Economic Sociology of Conventions

Annu. Rev. Sociol. 2003. 29:443–64 doi: 10.1146/annurev.soc.29.010202.100051 Copyright c 2003 by Annual Reviews. All rights reserved First published online as a Review in Advance on June 4, 2003

THE ECONOMIC SOCIOLOGY OF CONVENTIONS:
Habit, Custom, Practice, and Routine in Market Order
Nicole Woolsey Biggart1 and Thomas D. Beamish2
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Graduate School of Management and Department of Sociology, University of California, Davis, California 95616; email: [email protected] 2 Department of Sociology, University of California, Davis, California 95616; email: [email protected]

Key Words economic routines, network theory, mental models, cognition, decision making, institutions, intersubjectivity, coordination s Abstract Economic sociology and economics have tried to explain the organization and stability of market capitalism mostly by arguing for the effects of social structure on the patterning of relations, or for the role of the price system in balancing the demands of individual economic actors. In North America, the primary alternative to structural and individualist theories of market order has been network theory, a meso-level attempt to bridge over- and undersocialized views of actors. In Europe, the primary attempt to develop more realistic economics has centered on the role of conventions in shaping economic activity. We describe theories of market order, show how convention theory and related approaches represent a novel alternative, and suggest how convention theory can supplement network theory and institutional approaches to understanding market order.

INTRODUCTION
Economic organization and market order are central concerns of both classical and contemporary economics and economic sociology. Even scholars of different perspectives typically agree that stable economic organization is critical to capitalism. Capitalism, a system where private ownership and investment are the bases of economic action, functions best under conditions of steadiness, regularity, and predictability, conditions in which actors understand and trust the setting for investment, purchase, savings, and production. Actor uncertainty about the organization, rules, and transparency of the market, conversely, undermines confidence that transactions can take place in profitable ways. The dispersed and private nature of capitalism, as opposed to, for example, state socialist or patrimonial economies where coordination is centralized, properly leads scholars to be concerned with those factors that organize and coordinate
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the economy. Social science has sought the source of economic organization and coordination in firms, industries, networks, and populations (Baker 1981, 1984, 1990; Fligstein 1991; Hirsch 1972, 1975, 1986; Powell 1989; Powell & DiMaggio 1991; Swaminathan & Carroll 1995; Uzzi 1989, 1996, 1997; White 1981; Williamson 1985, 1994), classes and interest groups (Block 1992, 1994, 1996; Block & Manza 1997; Palmer 1983; Palmer et al. 1995a; Palmer et al. 1995b; Palmer et al. 1993a; Palmer & Biggart 2002; Palmer et al. 1987, 1993b; Wright 1978, 1985, 1987), or state and societal sectors (Evans 1989, 1992; Stark 1990, 1992; Streeck & Schmitter 1985). There is far less research on the microfoundations of capitalist organization and action from a sociological perspective (but see Abolafia 1996; Abolafia & Kilduff 1988; Hirsch 1972; Smith 1989; Zelizer 1979, 1992, 1994 [1984]). Economists have turned to laboratory experiments conducted by psychologists (see Tversky & Kahenman 1974, 1986; Tversky et al. 1990) and game theory (see Kreps 1990, Rationality and Society 1992) to develop microeconomic theory. Micro studies are concerned with factors that influence individual actors or small groups in economic decision making, for example interpretive, cultural, and psychological factors that produce regularities of action. In this review, we examine scholarship that considers the role conventions play in maintaining order in the economy. Conventions—and related concepts such as habits, customs, routines, and standard practices—are understandings, often tacit but also conscious, that organize and coordinate action in predictable ways. Conventions are agreed-upon, if flexible, guides for economic interpretation and interaction. Although used by individuals as they buy, bargain, and sell, conventions do not reside in, and are not reducible to, individuals. Theorists of conventions explain economic order as the product of socially knowledgeable actors working within collective understandings of what is possible, probable, and likely to result in fiscal and social gain and loss. Conventions are shared templates for interpreting situations and planning courses of action in mutually comprehensible ways that involve social accountability, that is, they provide a basis for judging the appropriateness of acts by self and others. Conventions thus are a means of economic coordination between actors that are inherently collective, social, and even moral in nature. The economic sociology of convention is a promising approach to a sociological understanding of both economic organization and dynamics. In this chapter, we do four things:
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First, we review alternative approaches to understanding organization, order, and coordination in the economy. Second, we discuss the concept of economic convention and related terms as used by classical economic and social theory. Third, we examine research on economic conventions, standards, routines, and related concepts. Finally, we suggest how the economic sociology of conventions creates an empirical and theoretical basis for claims made by institutional theories of the economy.

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MICRO AND MACRO THEORIES OF ECONOMIC ORDER
Traditionally, theories of economic order were either structuralist or individualist, that is, either top-down or bottom-up explanations of economic organization and stability. Structural theories, although varying widely, locate regularities in macrological forces and institutions that encourage, even demand, particular forms of action, whereas individualistic theories locate order in the orientations of actors, either in isolation or as they negotiate arrangements with others, and they are typically assumed to be autonomous rational actors.

MACRO INSTITUTIONAL THEORIES OF ECONOMIC ORDER
Political economy theories, including world systems (Wallerstein 1974, 1980, 1984, 1989; Wright 1978, 1985, 1987), dependency (Cardoso & Faletto 1979, Frank 1969), and modernization (Rostow 1969, Rostow & Kennedy 1990) situate economic order in the stratified relations between actors in a capitalist system. Actors, whether individuals or states, conduct themselves consistent with their location in an economic structure as, for example, a core state able to impose the conditions of trade, or a peripheral state dependent on relations with a dominant nation such as a former colonizer. Class theorists, including Wright (1978, 1985, 1987), Palmer (1983; Palmer et al. 1987; Palmer et al. 1993a,b; Palmer et al. 1995a,b; Palmer & Biggart 2002), and Buroway (1979, 1985; Buroway & Krotov 1992) use a similar logic, locating intra-economy coordination and order in the unequal power of some classes of actors to impose arrangements over all. Actors behave predictably, in ways that express their interests given their place in the economic order. The sociological institutional approach is also structural but includes a conceptualization of the social construction of ideas that orient actors and create the bases for order. For Weber (1968 [1922]), economic organization is built on structures of material interests and ideas that legitimate arrangements. Institutional sociologists have stressed macro-institutional sources and arrangements of market capitalism— particularly at the level of states and occasionally industries—investigating the historical sources of economic markets (Collins 1980, Hamilton 1994, Wallerstein 1984), the role of the state in creating and sustaining markets (Campbell & Lindberg 1990, Dobbin 1994), and markets as the outcome of politico-cultural processes (Fligstein 1996, Swaminathan & Carroll 1995). Institutional sociologists conceptualize economic market environments as “fields” within which economic actors (typically firms) are constrained by regulative and normative pressures (Baker 1984; Fligstein 2001; Scott 1995; Galaskiewicz 1985; Powell & DiMaggio 1991, pp. 64–65). They have collectively sought to demonstrate the social bases of markets in part as a refutation of asocial market conceptualizations that dominate economic theory and policy (Abolafia & Biggart 1991). More recent efforts by institutional scholars attempt to connect macrostructural models and meso- and micro-level market processes. Researchers have

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documented the importance of conventions in the composition and legitimacy of economic institutions including the importance of family structure (Hamilton & Biggart 1988); culture, norms, and professional organizations (Guill` en 1994); and the underlying arrangement of social groups in society (Biggart & Guill` en 1999). Fligstein (2001) advances a macro-institutional perspective on market formation, structure, and strategy but with an explicitly cultural-political conceptualization of firm behavior. The orderly configuration of markets reflects the interpretive frameworks market actors tactically employ to survive and prosper in competitive economic environments. Fligstein (2001) labels these interpretations conceptions of control. An ascending conception of control increasingly is perceived as the standard for conduct. In this, Fligstein supplies a theoretical account that relates the derivation and rise of institutional practices, i.e., convention, in industrial markets. Economic historians, too, have viewed the development of institutional arrangements—such as property rights regimes, the laws of the state, and the administrative routines of government—as creating constraints that channel firm behavior in predictable ways (North 1981). Greif (1989) demonstrated how the family structure of the Mughabi traders created durable patterns for private economic arrangements. Although there are parallels between institutional economics and institutional sociology, sociologists maintain that it is not simply the structure of the economy, but the substance of the structure of relations that shapes economic activity and practice in predictable ways. Institutional sociologists find market order emerging not only from perturbations in preconditions, but also as the result of social and political processes—especially ideational ones. However, although sociological studies have provided an aggregate picture of the social basis of markets, they have left the actual conventions they posit largely unexplored.

Micro Theories of Economic Order
Micrological theories of the economy typically locate order in the aggregate acts of many individuals. Economic theory locates order in the price system, an impersonal competitive process wherein the highest bidder succeeds and the market clears. Disequilibrium, or the disorder caused by too few or too many goods, causes rational market actors to adjust the amount of goods for sale, their prices, or quality as a proxy for price, returning a disorderly market to orderly equilibrium. Under capitalism it is the price system—and its metaphorical expression as an invisible hand—that coordinates the autonomous acts of people pursuing interests without regard to each other (Eatwell et al. 1987). Microeconomic theories have elaborated this model in different ways. For example, transaction cost economics argues that actors seek the least costly way of pursuing their interests, for example in the market or through firm organization, depending on the nature of the economic setting (Teece 1986; Williamson 1985, 1994). Individual actors pursuing efficient organization is what effectively creates order in the economy (see Biggart & Castanias 2001).

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According to rational choice theorists, all social action is rationally motivated, instrumental, and calculated. Further, the selection of choice alternatives is based on problem attributes, environmental constraints, and decision-maker preferences embedded in a criterion of self-gain (see Blau 1964; Coleman 1973, 1990; Cook & Levi 1992; Granovetter 1985; Hechter & Kanazawa 1997; Homans 1961). This theoretical viewpoint underlies the assumptions of many sociologists who operationalize these suppositions—sometimes explicitly, but often implicitly—to explain the behavior of both individuals and corporate forms (but see Coleman & Fararo 1992, Gambetta 1993, Haveman 1995, Haveman & Cohen 1994, Schlegel & Weisburd 1992). Rational choice theory as employed by sociologists and other social scientists, although increasingly colonized by economists (Scott 2000), does differ from microeconomic conceptions in that rational choice accounts tend to presume that actors are instrumentally rational within the structure of an economic system, not in the abstractly rational way presumed by neoclassical economics. Structure creates a context within which economically rational action occurs. These theorists also tend to assume that economic structures are path dependent, that is, influenced by small changes in technology and market factors (see Nelson & Winter 1982). Yet, similar to microeconomic arguments, rational choice theory assumes economic actors to be egoistic and hyperrational. Although rational choice theorists have attempted to mitigate assumptions of hyperrationality and egoistic intention, among others, by adding variables to their models, the theory is ultimately built on the edifice of these suppositions (see Peterson 1994). Theories that assume actors are egoistically driven and comprehensively rational are challenged by recent developments in cognitive science, developments just beginning to find their way into economic reasoning (Kahenman & Tversky 2000). In contrast to utility-maximization (see Becker 1996), research demonstrates that rationality is both limited by the cognitive capacities of human beings as well as bounded by the context within which market actors are embedded. Psychologists reject both the reductionist models of economics and behaviorism as explanations of human action in favor of more complex understandings of why people act and how they make choices. Cognition is the process by which actors come to know and judge phenomena. Rather than apprehending the world indiscriminately, cognitive psychologists have demonstrated that the mind selectively filters and categorizes information through the use of mental models of various types (Fischhoff 1990, Kahenman & Tversky 2000, Slovic et al. 1979, Tversky & Kahenman 1974). Mental models shape what people perceive, how they process perceptions, and how they store and retrieve information. Actors use mental models to organize what they experience into expected relationships and to frame their understandings, and even responses, “appropriately” (see DiMaggio 1997 for a sociological review of cognitive science, and Zerubavel 1997). In complex situations actors seek familiar patterns, expected relations, and use schemata, or working hypotheses from which to construct a strategy of action. These schemata are constructed from experience and a situational understanding of what others

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are likely to do, what has worked in the past, and the general direction change is likely to take. Schemata are not static but rather ongoing and subject to change with social interaction, feedback, and synthesis. In light of these developments, economists and rational choice theorists (see Peterson 1994) have begun to use the insights of cognitive science to develop richer models of economic rationality and choice. For example, Arthur argues that in ill-defined or subjectively complex situations, deductive logic of the sort assumed by traditional economics has limited use (Arthur 1994, p. 406). Rather than abstractly weighing alternatives, actors make judgments and choices based on situational expectations and use inductive logic. Hypotheses are revised in response to feedback from others and from new observations. Arthur assumes that agents differ and may simultaneously hold multiple models. Schemata enhance efficiency because they give actors realistic bases from which to make choices, bases constantly tested and revised in response to feedback. Cognitive science’s concern with mental models, schemata, and pattern-based perception has developed out of research on individual psychology, but sociological research affirms and supplements these ideas in ways that hold promise for understanding economic action. Using fieldwork and observational methods, sociologists concerned with subjectivity have variously argued that social worlds are organized social constructions—a mentalit´ e, habitus, or logic—and that actors impose frames of meaning on experience. These sense-making practices make meaningful interaction possible. Research in this tradition gives credence to the idea that economic action is facilitated by shared understandings and mutually accepted definitions of situations. At the level of interpersonal interaction, “scripts” make exchange routinized and unproblematic (Garfinkel 1967), and at the level of industries and economies, “institutionalized” understandings and arrangements facilitate economic action by providing agreed-upon, often tacit, ways of conducting business (Fligstein 1990). Although not necessarily the product of conscious calculus and deductive logic, everyday economic action can be understood as inductively rational and straining toward efficiency, the result of practical reason (Bourdieu 1990) and the application of situational logics. The content and structure of models vary culturally across societies and over time in a single society (Douglas 1966, Schweder 1991, Zerubavel 1997). Actors are socially situated, and mental models or institutionalized logics are only understandable in terms of the social structure in which action takes place. This observation supports recent insights of institutional economics (North 1990) and sociological institutional theory (Meyer & Whittier 1994). Over time, established social arrangements can provide incentives to act in predictable ways thus upholding “credible commitments” (see Becker 1960; Biggart & Hamilton 1984 for sociological perspectives on commitment and action; and Williamson 1985, p. 48 for an economic version of this observation). Actors who ignore established arrangements and conventions risk being unintelligible to others or judged immoral or irrational.

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Akerlof (1980) has used this insight to model customary economic activity. His model explains why “social customs that are costly for the individual to follow persist nevertheless”(Akerlof 1980, p. 749). He departs from the Arrow-Debreu economy that assumes unbridled greed, in assuming that people care about their reputations and about maximizing their consumption. Actors in his model follow a code of honor upheld by reputable members of a community. Indeed, it is possible that only by acting reputably an actor can maximize economic utility. Further, “many different customs, once established, could be followed in equilibrium. Indeed, such multiplicity is the essence of social custom: it is inherent in the adage, ‘When in Rome, do as the Romans do’” (Akerlof 1980, p. 751). This is a logical model and does not theorize or explain any particular economic setting. Sociologists and cognitive psychologists have critiqued microeconomic models of economic behavior as unrealistic accounts of economic decision making and contexts. To cognitive psychologists, microeconomic models overestimate human cognitive capacities and ignore the mental shortcuts people use to make complex decisions. To sociologists, markets are more than spheres of economic exchange that are characterized by scarcity and competition. Finally, at the micrological level, both sociologists and anthropologists have critiqued the neoclassical perspective through historical analysis of markets (Carruthers 1996, Polyani 1957 [1944], Roy 1997) by conducting ethnographies that outline and describe actual economic behavior (Abolafia 1996, Smith 1989, Wilk 1996, Zelizer 1994 [1984]) and by documenting the multiplicity of markets and market conceptions (Biggart & Guill` en 1999, Geertz 1978, Westney 1987). In short, sociologists have been critical of market models that do not account for the social rules and regulations, i.e., conventions that govern social interaction in economic settings.

THE SEARCH FOR MIDDLE-RANGE THEORY
Reductionism is typically the bridge that, whether implicitly or explicitly, unites individuals and aggregates via structural determination or its antithesis, methodological individualism. Yet there are attempts to create middle-range economic theories in sociology that do not postulate self-equilibrating market systems, comprehensively rational individuals, or social dopes who mechanically follow social structural cues. In North America, network analysis has been the primary vehicle for developing meso-level understandings of economic contexts. Both macro and micro orientations are combined in the embeddedness approach, an insight traced to Polanyi’s study of the rise of market capitalism in the West (1957 [1944]). Polanyi argued against those who saw the market becoming an autonomous sphere under modern capitalism, with people becoming more calculating and individuated, a position formalized in economic theory as autonomous rational actors. Granovetter (1985) used the embeddedness concept to extend White’s (1981) claim that stable markets were only possible if exchange partners took one another into account. Like Polanyi, Granovetter argued for the role of concrete personal relations and structures in creating stable economies.

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Network ties establish and ensure durable market relations as opposed to the typically assumed spot market—a market that involves one-time buyers and sellers whose only tie is a single exchange—assumed by economic models. Granovetter (1985, 1992) and others (e.g., Baker 1990; Burt 1992; Gulati & Gargiulo 1999; Romo & Schwartz 1995; Uzzi 1989, 1996, 1997) have increased our understanding of market action as influenced by their embeddedness in networked roles and relations. Yet the embeddedness approach—as currently configured— continues to be a partial explanation. In pursuing a role- and relation-based understanding of market arrangements, embeddedness scholarship treats markets as structurally determined and implicitly outside the realm of meaning, interpretation, and individual agency (Krippner 2001, Zuckerman 1999). Markets conceptually remain reified empirical objects, external to the social actors who constitute them, rather than being conceived of as reified abstractions that represent intersubjective states of mind and meaning, reproduced through ongoing social participation and social investment. In order for participants to come together and meaningfully interact, they must share at least a sense of purpose, if not a syntax of intersubjective essentials—in a word, market ties must be meaningful (Emirbayer & Goodwin 1994). Organizational analysts (Barley & Tolbert 1997, March & Simon 1993, Nelson & Winter 1982, Silverman 1970, Simon 1945, Zucker 1987) and before them “interpretivists” (Collins 1980; Garfinkel 1967; Goffman 1963, 1967; and social psychologists such as Weick 1979, 1995) have for some time recognized that intersubjectivity is critical in maintaining social order and stability in both formal and informal settings. Intersubjectivity also contributes to market order because it produces agency within constraints: Actors faced with complex settings, numerous others, and financial uncertainty construct strategies of gain and make decisions by pulling from a repertoire of alternatives that reflect social structural constraints but are also modified via new combinations and subtle innovation. In so doing, economic actors simultaneously reproduce and transform marketplace relations in a relatively routine, predictable, and socially accountable manner (Molotch 1990). There are a handful of empirical studies by sociologists that suggest how economic action is conducted in market and market-like settings with special attention paid to routine conduct (e.g., Bourdieu 1984, 2002a,b; Saxenian 1994; Zelizer 1994 [1984]). For example, Abolafia’s (1996) comparative analysis of three Wall Street exchanges argues that the structure of the local exchange supports a particular type of culture with attendant conventional practices, which in turn leads to a distinct orientation toward economic action. Smith (1989) similarly suggests how both manifest and latent rules over conduct differentiate two distinct types of auction markets within which price-setting behavior occurs. Biggart (1989) discusses how meaning structures support stable relations among formally independent, directselling salespeople. These examples account for economic patterning through action, not by reconstructing the network in which action takes place or by assuming the impact of macro forces. Similarly, convention theory—a range of approaches that spring

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from common assumptions—represents a subjectivist way of understanding economic order. Convention theory, like network theory, is a middle-range perspective but begins from micro foundations, not structural ones. Just as network theory is an attempt at realistic economic theorizing in North America, convention theory represents European, particularly French, attempts to develop a realistic economics. Perhaps ironically, convention theory traces its roots to American pragmatism, as well as to Durkheimian sociology.

CONVENTIONS, HABITS, CUSTOMS, AND ROUTINES IN CLASSICAL THEORY
The role of social customs and conventions in the economy has had a small but enduring place in economic scholarship. Mill in Principles of Political Economy (1965 [1871], pp. 242–48) argued early on for the importance of custom, not only competition, in directing economic action and outcomes. However, he spent little time exploring the role of custom in setting prices because he determined that custom, as in customary wages and prices, varies by society and group, and therefore is not amenable to universalistic propositions or to methods that assume economic universality. Mill acknowledged the importance of custom in the economy but neglected it in the pursuit of a general model based on competition and also because he and other early theorists believed that customary economic relations were vestiges of traditional economy. Custom, in their view, had to be purged for modern rational capitalism. Weber (1968 [1922], p. 29) agreed with Mill in assuming that traditional orientations interfered with rational capitalist action, but he distinguished between traditional behaviors by the character and degree of social approbation they incited. To Weber, usage refers to all types of action that occur repeatedly, for whatever reason. A usage becomes a custom when it is a practice of long standing. Customs are practices that do not carry social sanction; they are typically a matter of personal preference or habit. Weber also extensively used habit to explicate the effects that custom and convention had in enforcing conformity and impeding social innovation. Contained in his use of the term Eingesteltheit, or habitual disposition, Weber meant by this the “unreflective, set disposition to engage in actions that have been long practiced” (Weber as quoted in Camic 1986, p. 1057). Weber (1968 [1922], pp. 55, 67–68, 78, 89, 320) commented throughout Economy and Society that the basis of economic activity (i.e., exchange, consumption, saving) was conditioned by custom. Custom, convention, and habit may be transformed through enactment, conferring “on them the dignity of oughtness” (Weber 1968 [1922], p. 326). When customary behaviors become expected behaviors, Weber refers to them as “conventions” that may become “laws” or enforced behaviors required on pain of physical or psychological coercion (Weber 1968 [1922], p. 34). Weber and Marshall both described custom as interfering with economic development, but it was Schumpeter in The Theory of Economic Development who

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dissected the reasons that custom acted as an impediment. Economic activity is carried out in repeating cycles and, over time, economic routines become lost to conscious reflection. “This is so because all knowledge and habit once acquired becomes as firmly rooted in ourselves as a railway embankment in the earth” (Schumpeter 1934 [1926], p. 84 as quoted by Swedberg 1993, p. 207). In order to break with custom one needs new knowledge, a psychological ability to get outside of customary ways of thinking, and the ability to withstand the sanctions imposed by upholders of convention. According to Schumpeter (1934 [1926]), it is the entrepreneur who is able to step outside of economic custom in order to establish new economic practices. As with these previous scholars, Durkheim, in his early writing, also used rote learned custom or its synonym, habitus, extensively (Camic 1986). Although not at the forefront of his later work, Durkheim believed custom underlay social conformity on which collective life was based. Whether in his discussions concerning the “force” or “yoke of habit” in elementary “mechanical” societies, or later through his study of the division of labor in modern “organic society,” Durkheim relied on the concept of habitus to capture the deepest layer of human social conditioning that appeared as “reflex” or “instinct.” Durkheim was quite explicit in his references to modern market-based societies as relying on “‘more and more intensive and assiduous work, and [such work becomes] habitual—and habitual in a particular way, since, ‘civilization . . . imposes upon man monotonous and continuous labor, [which] implies an absolute regularity of habits” (Durkheim as quoted in Camic 1986, p. 1051). It is only when convention is disrupted that conscious reflection occurs and the range of possible alternatives and solutions are entertained. Pragmatists such as Pierce, James, Dewey, and Mead (Abolafia 2001; Boydston 1967–1991; Chiasson 2001; James 1953, 1981) all built on the seemingly contradictory notion that limited cognition is the basis of social interaction. The boundaries intersubjectivity places on human consciousness, and the capacity to manipulate symbols innovatively and interact, are two sides of the same coin. While constraining to pure and continuous innovation, conventional practices (i.e., taken-for-granted assumptions and modes of conduct) supply the foundations for stability, precisely because they limit the debilitating effects of interactional uncertainty, a prerequisite of symbolic interaction.

CONTEMPORARY WORK ON ECONOMIC CONVENTIONS
Modern sociological scholarship on conventions and like concepts—including genre, practice, repertoire, and routine—most often employs the assumptions and perspectives of Durkheim and the American pragmatists. Contemporary research tends to stress the ways in which actors classify phenomena in order to make them manageable, and once classified, to select an appropriate program of action. For example, Becker, in “The Power of Inertia,” observes “one of the remarkable things about the world of classical music is how stable it is through time” (Becker 1995,

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p. 301). He explains this consistency by describing music making as bound up in hegemonic conventions. It is in the minutia of music making (i.e., the traditional shape of an instrument, the notes it can emit, how one learns to play, the phraseology employed by musicians) through which social inertia manifests, carrying convention into the next moment and, in so doing, circumscribing performance in the future. Put another way, social relations, in their totality, represent a bundle inscribed in material technologies, professional standards, and habituated routines. Thus conceived, the potential for coordinated human interaction pivots on both the stability and predictability of the systems within which humans reside, but the price to be paid is resistance to change. In Becker’s case, conventions are represented in both deliberate practices and automatic routines. Becker’s development of both as co-constitutive in the fomentation of social inertia is a relatively rare account of conventions and conventional practices. More typically, a cleavage in attention to either one or the other characterizes most of the research to date. The remainder of this section is organized according to the distinction between research that looks at tacitly held habitualized conventions and research that look at consciously applied standards as conventions.

Standard Conventions
If standardized scales, musical instruments, and professional canon enhance the stability and coordination in music making, then we should expect something similar in other social contexts such as markets and economies. Economic actors also agree, consciously, to standards of practice, quality, safety, and so forth in economic endeavor. These agreed-upon, explicit conventions are typically called industry standards and can emerge as part of the competitive process (e.g., the Apple versus PC computer standard) or can be imposed by government or industry groups (e.g., National Bureau of Standards, Fair Accounting Standards Board). Standards eliminate some bases for competition, allow others, and stabilize markets around established ideas, technologies, activities, or moral practices. The literature on economic standards is extensive in economics and business strategy (Brunsson & Jacobsson 2000), but there is relatively little work, to date, by sociologists on economic standards. Durkheim’s (1964 [1895]) conception of the social fact as external to and coercive of individuals does cover “standards of taste.” Mulligan & Lederman’s article, “Social Facts and Rules of Practice” (1977), takes Durkheim one step further and uses Rawls’s conception of “rules of practice” to distinguish between social facts as regulative rules and rules of practice. Allport’s (1939) J-curve hypothesis and study of conformity represent another perspective from which the problem of standards (and when they are obeyed) is addressed. Leblebici et al. (1991) construct an organizational history of the radio broadcasting industry and examine standards in that industrial market and the role they play in organizing the industry (p. 333). Bensen & Farrell (1994) research compatibility standards among firms (p. 129). Based on which strategy they judge to be the most profitable, firms either seek to establish their technology as the industry standard or shape their technology to fit an existing standard.

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Schoechle (1995), using Habermas’s notion of the “public sphere,” addresses the role that standard-setting organizations have in shaping public policy. Gandal (2002) addresses implications of compatibility and standardization in high technology, internet, and information industries. He concludes that “given the dramatic growth of the Internet and information-technology industries in general, and the importance of interconnection in these networks, the economies of compatibility and standardization have become mainstream economics” (Gandal 2002, p. 89). While the question of the policy implications of standards has been addressed in academic and industry literature, policy makers have also taken up this issue. In the Technology Preeminence Act of 1991, Congress formally requested a report that would examine the use of technical standards and product certification, and the extent to which promoting international standards would facilitate or impede international trade (National Research Council 1995). Scholars who study technological change and innovation have also demonstrated the economic importance of firm and industry standards, conventions, and their promulgation through “communities of practice” (see Anderson & Tushman 1990, Hargadon & Douglas 2001, Henderson & Clark 1990, Rogers 1995, Saxenian 1994). Industries and firms have often been noted for their resistance to giving up their existing conceptualizations of their products, services, and standard operating procedures in the face of changing material considerations. Resistance to innovation and social change resides in continued reliance on not only outmoded products (Tushman & Anderson 1996) but also practices (Henderson & Clark 1990) and culture (Saxenian 1994). “Competency traps” based on past capabilities are dangerous to firm survival because they, as bundles of outmoded worldviews and practices, block development of new product and action conceptions and means for organizing economic action. It is precisely because shared views and conventions permit fluid replication and repetition at higher degrees of fidelity than do unroutinized practices and processes that they are socially and sometimes economically efficient (Hannan & Freeman 1984; Nelson & Winter 1982; Stinchcombe 1959, 1990), but it is in their routinization that they can also become “pathological” obstacles to adaptation (Beamish 2002).

Habitual Conventions
Although consciously applied economic standards of practice have received a good deal of attention outside of sociology, there is much less research inside and outside of sociology on economic conventions as “habituated normativity,” where largely tacit routinized views direct actor preferences, decision making, and hence behavior repertoires concerning “what ought to be” (but see DiMaggio 1997, Berger & Luckman 1967, Bourdieu 1990, Garfinkel 1967). However, other overlapping subspecialities within sociology lend guidance to economic sociology in mapping the direction research in this area could take. Similar to Becker’s analysis of classical music, science and technology studies have observed how collectively recognized categories and their overlap with artifacts and technologies enable and sustain social stability once these relations

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are institutionalized (Bijker & Law 1997, Hughes 1983, Hughes et al. 1987, Latour & Woolgar 1986). These scholars describe sets of ideas, packages, or what Latour (1987, Latour & Woolgar 1986) describes as “lash-ups.” In Latour’s language, an accepted object such as a scientific fact or technology requires a complex assemblage of active allies and hardware but also routinized procedures that, once woven together, sustain it through time. Each aspect of the package presupposes the existence of all the other elements with which it is imbricated and exerts a stabilizing inertial force. Likewise, neo-institutional theorists Meyer & Scott (1992) have engaged in organizational sociology’s most programmatic attention to the place of conventional practice, as reflected in culture, social structure, and routine practices, as the carriers of both structure and agency. They hold that convention(s) (and its variants) inform and constrain behavior in a manner that lays the basis for institutional reproduction (see also Scott 1995). Cyert & March (1963) and institutional economists Nelson & Winter (1982) have similarly investigated the place organizational codes of conduct, protocols, and conventions play in organizational systems. Still other scholars of institutional aspects of conventionalized conduct also see them as reflecting internalized and naturalized cultural rules (Douglas 1986) or habitus (Bourdieu 2002a), or as conventionalized behaviors that reflect the tacit or assumed cognitive boundaries of knowledge for any given actor or actors (March & Simon 1993). What is more, research reveals that actors borrow the action repertoires (Swidler 1986), communicative genre repertoires (Orlikowski & Yates 1994), and rules of appropriateness (Vaughan 1996, Beamish 2000) from others to fit a priori socially approved scripts, which Barley & Tolbert (1997) describe as behavioral regularities in organizational and work settings, rather than mental models (see also Aldrich 1999, Bechky 1999). These approaches all assume the social and psychological need of actors to reduce uncertainty when faced with equivocal situations. On this, Weick (1979) argues that complex organization itself is an attempt to reduce the equivocality characteristic of loosely coupled informal social systems. Organization “serves to narrow the range of possibilities, to reduce the number of ‘might occurs’” (Weick 1979, p. 40) by establishing frames, definitions of the situation, and a sense of coherence to phenomena open to multiple interpretations. Conventionalized ways of defining activity, both of “automatic habituated” and “deliberately applied” sorts, create order for actors and allow them a basis from which to coordinate their activities.

THE ECONOMICS OF CONVENTION
The French Conventions School, also called the Economics of Convention approach, was started by heterodox French economists studying uncertainty and risk (Boltanski & Chiapello 1999, Favereau 2002, Th´ evenot 1998), but it is now increasingly populated by sociologists and other social scientists in Europe and elsewhere (Beckert 2002, Gomez & Jones 2000, Wilkinson 1997). Risk is a situation in which outcomes can be calculated (i.e., the odds of some occurrence), but

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uncertainty is a situation in which actors cannot assign a probability to the consequences of their acts. Conventions School scholars see this as a critical problem for a traditional economics that assumes rational actors: What is rational under conditions of uncertainty, in situations where preferences cannot be ranked or where the interpretation of facts is debatable? For the Conventions School, the process of justification (rationalization) is critical to actors assuaging their concerns about an unknowable future. Actors work to appear rational, reasonable, and accountable, a process well recognized by symbolic interactionists. For convention theorists, however, justifications can become conventionalized, taken-for-granted beliefs about why certain acts and practices are normal and right. Justifications allow people to move forward without actively calculating and defending each action, feeling psychologically affirmed. Conventions scholars use realist and pragmatist empirical methods (in contrast to the instrumentalist abstractions of standard economics) to examine how actors actually calculate decisions. Further, they are interested in how economic actors coordinate with each other, given ambiguity and complexity. Whereas other economists see markets and hierarchies as coordination devices, Conventions theorists find economic coordination to be a concern of rational individuals who achieve it via obedience to rules, norms, and intersubjectively mediated action of various forms. The critical project is to define “the situation in its temporality, the individual’s uncertainty about the identification of the situation and the interpretive effort that is required to determine, together with others, the situation as a shared and common one” (Wagner 1994, p. 174). For example, the Conventions School has found an important source of coordination in actors’ agreement on categories, what they call equivalence. Equivalence is communal agreement on the quality or character of a product, industry, wage structure, or any other economically meaningful phenomenon. Equivalence is critical to price competition and for market adjustment around prices. Alternatives must be evaluated as commensurable, a process that is culturally variable (Lamont & Th´ evenot 2000). Commensuration is a social process worked out collectively (e.g., wage structures as a means of creating equivalence among different skills) and is a process of establishing moral bounds and categories (Espeland & Stevens 1998). Wage differences are not the product of market forces: Market forces work around categories that have been socially established. Conventions research has used debates about the status of commodities in the formation of the European Union, for example, as a source of data on the processes of constructing equivalence. Is a cheese that is made of skim milk really a cheese subject to the same regulations and tariffs of French full-fat brie (Th´ evenot 1998)? Innovations such as low-fat cheese disrupt received commonsense identities and put in motion debates about the proper qualification (i.e., determining essential qualities or character) of a market. This is a communal cognitive process and a legitimation procedure. Qualified markets, e.g., French full-fat cheese, elite university education, and human labor, are socially affirmed, whereas others like low-fat cheese, on-line education, and human body parts are contested or in the process of transformation.

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Convention theorists reject dualisms of subject-object and structure-action. For example, convention theorists reject the rational actor model underpinning neoclassical economics, a model that assumes a clear separation between the actor and the goal of economic action. In the rational actor model, an economic actor identifies a goal and rationally optimizes a strategy for achieving it. According to Beckert (2002), however, in much economic activity neither are the goals clear nor the possibilities for achieving them. In fact, much economic activity concerns complex and novel situations where possibilities and strategies of action are uncertain. Rather, in such situations actors construct courses of action that are intersubjectively defensible and sustainable as economically rational acts. This is an emergent process, a performance of rationality that is constructed in interaction with others and is rational in the sense that it appears rational to self and others within a social setting but not necessarily in some objective external sense. Rational acts become routinized approaches to economic situations. This concern with rationality as an emergent, interpretive, and performance process is rooted in the perspective of American pragmatism, particularly in the work of Dewey and his concern with habit but also in Schutz’s work on routines, Polanyi’s discussion of “tacit knowledge,” and other scholars concerned with intersubjective and noncalculating responses to situations. It is clearly opposed to the objective and calculating individual assumed by rational actor theories. According to the economics of convention, separating the actor, the action, and the goal is neither empirically nor ontologically justifiable. Convention theorists are also concerned with material goods in the system of market relations in which they are embedded, similar to science and technology studies. A product represents not only the outcome of a material production process but is at the center of a market world—of contractors, distributors, consumers, regulators—that develops over time in a path-dependent way. Market worlds include taken-for-granted assumptions, practices, and conventions that maintain stable relations. Convention theorists argue that regions become dominant in certain product categories, for example, Silicon Valley in high-technology goods, not because of economic factor endowments but because action frameworks “centered on conventions among economic actors . . . enable them to coordinate, in coherent fashion, ensembles of economic practices leading to successful products” (Storper & Salais 1997, p. 4) and are difficult for others to emulate. Conventions of coordination are historically developed and local, and explain why the same industry is organized differently in different places. Differences are the result of actors’ pragmatic attempts to coordinate with others over time; multiple means of coordination are possible.

ECONOMIC CONVENTIONS AS INSTITUTIONAL THEORY WRIT SMALL
Sociological institutional theory assumes the social construction of economic arrangements as firms adopt forms and practices in attempts to deal with uncertainty. Elites, the state, and powerful others may be the source and maintenance of

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institutionalized beliefs and practices such as conceptions of control and governance regimes. Institutional theory assumes meaningful action between economic agents, but commitment to macrohistorical and quantitative data analyses cannot demonstrate the emergence or dynamics of institutional process and formation. Conventions theorists see institutions as bundles of conventions that have emerged as pragmatic solutions to economic problems and have become reified as normal. Institutional arrangements may serve elite interests, but conventions theorists also leave open the possibility that arrangements are merely congealed successful solutions to economic problems, i.e., the French way of organizing. Institutional theorists have sought to develop more realistic economic understandings by accounting for the network of relations in which economic action occurs. This middle-range approach gets closer to the actor by examining actor networks but cannot examine the source, meaning, or substance of ties in economic relations. Examining the construction and use of conventions can complement institutional and network theories by supplementing undersocialized conceptions of markets, emphasizing markets as evolving reified abstractions that orient actors in their efforts to coordinate successfully, and stressing the necessarily intersubjective nature of markets. ACKNOWLEDGMENTS Earlier writing on this topic by Nicole Biggart appeared as an editorial on the Economic Sociology list serve. The authors thank Penney Alldredge for research assistance in the preparation of this review and an anonymous reviewer for thoughtful critique.
The Annual Review of Sociology is online at http://soc.annualreviews.org

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