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Formalist and Substantivist Debate

The formalist and substantivist debate remains a critical point of discussion in economic anthropology, primarily concerning the appropriate methods for studying economic systems across diverse societies. Formalist and substantivist perspectives have their unique methodologies and theoretical foundations, both significantly influencing the academic discourse. This article delves into the key aspects of the formalist and substantivist debate, highlighting their similarities and differences.

Formalist and Substantivist Debate in Economic Anthropology

Formalist Approach

The formalist approach, rooted in neoclassical economic theory, advocates for the universal applicability of economic principles across all societies [5]. According to formalists, the study of economic systems should focus on the rational decision-making process, where individuals aim to maximize utility or profit. Key features of the formalist perspective include:

  • Assumption of rational economic actors: Formalists believe that individuals, regardless of their cultural or social context, are motivated by self-interest and will act rationally to maximize their utility [4].
  • Universal principles: Formalists contend that economic principles are universally applicable and can be used to analyze any economic system, regardless of its cultural or historical context [1].
  • Emphasis on methodological individualism: Formalists place importance on individual decision-making processes and analyze the economic system from the perspective of individual actors [3].

Substantivist Approach

In contrast, the substantivist approach, pioneered by Karl Polanyi, argues that economic systems are embedded within social and cultural contexts, necessitating the consideration of these factors when studying economic phenomena [5]. Substantivists emphasize the role of culture, institutions, and social relationships in shaping economic behavior. Key features of the substantivist perspective include:

  • Embeddedness: Substantivists assert that economic activities are embedded in social and cultural contexts, and cannot be separated from them [5].
  • Social relations: Substantivists focus on the role of social relationships and institutions in shaping economic behavior and the distribution of resources [6].
  • Historical and cultural specificity: Substantivists argue that economic systems should be studied in their specific historical and cultural contexts, recognizing the influence of these factors on economic behavior [2].
AspectFormalist ApproachSubstantivist Approach
Theoretical FoundationNeoclassical economic theoryPolanyi’s embeddedness concept
Economic ActorsRational, self-interested individualsIndividuals influenced by social relationships
MethodologyMethodological individualismHolistic, emphasizing social context
ScopeUniversal economic principlesHistorical and cultural specificity
Key FocusUtility maximization, rational decision-makingSocial relations, institutions, embeddedness

The formalist and substantivist debate highlights the complexities of understanding economic systems in diverse societies. While both approaches offer valuable insights, they have also faced criticism for their respective limitations. For example, formalists have been critiqued for oversimplifying human behavior by assuming rationality and self-interest, whereas substantivists have been criticized for neglecting individual agency in favor of a more holistic view of economic systems. Despite these criticisms, the formalist and substantivist perspectives continue to inform contemporary research in economic anthropology, leading to a richer understanding of the myriad ways in which culture, society, and individual decision-making intersect in the realm of economics.

Course of the Debate

The formalist and substantivist debate has evolved over time, with each side responding to the criticisms and arguments posed by the other. The course of the debate can be traced through the following key stages:

  1. Initial Phase: The debate began in the 1950s, when Karl Polanyi introduced the concept of embeddedness, which emphasized the importance of social relations and institutions in shaping economic systems. This led to the development of the substantivist approach, which sought to challenge the formalist perspective rooted in neoclassical economic theory [5]. Early proponents of the substantivist approach, such as George Dalton and Marshall Sahlins, furthered Polanyi’s ideas by emphasizing the role of culture, social relationships, and historical context in determining economic behavior [2]; [6].
  2. Formalist Response: In response to the substantivist critique, formalists such as Scott Cook and Harold Schneider defended their approach by arguing that universal economic principles could still be applied across diverse societies. Cook (1966) criticized the substantivist approach for being overly focused on the anti-market mentality, while Schneider (1974) contended that both market and non-market economies could be analyzed using the same economic principles.
  3. Middle Ground and Synthesis: As the debate continued, some scholars sought to find a middle ground between the two perspectives. For instance, Clifford Geertz (1978) introduced the concept of the “bazaar economy,” which recognized the importance of cultural and social factors in shaping economic behavior, but also acknowledged the role of rational decision-making. Similarly, James Carrier (1992) proposed a “hybrid model” that incorporated both formalist and substantivist elements, acknowledging the interplay between social context and individual agency.
  4. Recent Developments: In more recent years, the debate has become less polarized, as economic anthropologists increasingly acknowledge the value of both perspectives. Many scholars now emphasize the importance of understanding economic systems as a complex interplay of culture, social relations, and individual decision-making, which necessitates the integration of both formalist and substantivist insights [4].

The course of the formalist and substantivist debate has seen numerous shifts and developments since its inception in the 1950s. Over time, the debate has moved from a highly polarized opposition to a more nuanced understanding of the value of both approaches. Contemporary economic anthropologists now often incorporate insights from both perspectives, recognizing the need for a comprehensive and multifaceted analysis of economic systems in diverse societies.


In summary, the formalist and substantivist debate centers on the appropriate methods for studying economic systems in diverse societies. While formalists advocate for the application of universal economic principles grounded in rational decision-making, substantivists emphasize the importance of social context and historical specificity in shaping economic behavior. Both perspectives have significantly contributed to the development of economic anthropology and continue to inform the academic discourse on the subject.


[1] Cook, S. A. (1966). The Obsolete ‘Anti-Market’ Mentality: A Critique of the Substantive Approach to Economic Anthropology. American Anthropologist, 68(2), 323-345. https://doi.org/10.1525/aa.1966.68.2.02a00070

[2] Dalton, G. (1961). Economic Theory and Primitive Society. American Anthropologist, 63(1), 1-25. https://doi.org/10.1525/aa.1961.63.1.02a00010

[3] Ensminger, J. (1992). Making a Market: The Institutional Transformation of an African Society. Cambridge University Press. https://search.library.uq.edu.au/permalink/f/l3gdeh/61UQ_ALMA21110539600003131

[4] Hann, C. M., & Hart, K. (2011). Economic Anthropology: History, Ethnography, Critique. Polity Press.

[5] Polanyi, K. (1957). The Economy as Instituted Process. In K. Polanyi, C. M. Arensberg, & H. W. Pearson (Eds.), Trade and Market in the Early Empires: Economies in History and Theory (pp. 243-270). Free Press.

[6] Sahlins, M. (1972). Stone Age Economics. Aldine-Atherton.

[7] Carrier, J. G. (Ed.). (1992). History of Anthropological Thought: Current Themes and Future Trends. Berg.

[8] Geertz, C. (1978). The Bazaar Economy: Information and Search in Peasant Marketing. American Economic Review, 68(2), 28-32.

[9] Schneider, H. K. (1974). Economic Man: The Anthropology of Economics. Free Press.

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