A sociological contribution to the general theory of consumption and savings
The driving force behind this whole thesis comes from the idea that a sociological perspective can substantially contribute to current academic debates in economics about modelling the saving behaviour in households and vice versa. There are four potential sociological contributions to explanation of saving behaviour: the notions of strategies, social and cultural capitals, different types of economies and trust.
In this chapter I start with the sociological concept of strategy, which in my opinion can be successfully applied to the problem of household consumption and savings. I discuss the concept of a ‘strategy’ which is used in the literature and introduce the notion of a ‘saving strategy’ in order to place emphasis on the idea that consumption smoothing in different social contexts can be implemented by using different tools. The main focus is on the concepts of cultural and social capitals developed by Bourdieu and Coleman and on the different types of economies specified by Gershuny and Pahl, and the issue of trust and uncertainty.
The final section of this chapter is devoted to the detailed layout of the types of strategies of smoothing consumption using different tools. I argue that one needs to take into account that consumption smoothing may be implemented not with the help of financial or tangible savings only. Social and cultural capital may accompany or even substitute for financial forms of capital in the process of consumption smoothing, even though at first site investments in these forms of capitals could be perceived as consumption.
The concept of a ‘strategy’
The notion of strategy is of direct interest to sociologists and other social scientists that tend to consider peoples’ behaviour a result of their strategic planning. Crowbrought everybody’s attention to the fact that the term has been extensively used in many different contexts (Crow, 1998). In sociology the term is widespread on all levels of analysis; for example, one can speak of the variety of strategies in the context of economic policies of states or strategies of different classes, strata, groups of people or single individuals. Sometimes strategies are determined by the goals of actions (‘growth strategy’), at other times they are determined by the type of agent (‘corporate strategy’) or sometimes by the performance of actions (‘paternalistic strategy’).
This extensive use of the term makes us think of the sources of its availability. Quite often the word ‘strategy’ is used just as a synonym for the term ‘action’, but it is unlikely that it is the main advantage of the concept. Anderson, Bechhofer and Kendrick (Anderson, Bechhofer, Kendrick, 1994) pointed out that this notion was brought into social sciences by Bourdieu, Levine, Tilly, Anderson, Oppenheimer and Pahl in order to avoid extremes of structural determinism and excessive voluntarism in finding explanations for the behaviour of people. They use the assumption that agents, on the one hand, are able to exercise initiative by pursuing their ends and choosing the appropriate means, but on the other hand, they are constrained in the range of possible goals and expedients. The notion of strategy offers the possibility of taking into account the interweaving of economic interests and social institutions and resolving the old-age contradiction between the action and the structure while at the same time reconsidering the idea of rationality.
.To benefit from the advantage of this concept, one has to clarify it. There are different definitions of what can be called a ‘strategy’ in literature. The term is widely used in game theory which is concerned with how rational individuals make decisions when they are mutually interdependent (Romp, 1997: 1). The game theory approach is based on the assumptions of individualism, rationality and mutual interdependence of players in the game. A strategy is defined as a complete description of how a player could play a game. And what is more important it not just a description of all possible actions but a discussion of actions which are dependant on what ‘he or she observes other players in the game to have done’ (Romp, 1997:9). In recent years this theory being applied to different problems in economics has significantly improved the understanding of economic behaviour. However, the game theory approach has never been applied to saving behaviour of households. That is why I will not go any further in describing this approach and will focus on sociological theories of strategic behaviour.
The above description of the strategy deals with individual strategies. The concept of 'household strategies' is discussed in Wallace’s paper on the conceptual relevance of this term (Wallace, 2002). As she mentioned “household strategies’ was a concept used first of all in studies of Latin America and Africa where the informal economy was at least as important as the formal economy in understanding every day economic behaviour among the urban poor (Hart, 1973; Castells and Portes, 1989; Roberts, 1991)’ (Wallace, 2002: 275).
Being later used as a concept in empirical studies of economic change in Britain in the 1980s (Gershuny and Pahl, 1979, Gershuny, 1978, Pahl, 1980, Pahl, 1984, Wallace and Pahl, 1985), it was further developed in a number of sociological papers: in Crow’s article on the use of this concept in sociological research (Crow, 1989), in Knights and Morgan’s note of dissent (Knights and Morgan, 1990), in Anderson, Bechhofer, Kendrick’s chapter on individual and household strategies in the book ‘The Political Economy of a Household’(1994).
In Crow’s opinion a strategy is a conscious, purposeful and long-term action (Crow, 1989:19). Knights and Morgan focus on the idea that strategic thinking and acting are conditioned by power (Knights and Morgan, 1990). That is why in their opinion only powerful agents are able to work out strategies. Referring to Bourdieu, Morgan emphasises the innovative component in the concept of strategy and its ability to explain how particular patterns of behaviour emerge and reproduce.
Anderson et al. stress the idea that ‘strategy’ must be distinguished from ‘behaviour’, implying that ‘strategies are not behaviours or practices but systems of rationally grounded decisions leading to desired medium- to long-term goals’(Anderson, Bechhofer, Kendrick, 1994: 21). This means that the concept of strategies is used in order to mark the ways in which people plan and map their future more or less consciously in a changing world. In all mentioned definitions, it is emphasised that a strategic action is marked as a long-term, goal-oriented,conscious, innovative, resourceful and powerful action.
However, while being promising conceptually, the strategic approach turned out to be rather ambiguous in empirical research. If one wants to identify strategies in real life, it is better to be cautious and circumspect with all of these components. For example, when considering the time horizon of actions, it is not clear how long long-term may be. Should it be comparable with a lifetime, or should we consider ten, five, three or one year to be long enough? If a family has been saving half a year for family holidays, can we consider these actions long-term? Perhaps yes because holidays used to be a yearly event for most families, and that is why it is unlikely that the horizon of planning will be longer than one year. So if all other characteristics of a strategic action feature the requirement about long term duration of actions seems to be too formalistic. But we can give a negative answer as well and prove it with the idea that it is necessary for holiday savings to be regular over a period of a number of years in order to be qualified as strategic actions. In that case its long-range character will again be considered basic. Hence the question of how long the long-term action is does not have a definite answer and may vary depending on the researcher’s preferences.
The ambiguity of the definition of length is also complicated by the fact that strategies are not just only long-term repeated actions but rather attempts to structure the future in a changing world. If this is so, strategies consist of a number of interrelated internal phases with different types of actions. And if there is a transition to another strategy (or non-strategy) or a move through the different phases within the same strategy, it is always not easy to identify. For example, if a family has moved their savings from Sberbank to a commercial bank can we identify this action as the same strategy, or not? It seems that it is possible give grounds for both answers. We can present this action as another stage of adherence to bank depositing or separate it into two different strategies because of the huge difcference between savings in a state bank and savings in a commercial bank.
The above examples prompt us to focus not on the length of actions but rather on their goals. Is it not a goal that constitutes a strategy? Let’s take for example a couple who wanted to buy a house and had been accumulating money resources for it. Let us suppose that a couple years later, this family decided to continue saving, but this time it was for an apartment instead of a house. Would that be a change in strategy? Maybe not because a researcher may say that there is too little difference between these two things – both are real estate property. But if this family later changed its mind once again and decided to rent a house, what can we say then? Now we may say it is another strategy, that they are not going to buy; they are going to rent – there is a big difference between these two financial actions. But there is also a big difference between living in a house and living in an apartment. Why did not we take this into account earlier? And we can also say ‘no’ again: the aim is to solve the problem of housing, and actually nothing has changed yet because the family is still saving. But what does this mean? Is the purpose of saving not important? Or is the concept of strategy flexibility enough to prove whatever we want?
And how can we interpret the case where changes in motivation have not caused corresponding modifications in actions performed? Let us assume that a family at some point was carefully watching over all offers on the financial market, looking for information, making comparisons among different options and making decisions on the preferable forms of savings. A couple of years later the family was still using the same financial tools, but at that time its preferences had become rather a habit than the result of a rational estimation of market options. Is it still worth considering these actions as strategic? Or maybe it is better to admit that habitual behaviour is out of the strategic domain. Again both answers seem to be valid; usually habits are persistent, thatt is why they may be considered strategies. But there is also the case against this – habitual behaviour has little in common with rationally grounded decisions made with long-term goals in mind.
This is one of the crucial issues in the conceptualisation of the strategic approach – how to deal with routine behaviour. If it is labelled strategic behaviour because of its persistent character, there will not be a lot left to be viewed as non-strategic. If routine is considered beyond strategic behaviour, we face the problem of how to distinguish conscious selection of ends and means from imitation of already proven patterns of behaviour, which is often non-reflexive. For example, the traditional or habitual way of behaviour may be proved as optimal from an economic point of view, and in this case it is unlikely to be distinguished from the strategic one as culturally or structurally determined behaviour. If we look at the behaviour of retired people in Russia, we may not be able to differentiate if the reason they keep their savings in Sberbank is because they do not know about other financial possibilities (or maybe they do not know how to use them) or because they consider Sberbank’s offer to be the best one among all others. To attempt to find the way out, one must consider an innovative capacity of action to be the important distinction of a strategic behaviour because it is exactly the inability or reluctance to see and estimate the new possibilities that characterises a non-strategic action versus a strategic one. But unfortunately there is no strict conformity between innovative and strategic actions because intuitively we feel that strategies are not always innovative.
The important component of a strategic approach deals with agents’ motivations. It says that it is necessary not only to look at the performance of action but also at its underlying motivation. Similar behaviour may be guided by different motives, and only by taking them into account can we understand the behaviour itself. However, it is not clear how we can be made aware of reasons behind actions. Direct questioning has its limits. People may have one way of thinking, another mode of presenting those thoughts to an observer and live their real life in a third way. Anderson at al. also brings up the question of how to take into account people’s motivations and understanding actual motives.
‘Strategies we take to be more generalized than plans, general prescriptions which actors take into account when making plans within structural constraints. Actors may not themselves refer specifically to strategies; we infer their existence from the accounts they give to their plans” (Anderson, Bechhofer, Kendrick, 1994: 21).
This means that in our investigation of motives, we cannot rely on either direct measurement of incentives or mere inference them from behaviour. We have to think about the indirect procedures of investigation into people’s motivations.
And lastly, if we are dealing with plans for the future, the problem of their feasibility arises, which is also a tricky question. Can a plan be referred to as a strategy if it is not possible to carry out the plan? And how can we estimate the chances that it will be done? If somebody has failed to accumulate money to buy a house by placing his money into a financial bubble, does it mean that he/she had no strategy? No, we would rather say that he had a strategy, but he failed to accomplish it because his strategy was risky. But if somebody has decided to bury his money expecting it to grow into a tree with golden leaves, we may say it was not a strategy but rather a dream. But the problem is that both actions are basically similar, and on the other hand, all innovative ideas looked like a dream at some time, so logically we should not refuse Pinnocio’s financial strategy just because it does not look feasible now.
Consequently, there is a lack of possibilities to sort behaviour into groups of strategic and non-strategic actions by looking at the outward characteristics of behaviour itself. There is also a problem with the strategy of non-strategic behaviour. It is definitely feasible and reasonable not to be strategic if one thinks about unintended consequences of her/his actions, so being non-strategic also may be a sort of strategic decision. Taking all these doubts into consideration, it seems that the given definition of a strategy is not going to work well in empirical investigations. First of all, it is because the definition is too loose – almost all existing actions including non-strategic (since one may have a strategy to have no strategy) can be presented as strategic depending on the personal preferences of the researcher.
Empirical research on household strategies in transition countries was focused on the investigation of ‘survival’ or ‘coping’ strategies (Walker, 1998; Rose and Haerpfer, 1992; Bridges and Pine,1998; Piirainen,1997; Kolankiewicz, 1996). Most of them were interested in how households have combined different types of resources and applied them in formal and informal economies in order to survive. As a result of their investigations the researchers developed different classifications of household strategies.
Rose and Haerpfer (1992) classified the households into ‘defensive’, ‘enterprising’, ‘marginal’ and ‘vulnerable’ types. Kolankiewicz revealed ‘market-oriented’, ‘traditional-defensive’, and ‘proletarian’ strategies. Researches were interested in how different social groups survive in the situation of rapid social change. However, the types which they arrived at, in my opinion, tell more about the ideological reflection on a specific situation of the transition rather than about the behaviour of households. Their approach is based on the neo-liberal assumption that post-communist countries are inevitably moving forward from communism to market capitalism. Whereas changing the perspective may modify the labelling of these types of strategies. If for example, in contrast to conventional liberal wisdom one sees the informal economy as a reaction of market forces against the corrupted domain of formal economy where social privileges of a few are maintained at the expense of the many (Hart, 1973; De Soto, 1986), then labelling the strategies of households as traditional-defensive or marginal may be considered rather disputable.
What can be done about this? I think that the conceptual basis for this concept may be strengthened if we, firstly, focus our attention not on the distinctions between strategic and non-strategic behaviour but on different patterns of strategic decision-making. Different institutional contexts give rise to different rationalities which should not be considered universalities of human nature but socially constructed patterns of behaviour. Secondly, it is better to avoid classifications which are based on politically stained concepts, however, it seems that it is impossible to escape subjectivity in this field entirely. That is why the main focus of a researcher is to reveal connections between the patterns of behaviour and the subjective meaning people attach to their actions – the realm of options they see and the edge of constrains they feel. Comparison between different patterns of behaviour and their subjective justifications will probably allow us to find out which particular aspects of institutional contexts may be responsible for them.