Richard Swedberg (Markets as Social Structures)

in The Handbook of Economic Sociology, 1994, pp.255-282 The Complexity of the Market Phenomenon. y y y y y To look at market as a specific type of social structure (some kind of recurrent and patterned interactions between agents that are maintained through sanctions). 255 To view markets in terms of exchange. 255 The term "market" was introduced into the English language in the twelve century (from the Latin mercatus - trade or place to trade). 255 Many meanings of the term markets over time. 255 It is uncertain when market first appeared archaeological findings indicate that external trade existed by at least 5000 BC. National markets were created first through the political revolutions of these centuries in England, France and the United States. 256 Four types of markets had made appearance (first in the United States and some European countries): The financial market The mass consumer market The labor market The industrial market. 256 The market economy was first mainly national in character, but as the twentieth century it has become international. 257

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The Market in Economic Theory. y y y In the economics literature a surprisingly small amount of attention to the market. 257 The market in classical political economy (from Adam Smith to Marx): Classical economists saw the market as synonymous with either a market place or a geographical area. In their eyes the market was something concrete as opposed to the abstract market of latter-day economists. Second, the main emphasis in classical political economy had been on production rather than on exchange. Third, it was argued that incidental factors would typically result in a market price that was different from the natural price. 257 Adam Smith saw as central to any analysis of market the relationship between the market and the division of labor and how the market influences price. 258 David Ricardo, John Stuart Mill political economics became more abstract (Mill talks about the laws of Production ). 258 Karl Marx production was more important than the market when it came to deciding the price of a commodity. Market consists of social relationships (the merchandise fetishism is an example). Markets have a distinct history. There is a legal and ideological dimension to the market. 258

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The marginalist revolution and the creation of the modern concept of the market. The market became an abstract concept. The emergence of the concept perfect market , characterized by perfect competition and perfect information. The economy was centered increasingly around markets. All markets in an economy were interconnected. 259 Alfred Marshall five factors were important in the understanding of markets: time, space, formal regulation, informal regulation, and familiarity between buyer and seller. 260 The Austrian School (Mises and Hayek). The most important contribution of neo-Austrian economics - the theory of the market as a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor (Mises). The market emerges spontaneously being the result of human action rather than human design. 260 Keynes s Critique of the Law of Markets his solution for matching demand and supply was the intervention of the state. Keynes did not believe that markets by themselves can ensure a high level of productivity. 261 Industrial Organization and the concept of market structure (Edward Chamberlin) conceived of the market as being an industry. Chamberlin criticized the theory of perfect competition because it did not take into account product differentiation. Reputation of the seller and personal links between buyers and sellers also could make difference. The structure-conductperformance paradigm. 261-262 Postwar developments general equilibrium theory, game theory (introduced the idea of intersubjectivity), the Chicago School (a more central place for the market), the economics of information, market clearing (Dennis Carlton), New Institutional Economics (transaction costs, property rights, search costs, enforcement costs, measurement costs). 263-264

The market in Sociological Theory. y y The market in classical sociological theory Max Weber emphasis on conflict/struggle in the market, social action in the market begins as competition and ends as exchange, exchange in the market represents the most instrumental and calculating type of social action that was possible between two human beings, competition as a peaceful conflict, monetary prices are always the result of a power struggle between the parties on the market. 265 Parsons and Smelser the market as a distinct social system in its own right. Polanyi markets were created by the state, commodification of land, misery of the common people, the idea of counter-movement. 266-267 Granovetter (networks approach), Wallerstein (the world system approach), a social structural approach, a social constructionist approach, a historical-comparative approach etc. 267 Harrison White markets consists of structures that are reproduced through signaling or communication between the participants. 268 Howard Baker markets as networks. 268 Zelizer the cultural dimension of markets. She analyzes how things become commodities (life insurance or the reverse process of removing commodities from the market child labor, for example).

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The role of the state. 270 Integrating the economic and sociological approaches to the market. I suggest that the core of the market phenomenon does not consist of one element exchange, but of two elements exchange in combination with competition. The social structure of the market is characterized by a special type of interaction that begins as competition between a number of actors (buyers and/or sellers) and that ends up with an exchange for a few of the actors. 271 Competition in production and competition in exchange. Incorporating the element of competition in the exchange. When the competition for opportunities of exchange starts to penetrate most of society outside the market the market progresses from being a nondynamic force in society to becoming a dynamic one . 272 Simmel competition as a form of indirect conflict . 272