Another way of monetizing infidelity: these t-shirts seemed to crop up for sale online seconds after speculation began about Woods cheating on his wife.
Another way of monetizing infidelity: these t-shirts seemed to crop up for sale online seconds after speculation began about Woods cheating on his wife.

In all the public discourse surrounding Tiger Woods and his alleged infidelities, one of the primary topics of interest has been the millions of dollars he may have paid to silence his mistress(es) and mollify his wife. While there has been a lot of speculation about who got how much, I haven’t seen anyone question the idea of linking money and monogamy.

The same linkage underlies another contemporary phenomenon: the “bad boy clause” in some pre-nuptial agreements, in which one spouse (oddly, it’s usually just one, not both) agrees to pay a financial penalty for cheating on the other. It’s hard to say how common this is, but such contracts are apparently enforceable and have been upheld in court.

The money-monogamy link raises a number of questions in my mind, including:

  • What are these payments supposed to mean to the wronged spouse?
    Say Tiger Woods has really paid millions to his wife as a result of cheating on her—is his wife supposed to understand that money as a conciliatory gift, like an XXL version of a bouquet of flowers with an “I’m sorry” note attached? Or is she supposed to receive it as a form of compensation, like the victim of medical malpractice who gets a big settlement in return for the loss of her health?

    Economic sociologists will recognize here the outlines of Viviana Zelizer’s (1996) taxonomy of exchange types and the kinds of social relationships they imply (“Payments and Social Ties”).

    Either way—gift or compensation—there is acknowledgement that a wrong has been done, which is probably valuable in its own right. What I’m asking, however, is the question implied by the Zelizer article: what kind of payment is this, and what kind of relationship does it imply between the spouses? Typically, gifts are associated with private life and emotional intimacy, whereas compensation forms of exchange more often occur in the public sphere. Gifts are (at least nominally) personal and emotion-laden, whereas compensation is impersonal, with legal-bureaucratic associations.

    The distinction would seem to matter for the future of the relationship: a gift would imply that there was still intimacy and a personal bond left to repair, and perhaps a hoped-for future together; in contrast, framing the payment as compensation has a kind of “cashing out” finality to it, shifting the relationship onto ground usually occupied by adversaries who have no intention of remaining connected to one another.

    In more concrete terms, if you’re the spouse receiving the kind of multi-million-dollar payment that Elin Nordegren Woods is supposedly getting from her supposedly cheating husband, what does that exchange mean to you in terms of the relationship, and your own self-image?

    It’s easy to be glib about this, and focus on her ability to “take the money and run.” But that ignores the emotions involved: if Elin loves her husband, the money may seem both totally inadequate as compensation for a broken heart and broken dreams, and inappropriately impersonal as a gift; if she doesn’t love him, she may still feel angry at the public humiliation she has experienced as a result of his behavior, and feel that neither gift nor compensation can fix the damage to her dignity.

    In other words, one can imagine situations in which the offer of money by a cheater to his wronged spouse could actually come across as adding insult to injury—as a cheap substitute for real understanding of the impact of infidelity, as if the wronged spouse is a kind of coin-operated machine, whose sense of betrayal can be assuaged with the application of sufficient funds to the wound.

  • Do financial penalties deter infidelity?
    From the perspective of the spouse who has been or might be unfaithful, does paying out a large sum of money alter his or her future behavior? If Tiger Woods has in fact paid millions to control the damage of having extra-marital affairs, should we expect the experience to make him think twice about cheating on his wife going forward? Or does someone who signs off on a “bad boy clause” in a pre-nuptial agreement really run through a mental calculus weighing the costs and benefits of having an affair?

    Causal linkages of this sort are implicit in the money-monogamy link, but I’m skeptical. I don’t think people are that rational, especially when it comes to governing their appetites for sex, power, admiration, or whatever extra-marital affairs may signify for them.

    Social scientific research established decades ago that humans are boundedly rational. And philosophers reached that conclusion even earlier: 18th century Scottish thinker David Hume—a rough contemporary of Adam Smith, and like Smith, an economist as well as a moral theorist—famously argued that emotions drive our decision-making. Rationality, he claimed, enters into

    David Hume, who probably would have scoffed at "bad boy clauses." And pre-nups.
    David Hume, who probably would have scoffed at "bad boy clauses." And pre-nups generally.

    the decision process at the end, in the form of rationalizations applied to obscure the true nature of our choices. In Hume’s own formulation,”Reason is and ought only to be the slave of the passions.”

    Social psychology provides another reason for skepticism about the money-monogamy link, emphasizing the power of context over character in shaping human behavior. One consequence of this is the fundamental attribution error. As I’ve written elsewhere, the lesson I take from this literature and from my own research is that rationality is not so much a property of individuals as of situations.

    Schemes involving payment for infidelity represent one attempt to change the context of extra-marital affairs—to introduce a negative consequence. But there have long been other negative consequences of cheating which many have found all too easy to ignore, such as causing pain to one’s spouse and other family members, loss of reputation or social status, and even loss of one’s job (cf. former New York Governor Eliot Spitzer). If none of that has been sufficient to deter infidelity, why would a financial payout achieve better results?

To answer these questions, we’d really need to hear from people who have faced this situation in real life: both the cheaters and the spouses they betrayed. Unfortunately, we rarely—if ever—hear about the money-monogamy link except in the context of gossip magazines, where any commentary given by the parties involved is bound to be primarily about impression management. They’re certainly not the place to look for reflection and insight.

What’s really strange to me, however, is that in the absence of any evidence that say, “bad boy clauses” actually deter infidelity, people still use them. And that may be the most compelling evidence for interpreting them as purely punitive devices.

But that just raises another set of questions, like: why would you want to marry on those terms? When one spouse seems so likely to cheat that it’s necessary to have a “bad boy clause” in the pre-nup, and the other spouse spells out how s/he plans to exact retribution for any infidelity, I have to wonder why the couple are bothering to marry in the first place. The whole arrangement just has “train wreck” written all over it.

And why stop at infidelity when you could enumerate all the other deal-breakers in the relationship, like snoring and hogging the remote? Turns out people actually do this! For a bracing example of taking ideas to their logical extremes, check out this list of “14 Popular Provisions in Pre-Nuptial Agreements” from the Irish Times:

    1. Who will do the housework, what type of housework, and how many times a week.

    2. How many times a year is suitable to go on vacation, and where.

    3. No contact with people from previous relationships.

    4. No cheating, especially with people from previous relationships. Sometimes known as the ‘bad boy’ clause. Taking a second spouse is also sometimes forbidden . . . in Islamic pre-nuptial agreements.

    5. No snoring.

    6. No leaving the toilet seat up.

    7. How many times a week it is acceptable to expect sex.

    8. The division of seasonal tickets to sports games and the theatre.

    9. How many times a year is suitable to visit the in-laws, and for how long.

    10. A declaration of who owns the remote control.

    11. A limitation of how much can be spent on a shopping spree, and how often said sprees should take place.

    12. A declaration of the monthly plastic surgery budget.

    13. Who takes out the rubbish.

    14. No weight gain beyond an agreed point.

Each one of these provisions could be the basis for a short story—probably something really bleak and despair-inducing, à la Raymond Carver or John Cheever. And remember, these are just the “popular” ones: imagine what might constitute an uncommon stipulation in a pre-nup. The horror…the horror.


    So my apartment in Copenhagen got robbed this afternoon–while I was in it. Dudes broke down the door, walked right past a flat panel TV, and ignored the closed bedroom doors, behind which they would have found a couple of new, easily fence-able laptops. And me.
    Having ignored all the pricey and highly portable electronics, guess what they stole?

The living room light fixture.

Something like the lamp that hung in my living room.
Something like the lamp that hung in my living room.

Let me say that again: the light fixture. I won’t dignify it with the name chandelier. It wasn’t anything special as far as I could tell, but my upstairs neighbors tell me that it was probably a designer number worth about 8,500DKK–that’s around US $1,700.

The thieves stacked up the couches in the living room so they could reach the lamp where it hung from the ceiling, then cut the wires and took it away. Wrapped in my favorite (and only!) overcoat, which is the part that really steams me, since it’s about 30F outside and I have nothing else to wear.

After I got over the surprise, I was in awe at the absurdity of it all. Instead of being frightened (that part set in later), I found there was something strangely funny at the sight of the raw electrical wires hanging from the living room ceiling, with the flat panel TV a foot away.

It just didn’t make sense economically. Who the heck breaks into a house to steal a light fixture? And who goes to that much trouble for it? Shattering the big, heavy front door so that the wood frame was splintered and the locks broken was not quick work. How could lamps be worth that kind of trouble?

But it gets even better: when I called the police, they said the whole neighborhood had been swept by a light-fixture-robbery gang today! In fact, they were so busy with these cases that they would not be able to come to my place to make a report for at least 24 hours. Apparently, there are gangs from Romania and Poland who steal pricey Danish light fixtures to resell outside of Denmark at a hefty profit. Heftier than the profit on a flat-panel TV? So it would seem.

So this got me thinking about other weird things people steal, and I knew in an instant that there must be a website or two devoted to this subject. After all, there are plenty of sites devoted to weird things people try to sell online. I figured theft must be closely related, and was not disappointed. Here are some highlights:

  • 27 buttons: Felicidad Noriega, former first lady of Panama, was arrested for stealing the buttons, which she clipped off jackets as she walked through a Burdines department store in Miami; note that she didn’t take the jackets…just the buttons, making the jackets unwearable for anyone else
  • handful of communion wafers: grabbed during Mass by a guy who simply tried to walk out, past the dozens of outraged congregants; that ended about as well as you’d expect
  • 93 severed ponytails: stolen by a fellow posing as a representative for the Locks of Love charity; his unsavory purposes remain mercifully obscure
  • $15,000 worth of breast pumps: stolen by two men; what a pair! Let it be noted that this theft, along with the ones involving buttons and communion wafers, was committed in Florida…Coincidence? You decide.
  • a 50lb halibut named Big Mamma: the thief broke into the California Halibut Hatchery, speared the star attraction (as close to a local celebrity as a fish could be), threw her on the grill, and served it to his guests, like some modern-dress version of the Feast of Thyestes; the thief’s attorney said later, “I tell you, it was as if he had barbecued Bambi. People want to put him in the gas chamber.”

What are people willing to pay for, and what are they willing to steal? This ends up being an economic sociological question, because it ties into what people value.  I didn’t even notice the lamp that a group of men broke down a door and risked arrest to steal. I can’t really remember what it looked like. But I’ll always miss my beloved overcoat, which they probably regarded as a rag–no different from a cheap towel or a throw rug, useful only in concealing the real goods.

In memory of Coat: RIP, old friend.

artichoke lamp
Does this look like $8,000 worth of design genius to you? Yeah, me neither.

My neighbor’s estimate of the lamp’s value was waaay low: turns out I was living with an interior design masterpiece and had no clue: the thing was a 1958 Poul Henningson “Artichoke” lamp, valued at 39,000DKK, or about US $8,000. Unbelievable. Had anyone mentioned this to me, I would have a) paid more attention to it, and b) made sure I didn’t leave anything valuable in the house, ever. In fact, I probably would have moved to a place that didn’t contain such a juicy target for thieves. Dang. Hard way to learn the difference between IKEA and “real” Danish modern.

This guest post is the first in what I hope will be a series of contributions by some of my former students from Brown University: people who took my course in Economic Sociology, and who have stayed in touch over the years. It’s always wonderful to hear from former students, and especially so when they find that material from my classes has been helpful in navigating their post-university lives. Since I was always rattling on in lectures about how pragmatic and useful Sociology can be–I was particularly fond of quoting Kurt Lewin, who is credited with saying “there is nothing so practical as a good theory”–it’s great to see how former students have applied sociological theories to make sense of their experiences.

In this entry, we find Galyn Burke–Brown class of ’05, formerly a competitive equestrienne, and now an enthusiastic triathlete–using Foucault and Putnam to shed light on the surging popularity of triathlon competition among American elites. Her analysis of what makes triathlons the “latest and greatest place to network professionally” follows.


Triathlon is the new Golf: As a young lawyer making a name for himself in the mid-seventies, my father’s superiors told him to “pick up golf” as a way to rise quickly within the firm, and to land lucrative clients. It’s still all about who you know, but if you want to get ahead in business today, don’t hit the putting green, sign up for an Ironman. Why?

Like Golf, Triathlon is cost prohibitive: The average annual income of an Ironman participant is nearly $160,000, while the average golfer makes a measly $100,980 a year, according to’s 2009 Survey.

With Ironman entry fees upwards of $500 each (plus the flight and lodging expenses associated with destination racing), a decent bike starting around $3,000 (plus $400 for the shoes, helmet, pedals and accessories), $200 for swim, bike and run gear, and $300/month in coaching and facilities fees; you start to understand the need for that extra $60,000/year.

A $6,800 Trek TT Bike, with Carbon, disk
wheels, which cost upwards of $2,000/set.

Triathletes make better business connections: Like Golf, Triathlon entrances “Type A” personalities, obsessed with winning, even if victory requires continuous practice and focus. Unlike golf, Triathlon also demands incredible pain tolerance and phenomenal endurance. Consequently, “the sport attracts high-income, driven, focused individuals who are able and willing to pay the price in time and money,” says David Samson, Florida Marlins president, and Hawaii Ironman 2006 finisher.

Not only are triathletes more driven, they’re also younger. On average, Ironman triathletes are 35-44, while avid golfers are generally in their early 50’s. Consequently, triathletes are at the peak of their professional careers, while many golfers are contemplating retirement, and thereby less effective in helping you infiltrate the network or company of your choosing.

Triathlon is a better way to schmooze (on a Micro Level): Now that you’ve drawn all of the rich, hard working, high powered individuals into one sport, it is time to make connections. Typically, only four players participate in a round of golf, which takes around 4.5 hours. You likely know at least one or two of the other competitors if you’ve been invited to play in the first place, so you’re left with at best two networking opportunities, which isn’t an efficient way to find the right contact for you.

Most of the Multi-Sport fitness groups in my home town (Marin County, CA), host weekly group rides, averaging thirty to fifty participants. The group usually covers seventy miles in a given ride, thereby providing five hours (plus a group brunch) to make friends, and connections.

The PurplePatch Fitness Weekly
Saturday Group Ride, Marin County, CA

The group usually breaks into smaller packs of evenly matched athletes after a ten mile warm-up. As competitive, Type A folks, multiple members in a given group will eventually ask you how old you are, what team you belong to, and what you do (probably to ascertain how much time you have to train, how long you’ve been serious about the sport, who coaches you, and what if any advantage your bike may provide you).

It is during this hierarchical ranking process that you establish dominance over the somewhat older, not-as-fast man on the really expensive bike. He may be the CEO of a major tech company in Silicon Valley, but that is the professional “Pond” (Frank, 1987) or “Sphere” (Putnam, 1995). Right now, you’re both in the triathlon sphere, where you’re fitter, faster and had a better time at Ironman Canada last year. As Frank noted, it is relative status that creates happiness and satisfaction, and in this pond, your status is higher than his.

So, for the remainder of the ride (and during brunch afterward), he picks your brain about triathlon, and you arrange to have lunch with him at his office next week, a networking win you’d never enjoy if you’d attempted to engage said CEO in the professional Sphere.

Aaron Wallen: ‘World’s Fittest CEO, 2008’
Ironman Challenge, Kona, HI

Triathlon as a character reference: Not only have you now procured a meeting, you’ve already passed the first round of the interview process. The ability to withstand (and even enjoy) suffering is a form of ‘bonding social capital’ (Putnam, 2001) that forges a strong sense of collective identity. It implies a preference for achieving work-like goals in the leisure sphere, which translates seamlessly into a strong, professional recommendation from your new friend, the high powered CEO.

Triathlon is a better way to schmooze (on a Macro Level): There is no other sport in which every race includes Professional, Amateur and “Age Group” triathletes from under ten to over eighty, separated only by “wave” times, which are determined by age and gender. As Bob Babbitt, publisher of Competitor Magazine put it: “I can’t pitch to Barry Bonds or tee off with Tiger Woods, but I can be on the starting line with the top people in triathlon.” Consequently, you can train, compete and network with individuals of all ages and abilities, from around the world.

While the world of triathlon is growing rapidly (223,594 US adults participated in a triathlon in 2007, up from just 83,612 just ten years ago), Triathlon is still a small community, even at the Macro level. With a limited number of Ironman (2.4mi Swim, 112mi Bike, 26.2mi Run), Half Ironman (1.2mi Swim, 56mi Bike, 13.1mi Run), Olympic (.9mi Swim, 26mi Bike, 6.1mi Run) and Sprint (.5mi Swim, 16mi Bike, 2mi Run) distance races, you are assured to become familiar (and even friendly) with similarly matched athletes from across the country, and the world.

Triathlon is a reciprocal Panopticon: Your athletic club affiliations are declared on your uniform, and your age is written on your calf prior to each race (so you can check the legs of everyone you pass and everyone who passes you, to estimate ranking in on your age group during the actual race).

Your relative time and ranking is posted within minutes of completing the race, so all can see where you fall amongst the 2,000 or so athletes who participated that day. Award ceremonies are performed immediately, and results are posted online within 24 hours. You can even look up their participant’s photos!

Basically, Triathlon is a Panopticon (Bentham 1995 [1785]; Foucault 1995 [1977]), in which everyone is given the role of prison guard and prisoner. You can’t hide anything about yourself, but in turn, you know everything about everyone else.

Left: results display an athlete’s age, gender, city, and results for every event completed.

Bentham’s Panopticon: A theoretical prison that allows guards to observe (-opticon) all (pan-) prisoners, who can’t reciprocally tell whether they are being watched.

Conclusion: Triathletes are a self selecting group of affluent, hig hly motivated individuals, who spend countless hours forging bonds through the competitive, grueling, and socially cohesive ritual of endurance athletics. The greater community convenes several times a year to establish relative rank by sex, age, casual, amateur and pro standards. With access to the region, age, gender and past performances of every athlete in this group, Triathletes are “tee’d up” to make local, national and international connections that turn into husbands, wives (38% of Triathletes are now women), employees, employers and friends. In a world where it’s all about whom you know, it doesn’t hurt to know the rich, successful, driven group that is Triathlon.


Bentham, Jeremy. 1995 [1785]. Panopticon Letters. Miran Bozovic (Ed.). London: Verso.

Foucault, Michel. 1995 [1977]. Discipline and Punish: The Birth of the Prison. New York: Vintage.

Frank, Robert. 1987. Choosing the Right Pond: Human Behavior and the Quest for Status. New York: Oxford University Press.

Putnam, Robert. 2001. Bowling Alone: The Collapse and Revival of American Community. New York: Simon and Schuster.

A sign whose like you will never see in Germany. Taken in Mountain View, CA.
A sign whose like you will never see in Germany. Taken in Mountain View, CA.
You know what’s really fun? Being sick and in pain, up the middle of the night, trying to decipher the directions inside a box of pain medication, in a language you don’t really understand that well. I got to enjoy that experience about six weeks ago, with a recurrence of the same problem that made it excruciating for me to walk back in July, prompting the first Medicine and Money post.

This time around, there was prescribed pain medication involved—hooray—but it was of a kind that could kill you if you took too much. So reading and understanding the package directions was actually important. Imagine my surprise to open that package in my hour of need and find that the insert contained pages of directions, but only in German. Not one word in any other language: as if it never occurred to the manufacturer that non-German-speakers might find themselves in Germany, sick and in need of this common pain medication. As if there were no such thing as a tourist, or an immigrant worker. 

In case the reasons for my surprise aren’t clear, I should point out that Germany is a relatively small country (by American standards) surrounded by neighbors who speak other languages: French, Italian, Dutch, Danish, Polish, etcetera. Internally, Germany also has a large number of immigrant groups in its population, the largest of which is Turkish. But was there any Turkish, or French, or Italian to be found on that package insert? Nein!A thousand times nein! Because anyone lucky enough to get into Germany should have the courtesy and intelligence to read German, right? Especially medical German, of the kind printed on the package insert for this pain medication.

So I sat in the bathroom with a dictionary at 3am, barely able to focus my eyes from the pain, trying to figure how to avoid killing myself by accident with the pills that were supposed to bring relief. Obviously, all’s well that ends well: I am not blogging from beyond the grave. But it got me thinking wistfully about the ways in which American drug manufacturers and pharmacies go way out of their way to avoid this sort of situation happening in the US. When I was in California a few weeks after wrestling with the pain meds, I stopped by a CVS and had to smile at images like the one above, of the Asian pharmacist with the caption in Spanish, and this sign—displayed near the prescription drop-off window—explaining to customers how to get help in 21 different languages, including English, Laotian, Polish, Portugese and German! (Please forgive the poor quality of my camera phone shots.)

CVS pharmacy service: now available in 21 languages.
CVS pharmacy service: now available in 21 languages.

Now this kind of outreach to non-English-speaking populations obviously doesn’t occur just as a humanitarian gesture: it’s a business decision by firms that want to make money by reaching out to the widest possible customer base. This means eliminating obstacles to the use and purchase of medical products—like language barriers. Despite all the crummy pockets of English-only activism in the US, American firms still want to make money, and that keeps them printing signs and package directions in lots of non-English languages—because they recognize the reality that many people in the United States, whether tourists or immigrants, don’t speak English at all, or don’t speak it well enough to decipher things like dosage directions while in pain in the middle of the night.

The question is: why don’t German firms recognize that? Why don’t they recognize that non-German-speakers within Germany have money to spend, and try reaching out to them—for instance, by making package directions available in other languages? Leaving aside the safety issues—it says something about German culture and its stance on foreigners that potentially dangerous medications are not labeled in any language other than German, or even in pictograms, which are commonly used elsewhere in the world as a language barrier workaround—it seems that German firms are forgoing some profits by making their products hard to use by non-German-speakers.

At root, I believe, this is about culture. Shortly after my arrival in the country, many Germans told me to be prepared for the total absence of American-style service culture. But that was only part of the story: after three years in Germany, what I notice is not just the absence of something like service orientation, but the presence of a cultivated user-unfriendliness, in which making things difficult and exclusionary is very much an explicit goal rather than an unintended consequence.

This is one of the many instances where conventional economic wisdom—all businesses wants to maximize profits—breaks down, and economic sociology can be very helpful. Because it’s not that hard to find places where entities nominally called businesses seem hell-bent on making it difficult for people to buy and use goods and services. The whole culture of capitalism as Americans know it is not universal, even though many US political and economic leaders would have us believe that those norms and values are shared everywhere that business is transacted. If you’ve ever been to a socialist or communist country, you know this already; but it is perhaps more surprising that one finds such substantial deviations from American, customer-oriented norms in countries known as developed capitalist democracies.

Like Germany—where two of my German friends recently got “fired” from their long-time health club because they complained to the owner that her employees were 10-15 minutes late almost every morning at opening time, leaving a crowd of members waiting around for the front doors to open. So instead of apologizing or trying to remedy the situation, the club’s owner told my friends that they were banned from the club henceforth as complainers who “upset the staff” with their unreasonable demands for things like reliable opening hours. Now that’s customer service! (I did find a tiny speck of consolation in this story: I thought that kind of thing only happened to foreigners like me, whose accents and grammatical errors while speaking German gave us away as members of a lower caste.)

Economically, this is just insane: what kind of business owner fires her own customers when they complain about her business failing to live up to its commitments? Wouldn’t it seem easier just to make sure the doors of the club got opened on time, rather than losing the revenue stream from customers of years’ standing? I suppose an economist would say that the club owner was maximizing her utility—whatever that means in this case. The utility of being able to cut off her nose to spite her face? To “win” a power play, but lose money in the process? Certainly, many people are willing to pay dearly for the experience of power and dominance over others. But whenever this sort of thing gets explained in terms of economic theory, I find the term “utility” deeply unsatisfactory: like a giant black box in which economists throw everything that they don’t understand.

Sociology is sort of like dumpster-diving in that black box: that’s where all the interesting stuff can be found. Like the costly, irrational stuff people do in the name of culture and preferences. There are a number of different definitions of culture across the social sciences, but I see it as the broad set of social values, practices, norms, roles and expectations people have because of the setting in which they were raised, or in which they live. Nothing happens without culture, including capitalism. And this is a major insight of economic sociology: there is no one universal capitalism, but numerous local variations, dependent upon culture. (Paging Max Weber—again.) So I come from a world in which the business norm is “the customer is king”—whether or not an individual transaction actually lives up to that ideal, I can call upon it within the US and most people will a) know what I’m talking about, and b) acknowledge that it’s the ideal to which business should aspire.

Go to Germany, however, and both a) and b) would cease to apply: there is no shared cultural agreement that customers are the most important people in a business transaction. That changes everything about the lived experience of economic activity there: things that would be unthinkable in the US can happen in Germany, like the gym owner firing my friends for their service complaints.

This produces a special kind of culture shock, of the specifically economic variety. It’s not something I’ve ever seen described, either in the scholarly literature or the popular press. But I’d venture that it happens to most of us, even when we travel outside our home countries: every time you find yourself in a new country, wondering if you’re supposed to leave a tip, and if so, how much, you’re experiencing a minor form of economic culture shock. But the phenomenon manifests itself in a variety of other ways that are hard to fully appreciate until you move to that new country and start working there, buying groceries, and going to the doctor.

Having shared a few stories about the way that economic culture shock has affected me, I’d be interested to hear from you–what forms have you encountered, and what did you make of those experiences?

ehrenreich500Shortly after posting On “Worth,” what to my wondering eyes should appear but this story from the Chicago Tribune: a mostly-first-person account of the experience of a young, white, middle-class couple applying for welfare. The husband is a graduate student, the wife is eight months pregnant, and they are both suddenly out of work.

The interest of the story–from the point of view of this blog–is not their experience (spoiler alert: the public assistance system is way broken), but readers’ responses to their story. The comments following the article represent a brilliant, if unintentional, case study in the rhetoric of justification, and the “social technologies” we use to determine who gets what resources. It’s like the commenters were all feral students of Boltanski and Thévenot, who weighed the possible justifications for going on welfare in this case, and declared the couple “Not Worthy.”

While some of the comments are basically sympathetic to the pair, the vast majority classify them among the “undeserving poor.” As I related in the previous post, the law once condemned such people

…to be whipped through the streets, publicly, until they learned the error of their ways.

In the Series of Tubes era, the public whipping takes place virtually, but with the same old intent to humiliate. Total strangers feel entitled to demand that the couple account for their most minute personal decisions, from their choice of college major (was it sufficiently pragmatic and career-oriented?) to their choice of birth control methods (so foolish of them to get pregnant during a recession).

It quickly becomes clear that the purpose of this questioning is not to learn anything about the conditions that can lead economically stable people into poverty, but to build a case against the couple, so that they can be blamed for their present circumstances. If you can stomach the ghoulish delight that many of the commenters seem to take in hurling retribution at the unfortunate pair, it’s fascinating to watch the ethics of Elizabethan England filtered through a 21st century medium.

So here’s a kind of pop culture pop quiz on worth: try to identify the justifications used by commenters in responding to this story of going on public assistance. Your options are the “orders of worth” known as: civic, market, industrial, domestic, inspiration, and fame. You can check out the exact definitions via Google Books’ link to On Justification.

Ready, set, go!


Well, here’s what I found: exactly one of the rhetorics of justification in use, that of the “domestic order of worth.” In Boltanski and Thévenot’s taxonomy, this form of justification for action is based on the idea that society is a kind of household writ large—a notion that goes back to Aristotle’s writings on statecraft and the oikos. In this moral order, individuals belong to the collective rather than to themselves, and that imposes a responsibility for mutual care and assistance on the entire group—see Durkheim’s work on suicide rates in Europe for another interesting take on the results of this conception of the world.

The most sympathetic commentators on the Tribune article drew on this ethic of care, which also tends to come with rigid social hierarchies. The flipside of protection of the “weak” is that it is usually used to legitimize the position of those in power–those with the authority and access to resources that make public assistance possible. This logic would have been very familiar to the people of pre-Reformation England, when there was no need for a codified “Poor Law,” because the Catholic Church enforced a moral order (hierarchical and collectivist) which ensured that people in need got at least some assistance. As far as I know, no first-person accounts of being poor in Catholic England have come down to us, so it’s difficult to know what the experience of care was really like. But we can say with some confidence that the provision of assistance to people in poverty was not nearly as controversial then as it is now.

Which leads me to the majority opinion expressed by the commentators: there is no justification for being poor.

I was going to add “and able-bodied” to the end of that sentence, to indicate that being physically disabled was one of the few possible conditions that could get a person classified as “deserving poor,” but then I wondered: how to acknowledge the vitriol unloaded on the 8-months-pregnant female member of the couple? Clearly, pregnancy is not equivalent to a permanent physical disability, but it can make many physical activities temporarily difficult and dangerous. Thus, even the welfare officials won’t demand she go to work.

But the commentators are another story. They interpret her advanced pregnancy not as a condition that makes her at least temporarily deserving of assistance, but as cause to damn her further—evidence that she’s irresponsible and therefore unworthy of any help!

Why? Because she should have known better than to get pregnant…during an economic crisis, while her husband was in graduate school, when the couple didn’t have enough money set aside, etcetera, ad nauseam.

And here, I think, with this rhetoric of “you should have known better than to put yourself at risk,” we find ourselves faced with one of the fundamental contradictions of contemporary capitalism. On the one hand, risk is good. Risk is rewarded. We hail the entrepreuneur and the pioneer for the risks they take. And most Americans see it as “fair” that such risks should be rewarded, financially and otherwise, because risk-taking benefits us all. So there’s the “risk premium” in finance, tax breaks for entrepreneurs, and patents for inventors. That’s all mostly uncontroversial.

But when people take risks and lose, they are vilified as burdens to society—unless they are corporate titans, in which case they get multi-billion dollar bailouts. The socially-accepted posture toward risks that don’t pay off is blame and recrimination.

“Lost your job? You schmuck—a smart guy/gal would have seen that coming/gotten a new position by now.”

“Your business went under? You should have put aside more in the cash reserves/paid your employees less/sold more products that people actually wanted!”

Undeserving poor? God help us, every one.

In other words: “You know that bad thing that happened to you? It’s your fault.”

If Max Weber were still with us, he’d probably say that this was all a tragic consequence of the Protestant Ethic: the distortion of Calvinist doctrine that led some Protestants (like the Puritans who settled North America) to believe that God marked the “elect” (those pre-destined for salvation) with worldly good fortune, including material prosperity. Therefore, ill fortune—like losing a job, or a business, or finding oneself in need of public assistance—was interpreted as evidence that one was not among the elect, but instead pre-destined for eternal damnation. Which obviated the need for public assistance—why mess with a fate that God ordained?

It’s probably a safe bet that none of the commentators on the Tribune article are Calvinists. They may not even be Christians. But most of them were probably born and raised in the US, and this is the miracle of socialization: you don’t have to be aware of it in order for it to be effective.

In fact, the less aware you are of your own socialization—all the things you take for granted as “natural” and “normal”—the more effective that socialization is in controlling your thoughts and behavior. No awareness = no resistance. And as Harold Garfinkel’s “breaching experiments” so vividly demonstrated, often we can’t even “prove” that socialization (or social structure) exists unless we purposefully break the rules—the more mundane and trivial the occasion, the better.

But back to the Tribune commentators, the majority of whom seem to believe something along the lines of “bad things only happen to bad people, who are therefore undeserving of any help.” Which is why their comments consist largely of uninformed speculation as to all the things the unfortunate couple probably did to bring their economic woes upon themselves. As if there were no economic crisis, and no such thing as bad luck.

These commentators don’t have to be Calvinists, or literal descendants of the Puritans, in order to espouse their views. All they have to be is well-socialized Americans. As part of the process of historical path-dependency, the beliefs of the nation’s founders have come down to us in the institutions and laws they created, as well as in their customs. Part of what it means to be an American is to resonate with the language of self-determination and independence, whose dark side is detachment from collective responsibility—as we saw in the Bush-era proposals to “privatizing” Social Security, and as we see now in the debate on health care reform.

Societies built on this extreme individualism have a hard time explaining misfortune, loss and failure—which is why we waste so much time blaming the victims and ignoring any systemic factors that may have come into play. Part of this is sheer laziness: it’s easier (and, I fear, more fun, for some) to blame individuals for any problems they may experience in life than to look at social structural problems like the breakdown of informal support systems in the family, or long-standing customs, like those between management and labor over pensions and job security.

What is miraculous, to me, is that the individual-blaming explanations survive even the most blatant examples of systemic breakdown. So the world financial system comes to the brink of collapse, and in the minds of many, it’s still the fault of individuals—like all those people who got home loans they didn’t deserve. It makes me wonder what exactly it would take—what kind of financial/social/environmental apocalypse—for Americans to give up blaming individuals for the misfortunes they experience, and consider that there are some forces that individuals cannot control, and for which no amount of planning provides sufficient protection.

Any ideas? Anybody? Bueller?

This post was inspired by a classic sketch by the 1990s comedy troupe The State:

Awww, yeahh…while whispering sweet nothings,  Barry and LeVon have raised Important Sociological Questions. Such as: what is worth? What does the word actually signify?

For answers, we must turn from Barry and LeVon to Luc and Laurent—Boltanski and Thévenot, that is. In On Justification: An Economics of Worth (Princeton 2006), these French sociologists argue that the concept of worth is a “social technology” used to adjudicate the competing claims to resources, legitimacy, and other goods that characterize social life.

As an example, consider the notion of the “deserving poor,” created in Elizabethan England in order to institutionalize the claims of certain people to public assistance (in the form of education, housing, medical care, money and food), while denying those resources to others (the “undeserving poor”).

Prior to the Reformation, these issues had been sorted out informally by the community. But with Catholic-communitarian morality giving way to a more individualist Protestant ethic (big shout-out to Max Weber here), people apparently stopped trying to save their own souls by doing good works for the poor. Which created a problem: the poor were still around, but they weren’t getting any kind of systematic help.

Enter bureaucracy: in 1563, Parliament began passing a series of laws, culminating in the “Poor Law” of 1601, to provide for the counting, classification, and treatment of poor people. The “worthiness” of these persons, and thus their legitimate access to resources, was defined as follows.

The “deserving poor” included

Those who would work but could not: these were the able-bodied…poor. They were to be given help either through outdoor relief or by being given work in return for a wage.

Those who were too old/ill/young to work: these were the impotent…poor. They were to be looked after in almshouses, hospitals, orphanages or poor houses. Orphans and children of the poor were to be given a trade apprenticeship so that they would have a trade to pursue when they grew up.

The “undeserving poor” were

Those who could work but would not: these were the idle poor. They were to be whipped through the streets, publicly, until they learned the error of their ways.

So the putative “worthiness” of some poor people justified their access to basic survival resources, while the “unworthiness” of others justified allowing them to starve. (Plus ça change, n’est-ce pas?) This is the kind of connection between moral and material worlds that Boltanski and Thévenot are trying to establish.

They argue that societies can be characterized by which standards of evaluation are considered legitimate, “universal” and binding on social actors. These evaluative standards are called “orders of worth” or “economies of worth.”

At any given time, multiple orders can coexist in a society, though they may not enjoy equal persuasive power. By analyzing contemporary French management training documents through the lens of political philosophy (!),

The authors argue that justifications fall into six main logics exemplified by six authors: civic (Rousseau), market (Adam Smith), industrial (Saint-Simon), domestic (Bossuet), inspiration (Augustine), and fame (Hobbes). The authors show how these justifications conflict, as people compete to legitimize their views of a situation.

Which brings us back to Barry and LeVon. Much of their two minute skit, particularly the opening 45 seconds, is devoted to justification:

LeVon: “Now we coulda bought $100 worth of of pudding…”

Barry: “And that woulda been a whole lotta pudding.”

LeVon: “But we had to go all the way, baby…”

Barry: “All the way home.”

LeVon: “With two hundred…”

Barry: “Forty dollars…”

LeVon: “Wortha pudding.”

This sounds just like the Augustinian notion of “inspiration,” which Boltanski and Thévenot define as a legitimation of value based on the “creation of a masterpiece” in a moment of creative genius. In fact, their description of this “order of worth” reads like an academic parody of Barry and LeVon:

…inspiration manifests itself spontaneously, suddenly, in a disorderly fashion, gripping the creator and obliging him to “surpass himself“…It is in the nature of inspiration to pour out, to spring up, to manifest itself in a “flash of genius, ” a “spark,” that will provoke the appearance of an idea, an illumination or unusual intuition that disturbs, bringing in its wake a “confused bubbling up,” a “strange whirlwind.” In this state, one grasps the world by means of impressions and feelings, through an aura of happiness, vertigo, fear and trembling.*

Awww, yeeaaahh. Happiness, vertigo, fear and trembling? “Now that’s the kind of pudding that only $240 can buy!”


* Boltanski and Thévenot 2006: 163. All italics, unbelievably, in the original.


For about six weeks, from the beginning of June to the middle of July, I didn’t write a word for Economic Sociology, interrupting my steady two-posts-a-month rate.  I wasn’t on vacation, but instead spending a lot of time with German doctors, trying to figure out why I suddenly couldn’t walk, sleep or eat without pain. I was sick, unable to walk a single step without holding onto something for support, and just miserable 24/7. It would have been a drag in any context, but trying to get help in a foreign language, in a country that is not exactly warmly disposed toward foreigners, made the whole situation very difficult.

One of the best parts of the experience, however, was a very small thing that made seeking medical help a lot less stressful: the segregation of the business part of a medical practice (the part that does billing and takes in payments) from the care-giving part. That means when you go to a doctor’s office, everyone from the office staff to the physician’s assistants to the doctors are focused on the same things that you are as a patient: dealing with what ails you. That’s what people in the business school world call “alignment of interests,” and it works very well in terms of minimizing the roadblocks between people in need of care and those who can provide it.

This separation of business from care in medicine also has a surprisingly comforting aspect emotionally, particularly if you’re used to a system in which the business part of medicine is inextricable from the care part. Though they are intertwined, they don’t work very well together. I think this is because, as Viviana Zelizer pointed out years ago in her article “Payments and Social Ties” (1996), the notions of “care” and “payment” are essentially antagonistic.

Probably every American has a story about the ways that the business part of a medical practice obstructed his or her ability to get care. I once knew a woman who, despite being well-insured, was harassed in her hospital bed by a billing department employee demanding to know how she–still groggy and in pain from an operation to save her life–was going to pay for her treatment; the hospital employee strongly implied that the woman would be “evicted” from her bed if she couldn’t prove that her bills would be paid. That apparently seemed like reasonable behavior to the hospital employee, “just doing her job” by looking out for the hospital’s business interests; the ethics of badgering an ill and vulnerable woman just out of surgery–in other words, the ethic of care–didn’t enter into the discussion.

For a few more–documented!–stories of this type, and an articulate, compelling discussion, check out “Health Care and Profits Don’t Mix” by Elizabeth Mika. (And try not to get mauled by a bear.)

These anecdotes do not argue against compensation for doctors–or any other caregivers, professional or otherwise. Rather, the point is that the motivations and incentives in relationships mediated by payment are often at odds with the motivations and incentives that we think are supposed to govern relationships defined by the term “care giving.” This is one reason many people have such a strong negative emotional response to the idea of paying stay-at-home spouses for their housework: the spouses are supposed to keep house, and possibly rear children, out of love and caring, not a desire to get paid; plus, there’s the fear that if stay-at-home spouses were paid, their emotional attachments to family members would deteriorate, replaced by a more impersonal employer-employee dynamic.

Back to Germany: Doctors certainly get paid for their services here, and seem to make a nice living. But when you walk into the reception area of their practices, you don’t see any apparatus for handling money: no credit card runners, no cash registers, nothing. All that is outsourced to firms located outside the doctors’ offices, often in different cities. Those outsource firms send a bill to your insurance firm, or–if you’re like me and have to pay every penny out of pocket–to you, the patient. Surprisingly, this doesn’t create the kind of snarled bureaucratic nightmare I would have expected: when I had questions about a bill from one of those outsource firms, I took the bill and the questions directly to my doctor, who called in his office assistant, and together they got on the phone with the billing firm and straightened things out for me on the spot.

This means that when you visit a doctor in Germany, the whole event is aligned around care from start to finish. That doesn’t make medicine a charitable undertaking, as some of the straw-man arguments in the US health care debate might lead you to think. Doctors here show no signs of having a forced choice between “doing well” and “doing good;” that distinction was also long held inviolate in the world of investing, and while the evidence has been around for over 15 years showing it to be a crock, it’s one of those snippets of economic ideology that seems impervious to reality.

Nor do patients face “rationing” of services in this system–apparently, the kinds of “socialized medicine” horror stories that Americans hear so often when we start talking about health care reform are drawn primarily from models like the NHS in Britian. Based on accounts from NHS patients, doctors and British politicians, that horror seems well-founded.

But not all “socialized medicine” is created equal, as it turns out. This came as a big surprise to me, child of the Reagan 80s, when I spent a year of high school in France and realized that a) it was being governed by the socialist party, and had been for some time, and b) people there had a much higher quality of life than most people I knew back in my suburban Chicago milieu. And nobody, ever, complained about the quality or availability of health care. So it wasn’t surprising to learn recently that independent studies by the United Nations and academic institutions (outside of France) ranked the French health care system the best in the world:

So this year [2008], two researchers at the London School of Hygiene and Tropical Medicine measured something called the “amenable mortality.” Basically, it’s a measure of deaths that could have been prevented with good health care. The researchers looked at health care in 19 industrialized nations. Again, France came in first. The United States was last.

Germany only made it to 12th on that list, but still–in nearly three years here, I have never heard a peep against the health care system, and certainly nothing remotely like the tragic litany of needless suffering (emotional and physical) and death that we hear in connection with the US system.

The French and German health care systems have another thing in common: they involve money (indeed, they are quite costly), but people living under both systems seem perfectly content to pay for the care they get, whether they do so out of pocket (like me) or through income taxes and health insurance premiums (like the majority). A big reason for that is quality: generally, people are willing to pay when they perceive they are getting value for their money. At the same time, in both systems as I’ve experienced them, the actual business of payment is kept physically separate from the provision of care.

I’m arguing that this segregation of business and care in medical services is not incidental to the subjective experience of quality and value on the part of the patient. Not having to deal with the “show me the money” issues up front, when you come to a doctor’s office or an ER in pain, makes a huge positive difference from a patient’s perspective. I hope that more Americans will get to test my claims for themselves, on home soil, rather than having to come to Europe to experience the enormous difference that such a simple change can make.

"¿Quién es más macho?"
"¿Quién es más macho?"

This post was inspired by an exchange I had last month with my friend Steve Murphy, who used to work on the NYSE and is one of the most informed, thoughtful, up-to-date people I know on world affairs. He regularly mass-mails his musings on political events to a select list of friends—I like to call them Murph-o-Grams—and the one on Kim Jong-Il generated a discussion about the ways in which things like North Korea’s nuclear shenanigans get priced into the market.

One hears with some frequency about events, particularly risky ones, being “priced into the market,” but what does that actually mean? Who does the pricing? And how?



Here is the original Murph-o-Gram:


Kim Jong Il-tempered


How does one deal with an impudent baby who threatens to hold its breath until it dies? You let it. And so it is with North Korea’s Kim Jong-Il. Granted, his temper tantrums could have much more serious global consequences.

The “Dear Leader” is up to his same old tricks. The US has become better at ignoring his tactics and addressing his neighbors, who offer him the hope of refuge if he goes too far: China and Russia.

China has much to fear from a destabilized North Korea: millions of desperate refugees, a new government that may be even less responsive, loss of face internationally. Russia has much less to lose unless it turns out it belongs to the international network that has helped North Korea buy nukes. Even then, Russia seems not to care too much what the international community thinks.

The US seems to accept that North Korea is merely a stubborn regime that keeps its people unnecessarily impoverished. So long as we keep a close eye on it, allow China to determine whether action is taken, and do not give Russia an opportunity to feel superior, we have little to fear.

But this strategy of letting China take the lead in dealing with Kim Jong-Il has made it difficult for American political leaders to address the very real concerns of our allies, South Korea and Japan: they are playing along, but nuclear toys so close to home are not easily ignored. Obama is trying to do better than his predecessors by taking the issue to the UN…though considering the UN’s track record in dealing with bullies and megalomaniacs, Kim Jong-Il probably knows he has little to fear.

The financial markets mostly shrugged off the goings-on in North Korea, as well they should. Compared to everything else going on in the world, North Korea’s still-limited nuclear capabilities no longer rattle world markets, While the first nuclear tests conducted there did fray a nerve or two on global exchanges, repetition has dulled their impact.

North Korea only becomes a serious problem if it mishandles its nukes, or if China loses patience with Kim Jong-Il’s brinksmanship. So far, neither event has come to pass. What really matters in the markets now are signs of a rebound in GDP growth. As long as Dear Leader’s shenanigans pose no threat in that regard, North Korea remains little more than a carny sideshow as far as the financial world is concerned.


And here is the dialogue that followed:

Could you explain something to me in slightly more detail: why isn’t Wall Street more spooked by the prospect of a madman waving nukes around like a kid with a water pistol? Why is there such a heavy discount on the nuclear threat from Kim Jong-Il, when a nuclear strike would seem to harm the world economy WAY more than WorldCom fudging its books by 1 cent to meet earnings expectations. (Not that WorldCom was right, but that Dear-Leader-with-the-Nukes is so wrong.)

: To answer your question, I was kind of surprised myself. I came up with several reasons:

  • Boy who cried wolf syndrome
  • Pattern of only going so far also suggests a certain amount of rationality
  • Supply chain from South Korea/Japan is less important than it used to be
  • North Korea still cannot launch nukes successfully
  • Lack of alarm on the part of the US military (even during the North Korean launch a couple of months ago US military leaders were non-plussed)
  • Nuclear threat already priced into the market (based on nukes in Pakistan)

As for the WorldCom comparison, the standard financial analysis models in use at the time the scandal broke were highly dependent on the accuracy of SEC reports and on the trustworthiness of management. Outlier events like nuclear strikes were not given much weight in those models because they were (and still are) seen as a systemic risk—that is, part of the risk you are willing to bear just by entering the market. Finally, WorldCom did more than fudge a number—the company did not match revenues with liabilities, so the fear in the market was that there was more to the story.

As an observer, I agree with you: I am more concerned about loose nukes than I am about loose books, mostly because I never believed in the accuracy of accounting in the first place.

: Is there an economic solution to this problem? Any leverage the US (or the world community) can place on a guy who prints his own $100 bills by the stack?

: Any “solution” runs into the same road block: China. China does not want a regime change in North Korea unless it can control it. Right now, China seems happy to have the North Korea “bargaining chip” at their disposal. This allows China to say to any country bordering the Sea of China: “The US may be more powerful than we are, but we share your geographical location and interests. Moreover, we can control North Korea–the US can not.”

The best the US can do is tolerate the situation, at least until there is ample provocation that can both galvanize the US and embarrass China.

The US is stepping up its attack against money laundering in large part to stop funding of terrorist activities, of which North Korea’s actions fit the definition. Along the way, they are picking up many tax cheats. By not allowing North Korea to pass counterfeit money, they are strangling the head rather than the body. The problem is, this approach takes time to be effective. On the plus side, it is hard for anyone to argue in favor of money laundering, so the US will catch no flack from the international community for attacking North Korea on this front.

: So I get your point that KJI looks like the boy who cried wolf—it’s hard to take him seriously now, and he seems to have a finely-tuned sense of where the boundaries of “going too far” lie…so he puts his toes right on the line, but goes no further.

Just to clarify, can you explain exactly how the risks posed by nuclear weapons (in North Korea, Pakistan or wherever) get “priced in” to the market, and by whom? Do analysts actually sit around modeling “chances of nuclear disaster” when making recommendations? Or do traders on the floor do the pricing-in? Or is it really several parties at once involved in the pricing-in process?

: The nuke issue gets priced in several ways. The one way it does not get priced in is through traders, on the floor or otherwise. It gets priced in by “investors”—that is, by money managers, hedge funds, institutions, etc. It also gets priced in by companies, banks, and anyone else whose financial interest in pricing that risk accurately makes it cost-effective to undertake the expense of an Enterprise Risk Management operation (ERM). By and large, ERM divisions tend to be small; I’d guess that in general, they cost firms less than 1% of revenues.

Threats considered by ERM staff typically run the gamut from the mundane (inflation at 1-2%) to the highly unlikely (the French winning a significant military conflict). For the most part, though, ERM staff focus on events likely to have the biggest impact on a particular firm and its industry. If the firm is a manufacturer with a global supply chain, anything that might disrupt that chain receives the lion’s share of attention in ERM: that could range from resource scarcity, to weather, political unrest, and changing social norms. If the firm is strictly trading financial instruments, the focus will be more on economic issues, news events, reaction times (which involve technology like crackberries—remember when that service was disrupted?), and collinearities (i.e., as the US dollar gets stronger, the price of gold rises). The work of ERM is never quite done. There are all sorts of scenarios to think up and action plans to prepare.

So to protect itself and reassure analysts and investors, Nestlé might employ a few analysts who devise all sorts of ways their operations could be disrupted, including what scenarios would likely ensue and how the company could respond to each. For example, a malaria outbreak in Cote d’Ivoire would interrupt cacao shipments from Senegal to Christchurch (New Zealand), thereby limiting supplies to Sydney. Therefore, Nestlé might have in place a plan to buy excess capacity in Manila, for which they pay a monthly premium, almost like insurance. The premium would be paid to whomever was obligated to make the delivery of the cacao: it could be a storage firm holding the commodity on a “just in case” basis, selling it off as their obligation ends; or it could be a plantation owner who normally sells his crop to a local confectioner, but in a pinch will stop selling to the local and sell to Nestlé instead; or it might go to a government holding a monopoly on production of the commodity. You can see how this can get quite complex (and quite politically muddy) very quickly. This is where firms like Morgan Stanley step in to make a buck in return for simplifying matters: they can sell Nestlé a derivative based on malaria outbreaks in Western Africa, creating the same kind of “insurance policy” at lower cost.

As for money managers, especially macro investors like George Soros, they might make financial bets on the likelihood of certain events (the end of the war in Sri Lanka, or a nuclear strike) that threaten markets worldwide, rather than particular companies. So unlike an airplane manufacturer or a Nestlé, a money manager’s ERM strategy focuses on the outcomes of elections, the workings of legislatures, or general economic efficiency in a country or region. Macro investors look for movements on a global scale—like the flow of funds into India and into Central Europe—rather than fluctuations in the prices of individual stocks, This aggregate perspective on risk also means that money managers hedge differently than individual firms do. Instead of taking out “insurance” on the supply of cacao or other production resources, money managers hedge through placements in the currency, commodity, equity or bond markets.

But the really important thing about money managers’ view of risk is how they model it, and how that results in their seemingly blasé responses to disturbing news like nuclear tests by Kim Jong-Il. Money managers’ models treat risk in a much more general way than the ERM of individual firms. So when money managers model market risk to include factors such as “likelihood of a nuclear strike,” location assumptions are irrelevant: the overall likelihood of the strike remains constant no matter whether the threat du jour comes from Iran, Pakistan or North Korea. Furthermore, information about new threats, such as Pakistani nukes falling into Taliban hands, would be treated in the money managers’ risk models as a change only in the overall likelihood of a strike happening somewhere in the world—that is, an incremental change, rather than a cause for reevaluating the model.

These are highly simplified examples, since the real models in use often have thousands of variables, but here’s what it means for our subject, pricing in the risks posed by Kim Jong-Il and his nukes. While it’s widely assumed that he has some sort of nuclear capability, his threats (and tests) are at best loosely related to his actual likelihood of deploying the weapons. That’s why, while each of his threats may make the news, we can say that the actual risk he presents (in terms of deployment ) has already been “priced in” to most financial models.

: What exactly is the US government doing to prevent North Korea from counterfeiting dollars successfully? I know about the changes in the bill design, of course, but do you know whether the US is attacking the problem primarily at the level of technology (i.e., preventing North Korea from obtaining the engraving machines used by the US mint, or just changing the designs so much that it’s hard for counterfeiters to keep up?) or at the level of transactions (that is, once the money has been counterfeited, making it difficult to pass it off as legit)? Is North Korea the worst offender when it comes to counterfeiting, or does it have competition from the other fraud capitals of the world, like Nigeria? (By the way, isn’t it interesting that countries seem to specialize in types of fraud? In Nigeria, it’s the 419 scam; in North Korea, it’s counterfeiting; and god knows what else in other parts of the world…)

: As for the counterfeiting, so far as I can tell, the Treasury wants to keep the fight as quiet as possible. They seem to be attacking the demand and distribution more than the supply. The ability to track money is highly refined. To be able to launder stacks of cash is very difficult. For a willing accomplice, the price is very high and reduces the incentive, unless the incentive is to destroy the dollar and the US. I do not think that is the intent in North Korea. The regime likes their luxuries too much.

The sophisticated nuclear sales group led by Pakistani nuclear scientist and arms dealer Abdul Khadeer Khan is not going to accept counterfeit bills. However, an Iraqi selling a Rocket-Powered Grenade on the street might be an unwitting victim. In any case, laundering that much counterfeit money would be very difficult. Compared to the money supply, which is around US$1.5 trillion, several billions of counterfeit is annoyingly acceptable. So while the US is certainly aware of and working toward stymieing counterfeiting (recall the freeze placed on all Macao bank accounts tied to North Korea in 2005) they are not looking for much publicity.

Of course, I could see an ironic situation where Hugo Chavez accepts North Korean counterfeit cash for payments—whether for Venezuelan oil or for any other transaction in which Venezuela might act as a middle-man—and then uses it to bail out Cuba…and round it goes, with only sworn enemies of the US trading on the assumed faith of a currency that does not exist. But that would be for the limited CSPAN audience.


* To my chagrin, I will not win any originality points for this dreadful pun. I can only say that others have punned worse, and often, on this subject. Google “How Do You Solve a Problem Like Korea” if you dare.

** ERM can range from a curmudgeonly troll in the basement, to a simple software program, to an outsourced quarterly report, to a whole in-house division of PhDs in statistical modeling. How a company approaches ERM depends on the personality and sophistication of the management, including the board of directors. A financial services company can create an ERM strategy quite easily and cheaply by creating a spreadsheet of its positions and hedging the aggregate position of the firm. A simple example: say a firm is long on 10 stocks in the DJIA and short on 20 DJIA stocks; to hedge its risk, it should buy enough futures contracts to balance out its long and short positions, and have a plan in place to unwind the future position once the Dow positions are liquidated.

Here’s a more complex scenario showing why a firm might find it economically valuable to have an ERM in place, both for internal use and as a signal to financial analysts that the firm is stable and reliable, even in times of crisis. Say Boeing or one of the other airplane manufacturers actually studied the impact on the aerospace industry of a terrorist using a plane as a missile. And say their analysis showed major short-term disruption in air travel (a couple of days), followed by a period of greatly reduced traffic (like a 50% reduction in passengers for a few months), culminating in a steady climb back to pre-attack levels. So when a catastrophe like 9-11 happens, the firm can brief the analysts covering their stock, showing that the firm has a response plan in place, such slowing down spending but not cancelling all projects, stretching costs out until growth is expected to resume, etcetera. Having a clear plan in place would impressed analysts and investors, meaning that the firm’s stock dropped less than others in the industry One thing is certain, an effective ERM must have access to all the details of every division in the firm. As a recent example of doing this successfully, consider Goldman Sachs, which just reported its forecast-beating $3.44 billion profit for the second quarter of 2009. ERM was a factor in the firm’s ability to prosper in the midst of chaos and economic dire straits in the rest of the financial services industry. That’s because GS saw its exposure to sub-prime mortgages as a risk and hedged against it. For the first couple of of quarters, the hedging investment looked like wasted money, but eventually it paid off. (BH: Understatement of the year?)


Behold! Ladies and jellyspoons, allow me to present the mysterious object which has haunted my sociological brain for the past five weeks.

Can you spot the two lines in this drugstore receipt that made my brain make a sound like this?

I was so overjoyed to finally be able to buy my favorite toothpaste again, after almost 25 years, that I almost failed to notice that my cash register receipt stated the price of my two tubes of Oligodent (gout verveine) not only in euros, but in French francs–a currency that was supplanted by the euro more than 10 years ago.

The French were probably more aware of that transition than anyone else, because they minted the first euro coin in history, in May 1998! When the euro became the country’s official currency on the 1st of January 1999, the exchange rate was forever fixed at the rate shown on the receipt: 6.55957 francs to the euro. By now, that conversion ought to be old hat, right?

While it’s certainly considerate and pragmatic to provide “dual pricing” information during a period of transition–francs were accepted as legal tender in the French economy, in parallel with the euro, until January 2002–it’s a little surprising to see it still in use after a decade.

An ecu minted by Louis IX.
An écu minted by Louis IX.

If they’re going to do that, I wondered, why not go all the way and show the value of a euro purchase in terms of the écu–the defining currency of France, which served her from the Middle Ages through the Enlightenment, from the reign of Louis IX (who minted the first écu in 1266) through that of Louis XVI (who lost his head in the Revolution of 1789)?

Some readers might be saying to themselves, “That’s an easy one:  The French don’t print register receipts showing prices in écus because the last person who saw one has been dead for two hundred years–whereas there are lots of people alive right now who grew up using francs.”

Which raises an interesting and relevant point: decades after the Revolution and the establishment of francs as the national currency, the French–including people who probably never saw an écu in their lifetime–were still using the old currency as a reference point:

The écu disappeared during the French Revolution, but the 5 franc silver coins minted throughout the 19th century were but the continuation of the old écus, and were often still called écu by French people.

This took me back to the mid-1980s, when I spent my senior year of high school living with a French family, in which the parents still talked about prices in terms of “old” francs–a currency that had ceased to exist 25 years before! And today, living in Germany, it’s still very common to hear people talk about contemporary prices in terms of Deutsche marks, even though they went out of circulation over seven years ago, and you never see dual pricing (i.e., prices in both euros and marks) in stores or on receipts. People just do the math in their heads (clever people, those Germans).

It makes some sense for them to keep referring to marks, however, because their national bank (the Deutsche Bundesbank) has agreed to redeem marks for euros indefinitely: that is, should you happen to find a 100 mark note stashed away in a vintage purse, you can take it to any branch of the Deutsche Bundesbank worldwide and get it exchanged for euros, at the irrevocable rate of DM 1.95583 = one euro.

It’s not like that in France, however: the Banque de France stopped exchanging 100 franc notes for euros in February of this year, and will stop exchanging all other denominations of franc notes as of February 2012. (Pity the holders of the 12.4 million 100 franc notes that are still floating around unredeemed! And someone please inform the gentleman with 40 thousand French francs in his fridge.) This means that while the Deutsche mark will always have some exchange value, the French franc will soon be no more than a pretty piece of paper. Which makes the attempts by the French people to keep the franc alive through dual pricing even more puzzling.

Consider again the receipt that started this train of thought: the euro-to-franc currency conversion it shows was printed by a machine, purpose-built and programmed to perform that function. It bespeaks a kind of institutionalization process, which involves more than just remembering and talking about the franc, but literally embedding it in calculative devices. This might be an opportune moment to review W. Richard Scott’s definition of an institution:

Institutions are social structures that have attained a high degree of resilience. [They] are composed of cultural-cognitive, normative, and regulative elements that, together with associated activities and resources, provide stability and meaning to social life. Institutions are transmitted by various types of carriers, including symbolic systems, relational systems, routines, and artifacts (2001: 48).

“Resilience”? Check. “Stability and meaning”? Check. “Symbolic systems” and “artifacts”? Check and check.

That drugstore receipt is the product of the institutionalization of a currency system, which is in turn linked to national identity and a whole set of emotional and cognitive associations around what it means to be French–as distinct from being European. Lest you think that j’exagére un peu, let’s hear it from an Actual French Person™:

According to the original schedule [Franc] notes and coins were to be withdrawn in February 2002, and dual pricing in Francs and Euros would end at the beginning of the following year. The notes and coins duly disappeared more or less on schedule. Dual pricing should have disappeared by now, but the schedule has had to be revised under the pressure of popular opinion. Business who had already switched to pricing only in Euros have had to restart labelling prices in Francs as well. Too many people simply do not like the new currency.

In everyday conversation many people around here now operate three different systems depending on the value involved. For prices up to around €100 Euros are used. For higher values Francs are used – New Franc that is, except for values of 10,000 New Francs and more which are still quoted in old Francs. It is easy to sympathise with the old lady who echoed the complaint made when Britain decimalised in the 1970s: “I don’t know why they don’t wait until all us old people are dead before introducing this new money.”

That’s right: French people keep three parallel currency systems running in their head at any given time. As if that weren’t impressive enough, they also apply those price measurements selectively, based on the value of the item in question: the price of trifles can be expressed in euros, but something truly precious can only be priced in old (pre-1960) francs! This seems closely related to that classic status distinction among the rich: those who represent “old” money enjoy more prestige than the nouveaux riches, even if their net worth is identical to the penny.

There’s something complicated happening here, involving not just money and memory, but also status and value, in the broadest sense of the term. This is where sociology and anthropology really part ways with economics. While economists can acknowledge that there is more going on with currency than its material exchange value, they’re generally not interested in finding out what that “more” is (unless they can repackage sociology and anthropology as Freakonomics–which represents a whole disciplinary status war in its own right) because they don’t (yet?) have the means to shoehorn institutions and culture into tidy mathematical models.

Procrustes' bed.
Procrustes' bed.

Fortunately, sociologists and anthropologists are under no such obligation to force the messy, multi-faceted world of human behavior into the economists’ Procrustean bed. Many of us still do quantitative analyses, but our professional norms place far more value on empirical data than on elegant mathematical models.


If you’re interested in learning more about the differences between economics and economic sociology, this classic article is a good place to start. And for a fascinating visual representation of the geographical path of euros through France via trade with neighboring countries, click here.



* For those who have not already noticed, I feel obliged to point out that this title includes a bilingual pun. Thank you. Don’t forget to tip your waitress.


This post represents something of a departure from the usual themes of this blog, since it does not deal directly with questions of economic behavior, money or markets. However, it does address “big picture” issues in scientific inquiry, which affect all realms of sociological research. Specifically, the post builds on an analogy drawn by Wolfgang Streeck in his new book, Re-Forming Capitalism: Institutional Change in the German Political Economy (Oxford 2009). His account of epistemology in social science, and its resemblance to the advance of knowledge within evolutionary theory, struck me–to my surprise–as  a particularly compelling way to frame the contribution of qualitative research to sociology. The devaluation of qualitative sociology as “unscientific” and of dubious value compared to quantitative research has always struck me as ill-considered; Streeck’s work provided a way to articulate a response that went right to the heart of the debate. 

Early in the book, Streeck raises “the possibility of the theory of biological evolution…serving as a model for social history” (p. 11). It’s an extraordinarily fruitful idea, with wide-ranging implications. The pursuit of knowledge through data sources such as archival research, content analysis and participant observation turns out to have a surprising amount in common with evolutionary theory. Yet qualitative research faces ongoing threats to its legitimacy, even within sociology. The fallacies of these legitimacy challenges will be the subject of this post, drawing on and extending Streeck’s analogy between sociology and research on evolution.

The works of Marx and Weber, like virtually all the classic literature in the field, were based on qualitative, historical methodology (Durkheim’s quantitative study Suicide being a notable exception). As Streeck puts it,

Classical social science examined how the modern way of life had evolved out of the past…and the evolution of the emerging political-economic institutions of capitalist society.
(p. 11, emphasis in original)

Even outside the realm of these classic studies, qualitative research in sociology inevitably contains an element of the historical. In order to explain how things are, what social actors think they are doing, and what it means to them, qualitative research necessarily delves into the past, uncovering path-dependencies in structures and actions. In this way, it shares the basic perspective of evolutionary theory: privileging explanation over prediction. Yet no one questions the position of evolutionary theory as part of the broader scientific endeavor. Even creationist publications that reject evolution as “Satanic” acknowledge its status as a science by attacking its purported failures to be sufficiently scientific—for example, by claiming that “evolution is just a theory” or that “The primary scientific evidence is a pitifully small array of bones.”

In contrast, sociology occupies a far more tenuous position, often treated as a pseudo-science or a “wannabe” science particularly when it comes to qualitative work. As of 2006, 95 percent of Americans agreed that biology—of which evolutionary theory is a part—was a science, but only about half that many (49 percent) thought sociology was; a full 8 percent said they’d never heard of sociology in the first place! Making matters worse, sociologists themselves disagree as to whether their discipline is a science. Qualitative sociology has been at the center of these attacks—often devalued as “mere description,” making it indistinguishable  (in the eyes of some) from non-scientific endeavors like history and journalism. These legitimacy challenges to the status of qualitative research as part of the scientific endeavor has been growing since the “quantitative revolution”—the rise of computer-assisted calculation—swept through sociology starting in the 1950s.

Why evolutionary theory isn't such a good analogy for quantitative sociology?
Why evolutionary theory and quantitative sociology aren't such a good fit?

Streeck’s observations about the surprising commonalties between sociology and evolutionary theory got me thinking about the liminal status of qualitative sociology. Given the many resemblances between it and evolutionary theory, the questions about the scientific status of the former seem even more ill-founded than usual. Of the many observations one could make in this connection, I was especially struck by two things:

  • On Prediction and Hypothesis-Testing

    Like qualitative sociology, evolutionary theory has been subject to widespread misunderstanding about its ability to make predictions. While evolutionary theory can’t predict exactly how animals and plants will evolve, it can make predictions that guide future research, as the cases of Tiktaalik roseae and the naked mole-rat illustrate. It does this by looking backward, explaining how things came to be, then using that method to construct and validate models that can be extrapolated into the future. Sometimes, this process results in highly specific predictions—like those surrounding changes in the appearance of the Peppered Moth in Great Britain during recent decades—other times in more generalized conjectures, such as warnings about the possibility of a “mass extinction event” if global biodiversity continues to decline at its present rate.These methods of advancing knowledge have close parallels in qualitative sociology. For example, the ability of qualitative sociology to generate theory inductively, through means such as grounded theory development, is fairly well-accepted. This process includes the formulation of causal models and hypotheses, which means that qualitative research can create testable (and falsifiable) predictions—an essential characteristic in the definition of science.

It's all in the wrist: the missing link between fish and land animals.
It's all in the wrist: Tiktaalik roseae as the missing link between fish and land animals.

However, the rigor of theory testing is often thought to be beyond the scope of qualitative research—an assumption that persists despite a multitude of peer-reviewed, published studies demonstrating the contrary.

  • Accounting for Historicity and Change
  • Another important commonality between evolutionary theory and qualitative sociology is their direct engagement with historical change. Evolution is first and foremost about processes of transformation in the natural world, and qualitative sociology excels at this kind of explanation in the social realm, particularly when it comes to addressing phenomena such as the effects of repeated interactions on groups and institutions. Both domains of research recognize that there is an irreducible element of stochastic change—that is, unpredictability—over time within any complex system. And while their temporal scales are certainly different—evolution deals with change over thousands of years, while sociology rarely looks at more than a century’s worth of data—they share the basic viewpoint that history matters and that one purpose of inquiry is to explain how.

    While some notable sociologists—such as Mark Granovetter, whose undergraduate degree is in history—have pointed out that sociological research can and should acknowledge the impact of “embeddedness,” regardless of the research methods employed, much of discipline has fallen into “temporal reductionism”—“treating relations and structures of relations as if they had no history.” [1] This is particularly strange, because as Streeck points out in his new book, explaining historical change was one of the core objectives of the emerging social sciences in the 19th century. Yet paradoxically, in its quest to become more “scientific” in the 20th century and beyond, the discipline modeled itself on “nineteenth-century mechanics,” resulting in the “search by much of current social science for historically universal, invariant principles governing social organization” (p. 12).Streeck does not elaborate here on the methodological consequences of this selection, but a definition of “science” as the discovery of mechanistic laws that transcend time and space would seem to exclude virtually anything but quantitative research. At the same time, this (mis)understanding of science devalues qualitative inquiry, making many sociologists “afraid of being accused of ‘atheoretical storytelling’” (p. 12). Thus sociology finds itself in the peculiar position of seeming to delegitimate its own origins.

    Among the most regrettable consequences of this is the limitations it imposes on what sociology can achieve: that is, the kinds of questions it can address, and the kinds of answers it can offer. In the latter case, as Streeck points out, we are confronted with many instances of “ahistorical theory-building” (p. 12), whose explanatory power leaves much to be desired. Perhaps even more troubling, the devaluing of qualitative research has the perverse effect (for a discipline that purportedly seeks “universals”) of reducing sociology’s ability to engage with the big-picture questions of the social world—like “how did capitalism arise where and when it did?”Because evolution can address big-picture questions without having to defend its status as a science, it has made a good deal of progress on issues like the origins of life on Earth. The downside of trying to do big-picture science is that it leads into the messy terrain of complex systems: ones that combine elements of randomness with strong patterns of historicity. Acknowledging these forces is a strength of evolutionary theory, as well as of qualitative forms of sociological research—good reasons to embrace the latter as part of the social scientific endeavor.

While Streeck’s point about the links between sociological theory and evolution was incidental to his larger aims in the new book, he contributes an important insight on the puzzling status of qualitative research in contemporary sociology. The computing revolution, along with the long-standing popular view of sociology as mere common sense—a misconception that remains surprisingly robust, despite having been tackled by Max Weber nearly a century ago—have all contributed to the problem. Sociology’s ill-fated efforts to achieve scientific legitimacy by modeling itself on the physical sciences have been noted by others; but Streeck does something entirely new, suggesting that the problem is not that sociology is unscientific, but that sociologists have been modeling their work on the wrong kind of science—and an outmoded type at that!

His simple observation suggests something rather radical: instead of trying (and failing) to be like 19th century physics, sociology would play to its own strengths and contribute more to knowledge by building on its commonalties with evolutionary theory. One way to start this paradigm shift, as I see it, is to start by recognizing the scientific value of qualitative research, based on its ability to address complex, big-picture questions, and to offer explanations that account for conflict and change—things we often miss by privileging quantitative sociology.



This year gives us occasion to celebrate two important events:


* the 200th anniversary of Darwin’s birth (12 February 1809)

* the 150th anniversary of the publication of On the Origin of Species (24 November 1859)


Happy Birthday to both!


[1] Granovetter, Mark. 1992. “Problems of Explanation in Economic Sociology.” In Nohria, Nitin and Eccles, Robert (Eds.), Networks and Organizations,Boston: Harvard University Press. p. 34.