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I.3.2 Formalist and Substantivist debate

Economic Anthropology has two approaches for the study of economic life of the primitive and peasant peoples.

These approaches are: (i) Substantivism  and (ii) Formalism.

Malinowski  in his study of Trobriand Islanders says that the concept of “economic man” in conventional economic theory cannot be applied to primitive population. Firth  studied the Maori economy and argued that the primitive man is an “economic man”, that the  primitives have a rational choice built around a principle known as “calculus of maximization” and that the formal economic theory can be applied to primitive economies.

Karl Polanyi followed Malinowski. He proposed two meanings of the word
“’economic”: (i) substantive and (ii) formal.

The substantive meaning holds that economy is an “instituted process” and human economy is embedded and enmeshed in the institutions like “economic” and “non-economic”, that it refers to providing of goods and services to supply of social and biological wants and that this meaning applies to all societies, at all times, at all places, since all people have to use resources to maintain themselves irrespective of time and space. The western economic concepts such as profit motive, savings, capital goods etc. cannot be applied to non-industrial societies. Thus, the substantive meaning of “economic” clarifies that man depends, upon nature and on his fellow-beings for his livelihood and this dependency supplies him with want satisfying material means.

According to Karl Polanyi the formal meaning of the word “economic” is ‘“economizing”. That means people make choices among alternative courses of action in a rational manner. The word rational means, choosing a course of action that will maximize individual’s well-being and profit. Economic theory is to do with the ways people get greater personal satisfaction in saving things and distribution of scarce resources. Therefore this theory is applicable to economies of advanced societies.

Substantivism Formalism
The substantivists are Malinowski (1922), Karl Polanyi, George Dalton, Cyril Belshaw and Paul Bohannan. The formalists are Raymond Firth, Herskovits and Burlings
The substantive meaning holds good to primitive, peasant and advanced
economic life .
The formal meaning holds good to the economies of advanced societies.
Anthropologists who adhered to the substantive meaning and described, analyzed and explained the economic life of the people came to be
recognized as “substantivists
Anthropologists who used formal meaning in examining, analyzing and interpreting economic process came to be branded as “formalists”.
Concept of insufficiency, scarcity and choice – Scarcity is insufficiency of
means and choices be induced by that insufficiency.
a)      Scarcity is a socially determined condition.

b)     Scarcity abstains in a society, which places great value on material acquisition relative to other goal attainments.

c)      In a society where desirable objects are unlimited themselves, scarcity may not obtain at all.

d)     If there is no scarcity there will be no need for economizing.


a)     Man has unlimited wants.

b)     Means to satisfy them are limited. Therefore scarcity is universal.

c)      This scarcity is not mere physical storage but a condition of insufficiency. Relative to desire in order that choice be induced by that insufficiency.

d)                                       There must be more than one use to the means and more than on end
ordered in sequence of preferences.

a) The economy is of 2 types:

  • i)     The empirical economy.
  • ii)   The formal economy

Empirical economy exists in simple and primitive societies but formal economy occurs in modern complex societies.

b)  The substantivists assert that ‘economic theory’ developed by the economists is applicable to only market economies but not to empherical economies.

c)  An empiricalcal economy is “an instituted process of interaction between man and environment and it results in a continuous supply of want satisfying
material means.

a)  Formal economic theory is equally and universally applicable to the economic
systems of all societies.

b)  Leclair and Scott Hook questioned the need for dividing the economy as
substantivists did.

c)  They argued that the extreme conclusion of substantivists are based on
“Fallacious logic, Prendo individualism, ultimately reducible to the status
of meta physical propositions”.


Market, Money and Trade:
a)       Trade is relatively a peaceful method of acquiring of goods, which are not available on the spot.

b)       Trade is not an individual activity but a group activity. Therefore,
different communities meet at a place for different purposes and one of
the purposes being exchange of goods.

c)       According to Dalton, in primitive societies there are only market places,
but not market system. In economic anthropology, market mewans market
place (primitive societies), an actual site where goods change hands by
purchase and sale.

d)       in primitive societies money is absent. Therefore, there is barter.
Primitive economy is restricted to production of material items, in such
economies there is no price system. And also there is no feed back of
price system in non-market spheres of economy.

e)       The substantivises, argue money is independent of market. It is derived
from the definite uses to which “quantifiable objects” are put. Money is
“ only useful in terms of payment, standard and exchange. It has emerged independent of market system.


a)  Market is the locus of exchange.

b)  Trade is the real exchange.

c)  Money is the means of exchange.

d)  Trade is directed by prices and prices are a function of market.
Therefore, all trade is market trade just as all money is exchange



The two approaches are two ends of a continuum.

If we cannot apply the formal definition and its necessary correlates to primitive systems, we cannot equally apply the same at times to discover the economic rationality in a western economic behaviour.

The fact is that the economic processes in some primitive societies, which are come in contact with advanced societies, can be successfully studied using the formal economic theory.

On the other hand, the economies of some other primitive societies, which still maintain their age old patterns of life, can be fruitfully examined using the substantive economic theory.

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