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Social exchange vs. economic exchange and accounting

November 6, 2011

For my sociology of work class, I’m reading a bunch of articles to draft a presentation about lifetime employment in Japan (as contrasted to other countries). One of the articles discusses the social-exchange aspects of Japanese political economy, but first, it goes at length to describe social exchange (in general) as contrasted to economic exchange. I won’t go into all of those details, but the part that intrigued me was this:

Typically, in the American political economy the labels for dealings of the social exchange type are pejorative: “special favor,” “privileged access,” “log rolling,” “pork-barreling,” “patronage,” “cliques,” the “spoils system,” “insider deals,” “collusion,” and a host of similar terms illustrate the degree of disapproval of social-exchange relationships in the public and semi-public domains of contemporary society. They also illustrate, incidentally, just how widespread and inherent social exchange is in these domains. All pejorative judgments depend on a contrast with some ideal. In this instance, the contrast, of course, is with a set of ideals that distinguish economic exchange — namely, impersonal and rational means of contracting, “arm’s length” dealing, full public disclosure of information, short time horizons, and “equal” access for all potential participants. Yet despite its lack of fit with the reigning public ideology, social exchange prospers in areas of all industrial societies, apparently because it succeeds where formalized impersonal institutions are absent or where they function poorly for one reason or another.

Murakami, Yasusuke and Thomas Rohlen. 1992. “Social-Exchange Aspects of the Japanese Political Economy: Culture, Efficiency, and Change.” Pp. 63-105 in The Political Economy of Japan, Volume 3: Cultural and Social Dynamics. Edited by S. Kumon and H. Rosovsky. Stanford: Stanford University Press.

The thing that struck me here was the extent that the ideals of “economic exchange” are ideals of American accounting. If transactions aren’t at arm’s length, then they are suspect. The goal of financial statements if full public disclosure of information, which will lead to “equal” access for all potential participants. The nature of financial reporting (with emphasis on quarterly and annual reports) leads to short time horizons.

Yet, if that last part of that quote is correct, then it’s not like we can just develop more rules to make society more “rational” (in the economic sense). Social exchange prospers in areas of all industrial societies, because it succeeds where formalized impersonal institutions are absent or where they function poorly.

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