Chapter One

1. Definitions and Concepts

1.1. Economy, Economic System and Economics

The terms economy and economics both derive from the two Ancient Greek words
oikos(“house”, oikia, “family”) and nomos (“custom, rule, law”). Together they form oikonomia
which can be translated literally as “rules of the household” or, more generally,
as1“management of a household, administration”. Aristole used oikonomiké for the discipline
of leading of a household.

Economy is a process of interaction between man and his environment, by which he obtains all
necessary things in order to satisfy his needs. It is a complex of human activities which include
producing, exchanging, distributing and consuming goods and services. These activities or the
“part” of society that deals with production, distribution, and consumption of goods and
services is called an economic system.

Economics (earlier called political economy) was defined by the early economist and
theoretician of capitalism Adam Smith (The Wealth of the Nations, 1776) as: “an inquiry into
the nature and causes of the wealth of nations”. For him the three factors of production and
the major contributors to the “nation’s wealth” were land, labour and capital.

Economics today is understood as a social science that analyzes the production, distribution and
consumption of goods and services. It examines how economic agents behave or interact and
how do economies or economic systems work.

Economics is subdivided into microeconomics (micro = small) and macroeconomics

(macro=big). Microeconomics studies the behaviour of basic elements in the economy,
including individual agents (households, firms, buyers, sellers) and markets and their
interaction, while macroeconomics analyses the entire economy and issues affecting it,
including unemployment, inflation, economic growth, and monetary and fiscal policy.

Furthermore, there are many different subfields and schools of thought in economics. Some of
them will be discussed in this course. Economics today seems to be dominated by applied
economics which try to help solving actual problems in companies or national economies. Such
approaches often simply follow the assumptions of neoclassical (capitalist) economic theory
without critically revising them.
Besides economics also other disciplines study economy. Economic anthropology studies
economy from a socio-cultural perspective, psychology of economy studies the psychological
dimension of economic decisions, and socioeconomics or economic sociology studies the
interrelation between the society and the economy. The latter is not completely to be
distinguished from economic anthropology but is more focussed on larger populations and
economies. There are also attempts to bring economics and economic anthropology nearer to
each other as we see from the ethno-economics approach.22

1.2 Economic Anthropology

A very general but useful definition of economic anthropology is the following:2

“At the most basic, economic anthropology is the description and analysis of economic
life, using an anthropological perspective” (Carrier 2005:1).2

In another text of the same author it is added that economic anthropology is about economic
life in “social settings”. In order to understand this definition we have to examine its elements
(1.2.1) economic life, (1.2.2) social settings, (1.2.3) anthropological perspective and (2.4)
description and analysis.2

1.2.1 What is meant by “Economic Life”?

Economic life encompasses activities through which people or societies:-

 produce objects
 circulate objects
 consume objects
 secure their subsistence
 provision themselves according to their needs and wishes

The objects produced, circulated or consumed can be immaterial or material objects.

Immaterial objects include labour and services but also cultural knowledge and meaning, as
expressed in myth, ideas and names etc. (Carrier 2005:3-4). Material objects being part of
economic life in principle may include all material things of culturally defined importance for a
given society, be it produced goods or natural things (including natural resources). However, as
an item in cultural system of meaning, every material object has also an immaterial dimension
which adds to its economic value.

Example

Total Value = Economic Cost + Immaterial/Cultural Value

Example 1: The Diamond

· Material Dimension: A piece of crystallized carbon. It is hard, clear, and can be found in many places
around the world. Its material value is based on mining, cutting, and polishing.

· Immaterial Dimension:

· Symbolism: Diamonds are culturally encoded to symbolize eternal love, commitment, and status.
This association was largely created by a highly successful 20th-century marketing campaign by De
Beers with the slogan "A Diamond is Forever."

· Narrative: The idea that a diamond is "rare" and the ultimate token of romance is a powerful
narrative that has little to do with its actual geological abundance.

· Economic Value Added: A one-carat diamond can cost thousands of dollars. A similarly sized piece of
clear quartz (which is also a hard, clear crystal) costs a few dollars. The massive price difference is
almost entirely the immaterial value of the cultural story.

1.2.2 In which kind of “settings” economic anthropology study the economic

life?
Economic anthropologists may study a wide range of social settings “from small and intimate
social units like households through intermediate ones, like firms, villages or local markets, to
very large entities like regional systems of ceremonial exchange or global systems of advertising
and consumption” (Carrier at [Link]). Economic anthropology may
also be used as a fruitful approach to comparative economics which compare the economies or
economic cultures in different settings.3

1.2.3 What is the “Anthropological Perspective” on Economic Life?

The anthropological perspective on economic life is a socio-anthropological perspective,

which means that the economy is investigated not as an abstract process, but as an essential
component of the social life, culture, and livelihood strategy of defined group(s) or societies.
Social anthropologists see the economy as part of the cultural whole; they take a
comprehensive approach. They do not isolate the economy from its setting or context, but
rather contextualise it and investigate how it interacts with other socio-cultural domains or
cultural features.
The anthropological perspective on economic life is rather a socio-anthropological perspective
which means not the economy itself as an abstract process is in the focus of investigation but
the economy as indispensable part of the social life, culture and livelihood strategy specifically
of defined group(s) or societies. Social anthropologists view economy as part of the cultural
whole; they have a holistic [Link] do not single out economy from its context but
rather contextualize it and examine how it is related with other socio-cultural domains or
cultural aspects.

4Carrier (2005: 1-2) explains the anthropological perspective as follows:

“The anthropological perspective approaches and locates aspects of people’s individual

and collective lives, which is to say their lives and societies, in terms of how these
aspects relate to one another in an interconnected, though not necessarily bounded or
very orderly, whole. The aspects at issue can be different elements or fields of people’s
lives, such as religious belief, consumption, household organisation, productive activities
or the like. So, for example, an anthropologist might want to study how household
organisation among a particular set of people is related to, say, religious belief, and vice
versa (in an ideal world that anthropologist would want to know how all the elements of
people’s lives and societies are related to one another). As this suggests, anthropologists
tend to want to see people’s lives in the round.”4

The following is how Carrier (2005: 1-2) describes the anthropological perspective:
"Aspects of people's individual and collective lives, or their societies, are approached
and located from an anthropological perspective in terms of how these aspects relate
to one another in an interconnected, though not necessarily bounded or very orderly,
whole."A person's religious beliefs, consumption, household organisation, creative
activities, and other areas of their life may be the subject of the discussion. An
anthropologist might, for instance, wish to investigate the relationship between, say,
religious belief and household organisation among a specific group of people, and vice
versa. In a perfect world, an anthropologist would want to understand the
relationships between all the components of people's lives and societies.
Anthropologists are inclined to observe people's lives in the round, as this implies.

Social Anthropologists examine the relationships between cultural concepts (what people think
and say) and their activities or socio-cultural practices. They want to know how concepts and
practices are connected and how they shape each other.
The anthropological perspective is empirical and naturalistic. It is based on the “observation
(empirical) of people’s lives as they live them (naturalistic)” (Carrier 2005). Social anthropology
is not so much interested in the development of an overall economic theory, or on far reaching
generalisations. It is rather concerned with particularities. Therefore, the popular assumption
that all economic activity aims at utility or profit maximisation will not find uncritical supporters
among social anthropologists. Certainly they will accept the notion that humans are “economic
animals” as they are also “political animals”. However, even the assertion of the famous
economist and theoretician of Capitalism, Adam Smith (1776, cited5after Carrier 2005), that
there is “a certain propensity in human nature […] to truck, barter, and exchange one thing for
another” would not be fully agreed upon. Of course people transact things, and the study of
such transactions is a central aspect of a great deal of anthropological work but this “work
indicates that people in different situations in the same society, not to mention in different
societies, transact in different ways and understand what they are doing in different ways”.

In the anthropological perspective the nature of “the economy” is not taken for granted or self-
evident. It does not explain economy as necessarily following quasi-natural rules and logic but
as an ever developing process resulting from and (re-)shaping cultural concepts and practices.

As it is always the case with social anthropology its perspective not only takes into account the
world view of the people investigated but makes it its central starting point. The emic
perspective (i.e. the grounded assumptions about the insider’s view) is seen as necessary for
the understanding of economic life (see also Carrier 2005: 4).

The anthropological perspective is empirical and naturalistic. Its basis is the "observation
(empirical) of people's lives as they live them (naturalistic)," according to Carrier (2005).
Social anthropology is less concerned with formulating a thorough economic theory or
drawing wide generalisations. Its primary interest is on particularities. As a result, social
anthropologists will not blindly accept the popular notion that utility or profit maximisation is
the ultimate objective of all economic activity. As "political animals," they will surely agree
with the notion that humans are "economic animals."

1.3 5How Do Economic Anthropologists Describe and Analyse Economic Life?

In the description and analysis of economic life economic anthropology roughly follows two
methodological approaches, the individualistic and the systemic (not systematic, that’s
something else!):

The individualistic methodology in the tradition of Malinowski (Argonauts of the Western

Pacific, 1922) “approaches the relationship of economic and social life through the study of the
beliefs and practices of individual members of the group being investigated”. To use an
individualistic methodology does not mean that individuals are described as independent of
their society and culture but that self-interested individuals are described in their typical ways
of economic activity and their typical relationship to society (Carrier 2005: 4-5).

The systemic methodology influenced by Durkheim (The Division of Labour in Society, 1893)
and his nephew Marcel Mauss (The Gift, 1925) understands “society as a superordinate system
or set of inter-related parts, with properties of its own”. Durkheim classified societies according
to their degree in division of labour. This degree he correlated with different other societal
attributes, especially the legal systems (Carrier 2005: 5). Systemic is any approach which
examines phenomena as systems according to the qualities of interrelatedness among their
aspects or parts.6

The individualistic approach, following Malinowski's tradition (Argonauts of the

Western Pacific, 1922), examines the connection between economic and social
life by analysing the beliefs and actions of individual members within the
studied community.

The main concept of the systemic methodology is to analyze and address

problems by viewing them as part of a larger, interconnected system. Instead of
focusing on individual components in isolation, it examines the relationships,
structures, and interactions between parts to understand their collective
behavior and achieve a common objective. This approach is particularly useful
for complex situations that are too intricate to be understood through a
reductionist perspective.

This quote describes a sociological perspective that views society as a complex

system, where its various parts are interconnected and the system as a whole
has its own emergent properties that cannot be understood by just looking at
the individual components. This idea is similar to functionalism, which sees
society as a living organism with interdependent parts that all contribute to its
overall stability and function.

1.3. A Short History of Economic Anthropology

Economic anthropology is the product of a juxtaposition of two academic disciplines in the
twentieth century. It would be wrong to speak of the relationship between economics and
anthropology as a dialogue. From the beginning, economists in the ‘neo-classical’ tradition have
rarely expressed any interest in anthropology and none at all during the last half-century, when
their discipline has become the dominant ideological and practical arm of global capitalism.
Anthropologists, on the other hand, when they have been concerned with ‘the economy’, have
usually felt obliged to address the perspective of mainstream economists, sometimes applying
their ideas and methods to exotic societies, more often being critical of the discipline’s claim to
be universally valid. Since anthropologists in this period based their intellectual authority on the
fieldwork method, discourse in economic anthropology has generally been preoccupied with
the interpretation of economic ideas in the light of ethnographic findings. But civilization is
often thought of as an economy these days; and some anthropologists, drawing on a variety of
theories and methods, have offered alternative visions of the economy’s past, present and
future.

After briefly considering the idea of economy in anthropological perspective, we divide our
account into three historical periods. The first covers from the 1870s to the 1940s, when
economics and anthropology emerged as modern academic disciplines. A bureaucratic
revolution concentrated power in strong states and corporate monopolies, yet economics
reinvented itself as the study of individual decision-making in competitive markets. Later, when
a rapidly urbanizing world was consumed by economic disaster and war, anthropologists
published ethnographies of remote peoples conceived of as being outside modern history.
Neither branch of study had much of a public role. The period since the Second World War saw
a massive expansion of the universities and the rise of economics to the public prominence it
enjoys today. An academic publishing boom allowed anthropologists to address mainly just
themselves and their students. Economic anthropology sustained a lively debate from the
1950s to the 1970s, when the welfare state consensus was at its peak and European empires
were dismantled. The sub-discipline has been less visible since the 1980s, the era of ‘neo-
liberalism’ and ‘globalization’ in world economy. A lot is still produced on exchange, money,
consumption and privatization, but, as with much else in contemporary anthropology, the
results are fragmented.

Despite our focus on historical change, there are some abiding questions at the intersection of
economics and anthropology. Is the economists’ aspiration to place human affairs on a8rational
footing an agenda worthy of anthropologists’ participation or just a bad dream?

Since economics is a product of western civilization – and of the English-speaking peoples in

particular – is any claim to universality bound to be ethnocentric? If capitalism is an economic
configuration of recent origin, could markets and money be said to be human universals?

Can markets be made more effectively democratic, with the unequal voting power of big
money somehow neutralized?

Can private and public interests be reconciled in economic organization or will the individualism
of homo economicus inevitably prevail? Should the economy be isolated as an object of study
or is it better to stress how economic relations are embedded in society and culture in general?

In The Great Transformation (1944), Polanyi brought a radical critique of modern capitalism to
bear on his moment in history. We too must start from the world we live in, if we are to apply
the vast, but inchoate intellectual resources of anthropology to a subject that is of vital concern
to everyone. Ours is a very different world from when Polanyi so confidently predicted the
demise of the market model of economy. Yet the revival of market capitalism and dismantling
of state provision since the 1980s furnishes plentiful material for Polanyi’s thesis that the
neglect of social interests must eventually generate a political backlash and a retreat from
market fundamentalism. In our Introduction, we suggested that the world may now be
emerging from the period of neo-liberal hegemony, with obvious potential consequences for
the project known as ‘economic anthropology’. The ongoing globalization of capital – its spread
to Japan, China, India, Brazil, and Russia and elsewhere after centuries of western monopoly –
is also bound to affect our understanding of economy. The absolute dominance of market logic,
at least in the form devised by neo-liberal economists, may be coming to an end. Then, not only
will Polanyi’s ideas receive more favorable attention, as they already have in some quarters, but
the urgent need to review the institutional basis of economy may stimulate anthropologists to
renewed efforts.

Economic anthropology emerged from the juxtaposition of economics and anthropology in the
twentieth century. It combines the study of human cultures with the study of economic
systems, often critically engaging with the assumptions of mainstream economics from an
anthropological perspective.

Economics: Historically focused on market-based, industrialized societies and concepts like

profit maximization.

Anthropology: Provided the ethnographic and fieldwork-based approach, studying social life,
reciprocity, and economic practices in non-Western or "primitive" societies, which differed
from Western models.

Juxtaposition: The field was born as anthropologists critically applied or questioned neoclassical
economic theories in diverse cultural contexts, leading to different schools of thought like the
"formalists" (who believed Western economic models were universally applicable) and the
"substantivists" (who argued that economic theories are culturally specific and cannot be
applied universally).

It would be wrong to speak of the relationship as a dialogue because their approaches are
fundamentally different: economics is often a deductive, quantitative discipline that uses
abstract models, while economic anthropology is an inductive, qualitative field that provides a
holistic, culturally-grounded understanding of economic behavior. Anthropology views
economic activity as embedded within a broader cultural context, including social relationships,
norms, and values, whereas economics often analyzes economies in isolation.

Summary of "A Short History of Economic Anthropology"

This text outlines the development of economic anthropology as a field born

from the often one-sided relationship between anthropology and economics.

Key Points:

· An Asymmetric Relationship: The interaction is not a dialogue. Mainstream

economists have largely ignored anthropology, while anthropologists have
consistently felt the need to engage with, critique, and test economic theories
against their ethnographic findings.

· Three Historical Periods:

1. 1870s-1940s: Economics and anthropology emerged as modern disciplines.

Economics focused on individual market decisions, while anthropology studied
remote societies, with neither having a major public role.

2. 1950s-1970s: A period of lively debate in economic anthropology, coinciding

with the peak of the welfare state and the dismantling of empires.

3. 1980s-Present (Neoliberal Era): Economic anthropology became less visible

and more fragmented, though it continued to produce work on topics like
money and consumption.

· Enduring Core Questions: The field grapples with fundamental questions, such
as:

· Is economics' rational, universal model ethnocentric?

· Are markets and money human universals?

· Can the economy be separated from society and culture?

· Can economies be made more democratic?

· Contemporary Relevance and Future: The text suggests that the dominance of
neoliberal market logic may be waning. This, along with the globalization of
capital, could lead to a renewed relevance for economic anthropology and
critical thinkers like Karl Polanyi, stimulating new anthropological efforts to
rethink the institutional basis of the economy.

1.4. What is the Difference between Economic Anthropology and Economics?

Economic anthropology and economics are clearly different from each other. Their foci (plural
of focus) and the theoretical and research questions differ strongly. Here are three of many
ways to explain the differences:10
 11“[...] economic anthropologists study economic processes; their approach is different
from that of economists. Economists usually restrict themselves to monetary
transactions and try to develop formal, abstract models of economic systems. Economic
anthropologists, on the other hand, usually are concerned with all forms of production,
circulation and consumption, monetary or not. Further, they are concerned less with
developing formal models and more with trying to describe and understand economic
actions in their social and cultural context” (Carrier at
[Link]).

11Tucker elaborates a bit further:

“Anthropology is the study of human diversity; Economics is the study of how people
make decisions about resources. Economic anthropology examines the diversity of
peoples’ preferences, choices, behaviors, habits, activities, customs, and institutions
relating to resources. College courses in economics are often limited to business
applications, which are to say, economic behavior under capitalism. Economic
anthropology is equally interested in how hunter-gatherers decide which prey to
exploit, how peasants reduce risk, why people give gifts and host feasts, and why rural
villagers cooperate to achieve communal goals. Economic anthropology addresses
classic questions within anthropology, such as whether societies have structure, and
how culture as a collective phenomenon influences the actions of individuals. It is also
concerned with classic questions within economics, such as the origins of wealth,
market value, and social inequality, and how best to ‘develop’ poor countries” (Tucker,
online document).

Mazzucato explains the difference like this:

“While economics focuses on factors of production and their allocation in the

production process, economic anthropology is concerned with the people using the
factors and making decisions on how to allocate them. Economists focus on measuring
variables and their trends, economic anthropologists are interested in identifying the
relevant variables through understanding the way people view their system of economic
organisation. Economists tend to generalize, economic anthropologists focus on the
particular [...] Economic anthropologists study indigenous economies through their
analysis of people’s economic reasoning, their notions of wealth, labor, and capital, and
how to manage, invest and preserve them through time, i.e. the processes of decision
making. Through the ethnographic approach, they formulate the cultural11logic behind
decisions, i.e. they identify the factors most relevant to decision making for the people
being studied.
All in all, Economics is the study of production, distribution, and consumption of [Link]
focuses on the production, distribution, and consumption within the industrialized
[Link] Anthropology studies economics comparatively in all societies of the world,
industrialized and [Link] anthropology economics means distribution, exchange
and consumption of good embedded in social, political and economic relationships-reciprocity,
exchange and consumerism. Economists unlike economic anthropologists uniformly use similar
models in all societies- cultural ignorance. Classical economic theory assumed that individuals
universally acted rationally, by economizing to maximize profits.

Economic Anthropology focuses on:

 How does a social group produce what it needs, wants, and desires
 How are those goods exchanged
 How are those goods consumed

1.5. The Ethno-Economics Approach

Mazzucato proposes an interesting approach in which economic can learn from economic
anthropology and its ethno-science methodology. The ethno-science methodology tries to
understand the world of the researched people in their own words and categorizations, i.e.
through their emic perspective.

Applied to economics the ethno-science methodology tries “to gain an understanding of how a
society perceives economic phenomena through its use of economic terms. This means
developing an indigenous classification system of economic terms such as benefits, costs,
insurance, interest, profits, security, and risk. The classification system and the insights gained
from the ethno-economic methodology can then be used to define the variables in an economic
analysis” (Mazzucato). When analyzing, for example, the benefits and costs (B/C analysis) of the
economic activity of a farmer one measures the benefits according to the farmers’ definition of
benefits. This may mean looking at revenues as traditionally done by economists but it may also
include things such as social status, security, risk insurance, and other culturally defined
variables. The same with costs which may not be in terms of input costs but damaged
reputation, or weakening of claim to land. Or, for example, after eliciting an economic folk
taxonomy it may become apparent that B/C analysis is not the correct tool with which to
explain the choice of a technology. It may indicate the need for another more relevant
method.12
13