work outside the home. At this stage, too, parents face a choice between whether to remain at home or take paid employment on the outside. As at the earlier stage, here too the tradeoff is between a substantial increment in the material resources available to the family, on the one hand, and diminished family social capital on the other.

Within broad limits, having more material resources is beneficial for children, while having less parental attention is bad. Once more, let us assume that parents are rational, that they love their children, and place high value on preparing them to do well in life. Is it likely that when such parents voluntarily choose to work outside the home, the result, on balance, is worse for children than if one or both parents had spent more time in the home? If parents are rational, the answer seems to be no. And yet the effect of individually rational parental decisions may nonetheless be precisely the un- attractive outcome Coleman and other social critics have described. The reason is that the material resources earned outside the home create powerful social externalities.

To illustrate, consider how material resources

are deployed to educate children.20 Virtually all parents recognize the critical importance of education to their children's prospects for lead- iug successful lives. Within any society, education is an inescapably relative phenomenon. To be "well educated" means simply to be better educated than one's peers. In the U.S. and many other Western countries that rely primarily on public education, the parental strategy with respect to education is thus clear: it is to buy or rent a house in the best affordable school district. When a second parent considers employment outside the home, the plus side is that the additional earnings will facilitate a move to a better school district. When this benefit is weighed against the cost of a decline in contact with children in the ho -me, the choice often seems all too clear. Taking the job isn't ideal, but it is better than the alternative.

Yet the collective effect of such choices is likely to be far from what most parents had hoped for. Ha^ving two-earner families has given us more income, and this has led us to bid up the price of access to the best schools. But it has not changed the fundamental distribution of educational opportunity. Today, just as before the move to two-earner households, only a tenth of our children occupy seats in top-dec- ile schools. In the familiar stadium metaphor, all spectators leap to their feet to get a better view of an exciting play, yet when all stand the view is no better than if all had remained seated. Here, parents spend more time at work hoping to move their children up the social ladder, yet when all work longer hours, relative position on the social ladder remains un- changed.

From the perspective of the individual family, parents are speaking intelligibly when they say that both must work or else they will be unable to afford the things their children need most. Yet at the macro level, we see the pro- found contradiction that today's society cannot afford to provide as well for its children as could the much poorer societies of the past. To re- solve this contradiction within a rational choice framework, we need not assume that people have ceased to feel concern for the well being of their children. Nor need we assume that the

20 For a more detailed discussion of the argument that follows, see Frank 1985, ch. 7.


primary motive for investing in children is so that they can care for us during old age. Rather, it is sufficient to observe that when significant externalities exist, the collective consequences of individual decisions are often far from what decision makers intend. Here, the relevant externality is that one family's attempt to move forward in the social hierarchy has negative consequences for where others stand in that same hierarchy. In the presence of such an externality, the fact that individuals freely accept less time at home in return for higher monetary earnings does not imply that the results of such an exchange are socially optimal, just as the fact that individuals freely decide to commute by car in Los Angeles does not mean that the resulting level of smog is socially optimal.

The irony is that this alternative view of the problems of the modern family seems much more in harmony with Coleman's methodological approach than his own explanation is. In- deed, by suggesting that the plight of the modern family is simply an aggregation of purposeful individual decisions based on diminished expectations of getting future benefits from children, Coleman is guilty of one of the very sins he attributes to other sociologists. And in the process, he plays directly into the hands of critics of the rational choice approach.

Our view of what causes the plight of the modern family has obvious significance for social policy. Coleman's policy orientation is clearly colored by his view that the problem stems from a deficiency of parental concern for children. For example, he asks, "Should social policy attempt to recreate the conditions which reinforce parents' natural interest in and responsibility for their own children or attempt to create conditions which will induce agents of the state to take a long-term personal interest in and responsibility for children who fall into their hands?" (p. 608). If the problem stems not from a lack of parental interest in children but from externalities with respect to social position, neither of the alternatives suggested by Coleman is an attractive policy.

On the contrary, the most direct solution is to deal with the externality, and there are a variety of simple policies that could be employed toward that end. For example, the state could take greater steps to equalize educational resources across public school districts. It could

revise the tax schedules to make part-time work and single-earner households financially more attractive, and so on.

The failure to appreciate the distinction between corporate size and corporate power also appears to have strongly colored Coleman's rather chilling portrait of the role of the corporation as a purveyor of goods, which is akin to the one offered by John Kenneth Galbraith in The New Industrial State. In Galbraith's revised sequence, the products offered for sale are governed not by the desires of consumers, as in the traditional economic model, but by the convenience of large producers. Coleman offers this characterization:

This suggests that there may be developing, in societies containing many large corporate actors, a condition which may be described as parasitism. Corporate actors are the parasites, and natural persons are the hosts. Although the parasites not only feed off the hosts but also provide food for them, the rationale for describ- ing the relation as parasitism, rather than as a more symmetric symbiosis between two components of a system, is that the corporate actors effectively control the system. Since corporate actors control the system, the state of the other parties, the natural persons, is such as to maximize the corporate actors' utility, rather than to maximize their own utility. They become, in effect, slaves, maintained at a level of satisfaction that is less than possible given their resources. (p. 634)

The difficulty with this line of thought is the same as with Galbraith's revised sequence. It completely ignores the role of labor and product market competition in the shaping of corporate behavior. If people are unhappy about their enslavement by existing firms, what prevents new firms from offering more attractive working conditions? If workers are willing to accept wage reductions sufficient to cover the cost of making conditions more attractive, then such conditions will quickly become the norm. If not, then the improved conditions simply are not worth their cost. In the hot, humid conditions of the South, for example, most manufacturing firms are air conditioned, because this is an amenity that costs less than workers are willing to pay for it. By contrast, in many parts of Canada, workers assign little value to air con- ditioning, with the result that few manufactur-


ing firms offer it. Similarly, while producers surely do use advertising and other means to persuade consumers to buy their products, this does not imply that producers have the power to dictate society's menu of goods and services. Even an extraordinarily slick and costly advertising blitz, for example, could not persuade many people to buy Jazz, the Lotus Corpora- tion's spreadsheet software for the Apple Macintosh. Microsoft's Excel, by most accounts a superior substitute, quickly captured the market despite its very modest promotional budget. National advertising campaigns are both costly and risky, and even the most powerful corporate actors have strong incentives to launch them for only those products they believe are most likely to win consumer approval.

Here too the irony is that Coleman need not have invoked power asymmetries to account for the phenomena he is trying to explain. As I have argued elsewhere (Frank 1985, ch. 9), many of the so-called abuses of corporate power are more plausibly interpreted as the result of prisoner's dilemmas involving competition between individuals for relative economic position.

Coleman's model of the formation of social capital has implications for the future course of social change. From the standpoint of social efficiency, Coleman argues, the general problem with social capital is that its returns, unlike those from physical and human capital investments, are largely external. Thus, for example, -a family deciding whether to move to a new city may not take full account of the effect of their departure on the value of existing social networks.2' Coleman argues that because it is not in an individual's benefit to invest in social capital, social capital generally comes into being as an incidental by-product of other activities. And here his theory yields a prediction of enor- mous interest and importance: Affluence mili- tates against the formation and maintenance of

social capital because it leads people to purchase in the market many of the services they used to obtain or perform informally through social networks. Thus the mere fact that the income elasticity of demand for many services exceeds unity may have unintended, yet pro- foundly important, consequences for the evolution of social structure.

The Mathematics of Social Action

In terms of its total page count, Coleman devotes the final third of Foundations to the formalization of many of the theories he sketches verbally in the preceding chapters. My overall reaction to this separation of discursive and analytical modes is that it is an enormously positive step, one that economists would do well to emulate.22 One advantage is that it wid- ens the audience to include those who lack training in formal analysis. But even for people who are well trained in analytical methods, the effort to master an idiosyncratic new collection of notation and then wade through a mass of technical details has high opportunity cost. Coleman's presentation, which provides an in- formative summary of the issues in the verbal mode, allows readers to invest that effort in a much more informed and selective way.

The structure of many of Coleman's formal models is borrowed directly from economic theory. The core presentation is a straightforward general equilibrium model in which people start with exogenously determined interests and endowments. Interests take the specific functional form of the Cobb-Douglas utility function, a restriction that Coleman justifies in the name of computational necessity:

The fixing of a specific form for the utility function represents a compromise different from the one that has been made in economics. Economists have generally sacrificed the ability to characterize the general equilibrium for systems of many goods in order to prove results that assumed no restrictions on the utility function beyond the signs on the first and second derivatives. The theory of this book requires calculation of the general equilibrium for more than two goods . . . and more than two types of actors. In order to do this I am sacrificing

21 Coleman might have noted that similar problems exist for human and physical capital. By becoming more educated, for example, a person benefits not only herself but also others with whom she works and socializes. And many physical investments, like those in R&D, also generate substantial external benefits. But it seems fair to say that the problem of external returns is more significant for social than for either human or physical capital.

22 At least one economist, Amartya Sen, 1970, has also employed this approach to great advantage.


results beyond the Cobb-Douglas utility function. (p. 675)

As a way to get the formal research effort under way, this seems perfectly sensible. But future researchers will want to bear in mind that one particular restriction implied by the Cobb-Douglas form has potentially serious consequences for many social behaviors of great interest. The problem is that the Cobb-Douglas form constrains the income elasticity of demand for every good to be exactly unity. Yet as Cole- man himself notes earlier in his book, many important trends in the evolution of social structure are the result, in part, of the fact that the income elasticities of demand for several key service categories are substantially larger than unity. Researchers whose focus is on such issues will be pleased to know that techniques now exist for computing multiactor, multigood, general equilibrium models without having to assume the Cobb-Douglas utility function.

The Self

There is, as noted earlier, a long history of hostility within sociology of the proposition that people act rationally in pursuit of their own interests. Coleman is sensitive to this hostility and does not insist that narrow rationality provides an accurate characterization of all human behavior. Indeed, he even proposes a broader version of the rational choice model, one based on a two-part model of the self-the self as object and the self as agent. The self as object is the storehouse of the person's values and experiences. The self as agent acts on behalf of the object self's interests, and in the relationship between the two a similar set of principal- agent problems arises as in the standard two- person examples. As Coleman puts it:

The general nature of this conception is that the object self, in whose interests the agent acts, is ever changing and throughout much of life expanding. This conception makes unnecessary any deviation from the conception of a rational purposive actor on which the theory of this book is based. Acts of apparent altruism, acts which derive from sentimental attachments and appear to be against the actor's self-interests narrowly defined, are explicable through such an addition to the theory, the use of an expanded notion of the object self.

This theoretical device would be of no value, however, if the theorist were merely using it as a way of saving the theory. The first question is this: what does identification do for the person who identifies with another so as to lead him to do it? The second is this: What are the constraints which limit the process? Without any constraint, every action could be explained trivially, merely by positing a degree and direc- tion of identification which would lead to that action. (p. 518)

These are just the right questions, but Cole- man has little to offer in the way of answers. He suggests that if a person by his own action can bring benefit to another, one way for the first individual to take advantage of that fact is to identify with the second individual, thereby to experience the pleasure brought about by the benefit. Yet Coleman is aware that this line of argument raises troubling questions. If one can obtain one's pleasure by identifying with others, why not just identify with star athletes, princes, or the occupants of other enviable positions and dispense with costly action that benefits others? Coleman answers that the inevitable intrusions of reality prevent people from living in such a dream world, but he acknowledges that this isn't really an adequate response.

Perhaps a more promising approach would be to look for ways that people might benefit in material terms by identifying with another's interests. One example, mentioned earlier, is that a principal should be willing to pay a higher salary to an agent who has identified with the principal's interests. After all, the principal can economize on monitoring costs by hiring such an agent. More generally, we can try to explain a person's interests in an evolutionary framework, asking what set of interests are most compatible with the individual's survival.

Coleman takes this very tack in trying to explain a critical change of management orientation that took place in the Ford Motor Company in 1930. Prior to the mid-1920s, Ford had pros- pered by focusing its attention on the details of the manufacturing process. But from that time forward, it came under increasing pressure from General Motors, a company that focused on design, engineering, and styling. Ford ultimately underwent an internal reconstitution whereby corporate power fell into the hands of engineers and design specialists, and this


change, Coleman argues, saved Ford from failure.

For natural persons too, tastes are an important tool for survival. As the psychologist Je- rome Kagan (1984) notes, the individual values emphasized in different societies are related in an intelligible way to material conditions in those societies. Thus, for example, a society constantly threatened by war tends to empha- size physical courage; one with high infant and child mortality tends to celebrate emotional de- tachment; and so on. Indeed, it is only by taking such an instrumental view of tastes that rational choice theorists can escape from the charge that they are simply dreaming up tastes to explain each new situation.

On Moral Relativism

In a work much of whose focus is on how people deal with externalities, it is inevitable that Coleman confronts a host of questions in the domain of moral philosophy. Rather than shy away from these questions, Coleman tackles them head on. Much of what he says is provocative, and one needn't agree with all of it to admire his effort to move these issues forward.

Coleman speaks at length about the distribution of individual rights within organizations and societies, and his aim for the most part is to construct a positive theory of how such rights are assigned. His answer is simple and straightforward: rights are assigned on the basis of a power-weighted consensus. No right exists unless it is the consensus of the group that it exist. In the light of this positive theory of how rights are allocated, what can be said about how rights ought to be allocated? Coleman responds:

The implication of this theory is that the question is unanswerable in general; it can be an- swered only in the context of a particular system of action, and there the answer is that the existing distribution of rights is right. To go beyond this implies a vantage point outside the system under consideration, and the theory is explicit that there is no such vantage point. What is right is defined within the system itself, by the actors' interests and relative power in that system. The theory implies that moral philosophers searching for the right distribution of rights are searching for the pot of gold at the end of the rainbow. (p. 53)

Now, this is a controversial statement. It implies, for example, that torturing children is right if a power-weighted consensus of the current members of a society approves of it. Under a political dictatorship, a power-weighted consensus corresponds uniquely to the moment- by-moment preferences of the dictator, and this too hardly seems to constitute grounds for moral approval.

Coleman's perspective also appears to ignore the moral arguments that temper the exercise of power in existing societies. For example, many countries could deny welfare benefits to guest workers, yet don't. It would appear incon- sistent with Coleman's use of the term "power" throughout the book for him to say here that guest workers get these benefits because of their power to summon our sympathy. Yet Coleman suggests something of just this sort when he notes that because choices are often tempered by each person's concern about the well being of others, the power-weighted social consensus may be less morally objectionable than it appears:

Suppose, for simplicity of exposition, that there are only two relevant positions with respect to a certain policy: the position of being a man and the position of being a woman. If the policy is to be evaluated directly and each person has an equal voice in the evaluation, the outcome will depend on whether men or women are in the numerical majority. If, however, each man and woman places himself or herself in the position of others in the system, then each will take into account not only the numbers of men and numbers of women affected by the policy, but also the strength of the effect. Each will weigh the interests of those benefited against the interests of those harmed by the policy, and each will arrive at the same overall evaluation. The issue will be resolved by consensus, since all will see the policy in the same way-having internalized the interests of all others in the system. Self-interests will count for no more than the interests of any other. Each will speak in the name of the whole. (p. 385)

Coleman views the above as an idealization not achieved even in small groups, the climate most favorable. But he argues that if social issues are resolved in this way, "the decision- making process will give a socially efficient outcome in a way that is precisely analogous to the market for externalities envisioned by


Coase (1960) as a means by which a socially efficient outcome is achieved" (p. 386).

From the foregoing passage, Coleman appears to regard social efficiency and moral justice as one and the same. But even if we grant his ideal case of thoughtful internal deliberators, each concerned about the interests of others, on what grounds could we suppose that the initial distribution of power among them would lead to morally just outcomes? Suppose, for example, that men have three times the power of women, and would be willing to spend 10 percent of their power to get their way on a particular issue, whereas women would be willing to spend 20 percent of their power to prevail. In a Coaseian world, the men would prevail, since their total willingness to pay is higher. If necessary, they would compensate the women for the right to act. Yet if power had been distributed equally, the outcome would have been the reverse. In the absence of a compelling moral defense of the initial unequal distribution of power, the outcome that would emerge under an equal distribution of power has a prima facie claim to greater fair- ness.23

What attitudes toward the initial distribution of power are Coleman's internal deliberators assumed to take? He doesn't say, but presum- ably he means for them to accept the initial distribution as given. Yet the core of the injus- tice in many situations stems from precisely the unequal distribution of power. Coleman concedes that people outside the system could judge the initial distribution of power wrong, and that would make the resulting allocations "morally wrong from the perspective of the external system. . . . There is no absolute observation point, outside any social system, from which moral judgment may be made" (p. 387).

Coleman's position thus seems to commit him, for example, to the judgment that there is no meaningful way for an observer outside a social system to conclude that the institution of slavery is immoral. This too is an extreme position. After all, external observers can be guided by the same insights and moral sentiments as can internal observers. Both types of observers might recognize that sympathy for

slaves may be deficient under current social arrangements (perhaps because slaves are phys- ically isolated, making their plight less visible to others). Observers from both external and internal vantage points might also be able to imagine alternative social arrangements under which sympathy for slaves might be substantially increased. Both types of observers might even agree that it would be morally desirable to make such changes. Yet self-control problems and other sources of social inertia might stand in the way of change.

Alternatively, external observers might per- ceive that current institutions lead to a morally deficient outcome in ways that are not immedi- ately apparent to internal observers. For example, new information, or merely further re- flection, might eventually persuade white supporters of apartheid in South Africa that the external critics of apartheid had been correct all along. Yet Coleman's perspective seems to rule out even this familiar form of moral dis- course. It requires the newly converted opponents of apartheid to say, against their wishes, that apartheid used to be morally correct just because they and sufficiently many others used to be in favor of it.

By equating social efficiency with moral justice, Coleman takes a very different position from the one taken by most welfare economists, who claim only that free exchange yields the best attainable result subject to the initial distribution of endowments. Economists make no moral claims on behalf of the initial allocation. On the contrary, many economists stand side- by-side with Rawls and other moral philosophers who argue strongly against initial allocations on moral grounds.

Corporate Responsibility

In an extended discussion of corporate responsibility, Coleman goes over the familiar economic arguments about why competitive pressures militate against corporate charitable acts. He regards such actions as being socially desirable, however, and goes on to advocate the use of tax policy as a means of inducing corporations to engage in them.

This discussion raises the question of whether corporations are as constrained from pursuing socially responsible actions as conventional eco-

23 See John Rawls, 1971, for arguments in support of this claim.


nomic models suggest. Consider, for example, the Star-Kist Tuna Company, which recently implemented a policy of not buying tuna from suppliers who use gill nets (which kill not only tuna but also dolphins and other marine mam- mals). Conventional economic models predict that this policy should lead to Star Kist's de- mise, because free-riding consumers should be unwilling to bear the higher prices necessitated by the costlier methods of catching tuna. In the event, however, the Star Kist policy was a resounding commercial success. The company informed consumers of the reason for its higher prices, and sales not only did not fall, they actually rose substantially, and along with them the company's profits. So it is clear that in at least some instances, customers are willing to incur voluntarily the higher costs associated with socially responsible corporate policies.

Another possible means whereby socially responsible corporate action is sustainable under competition is through the effect of such action on the reservation wages of employees. To the extent that people have personal values that favor responsible corporate action, they should be willing to accept lower wages from employ- ers who act responsibly. In a recent study (Frank 1991), I have found that people are willing to accept significantly smaller salaries for jobs in companies whose mission they approve of than for otherwise similar jobs in companies whose missions they do not favor. For example, the median respondent in a sample of Cornell University seniors would have to be paid more than $15,000/yr extra to be willing to work as an ad copywriter for Camel Cigarettes than to work as an ad copywriter for the United Way. Here too, conventional economic models predict that employees will free ride by accepting the most remunerative jobs, but experience does not support this prediction.

Yet another possible means whereby socially responsible corporate behavior might be sustainable in the marketplace is through the effect of the corporation's behavior on the behavior of its employees. One way that corporations try to solve principal-agent problems is by the use of corporate culture-by trying to instill a sense of professionalism and loyalty among employees. A corporation that behaves opportun- istically-in terms of, say, its environmental policies-may have much greater difficulty

instilling such values than would a competitor who acts in a more socially responsible way.

In each of the three mechanisms discussed above, a rational choice model that fails to incor- porate moral sentiments yields substantially misleading predictions. Of course, that there are means by which corporations might remain ,profitable despite acting in a socially responsible way does not mean that these means are sufficient to assure socially optimal corporate conduct. There may, as Coleman believes, remain ample room for the law and corporate tax policy to take further steps to bring corporate and social interests into balance.

Concluding Remarks

Leading sociologists have been sharply critical of Coleman's analysis for being too oriented to rational choice, too much based on methodological individualism.24 Some economists will wish to ignore his work for almost the opposite reason, laden as it is with such group-oriented concepts as norms, social capital, networks, feedback loops, and the like. Both disciplines, however, will overlook Coleman's contribution only at their own peril. He is by no means the first sociologist to stress the importance of interdependencies in human behavior. But he is the first to have given economists a systematic and methodologically compatible way of incor- porating such issues into traditional economic models. And he has also shown how sociologists can move toward a more precise, predictive science of human behavior. Foundations of So- cial Theory is indeed a fitting capstone to the career of one of this century's most distin- guished and creative sociologists.

24 See, for example, the reviews by Neal Smelser and Harrison White 1990.

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Documents

James Coleman's Foundations of Social Theory