Unformatted text preview: at they obey the same logic?
Should we have a single theory to explain both?
Should we use the same mathematical tools to analyze both? 17 Networks: Lecture 1 Introduction Importance of Networks in Economics and Sociology?
Sociology largely about group interactions, thus network structure
Notions such as social capital, power, or leadership may be best
understood by studying the network of interactions within groups. Sociology largely descriptive and nonmathematical. Can the study of
networks bring more analytic power to sociology?
For example, what is “social power” related to? What kind of
relationships and linkages does a leader need to have in a community?
Or about dynamics of groups: is the karate club depicted above likely
to splinter into two groups? 18 Networks: Lecture 1 Introduction Importance of Networks in Economics and Sociology?
Economics about “allocation of scarce resources”— broadly
construed: “trades,” cooperation vs. competition, information
exchange and aggregation, technology adoption, etc.
Much of this allocation takes place in networked situations. But much
of economics studies either one of two extremes: (1) markets, where
all interactions are anonymous (implicitly anybody can trade with
anybody else); (2) games among few players— with the identities of
the players predetermined.
Example: competitive equilibrium at the one end, and bargaining and
auctions at the other. Can we develop new insights by systematically analyzing (and
economically representing) the network of relations underlying
19 Networks: Lecture 1 Introduction Examples of “Network Eﬀects”
How do people ﬁnd jobs?
Myers and Shultz (1951) The Dynamics of a Labor Market and Rees
and Shultz (1970) Workers in an Urban Labor Market documented that
most workers ﬁnd (have found) their jobs through “a social contact”.
Granovetter (1973) “The Strength of Weak Ties”: most people ﬁnd
jobs through acquaintances not close friends.
Is this a puzzle?
Yes and no. No because people have many more acquaintances than
friends, but also because of strong triadic closure; if 1 and 2 are close
friends, and 2 and 3 are close friends, then 1 and 3 are very likely to
know each other. Therefore, you are more likely to get referrals to a
manager whom you don’t know through an acquaintance than a close
friend → importance of weak ties. Weak ties may also be very important in understanding “social
20 Networks: Lecture 1 Introduction Examples of “Network Eﬀects” (continued)
How do people start and run their businesses?
In many developing economies (but also even in societies with very
strong institutions), networks of “acquaintances and contacts” shape
Munshi (2009) “Strength in Numbers: A Network-Based Solution to
Occupational Traps”: Indian diamond industry, which makes up about
14% of total merchandise exports, is dominated by a few small
subcasts, the Marwa...
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- Fall '09
- strong triadic closure