The debate between formalist and substantivist approaches is a foundational discussion in economic anthropology concerning how to analyze and understand economic systems, particularly in non-industrial societies. Formalists argue that universal economic principles, derived from neoclassical economics (such as rational choice, utility maximization, and scarcity), can be applied to all human societies, regardless of their cultural context. They believe that individuals everywhere make rational decisions to maximize their benefits given limited resources. Key proponents like Raymond Firth and Harold Schneider sought to identify these universal economic behaviors.

In contrast, substantivists, most notably Karl Polanyi, contend that economic behavior in non-industrial societies is 'embedded' within social, cultural, and political institutions. They argue that these economies are not primarily driven by market principles or individual profit maximization but by social obligations, reciprocity, and redistribution. For substantivists, the economy is a 'substantive' process of provisioning society, which takes different forms in different cultural contexts. Therefore, applying Western economic models to these societies would be ethnocentric and misleading. Marshall Sahlins, for instance, highlighted how cultural values often override purely economic rationality.

The core of the debate lies in whether economic theory should be universal or culturally specific. While formalists seek cross-cultural generalizations, substantivists emphasize the unique cultural logic of each economic system. Over time, the debate has led to more nuanced approaches, recognizing that elements of rational decision-making can exist within culturally embedded economic systems, and that a purely either/or stance may be too simplistic. This intellectual tension has significantly shaped the study of economic organization in anthropology.