Formalist–substantivist debate
Anthropologists embraced the substantive position as empirically oriented as they believed it did not impose western cultural assumptions on other societies where they might not be warranted.
In many ways, it reflects the common debates between etic and emic explanations as defined by Marvin Harris in cultural anthropology of the period.
Formalists such as Raymond Firth and Harold K. Schneider asserted that the neoclassical model of economics could be applied to any society if appropriate modifications are made, arguing that its principles have universal validity.
Since a formalist model usually states what is to be maximized in terms of preferences, which often but not necessarily include culturally expressed value goals, it is deemed to be sufficiently abstract to explain human behavior in any context.
According to Polanyi, in modern capitalist economies the concepts of formalism and substantivism coincide since people organise their livelihoods based on the principle of rational choice.
Conversely, market exchange is seen as the dominant mode of integration in modern industrial societies, while reciprocity may continue in family and inter-household relations, and some redistribution is undertaken by the state or by charitable institutions.
Without a system of price-making markets formal economic analysis does not apply, as for example, in centrally planned economies or preindustrial societies.
Economic decision-making in such places is not so much based on individual choice, but rather on social relationships, cultural values, moral concerns, politics, religion or the fear instilled by authoritarian leadership.
Consequently, any analysis of economics as an analytically distinct entity isolated from its socio-cultural and political context is flawed from the outset.
The substantive economy is an "instituted process of interaction between man and his environment, which results in a continuous supply of want satisfying material means" (1968:126).
[3] Critics of the formalist position question its central assumptions, in particular that the universality of rational choice and utility maximization can be assumed across all cultures, including its reductionism to explain even modern Western economies.
To quote: "This post hoc reasoning back to a priori assumptions has minimal scientific value as it is not readily subject to falsification."
Similarly, Gudeman argued that Western economic anthropologists will invariably find the people they study behave "rationally" since that is what their model leads them to do.
Social relationships play an essential role in people's livelihood strategies; consequently, a narrow focus on atomised individual behavior to the exclusion of his or her socio-cultural context is bound to be flawed.
