Half of all workers are hired through personal referrals, and networks of social connections channel flows of capital, technology, and international trade. Sociologists and economists alike recognize that economic exchange is shaped by social networks, which propagate information and facilitate trust, but each discipline brings a distinct theoretical perspective to the study of networks. Sociologists have focused on how networks shape individual behavior, economists on how individual choices shape networks. The Missing Links is a bold effort by an interdisciplinary group of scholars to synthesize sociological and economic theories of how economic networks emerge and evolve.

Interweaving sophisticated theoretical models and concrete case studies, The Missing Links is both an introduction to the study of economic networks and a catalyst for further research. Economists Rachel Kranton and Deborah Minehart illustrate their field's approach to modeling network formation, showing how manufacturers form networks of suppliers in ways that maximize profits. Exemplifying the sociological approach, Ronald Burt analyzes patterns of cooperation and peer evaluations among colleagues at a financial organization. He finds that dense connections of shared acquaintances lead to more stable reputations. In the latter half of the book, contributors combine the insights of sociology and economics to explore a series of case studies. Ray E. Reagans, Ezra Zuckerman, and Bill McEvily investigate an R & D firm in which employees participate in overlapping collaborative teams, allowing the authors to disentangle the effects of network structure and individual human capital on team performance. Kaivan Munshi and Mark Rosenzweig examine how economic development and rising inequality in India are reshaping caste-based networks of mutual insurance and job referrals. Their study shows that people's economic decisions today are shaped both by the legacy of the caste hierarchies and by the particular incentives and constraints that each individual faces in an evolving labor market.

Economic globalization is forging new connections between people in distant corners of the world, while unsettling long-standing social relations. Anyone interested in understanding the opportunities and challenges of this era of rapid change will find a highly informative guide in The Missing Links.

The Missing Links

The predominant sociological approach to formation of economic networks focuses on past interaction: people get to know and trust each other, especially in social settings (“embeddedness”), and are then able to share information and do business together. Economists instead argue that actors strategically choose to invest in certain relationships based on forward-looking incentives. Oversimplifying, in economics you choose your network but in sociology your network chooses you.

This paper takes a step towards merging these two approaches. We do not attempt to do so at the most general level. Instead we focus on a specific class of actors (entrepreneurs) and thereby hope to show how merging the economic and sociological approaches can yield new predictions and policy recommendations in a concrete empirical setting.

Slides are also available.

Clusters and Bridges in Networks of Entrepreneurs

In this chapter, I provide a broad level overview of the economics literature on economic and social networks. The plan is to examine the evolution of that literature, and in doing so to provide an idea of the approaches that have been taken and the perspective from which networks have been analyzed. Given the objectives of this volume, I am not attempting to provide a detailed description of what has been asked and answered by the literature,1 but rather to examine what economists might hope to gain from the analysis, how their paradigm has influenced their approach and the questions that they have tended to ask, and some examples of the research. The discussion is aimed at a general audience, with no presumption of any familiarity with the economics literature.

The Study of Social Networks In Economics

How do decisions for the near future differ from decisions for the more distant future? Most economic models predict that they do not systematically differ. With online grocery data, we show that people are decreasingly impatient the further in the future their choices will take effect. In general, as the delay between order completion and delivery increases, customers spend less, order a higher percentage of "should" items (e.g., vegetables), and order a lower percentage of "want" items (e.g., ice cream). However, orders placed for delivery tomorrow versus two days in the future do not show this want/should pattern. A second study suggests that this arises because orders placed for delivery tomorrow include more items for planned meals (as opposed to items for general stocking) than orders placed for delivery in the more distant future, and that groceries for planned meals entail more should items than groceries for general stocking.

I'll Have the Ice Cream Soon and the Vegetables Later: Decreasing Impatience over Time in Online Grocery Orders

Social interactions between individuals do not occur in a void. Nor do they take place on a pre-existing fixed social network. Real social behaviour can be understood both to take place on, and to bring about, a complex set of overlapping topologies best described by a multilayer network in which different layers indicate different modes of interaction. Here we distinguish between the milieu within which social organisation is embedded and the transactional relationships that constitute this social organisation. While both can be represented by network structures, their topologies will not necessarily be the same. Researchers in various domains have realised the importance of the context in which individuals are embedded in shaping properties of the functional transactions in which they choose to engage. We review several examples of the relationship between milieu and function and propose a conceptual framework that may help advance our understanding of how social organisation can occur as a result of self-organisation and adaptation.

Milieu and Function: Toward a Multilayer Framework for Understanding Social Networks

As the network around a set of people closes, it creates a competitive advantage known as social capital. The gist of the argument -- found in economics (e.g., Tullock, 1985; Greif, 1989), political science (e.g., Putnam, 1993, 2000), and sociology (e.g., Coleman, 1988, 1990; Granovetter, 1985, 1992) --- is that closed networks create a reputation cost for inappropriate behavior which facilitates trust between people in the network. A network is closed to the extent that the people in it have strong relations with one another or can reach one another indirectly through strong relations to mutual contacts. Information travels quickly in such networks. People wary of news reaching colleagues that might erode their reputation in the network are careful to display appropriate opinion and behavior. With a reputation cost for inappropriate opinions and behavior, trust is less risky within the network, people are self-­aligning to shared goals, transactions occur that would be difficult outside the closed network, and production efficiencies result from donated labor and the speed with which tasks can be completed.

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Persistent Reputation and Enduring Relations

This paper reviews the literature on small-world networks in social science and management. This relatively new area of research represents an unusual level of cross-disciplinary research within social science and between social science and the physical sciences. We review the findings of this emerging area with an eye to describing the underlying theory of small worlds, the technical apparatus, promising facts, and unsettled issues for future research.

Small-world networks and management science research: a review

Global capitalism has worked many wonders, but where in the free world can one see 10,000 children dancing in synchronisation, dressed as eggs?

Sun, sex and Stalinism: Holidays in North Korea

Counterterrorism, like espionage and covert action, is not a spectator sport. The more a country practices, the better it gets.

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As a practical matter, there will always be a trade-off of sorts between citizen liberties and the powers a state needs to fight certain threats. Yet it is the paramount duty of any liberal democracy not only to protect the rights associated with a decent political order, but also to protect the lives of its citizens. Exercising power in the name of security is not necessarily illiberal. And as our examination of the French approach to counterterrorism suggests, the exercise of such power can be considerable indeed. It is a point that some liberal and civil libertarian critics of the Bush administration, who too rarely study what is going on abroad, might do well to remember.

France: Europe's Counterterrorist Powerhouse

The debate is over. A consensus has been reached. On global warming? No, on how Democrats are favored on television, radio and in the newspapers.

Well, I'm glad that's over. Now we can focus on the media's unwavering attention toward the superficial and the sensational. And when I say "the media", I mean their audience, of course. In the market, you are what feeds you.

Even Harvard Finds The Media Biased