This document discusses how social networks shape economic lives. It argues that (1) production and distribution are social acts, (2) social systems are constituted by social networks, and (3) there are interrelations everywhere from inter-industry flows to consumer choice to corporate governance networks. The document then provides examples of different economic networks, such as networks of inter-industry flows, consumer choice networks, and financial networks. It suggests that mainstream economic theory cannot explain the degree of interconnectedness revealed by analyzing these networks and that policy is not addressing the fact that there appear to be centralized private sector planners.

1. How Social Networks Shape Our Economic
Lives
Mitch Green
IPh.D. Student
Economics & Social Sciences
Consortium
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2. Why Networks?
• The socially embedded economy
• Production & Distribution are social acts
• Social systems are constituted by social
networks 2

3. Networks Illustrate
Connectedness
• There are interrelations everywhere!
– Circular production – i.e. inter-industry flows
– Social Accounting Matrices
– Consumer choice – our behavior influences
others within our social networks, vice versa.
– Corporate governance networks
– Financial system
3

4. A Brief Tour Through Economic
Networks
4

5. Networks of Inter-industry Flows
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6. Consumer Choice
6

7. Financial System
Hypothetical financial
system consisting of 1,000
“balance sheets”
Red notes indicate balance
sheets most susceptible to
liquidity crisis, in the event a
“too big to fail” institution
faces insolvency.
Just one
TBTF
insolvency
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8. Corporate Governance
Networks
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9. Corporate Governance
Networks
Red indicates
directors from finance
& insurance sectors
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10. Method
• Always iterative
– i.e. networks evolve
• Always grounded
– The Method of Grounded Theory (Glaser &
Strauss)
• “Babylonian Mode of Thought”
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11. Significance of Interlocking Directorates
• Offers a glimpse into the interdependence
between corporations
• Interdependence reflects the need to
govern markets
• Networks of interlocking directorates
suggest a degree of centralized planning
in the economy
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12. Centralized Private Sector
Planning
• Core: CPSP Firms – Periphery
large multinational
corporations
embedded networks
of market
governance
institutions. Core
Powerful.
• Periphery: occupied
by much smaller
firms, with little
power. Accessory to
central core.
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13. So What?
• Mainstream economic theory can’t explain
this degree of interconnectedness.
• But, policy is based upon mainstream
theory.
• We act as if there are no planners – i.e.
the “invisible hand.”
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14. This Changes the Question…
• How shall we choose the planners?
• For whom shall they plan?
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15. Questions?
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