The terms ‘formalism’ and ‘substantivism’ were used to mark the antagonistic positions in a controversy that dogged economic anthropology in the 1960s. The distinction between ‘formal’ and ‘substantive’ approaches to economic phenomena was made by the influential economic historian Karl Polanyi (Polanyi 1958), echoing Max Weber’s distinction between formal and substantive rationality. The ‘economic’, according to Polanyi can be defined in formal terms — as a kind of rationality which assesses choices between scarce resources by calculating in terms of means and ends, costs and benefits. Or it can be defined substantively – as whatever processes people employ in their relationship with the material world. The formal definition is that employed by modern economics and is a product of a society in which the economy has been isolated from other areas of social life. The substantive definition is potentially much broader in its application, and is explicitly intended to deal with societies and historical epochs in which the economy has not been disembedded from other areas of social life like religion or kinship.
In brief, what was at stake in this controversy was the status of modern Western economics in cross-cultural and historical research. Did economics provide a viable and reasonably culture-free way to approach other people’s economic life? Or was it hopelessly attached to assumptions about choice, maximization and scarcity which were only to be found in modern market economies? Interestingly, this debate in 1960s economic anthropology was paralleled by contemporary arguments in the anthropology of kinship and law. In each case anthropologists were divided by their use of Western models: did these provide more rigorous and scientific tools for the study of other societies, or were they hopelessly inappropriate because of their culturally and historically specific origins?
Polanyi’s argument was enthusiastically adopted by anthropologists like G. Dalton and Marshall Sahlins, and as enthusiastically opposed by more mainstream economic anthropologists (e.g. Burling 1962; Cook 1966; the most important arguments are collected in Leclair and Schneider 1968). Sahlins’s Stone Age Economics (1972) was explicitly presented as one more contribution to the argument. In the introduction, though, Sahlins made an important historical shift, claiming as antecedents for the two positions Adam Smith and Karl Marx. Whatever its qualities as intellectual history, this ancestral gesture marked the beginning of the end of the controversy. The Marxist anthropology of the 1970s was, like the work of the substantivists,critical of the supposed value-free neutrality of Western economics, but it was also (as Sahlins subsequently conceded) indifferent to the cultural peculiarities of other people’s material life; as such it could not be easily fitted on either side of the 1960s divide. By the end of the 1970s the issues which had seemed so divisive a decade earlier had been almost forgotten. Ten years later, at the end of the 1980s, the starting point of the controversy — the distinction between embedded and disembedded, primitive and modern economies — was itself challenged by the growing ethnography of capitalism and the market as cultural phenomena.
