Markets from Networks: Socioeconomic Models of Production (review)

Markets from Networks: Socioeconomic Models of Production. By Harrison C. White. Princeton University Press, 2002. 384 pp. Cloth $35.00.

Ever since the mid-1970s, Harrison White has devoted much interest to production markets and has produced a long chain of papers the common ambition of which has been to develop a sociological account of these markets. Never interrupted, this enterprise has continued through 1980s and 1990s and, finally, culminated into a major work, Markets from Networks. What has motivated this sustained endeavor is the sharp distinction that White discerns between production markets and the well-known exchange markets, viewing the former as a distinct genus of organization that is profoundly different from the one that economic theory commonly theorizes about. Yet, as White frequently asserts, this fundamental distinction escapes the attention of the mainstream economists who, out of their empirical insensitivity toward factual contexts and their rigid individualistic outlook, fail to even distinguish between the two, let alone to construe production markets adequately and grasp their structural properties and maintenance mechanisms. Consequently, whereas economists do have a well-developed theory of exchange markets, this theory is inapplicable to, and irrelevant for, production markets. Confounding the two and treating them indiscriminately, this failure has therefore left economics of today with a total absence of any theoretical treatment of the latter.

To maintain that economics has no theory of the most central institution of modern economies is apparently a bold claim. Bolder, however, is to regard economists incurably disqualified from filling this theoretical void and to assign the task to sociologists instead. Once hoping for a closer relationship between economics and sociology and for their reciprocal diversification, White has indeed gradually grown disillusioned in this regard and now seems to be mainly interested in capturing the isolated novel ideas that every now and then surface in economics but nonetheless are seldom fully deployed by the discipline. Potentials of such ideas can, in White's view, be tapped in more imaginative ways only when they are replanted in the sociological soil.

White's account, however, departs from his network image of the complex, large-scale production apparatus of modern economies made up of numerous directional flows of intermediate products, interconnecting producer firms back and forth in the long production chains that weave together distinct but not seldom overlapping manufacturing processes into a dense and complex texture of interdependencies. Crucial to White's model are regularity in magnitude as well as stability of quality; these flows run through the modern production machinery and interlock producer firms in most intractable ways. Against this background, White conceives of production markets basically as stable social structures that evolve historically as shields against the inherent contingencies that characterize this type of economies. Embedded within such a gigantic and dense network mesh, numerous specialized production markets are, in other words, spontaneous local orders that may appear at certain congestion points in this mesh. In absence of any central planner of the Leontief's model, each one of these markets is thus basically induced by the quest of predictability, as the participant producer firms are forced to commit themselves to deliver downstream regular flows of volume and quality.

Moreover, in White's account, any particular production market consists of a small set of slightly differentiated producer firms that, due to the similarity of their positions with regard to the particular stages of the manufacturing process in question, perform roughly the same function. Structurally equivalent, these firms therefore make up a set of comparable units that, on the whole, are interchangeable in the eyes of those situated upstream and downstream. Yet the crucial point is that these firms are only roughly comparable and interchangeable, each performing its function in a slightly different fashion with the subsequent product differentiation as a result. Echoing Chamberlin, in White's model each individual producer within any given market pushes apart and differentiates itself in quality and thereby finds or defines its own distinct niche...