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The formalist vs substantivist debate
The opposition between substantivist and formalist economic models was first proposed by Karl Polanyi in his work ''The Great Transformation'' (1944). He argued that the term 'economics' has two meanings: the formal meaning refers to economics as the logic of rational action and decision-making, as rational choice between the alternative uses of limited (scarce) means. The second, substantive meaning, however, presupposes neither rational decision-making nor conditions of scarcity. It simply refers to the study of how humans make a living from their social and natural environment. A society's livelihood strategy is seen as an adaptation to its environment and material conditions, a process which may or may not involve utility maximisation. The substantive meaning of 'economics' is seen in the broader sense of 'economising' or 'provisioning'. Economics is simply the way society meets their material needs. Anthropologists embraced the substantivist position as empirically oriented as it did not impose western cultural assumptions on other societies where they might not be warranted. The Formalist vs. Substantivist debate was not between anthropologists and economists, however, but a disciplinary debate largely confined to the journal ''Research in Economic Anthropology''. In many ways, it reflects the common debates between "etic" and "emic" explanations as defined by Marvin Harris in cultural anthropology of the period. The principal proponents of the substantivist model were George Dalton and Paul Bohannan. 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 it's principles have universal validity.
== The formalist position==
The formalist model is closely linked to neoclassical economics, defining economics as the study of utility maximization under conditions of scarcity. All societies are therefore a collection of "choice making individuals whose every action involves conscious or unconscious selections among alternatives means to alternative ends" or culturally defined goals. (Burling, 1962, quoted from Prattis, 1982:207). Goals refer not only to economic value or financial gain but to anything that is valued by the individual, be it leisure, solidarity or prestige.
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. A traditional assumption many formalists borrow from neoclassical economics is that the individual will make rational choices based on full information, or information that is incomplete in a specific way, in order to maximize whatever that individual considers being of value. While preferences may vary or change, and information about choices may or may not be complete, the principles of economising and maximising still apply.
The role of the anthropologist may then be to analyse each culture in regards to its culturally appropriate means of attaining culturally recognized and valued goals. Individual preferences may differ from culturally recognized goals, and under economic rationality assumptions individual decisions are guided by individual preferences in an environment constrained by culture, including the preferences of others. Such an analysis should uncover the culturally specific principles that underlie the rational decision-making process. In this way, economic theory has been applied by anthropologists to societies without price-regulating markets (e.g. Firth, 1961; Laughlin, 1973).
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