Social Network Analysis

Economic Approaches:

Key assumptions and aspects:

  • Economies are made up of: Social networks
  • Human beings are: Embedded in social structures and relations
  • Economies change through: Developments in interpersonal ties
  • Favoured methods: Network analysis and graph theory

Social network analysis originated in the beginning of the 20th century in sociology, but has only been systematically applied to economic topics since the 1980s. In doing so, it helped initiate a revival of economic sociology. More recently, it has inspired economists to focus on networks, done often under the name “the economics of networks”. Social network analysis also has some overlap with complexity economics and interacts with the broader academic field of network science. Social network analysis applied to economic topics looks at how economic life is embedded in social life. Instead of analysing economies as if individuals operate rationally as atoms in markets, the focus lies on social relations and structures in which people interact with each other. As such, social network analysis neither focuses on individuals and their characteristics (such as preferences and rational or irrational behavior), nor on collectives (such as classes and nations). Instead it looks at how networks are structured by analysing the relations (also called ties, edges or links) between the nodes (which can be people, organizations or things). 

Materials:

  • Social Network Analysis by John Scott, from 1991. 
  • The Impact of Social Structure on Economic Outcomes by Mark Granovetter, from 2005.
  • Economic Action and Social Structure: The Problem of Embeddedness by Mark Granovetter, from 1985.