Question

How Granovetter’s view of economic behavior differs from economic behavior as described in classic economic theory?

Answer 1

Granovetter's Theory - he found a more appropriate relationship between much of the existing sociological theory that over-socializes behavior and economic theory that under-socializes behavior. According to him it's more accurate to view economic rationality as "embedded" within social relationships. The Embeddedness theory acknowledges that "the ongoing networks of social relations between people discourage malfeasance." People guide their choices based on past actions with people and continue to deal with those they trust. However, Embeddedness theory acknowledges that social networks alone will not deter malfeasance and it makes no assumptions of an orderly self regulating system.

Classical theories of economics - The fundamental principle of the classical theory is that the economy is self‐regulating. According to classical economists the economy is always capable of achieving the natural level of real GDP or Output, which is the level of real GDP that is obtained only when the economy's resources are fully employed.