Substantivism arose in anthropology largely in response to what was perceived as the inapplicability of formal approaches and the assumptions of neoclassical economics to ethnographic case studies (Wilk 1996: 1-26). Substantive approaches emphasize that economy and exchange are fundamentally linked to other aspects of human behavior. To substantivists, economic institutions are effectively cultural traits, therefore techniques designed around "modern" or "western" conceptions of rational individualism are inadequate for application in non-western cultural contexts (Bohannan and Dalton 1962;Dalton 1969). The position was first articulated by Karl Polanyi (1957) that the economy is "embedded" in sociopolitical institutions. This view of economy and non-western exchange has its roots in studies by Malinowski (1922) and Mauss (1925), although the focus in that earlier period of economic anthropology was on social relationships, whereas social change dominated the discourse in economic anthropology during the 1960s (Dalton 1969).

Mid-twentieth century substantivism was based on a functionalist view of society as static and aspiring to the maintenance of equilibrium within the social environment (Schneider 1974). Interaction took place through reciprocity, redistribution, and exchange. Sahlins' (1965) further elaborated on reciprocity based exchange by placing generalized, balanced, and negative reciprocities along a continuum that served to describe the dynamics of interaction within specific social contexts. Another distinction lay between the transfer of inalienable gifts between reciprocally dependent individuals "that establishes a qualitative relationship between the transactors" (Gregory 1982: 101) and alienable commodities as transfer between reciprocally independent people "that establishes a quantitative relationship between the objects exchanged" (Gregory 1982: 100).

A number of critiques have emerged of the substantivist approach. One critique of substantivist approaches to exchange, one that is true of functionalism more generally, is an early version of agency theory. In the substantivist view, society is constructed of consistent rules within agents must act and includes a moral obligation of exchange (Dalton 1969: 77). In this organic perspective, however, "[t]here is little room for individual construction of social strategies and manipulation of rules, and there is little intimation of conflicts and contradictions between interests" (Hodder 1982: 200).

A second critique focuses on the distinction drawn by substantivists between complex and small-scale societies. Among complex societies, formal approaches are supposed to be more relevant, but in the context of small-scale societies substantive approaches are appropriate, and this dichotomy creates a dilemma of where exactly to draw the line. Monica L. Smith (1999: 111) argues that the ethnographic cases to which many substantivist models refer (i.e., small-scale societies) are lower in population density and involve fewer layers of interaction than would have been found in premodern states and empires and therefore formal approaches might have more relevance in premodern complex societies than is presented by substantivists.

A third critique holds that the direct correlation between forms of exchange and level of socio-political complexity lacks empirical support (Hodder 1982: 201). Anthropological studies suggest that unpredictability in food supply correlates with more extensive reciprocal exchange systems. Reciprocity is encountered more frequently among hunters, fishers and farmers than among gatherers and pastoralists who exploit relatively predictable resources (Pryor 1977: 4).

In the current day, Polyani's framework centering on the distinction between reciprocity, redistribution and market forces continues to be widely used in anthropology and archaeology, despite the development of alternative models that are particularly relevant to studies of commercialized pre-modern states. In particular, Michael E. Smith (2004) argues that more refined differentiation of transaction mechanisms can be used to distinguish the degree of internal and external commercialization in state-level societies, such as those presented by Carol A. Smith (1976). However, the subtleties of ancient commercial enterprise are less relevant in places like ancient Egypt and the Andes where historical and archaeological evidence attest to strong state control of uncommericalized economies without market-based economics, money, and independent merchants. In other words, Polyani's coarser distinctions of reciprocity, redistribution combined with non-market trade are sufficient in regions such as the ancient Andes where most scholars believe commerce played an minor role in prehistoric development (LaLone 1982;Stanish 2003). In Mesoamerica, however, where evidence for prehispanic markets and traders is widespread, anthropologists have found that Polyani's distinctions are vague and that models with further refinement in modes of commercialization are applicable (Braswell 2002;Smith 1976;Smith 2004).