The Study of Social Networks In Economics

As Joel Podolny and James Rauch point out in their introductory chapter, social networks are endemic to economic interactions. The rise of what one might refer to as “social economics” comes very much from the realization by economists that there are many economic interactions where the social context is not a second-order consideration, but is actually a primary driver of behaviors and outcomes. Obvious examples range from the primary role of social networks in obtaining jobs, to their in‡uence on decisions of which products to buy, how much education to pursue, and whether or not to undertake criminal activity. While the widespread realization of the importance of the embededdness of economic activity in social settings has been fundamental to sociologists for some time, and quite eloquently exposited by Granovetter (1985), it was largely ignored by economists until the last decade. The recent interest comes from having pushed many economic models to their limits, and having found that social circumstances can help explain observed economic phenomena (e.g., persistent wage inequality) in ways that narrower economic models cannot. I draw a parallel to the recent rise of interest in “behavioral economics,”which comes the realization that a deeper exploration of