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ABSTRACTThis article takes issue with the rational choice approach that views the economy as an autonomous realm where isolated individuals make maximizing choices in terms of their personal preferences. The argument made is that income generation, consumption and exchange form a holistic complex that must be studied in its unity and that the economy and individual economic behaviour are articulated with a social context. This is demonstrated by evidence (collected through fieldwork) on the differences in the use of remittances by three villages in Kerala, India, which have experienced large scale migration to the Middle Eastern countries.In the three cases, it was the way in which income earned from international migration was perceived, together with the variation in ethnic structures, that explained the similarities and differences in their consumption, exchange and investment patterns. In each case, it was the larger ethnic structure that conditioned (1) the types of activities into which the money was channelled; (2) the range of people who were the beneficiaries of migrant remittances; (3) the patterns of reciprocity or charity practised by the migrants; (4) the selection of the trade‐off point between community status and economic accumulation; and; (5) the groups of individuals who gained or lost economic control.