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economics Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. Economics focuses on the behaviour and interac ...
, a market is a composition of
system A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its open system (systems theory), environment, is described by its boundaries, str ...
s,
institution An institution is a humanly devised structure of rules and norms that shape and constrain social behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions and ...
s, procedures,
social relation A social relation is the fundamental unit of analysis within the social sciences, and describes any voluntary or involuntary interpersonal relationship between two or more conspecifics within and/or between groups. The group can be a language or ...
s or
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...
s whereby parties engage in
exchange Exchange or exchanged may refer to: Arts, entertainment and media Film and television * Exchange (film), or ''Deep Trap'', 2015 South Korean psychological thriller * Exchanged (film), 2019 Peruvian fantasy comedy * Exchange (TV program), 2021 Sou ...
. While parties may exchange goods and services by
barter In trade, barter (derived from ''bareter'') is a system of exchange (economics), exchange in which participants in a financial transaction, transaction directly exchange good (economics), goods or service (economics), services for other goods ...
, most markets rely on sellers offering their goods or services (including
labour power Labour power (; ) is the capacity to work, a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do the work, i.e. labour power, and the physical act of working, i.e. labour. ...
) to buyers in exchange for
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: m ...
. It can be said that a market is the process by which the value of goods and services are established. Markets facilitate
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. Traders generally negotiate through a medium of cr ...
and enable the distribution and
allocation of resources In economics, resource allocation is the assignment of available resources to various uses. In the context of an entire economy, resources can be allocated by various means, such as markets, or planning. In project management, resource allocation ...
in a society. Markets allow any tradeable item to be evaluated and
price A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
d. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf.
ownership Ownership is the state or fact of legal possession and control over property, which may be any asset, tangible or intangible. Ownership can involve multiple rights, collectively referred to as '' title'', which may be separated and held by dif ...
) of services and goods. Markets generally supplant
gift economies A gift economy or gift culture is a system of exchange where Anthropological theories of value, valuables are not sold, but rather given without an explicit agreement for immediate or future rewards. Social norms and customs govern giving a gift ...
and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale (local produce or stock registration). Markets can differ by products (goods, services) or factors (labour and capital) sold,
product differentiation In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others to make it more attractive to a particular target market. This involves differentiating it from c ...
, place in which exchanges are carried, buyers targeted, duration, selling process, government regulation, taxes, subsidies,
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. List of countries by minimum wage, Most countries had introduced minimum wage legislation b ...
s,
price ceiling A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings to protect consumers from conditions that could make commodities proh ...
s, legality of exchange, liquidity, intensity of speculation, size, concentration, exchange asymmetry, relative prices, volatility and geographic extension. The geographic boundaries of a market may vary considerably, for example the food market in a single building, the real estate market in a local city, the consumer market in an entire country, or the economy of an international
trade bloc A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where barriers to trade (tariffs and others) are reduced or eliminated among the participating states. Trade blocs can be stand-alo ...
where the same rules apply throughout. Markets can also be worldwide, see for example the global
diamond trade Diamond is a solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Diamond is tasteless, odourless, strong, brittle solid, colourless in pure form, a poor conductor of electricity, and insol ...
. National economies can also be classified as
developed market In investing, a developed market is a country that is most developed in terms of its economy and capital markets. The country must be high income, but this also includes openness to foreign ownership, ease of capital movement, and efficiency of m ...
s or
developing market Development or developing may refer to: Arts *Development (music), the process by which thematic material is reshaped * Photographic development *Filmmaking, development phase, including finance and budgeting * Development hell, when a proje ...
s. In
mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to ...
, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and
information Information is an Abstraction, abstract concept that refers to something which has the power Communication, to inform. At the most fundamental level, it pertains to the Interpretation (philosophy), interpretation (perhaps Interpretation (log ...
. The exchange of goods or services, with or without
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: m ...
, is a transaction. Market participants or
economic agents In economics, an agent is an actor (more specifically, a decision maker) in a model of some aspect of the economy. Typically, every agent makes decisions by solving a well- or ill-defined optimization or choice problem. For example, ''buyers'' ( ...
consist of all the buyers and sellers of a
good In most contexts, the concept of good denotes the conduct that should be preferred when posed with a choice between possible actions. Good is generally considered to be the opposite of evil. The specific meaning and etymology of the term and its ...
who influence its
price A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
, which is a major topic of study of
economic An economy is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), consumption of Goods (economics), goods and Service (economics), services. In general, it is ...
s and has given rise to several theories and
models A model is an informative representation of an object, person, or system. The term originally denoted the plans of a building in late 16th-century English, and derived via French and Italian ultimately from Latin , . Models can be divided int ...
concerning the basic market forces of
supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris_paribus#Applications, holding all else equal, the unit price for a particular Good (economics), good ...
. A major topic of debate is how much a given market can be considered to be a "
free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...
", that is free from
government intervention A market intervention is a policy or measure that modifies or interferes with a market, typically done in the form of state action, but also by philanthropic and political-action groups. Market interventions can be done for a number of reas ...
. Microeconomics traditionally focuses on the study of market structure and the efficiency of
market equilibrium In economics, economic equilibrium is a situation in which the economic forces of supply and demand are balanced, meaning that economic variables will no longer change. Market equilibrium in this case is a condition where a market price is esta ...
; when the latter (if it exists) is not efficient, then economists say that a
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value.Paul Krugman and Robin Wells Krugman, Robin Wells (2006 ...
has occurred. However, it is not always clear how the allocation of resources can be improved since there is always the possibility of
government failure In public choice, a government failure is a counterpart to a market failure in which government regulatory action creates economic inefficiency. A government failure occurs if the costs of an intervention outweigh its benefits. Government failu ...
.


Definition

In economics, a market is a coordinating mechanism that uses prices to convey information among economic entities (such as firms, households and individuals) to regulate production and distribution. In his seminal 1937 article "
The Nature of the Firm "The Nature of the Firm" (1937) is an article by Ronald Coase published in the economics journal '' Economica''. It offered an economic explanation of why individuals choose to form partnerships, companies, and other business entities rather than t ...
",
Ronald Coase Ronald Harry Coase (; 29 December 1910 – 2 September 2013) was a British economist and author. Coase was educated at the London School of Economics, where he was a member of the faculty until 1951. He was the Clifton R. Musser Professor of Eco ...
wrote: "An economist thinks of the economic system as being coordinated by the price mechanism....in economic theory, we find that the allocation of factors of production between different uses is determined by the price mechanism". Thus the usage of the price mechanism to convey information is the defining feature of the market. This is in contrast to a firm, which as Coase put it, "the distinguishing mark of the firm is the super-session of the price mechanism". Thus, Firms and Markets are two opposite forms of organizing production; Coase wrote: There are also other hybrid forms of coordinating mechanisms, in between the hierarchical firm and price-coordinating market(e.g. global value chains,
Business Venture Venture capital (VC) is a form of private equity financing provided by firms or funds to start-up company, startup, early-stage, and emerging companies, that have been deemed to have high growth potential or that have demonstrated high growth in ...
s,
Joint Venture A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acce ...
, and
strategic alliance A strategic alliance is an agreement between two or more Legal party, parties to pursue a set of agreed upon objectives needed while remaining independent organizations. The alliance is a cooperation or collaboration which aims for a synergy wh ...
s). The reasons for the existence of firms or other forms of co-ordinating mechanisms of production and distribution alongside the market are studied in "The Theory of the Firm" literature, with various complete and incomplete contract theories trying to explain the existence of the firm. Incomplete contract theories that are explicitly based on
bounded rationality Bounded rationality is the idea that rationality is limited when individuals decision-making, make decisions, and under these limitations, rational individuals will select a decision that is satisficing, satisfactory rather than optimal. Limitat ...
lead to the costs of writing complete contracts. Such theories include: Transaction Cost Economies by Oliver Williamson and Residual Rights Theory by Groomsman, Hart, and Moore. The market/firm distinction can be contrasted with the relationship between the agents transacting. While in a market, the relationship is short term and restricted to the contract. In the case of firms and other co-ordinating mechanisms, it is for a longer duration. In the modern world, much economic activity takes place through fiat and not the market. Lafontaine and Slade (2007) estimates, in the US, that the total value added in transactions inside the firms equal the total value added of all market transactions. Similarly, 80% of all World Trade is conducted under Global Value Chains (2012 estimate), while 33% (1996 estimate) is intra-firm trade. Nearly 50% of US imports and 30% of exports take place within firms. While Rajan and Zingales (1998) have found that in 43 countries two-thirds of the growth in value added between 1980 and 1990 came from increase in firm size.


Types

A market is one of the many varieties of
system A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its open system (systems theory), environment, is described by its boundaries, str ...
s,
institution An institution is a humanly devised structure of rules and norms that shape and constrain social behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions and ...
s, procedures,
social relation A social relation is the fundamental unit of analysis within the social sciences, and describes any voluntary or involuntary interpersonal relationship between two or more conspecifics within and/or between groups. The group can be a language or ...
s and
infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and pri ...
s whereby parties engage in exchange. While parties may exchange goods and services by
barter In trade, barter (derived from ''bareter'') is a system of exchange (economics), exchange in which participants in a financial transaction, transaction directly exchange good (economics), goods or service (economics), services for other goods ...
, most markets rely on sellers offering their goods or services (including labour) in exchange for
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: m ...
from buyers. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate
trade Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market. Traders generally negotiate through a medium of cr ...
and enable the distribution and
allocation of resources In economics, resource allocation is the assignment of available resources to various uses. In the context of an entire economy, resources can be allocated by various means, such as markets, or planning. In project management, resource allocation ...
in a society. Markets allow any trade-able item to be evaluated and
price A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
d. A market sometimes emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf.
ownership Ownership is the state or fact of legal possession and control over property, which may be any asset, tangible or intangible. Ownership can involve multiple rights, collectively referred to as '' title'', which may be separated and held by dif ...
) of services and goods. Markets of varying types can spontaneously arise whenever a party has interest in a good or service that some other party can provide. Hence there can be a market for cigarettes in correctional facilities, another for chewing gum in a playground, and yet another for contracts for the future delivery of a commodity. There can be
black market A black market is a Secrecy, clandestine Market (economics), market or series of transactions that has some aspect of illegality, or is not compliant with an institutional set of rules. If the rule defines the set of goods and services who ...
s, where a good is exchanged illegally, for example markets for goods under a command economy despite pressure to repress them and virtual markets, such as
eBay eBay Inc. ( , often stylized as ebay) is an American multinational e-commerce company based in San Jose, California, that allows users to buy or view items via retail sales through online marketplaces and websites in 190 markets worldwide. ...
, in which buyers and sellers do not physically interact during negotiation. A market can be organized as an
auction An auction is usually a process of Trade, buying and selling Good (economics), goods or Service (economics), services by offering them up for Bidding, bids, taking bids, and then selling the item to the highest bidder or buying the item from th ...
, as a
private electronic market A private electronic market (PEM) uses the Internet to connect a limited number or pre-qualified buyers or sellers in one market. PEMs are a hybrid between perfectly open markets (e.g. exchanges where there is no pre-existing relationship betwee ...
, as a commodity wholesale market, as a
shopping center A shopping center in American English, shopping centre in English in the Commonwealth of Nations, Commonwealth English (see American and British English spelling differences#-re, -er, spelling differences), shopping complex, shopping arcade, ...
, as complex institutions such as international markets and as an informal discussion between two individuals. Markets vary in form, scale (volume and geographic reach), location and types of participants as well as the types of goods and services traded. The following is a non exhaustive list:


Physical consumer markets

* Food retail markets: farmers' markets,
fish market A fish market is a marketplace for selling Fish as food, fish and fish products. It can be dedicated to wholesale trade between Fisherman, fishermen and fish merchants, or to the sale of seafood to individual consumers, or to both. Retail fish ma ...
s, wet markets and
grocery store A grocery store ( AE), grocery shop or grocer's shop ( BE) or simply grocery is a retail store that primarily retails a general range of food products, which may be fresh or packaged. In everyday US usage, however, "grocery store" is a synon ...
s * Retail marketplaces: public markets,
market square A market square (also known as a market place) is an urban square meant for trading, in which a market is held. It is an important feature of many towns and cities around the world. A market square is an open area where market stalls are tradit ...
s, Main Streets,
High Street High Street is a common street name for the primary business street of a city, town, or village, especially in the United Kingdom and Commonwealth. It implies that it is the focal point for business, especially shopping. It is also a metonym fo ...
s,
bazaar A bazaar or souk is a marketplace consisting of multiple small Market stall, stalls or shops, especially in the Middle East, the Balkans, Central Asia, North Africa and South Asia. They are traditionally located in vaulted or covered streets th ...
s, souqs, night markets, shopping
strip mall A strip mall, strip center, strip plaza or simply plaza is a type of shopping mall, shopping center common in North America and Australia where the stores are arranged in a row, with a footpath in front. Strip malls are typically developed as a ...
s and
shopping mall A shopping mall (or simply mall) is a large indoor shopping center, usually Anchor tenant, anchored by department stores. The term ''mall'' originally meant pedestrian zone, a pedestrian promenade with shops along it, but in the late 1960s, i ...
s *
Big-box store A big-box store, a hyperstore, a supercenter, a superstore, or a megastore is a physically large retail establishment, usually part of a chain of stores. The term sometimes also refers, by extension, to the company that operates the store. The ...
s:
supermarket A supermarket is a self-service Retail#Types of outlets, shop offering a wide variety of food, Drink, beverages and Household goods, household products, organized into sections. Strictly speaking, a supermarket is larger and has a wider selecti ...
s,
hypermarket A hypermarket or superstore is a big-box store combining a supermarket and a department store. The result is an expansive retail facility carrying a wide range of products under one roof, including full grocery lines and general merchandise. In ...
s and
discount store Discount stores offer a retail format in which products are sold at prices that are in principle lower than an actual or supposed "full retail price". Discounters rely on bulk purchasing and efficient distribution to keep down costs. Types (Uni ...
s * ''Ad hoc''
auction An auction is usually a process of Trade, buying and selling Good (economics), goods or Service (economics), services by offering them up for Bidding, bids, taking bids, and then selling the item to the highest bidder or buying the item from th ...
markets: process of buying and selling goods or services by offering them up for bid, taking bids and then selling the item to the highest bidder * Used goods markets such as
flea market A flea market (or swap meet) is a type of street market that provides space for vendors to sell previously owned (secondhand) goods. This type of market is often seasonal. However, in recent years there has been the development of 'formal' ...
s * Temporary markets such as
fair A fair (archaic: faire or fayre) is a gathering of people for a variety of entertainment or commercial activities. Fairs are typically temporary with scheduled times lasting from an afternoon to several weeks. Fairs showcase a wide range of go ...
s *
Real estate market Real estate business is the profession of buying, leasing, managing, or selling real estate (commercial, industrial, residential, or mixed-use premises)."Real estate": Oxford English Dictionary online: Retrieved September 18, 2011 Marketing and ...
s


Physical business markets

* Physical wholesale markets: sale of goods or merchandise to retailers; to industrial, commercial, institutional, or other professional business users or to other wholesalers and related subordinated services * Markets for
intermediate good Intermediate goods, producer goods or semi-finished products are Good (economics), goods, such as partly finished goods, used as inputs in the production of other goods including final goods. A firm may make and then use intermediate goods, or mak ...
s used in production of other goods and services *
Labour market Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the labou ...
s: where people sell their labour to businesses in exchange for a
wage A wage is payment made by an employer to an employee for work (human activity), work done in a specific period of time. Some examples of wage payments include wiktionary:compensatory, compensatory payments such as ''minimum wage'', ''prevailin ...
* Online auctions and ''Ad hoc''
auction An auction is usually a process of Trade, buying and selling Good (economics), goods or Service (economics), services by offering them up for Bidding, bids, taking bids, and then selling the item to the highest bidder or buying the item from th ...
markets: process of buying and selling goods or services by offering them up for bid, taking bids and then selling the item to the highest bidder * Temporary business markets such as
trade fair A trade show, also known as trade fair, trade exhibition, or trade exposition, is an exhibition organized so that companies in a specific Industry (economics), industry can showcase and demonstrate their latest Product (business), products and se ...
s *
Energy market An energy market is a type of commodity market on which electricity, heat, and fuel products are traded. Natural gas and electricity are examples of products traded on an energy market. Other energy commodities include: oil, coal, carbon emission ...
s


Non-physical markets

*
Media market A media market, broadcast market, media region, designated market area (DMA), television market area, or simply market is a region where the population can receive the same (or similar) television station, television and radio broadcasting, ra ...
s (broadcast market): is a region where the population can receive the same (or similar) television and radio station offerings and may also include other types of media including newspapers and Internet content * Internet markets (
electronic commerce E-commerce (electronic commerce) refers to Commerce, commercial activities including the electronic buying or selling Goods and services, products and services which are conducted on online platforms or over the Internet. E-commerce draws on tec ...
): trading in products or services using computer networks, such as the Internet * Artificial markets created by regulation to exchange rights for derivatives that have been designed to ameliorate
externalities In economics, an externality is an indirect cost (external cost) or indirect benefit (external benefit) to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced ...
, such as pollution permits (see
carbon trading Carbon emission trading (also called carbon market, emission trading scheme (ETS) or cap and trade) is a type of emissions trading scheme designed for carbon dioxide (CO2) and other greenhouse gases (GHGs). A form of carbon pricing, its purpose ...
)


Financial markets

Financial market A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial marke ...
s facilitate the exchange of
liquid asset Liquid capital or fluid capital is the part of a firm's assets that it holds as money. It includes cash balances, bank deposits, and money market The money market is a component of the economy that provides short-term funds. The money marke ...
s. Most investors prefer investing in two markets: * The
stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange a ...
s, for the exchange of shares in
corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...
s (
NYSE The New York Stock Exchange (NYSE, nicknamed "The Big Board") is an American stock exchange in the Financial District, Manhattan, Financial District of Lower Manhattan in New York City. It is the List of stock exchanges, largest stock excha ...
, AMEX and the
NASDAQ The Nasdaq Stock Market (; National Association of Securities Dealers Automated Quotations) is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume, and ranked second on the list ...
are the most common stock markets in the United States) * The
bond market The bond market (also debt market or credit market) is a financial market in which participants can issue new debt, known as the primary market, or buy and sell debt security (finance), securities, known as the secondary market. This is usually in ...
s There are also: *
Currency market The foreign exchange market (forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines foreign exchange rates for every currency. By trading volume, ...
s are used to trade one currency for another, and are often used for speculation on currency exchange rates * The
money market The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. As short-term securities became a commodity, the money market became a compo ...
is the name for the global market for lending and borrowing *
Futures market A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or f ...
s, where contracts are exchanged regarding the future delivery of goods *
Insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...
markets * Debt markets


Unauthorized and illegal markets

*
Grey market A grey market or dark market (sometimes confused with the similar term "parallel import, parallel market") is the trade of a commodity through distribution channels that are not authorised by the original manufacturer or trademark proprietor. ...
s (parallel markets): is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer * markets in illegal goods such as the market for
illicit drugs The prohibition of drugs through sumptuary legislation or religious law is a common means of attempting to prevent the recreational use of certain intoxicating substances. An area has a prohibition of drugs when its government uses the for ...
, illegal arms, infringing products, cigarettes sold to minors or untaxed cigarettes (in some jurisdictions), or the private sale of un pasteurized
goat milk Goat milk is the milk of domestic goats. Goats produce about 2% of the world's total annual milk supply. Some goats are bred specifically for milk. Goat milk naturally has small, well-emulsified fat globules, which means the cream will stay ...


Mechanisms

In economics, a market that runs under
laissez-faire ''Laissez-faire'' ( , from , ) is a type of economic system in which transactions between private groups of people are free from any form of economic interventionism (such as subsidies or regulations). As a system of thought, ''laissez-faire'' ...
policies is called a
free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...
: it is "free" from the government, in the sense that the government makes no attempt to intervene through
tax A tax is a mandatory financial charge or levy imposed on an individual or legal entity by a governmental organization to support government spending and public expenditures collectively or to regulate and reduce negative externalities. Tax co ...
es,
subsidies A subsidy, subvention or government incentive is a type of government expenditure for individuals and households, as well as businesses with the aim of stabilizing the economy. It ensures that individuals and households are viable by having acce ...
,
minimum wage A minimum wage is the lowest remuneration that employers can legally pay their employees—the price floor below which employees may not sell their labor. List of countries by minimum wage, Most countries had introduced minimum wage legislation b ...
s,
price ceiling A price ceiling is a government- or group-imposed price control, or limit, on how high a price is charged for a product, commodity, or service. Governments use price ceilings to protect consumers from conditions that could make commodities proh ...
s and so on. However, market prices may be distorted by a seller or sellers with
monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
power, or a buyer with
monopsony In economics, a monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The Microeconomics, microeconomic theory of monopsony assume ...
power. Such price distortions can have an adverse effect on market participant's welfare and reduce the
efficiency Efficiency is the often measurable ability to avoid making mistakes or wasting materials, energy, efforts, money, and time while performing a task. In a more general sense, it is the ability to do things well, successfully, and without waste. ...
of market outcomes. The relative level of organization and negotiating power of buyers and sellers also markedly affects the functioning of the market. Markets are a
system A system is a group of interacting or interrelated elements that act according to a set of rules to form a unified whole. A system, surrounded and influenced by its open system (systems theory), environment, is described by its boundaries, str ...
and systems have
structure A structure is an arrangement and organization of interrelated elements in a material object or system, or the object or system so organized. Material structures include man-made objects such as buildings and machines and natural objects such as ...
. The
structure A structure is an arrangement and organization of interrelated elements in a material object or system, or the object or system so organized. Material structures include man-made objects such as buildings and machines and natural objects such as ...
of a well-functioning market is defined by the theory of
perfect competition In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In Economic model, theoret ...
. Well-functioning markets of the real world are never perfect, but basic structural characteristics can be approximated for real world markets, for example: * Many small buyers and sellers * Buyers and sellers have equal access to information * Products are comparable Markets where price negotiations meet equilibrium, but the equilibrium is not efficient are said to experience
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value.Paul Krugman and Robin Wells Krugman, Robin Wells (2006 ...
. Market failures are often associated with time-inconsistent preferences, information asymmetries, non-perfectly competitive markets,
principal–agent problem The principal–agent problem refers to the conflict in interests and priorities that arises when one person or entity (the " agent") takes actions on behalf of another person or entity (the " principal"). The problem worsens when there is a gr ...
s,
externalities In economics, an externality is an indirect cost (external cost) or indirect benefit (external benefit) to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced ...
, or
public goods In economics, a public good (also referred to as a social good or collective good)Oakland, W. H. (1987). Theory of public goods. In Handbook of public economics (Vol. 2, pp. 485–535). Elsevier. is a goods, commodity, product or service that ...
. Among the major negative externalities which can occur as a side effect of production and market exchange, are
air pollution Air pollution is the presence of substances in the Atmosphere of Earth, air that are harmful to humans, other living beings or the environment. Pollutants can be Gas, gases like Ground-level ozone, ozone or nitrogen oxides or small particles li ...
(side-effect of
manufacturing Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of the secondary sector of the economy. The term may refer ...
and
logistics Logistics is the part of supply chain management that deals with the efficient forward and reverse flow of goods, services, and related information from the point of origin to the Consumption (economics), point of consumption according to the ...
) and
environmental degradation Environment most often refers to: __NOTOC__ * Natural environment, referring respectively to all living and non-living things occurring naturally and the physical and biological factors along with their chemical interactions that affect an organism ...
(side-effect of
farm A farm (also called an agricultural holding) is an area of land that is devoted primarily to agricultural processes with the primary objective of producing food and other crops; it is the basic facility in food production. The name is used fo ...
ing and
urbanization Urbanization (or urbanisation in British English) is the population shift from Rural area, rural to urban areas, the corresponding decrease in the proportion of people living in rural areas, and the ways in which societies adapt to this change. ...
). There exists a popular thought, especially among
economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...
s, that free markets would have a structure of a
perfect competition In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In Economic model, theoret ...
. The logic behind this thought is that market failure is thought to be caused by other exogenic systems, and After eliminating external influences or interventions, often referred to as "exogenic systems," the markets were allowed to operate independently, adhering to the principles of free-market economics. This approach assumes that by removing regulatory barriers, subsidies, or other external controls, the market can function more efficiently. The underlying belief is that such "freed" markets, driven by the forces of supply and demand, can self-regulate and allocate resources optimally, thus preventing or minimizing occurrences of market failures. However, this perspective remains a topic of debate among economists and policymakers, as concepts like th
world market return policy
along with issues such as monopolies, externalities, and information asymmetries, highlight the complexities of market dynamics. . For a market to be competitive, there must be more than a single buyer or seller. It has been suggested that two people may trade, but it takes at least three persons to have a market so that there is competition in at least one of its two sides. However, competitive markets—as understood in formal economic theory—rely on much larger numbers of both buyers and sellers. A market with a single seller and multiple buyers is a
monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
. A market with a single buyer and multiple sellers is a
monopsony In economics, a monopsony is a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers. The Microeconomics, microeconomic theory of monopsony assume ...
. These are "the polar opposites of perfect competition". As an argument against such logic, there is a second view that suggests that the source of market failures is inside the market system itself, therefore the removal of other interfering systems would not result in markets with a structure of perfect competition. As an analogy, such an argument may suggest that capitalists do not want to enhance the structure of markets, just like a coach of a football team would influence the
referee A referee is an official, in a variety of sports and competition, responsible for enforcing the rules of the sport, including sportsmanship decisions such as ejection. The official tasked with this job may be known by a variety of other title ...
s or would break the
rules Rule or ruling may refer to: Human activity * The exercise of political or personal control by someone with authority or power * Business rule, a rule pertaining to the structure or behavior internal to a business * School rule, a rule tha ...
if he could while he is pursuing his target of winning the game. Thus, according to this view, capitalists are not enhancing the balance of their team versus the team of
consumer A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
- workers, so the market system needs a "referee" from outside that balances the game. In this second framework, the role of a "referee" of the market system is usually to be given to a democratic government.


Research

Disciplines such as
sociology Sociology is the scientific study of human society that focuses on society, human social behavior, patterns of Interpersonal ties, social relationships, social interaction, and aspects of culture associated with everyday life. The term sociol ...
,
economic history Economic history is the study of history using methodological tools from economics or with a special attention to economic phenomena. Research is conducted using a combination of historical methods, statistical methods and the Applied economics ...
,
economic geography Economic geography is the subfield of human geography that studies economic activity and factors affecting it. It can also be considered a subfield or method in economics. Economic geography takes a variety of approaches to many different topi ...
and
marketing Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce. Marketing is usually conducted by the seller, typically a retailer or ma ...
developed novel understandings of markets studying actual existing markets made up of persons interacting in diverse ways in contrast to an abstract and all-encompassing concepts of "the market". The term "the market" is generally used in two ways: # "The market" denotes the abstract mechanisms whereby supply and demand confront each other and deals are made; in its place, reference to markets reflects ordinary experience and the places, processes and institutions in which exchanges occurs # "The market" signifies an integrated, all-encompassing and cohesive capitalist world economy.


Economics


Political economy

Economics used to be called
political economy Political or comparative economy is a branch of political science and economics studying economic systems (e.g. Marketplace, markets and national economies) and their governance by political systems (e.g. law, institutions, and government). Wi ...
, as
Adam Smith Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...
defined it in
The Wealth of Nations ''An Inquiry into the Nature and Causes of the Wealth of Nations'', usually referred to by its shortened title ''The Wealth of Nations'', is a book by the Scottish people, Scottish economist and moral philosophy, moral philosopher Adam Smith; ...
: The earliest works of political economy are usually attributed to
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
scholars Adam Smith,
Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 29 December 1834) was an English economist, cleric, and scholar influential in the fields of political economy and demography. In his 1798 book ''An Essay on the Principle of Population'', Mal ...
, and
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...
, although they were preceded by the work of the French physiocrats, such as François Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1781). Smith describes how exchange of goods arose: And explains how exchanged mediated by money came to dominate the market:


Microeconomics

Microeconomics Microeconomics is a branch of economics that studies the behavior of individuals and Theory of the firm, firms in making decisions regarding the allocation of scarcity, scarce resources and the interactions among these individuals and firms. M ...
(from Greek prefix ''mikro''- meaning "small" and economics) is a branch of economics that studies the behavior of individuals and small impacting organizations in making decisions on the allocation of limited resources (see
scarcity In economics, scarcity "refers to the basic fact of life that there exists only a finite amount of human and nonhuman resources which the best technical knowledge is capable of using to produce only limited maximum amounts of each economic good. ...
). On the other hand, macroeconomics (from the Greek prefix ''makro''- meaning "large" and economics) is a branch of economics dealing with the performance, structure, behavior and decision-making of an economy as a whole, rather than individual markets.


=Marginal revolution

= The modern field of microeconomics arose as an effort of neoclassical economics school of thought to put economic ideas into mathematical mode. It began in the 19th century debates surrounding the works of
Antoine Augustin Cournot Antoine Augustin Cournot (; 28 August 180131 March 1877) was a French philosopher and mathematician who contributed to the development of economics. Biography Antoine Augustin Cournot was born on August 28, 1801 in Gray, Haute-Saône. He ent ...
,
William Stanley Jevons William Stanley Jevons (; 1 September 1835 – 13 August 1882) was an English economist and logician. Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method i ...
, Carl Menger and
Léon Walras Marie-Esprit-Léon Walras (; 16 December 1834 – 5 January 1910) was a French mathematical economics, mathematical economist and Georgist. He formulated the Marginalism, marginal theory of value (independently of William Stanley Jevons and Carl ...
—this period is usually denominated as the Marginal Revolution. A recurring theme of these debates was the contrast between the
labor theory of value The labor theory of value (LTV) is a theory of value that argues that the exchange value of a good or service is determined by the total amount of " socially necessary labor" required to produce it. The contrasting system is typically known as ...
and the
subjective theory of value The subjective theory of value (STV) is an theory of value (economics), economic theory for explaining how the value of goods and services are not only set but also how they can fluctuate over time. The contrasting system is typically known as the ...
, the former being associated with classical economists such as
Adam Smith Adam Smith (baptised 1723 – 17 July 1790) was a Scottish economist and philosopher who was a pioneer in the field of political economy and key figure during the Scottish Enlightenment. Seen by some as the "father of economics"——— or ...
,
David Ricardo David Ricardo (18 April 1772 – 11 September 1823) was a British political economist, politician, and member of Parliament. He is recognized as one of the most influential classical economists, alongside figures such as Thomas Malthus, Ada ...
and
Karl Marx Karl Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, political theorist, economist, journalist, and revolutionary socialist. He is best-known for the 1848 pamphlet '' The Communist Manifesto'' (written with Friedrich Engels) ...
(Marx was a contemporary of the marginalists). A labour theory of value can be understood as a theory that argues that economic value is determined by the amount of socially necessary labour time while a subjective theory of value derives economic value from subjective preferences, usually by specifying a
utility function In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. * In a Normative economics, normative context, utility refers to a goal or ob ...
in accordance with utilitarian philosophy. In his '' Principles of Economics'' (1890),A. Marshall, ''Principles of Economics'', 1890
Alfred Marshall Alfred Marshall (26 July 1842 – 13 July 1924) was an English economist and one of the most influential economists of his time. His book ''Principles of Economics (Marshall), Principles of Economics'' (1890) was the dominant economic textboo ...
presented a possible solution to this problem, using the
supply and demand In microeconomics, supply and demand is an economic model of price determination in a Market (economics), market. It postulates that, Ceteris_paribus#Applications, holding all else equal, the unit price for a particular Good (economics), good ...
model. Marshall's idea of solving the controversy was that the
demand curve A demand curve is a graph depicting the inverse demand function, a relationship between the price of a certain commodity (the ''y''-axis) and the quantity of that commodity that is demanded at that price (the ''x''-axis). Demand curves can be us ...
could be derived by aggregating individual consumer demand curves, which were themselves based on the consumer problem of maximizing
utility In economics, utility is a measure of a certain person's satisfaction from a certain state of the world. Over time, the term has been used with at least two meanings. * In a normative context, utility refers to a goal or objective that we wish ...
. The
supply curve In economics, supply is the amount of a resource that firms, producers, labourers, providers of financial assets, or other economic agents are willing and able to provide to the marketplace or to an individual. Supply can be in produced goods, ...
could be derived by superimposing a representative firm supply curves for the
factors of production In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilised amounts of the various inputs determine the quantity of output according to the rela ...
and then
market equilibrium In economics, economic equilibrium is a situation in which the economic forces of supply and demand are balanced, meaning that economic variables will no longer change. Market equilibrium in this case is a condition where a market price is esta ...
(economic equivalent of
mechanical equilibrium In classical mechanics, a particle is in mechanical equilibrium if the net force on that particle is zero. By extension, a physical system made up of many parts is in mechanical equilibrium if the net force on each of its individual parts is ze ...
) would be given by the intersection of demand and supply curves. He also introduced the notion of different market periods: mainly
long run and short run In economics, the long-run is a theoretical concept in which all markets are in equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long-run contrasts with the short-run, in which there are some constraints a ...
. This set of ideas gave way to what economists call
perfect competition In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In Economic model, theoret ...
—now found in the standard microeconomics texts, even though Marshall himself was highly skeptical it could be used as general model of all markets.


=Market structure

= Opposed to the model of perfect competition, some models of
imperfect competition In economics, imperfect competition refers to a situation where the characteristics of an economic market do not fulfil all the necessary conditions of a perfectly competitive market. Imperfect competition causes market inefficiencies, resulting in ...
were proposed: * The
monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...
model, already considered by marginalist economists, describes a profit maximizing capitalist facing a market
demand curve A demand curve is a graph depicting the inverse demand function, a relationship between the price of a certain commodity (the ''y''-axis) and the quantity of that commodity that is demanded at that price (the ''x''-axis). Demand curves can be us ...
with no competitors, who may practice
price discrimination Price discrimination (differential pricing, equity pricing, preferential pricing, dual pricing, tiered pricing, and surveillance pricing) is a Microeconomics, microeconomic Pricing strategies, pricing strategy where identical or largely similar g ...
. * Oligopoly is a market form in which a market or industry is dominated by a small number of sellers. The oldest model was the spring water
duopoly A duopoly (from Greek , ; and , ) is a type of oligopoly where two firms have dominant or exclusive control over a market, and most (if not all) of the competition within that market occurs directly between them. Duopoly is the most commonly ...
of Cournot (1838) in which equilibrium is determined by the duopolists reactions functions. It was criticized by
Harold Hotelling Harold Hotelling (; September 29, 1895 – December 26, 1973) was an American mathematical statistician and an influential economic theorist, known for Hotelling's law, Hotelling's lemma, and Hotelling's rule in economics, as well as Hotelling ...
for its instability, by Joseph Bertrand for lacking equilibrium for prices as independent variables. *
Monopolistic competition Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other but selling products that are differentiated from one another (e.g., branding, quality) and hence not perfect substi ...
is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g., by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. The "founding father" of the theory of monopolistic competition is Edward Hastings Chamberlin, who wrote a pioneering book on the subject, ''Theory of Monopolistic Competition'' (1933).
Joan Robinson Joan Violet Robinson ( Maurice; 31 October 1903 – 5 August 1983) was a British economist known for her wide-ranging contributions to economic theory. One of the most prominent economists of the century, Robinson incarnated the "Cambridge Sc ...
published a book called ''
The Economics of Imperfect Competition ''The Economics of Imperfect Competition'' is a 1933 book written by British economist Joan Robinson. Contents The book discusses the views of Alfred Marshall and Arthur Cecil Pigou on competition and the theory of the firm. Marshall believed th ...
'' with a comparable theme of distinguishing perfect from imperfect competition. Chamberlin defined monopolistic competition as "challenge to traditional viewpoint of economics that competition and monopoly are alternatives and that individual prices are to be explained in terms of one or the other". He continues: "By contrast it is held that most economic situations are composite of both competition and monopoly, and that, wherever this is the case, a false view is given by neglecting either one of the two forces and regarding the situation as made up entirely of the other". Hotelling built a model of market located over a line with two sellers in each extreme of the line, in this case maximizing profit for both sellers leads to a stable equilibrium. From this model also follows that if a seller is to choose the location of his store so as to maximize his profit, he will place his store the closest to his competitor as "the sharper competition with his rival is offset by the greater number of buyers he has an advantage". He also argues that clustering of stores is wasteful from the point of view of transportation costs and that public interest would dictate more spatial dispersion. *
William Baumol William Jack Baumol (February 26, 1922 – May 4, 2017) was an American economist. He was a professor of economics at New York University, Academic Director of the Berkley Center for Entrepreneurship and Innovation, and professor emeritus at Prin ...
provided in his 1977 paper the current formal definition of a
natural monopoly A natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming adv ...
where "an industry in which multifirm production is more costly than production by a monopoly". * Baumol defined a
contestable market In economics, the theory of contestable markets, associated primarily with its 1982 proponent William J. Baumol, held that there are markets served by a small number of firms that are nevertheless characterized by competitive equilibrium, and th ...
in his 1982 paper as a market where "entry is absolutely free and exit absolutely costless", freedom of entry in Stigler sense: the incumbent has no cost discrimination against entrants. He states that a contestable market will never have an economic profit greater than zero when in equilibrium and the equilibrium will also be efficient. According to Baumol, this equilibrium emerges endogenously due to the nature of contestable markets; that is, the only industry structure that survives in the long run is the one which minimizes total costs. This is in contrast to the older theory of industry structure since not only is industry structure not exogenously given, but equilibrium is reached without an ad hoc hypothesis on the behavior of firms, say using reaction functions in a duopoly. He concludes the paper commenting that regulators that seek to impede entry and/or exit of firms would do better to not interfere if the market in question resembles a contestable market.


=Market failure

= Around the 1970s the study of
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value.Paul Krugman and Robin Wells Krugman, Robin Wells (2006 ...
s came into focus with the study of
information asymmetry In contract theory, mechanism design, and economics, an information asymmetry is a situation where one party has more or better information than the other. Information asymmetry creates an imbalance of power in transactions, which can sometimes c ...
. In particular, three authors emerged from this period: Akerlof, Spence and Stiglitz. Akerlof considered the problem of bad quality cars driving good quality cars out of the market in his classic "
The Market for Lemons "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism" is a widely cited seminal paper in the field of economics which explores the concept of asymmetric information in markets. The paper was written in 1970 by George Akerlof and ...
" (1970) because of the presence of asymmetrical information between buyers and sellers. Michael Spence explained that signaling was fundamental in the labour market since employers cannot know beforehand which candidate is the most productive, a college degree becomes a signaling device that a firm uses to select new personnel. Stiglitz provided some general conditions under which market equilibrium is not efficient: presence of
externalities In economics, an externality is an indirect cost (external cost) or indirect benefit (external benefit) to an uninvolved third party that arises as an effect of another party's (or parties') activity. Externalities can be considered as unpriced ...
, imperfect information and incomplete markets.


=State interference

=
György Lukács György Lukács (born Bernát György Löwinger; ; ; 13 April 1885 – 4 June 1971) was a Hungarian Marxist philosopher, literary historian, literary critic, and Aesthetics, aesthetician. He was one of the founders of Western Marxism, an inter ...
, a founder of
Western Marxism Western Marxism is a current of Marxist theory that arose from Western and Central Europe in the aftermath of the 1917 October Revolution in Russia and the ascent of Leninism. The term denotes a loose collection of theorists who advanced an i ...
wrote about the essence of commodity-structure:.Lukács, György. (1971) ''History and Class Consciousness'', ''Reification and the Consciousness of the Proletariat-I: The Phenomenon of Reification'', Trans. Rodney Livingstone. Merlin Press. London. Human labour is abstracted and incorporated in commodities: * Objectively: is so far as the commodity form facilitates the equal exchange of qualitatively different things * Subjectively: human labour is both the common factor to which all commodities are reduced (in the abstract) and the principle governing the actual production of commodities (in reality) The ultimate problem for the thought of the bourgeoisie is the
crisis A crisis (: crises; : critical) is any event or period that will lead to an unstable and dangerous situation affecting an individual, group, or all of society. Crises are negative changes in the human or environmental affairs, especially when ...
: the qualitative existence of the 'things' misunderstood as
use-value Use value () or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a Commodity (Marxism), commodity (a tradeable object) which can satisfy some human requirement, want or need, o ...
s become the decisive factor. The failure is characteristic of
classical economics Classical economics, also known as the classical school of economics, or classical political economy, is a school of thought in political economy that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. It includ ...
and bourgeoisie economics, inadequate at explaining the true movement of
economic activity Economics () is a behavioral science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyse ...
''in toto''. The state has a system of law corresponding to capitalist needs:
bureaucracy Bureaucracy ( ) is a system of organization where laws or regulatory authority are implemented by civil servants or non-elected officials (most of the time). Historically, a bureaucracy was a government administration managed by departments ...
, formal standardization of
justice In its broadest sense, justice is the idea that individuals should be treated fairly. According to the ''Stanford Encyclopedia of Philosophy'', the most plausible candidate for a core definition comes from the ''Institutes (Justinian), Inst ...
and
civil service The civil service is a collective term for a sector of government composed mainly of career civil service personnel hired rather than elected, whose institutional tenure typically survives transitions of political leadership. A civil service offic ...
. C. B. Macpherson identifies an underlying model of the market underlying Anglo-American liberal democratic political economy and philosophy in the seventeenth and eighteenth centuries: persons are cast as self-interested individuals, who enter into contractual relations with other such individuals, concerning the exchange of goods or personal capacities cast as commodities, with the motive of maximizing pecuniary interest. The state and its governance systems are cast as outside of this framework. This model came to dominant economic thinking in the later nineteenth century, as so called liberal economists such as Ricardo,
Mill Mill may refer to: Science and technology * Factory * Mill (grinding) * Milling (machining) * Millwork * Paper mill * Steel mill, a factory for the manufacture of steel * Sugarcane mill * Textile mill * List of types of mill * Mill, the arithmetic ...
, Jevons, Walras and later neo-classical economics shifted from reference to geographically located marketplaces to an abstract "market". This tradition is continued in contemporary
neoliberalism Neoliberalism is a political and economic ideology that advocates for free-market capitalism, which became dominant in policy-making from the late 20th century onward. The term has multiple, competing definitions, and is most often used pe ...
epitomised by the
Mont Pelerin Society The Mont Pelerin Society (MPS), founded in 1947, is an international academic society of Economist, economists, Political philosophy, political philosophers, and other Intelligentsia, intellectuals who share a classical liberal outlook. It is hea ...
which gathered Frederick Hayek,
Ludwig von Mises Ludwig Heinrich Edler von Mises (; ; September 29, 1881 – October 10, 1973) was an Austrian-American political economist and philosopher of the Austrian school. Mises wrote and lectured extensively on the social contributions of classical l ...
,
Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and ...
and
Karl Popper Sir Karl Raimund Popper (28 July 1902 – 17 September 1994) was an Austrian–British philosopher, academic and social commentator. One of the 20th century's most influential philosophers of science, Popper is known for his rejection of the ...
, where the market is held up as optimal for wealth creation and human freedom and the states' role imagined as minimal, reduced to that of upholding and keeping stable property rights, contract and money supply. According to David Harvey, this allowed for boilerplate economic and institutional restructuring under
structural adjustment A structure is an arrangement and organization of interrelated elements in a material object or system, or the object or system so organized. Material structures include man-made objects such as buildings and machines and natural objects such as ...
and post-Communist reconstruction. Similar formalism occurs in a wide variety of
social democratic Social democracy is a Social philosophy, social, Economic ideology, economic, and political philosophy within socialism that supports Democracy, political and economic democracy and a gradualist, reformist, and democratic approach toward achi ...
and
Marxist Marxism is a political philosophy and method of socioeconomic analysis. It uses a dialectical and materialist interpretation of historical development, better known as historical materialism, to analyse class relations, social conflic ...
discourses that situate political action as antagonistic to the market. A central theme of empirical analyses is the variation and proliferation of types of markets since the rise of capitalism and global scale economies. The Regulation school stresses the ways in which developed capitalist countries have implemented varying degrees and types of environmental, economic and social regulation, taxation and public spending, fiscal policy and government provisioning of goods, all of which have transformed markets in uneven and geographical varied ways and created a variety of
mixed economies A mixed economy is an economic system that includes both elements associated with capitalism, such as private businesses, and with socialism, such as nationalized government services. More specifically, a mixed economy may be variously de ...
.


Economic coordination

Drawing on concepts of institutional variance and
path dependence Path dependence is a concept in the Social science, social sciences, referring to processes where past events or decisions constrain later events or decisions. It can be used to refer to outcomes at a single point in time or to long-run equilibria ...
, varieties of capitalism theorists (such as Peter Hall and
David Soskice David William Soskice, FBA (born 6 July 1942) is a British political economist and academic. He is currently the LSE School Professor of Political Science and Economics at the London School of Economics. Early life and education Soskice was b ...
) identify two dominant modes of economic ordering in the developed capitalist countries: * Coordinated market economies (such as
Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...
and
Japan Japan is an island country in East Asia. Located in the Pacific Ocean off the northeast coast of the Asia, Asian mainland, it is bordered on the west by the Sea of Japan and extends from the Sea of Okhotsk in the north to the East China Sea ...
) based on relational or incomplete contracting, network monitoring based on the exchange of
private information Privacy (, ) is the ability of an individual or group to seclude themselves or information about themselves, and thereby express themselves selectively. The domain of privacy partially overlaps with security, which can include the concepts of a ...
inside networks, and more reliance on collaborative, as opposed to competitive, relationships to build the competencies of the firm * Anglo-American liberal market economies: firms coordinate their activities primarily via hierarchies and competitive market arrangements. However, such approaches imply that the Anglo-American liberal market economies in fact operate in a matter close to the abstract notion of "the market". While Anglo-American countries have seen increasing introduction of neo-liberal forms of economic ordering, this has not led to simple convergence, but rather a variety of hybrid institutional orderings. Rather, a variety of new markets have emerged, such as for
carbon trading Carbon emission trading (also called carbon market, emission trading scheme (ETS) or cap and trade) is a type of emissions trading scheme designed for carbon dioxide (CO2) and other greenhouse gases (GHGs). A form of carbon pricing, its purpose ...
or rights to pollute. In some cases, such as emerging markets for water in
England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It is located on the island of Great Britain, of which it covers about 62%, and List of islands of England, more than 100 smaller adjacent islands. It ...
and
Wales Wales ( ) is a Countries of the United Kingdom, country that is part of the United Kingdom. It is bordered by the Irish Sea to the north and west, England to the England–Wales border, east, the Bristol Channel to the south, and the Celtic ...
, different forms of neoliberalism have been tried: moving from the state hydraulic model associated with concepts of universal provision and
public service A public service or service of general (economic) interest is any service intended to address the needs of aggregate members of a community, whether provided directly by a public sector agency, via public financing available to private busin ...
to market environmentalism associated with pricing of environmental externalities to reduce
environmental degradation Environment most often refers to: __NOTOC__ * Natural environment, referring respectively to all living and non-living things occurring naturally and the physical and biological factors along with their chemical interactions that affect an organism ...
and efficient allocation of water resources. In this case liberalization has multiple meanings: *
Privatization Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation w ...
: change of ownership from state monopoly to private hands *
Commercialization Commercialisation or commercialization is the process of introducing a new product or production method into commerce—making it available on the market. The term often connotes especially entry into the mass market (as opposed to entry into e ...
: pursuing efficiency, cost-benefit analysis and
profit maximization In economics, profit maximization is the short run or long run process by which a firm may determine the price, input and output levels that will lead to the highest possible total profit (or just profit in short). In neoclassical economics, ...
by introducing prices in comparison with the bill system proportional to property value *
Commodification Commodification is the process of transforming inalienable, free, or gifted things (objects, services, ideas, nature, personal information, people or animals) into commodities, or objects for sale.For animals"United Nations Commodity Trade Stati ...
: standardization, pricing to address
water scarcity Water scarcity (closely related to water stress or water crisis) is the lack of fresh water resources to meet the standard water demand. There are two types of water scarcity. One is ''physical.'' The other is ''economic water scarcity''. Physic ...
according to the Dublin principles and the Hague declaration In a period of fiscal and ideological crisis,
state failure A failed state is a state that has lost its ability to fulfill fundamental security and development functions, lacking effective control over its territory and borders. Common characteristics of a failed state include a government incapable of ...
is seen as the catalyst for liberalization, however the failure in assuring
water quality Water quality refers to the chemical, physical, and biological characteristics of water based on the standards of its usage. It is most frequently used by reference to a set of standards against which compliance, generally achieved through tr ...
can be seen as a driver for economic and ecological reregulation (in this case coming from the
European Union The European Union (EU) is a supranational union, supranational political union, political and economic union of Member state of the European Union, member states that are Geography of the European Union, located primarily in Europe. The u ...
). More broadly the idea of a water market failure can be seen as the explanation for state intervention, generating a natural monopoly of hydraulic infrastructure and the regulation of externalities such as
water pollution Water pollution (or aquatic pollution) is the contamination of Body of water, water bodies, with a negative impact on their uses. It is usually a result of human activities. Water bodies include lakes, rivers, oceans, aquifers, reservoirs and ...
. The situation however is not that simple, as the regulator may have the duty of introducing competition, which can be: * Direct competition or product competition * Surrogate competition * Competition for corporate control by mergers and takeovers * Procurement competition * Franchising Introduction of metering can result in both restriction and increase of consumption with LRMC pricing being the regulator ( Ofwat) preferred methodology.


Marketing


Market distribution

Paul Dulaney Converse and Fred M. Jones wrote: The methods of studying marketing are: * Functional approach: services or functions performed, what goods they are performed upon, what middlemen perform them * Commodity approach: what goods are marketed, what function are performed on them, what middlemen perform these functions * Institutional approach: what institutions, or middlemen, are engaged in distribution, what functions they perform, what good they handle Businesses market their products/services to a specific segments of
consumers A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. Th ...
: the defining factors of the markets are determined by demographics, interests and age/gender. A small market is a
niche market A niche market is the subset of the market on which a product is appealed to a small group of consumers. The market niche defines the product features aimed at satisfying specific market needs, as well as the price range, production quality and the ...
, while a big market is a
mass market The term "mass market" refers to a market for goods produced on a large scale for a significant number of end consumers. The mass market differs from the niche market in that the former focuses on consumers with a wide variety of backgrounds with ...
. A form of expansion is to enter a new market and sell/advertise to a different set of users.


Marketing management

The
marketing management Marketing management is the strategic organizational discipline that focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of marketing resources and a ...
school, evolved in the late 1950s and early 1960s, is fundamentally linked with the
marketing mix The marketing mix is the set of controllable elements or variables that a company uses to influence and meet the needs of its target customers in the most effective and efficient way possible. These variables are often grouped into four key ...
framework, a business tool used in marketing and by marketers. In his paper "The Concept of the Marketing Mix", Neil H. Borden reconstructed the history of the term "marketing mix". He started teaching the term after an associate, James Culliton, described the role of the
marketing manager Marketing management is the strategic organizational discipline that focuses on the practical application of marketing orientation, techniques and methods inside enterprises and organizations and on the management of marketing resources and a ...
in 1948 as a "mixer of ingredients"; one who sometimes follows recipes prepared by others, sometimes prepares his own recipe as he goes along, sometimes adapts a recipe from immediately available ingredients, and at other times invents new ingredients no one else has tried. The functions of total marketing include
advertising Advertising is the practice and techniques employed to bring attention to a Product (business), product or Service (economics), service. Advertising aims to present a product or service in terms of utility, advantages, and qualities of int ...
,
personal selling Personal selling occurs when a sales representative meets with a potential client for the purpose of transacting a Sales, sale. Many sales representatives rely on a sequential sales process that typically includes nine steps. Some sales represen ...
,
packaging Packaging is the science, art and technology of enclosing or protecting products for distribution, storage, sale, and use. Packaging also refers to the process of designing, evaluating, and producing packages. Packaging can be described as a coo ...
,
pricing Pricing is the Business process, process whereby a business sets and displays the price at which it will sell its products and services and may be part of the business's marketing plan. In setting prices, the business will take into account the ...
, channeling and
warehousing A warehouse is a building for storing goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial parks on the rural–urban fringe, out ...
. Borden also identified the market forces affecting marketing mix: * Consumer buying behavior * Trade's behavior (
wholesale Wholesaling or distributing is the sale of goods or merchandise to retailers; to industrial, commercial, institutional or other professional business users; or to other wholesalers (wholesale businesses) and related subordinated services. In ...
and
retailing Retail is the sale of goods and services to consumers, in contrast to wholesaling, which is the sale to business or institutional customers. A retailer purchases goods in large quantities from manufacturers, directly or through a wholesal ...
) * Competitors position and behavior: industry structure, product choice, oversupply,
pricing Pricing is the Business process, process whereby a business sets and displays the price at which it will sell its products and services and may be part of the business's marketing plan. In setting prices, the business will take into account the ...
and
innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or service (economics), services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a n ...
* Governmental behavior:
regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...
s Borden concludes saying that marketing is more an art than a science. The marketer E. Jerome McCarthy proposed a four Ps classification ( product,
price A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
, promotion,
place Place may refer to: Geography * Place (United States Census Bureau), defined as any concentration of population ** Census-designated place, a populated area lacking its own municipal government * "Place", a type of street or road name ** Of ...
) in 1960, which has since been used by marketers throughout the world. Koichi Shimizu proposed a 7Cs Compass Model (
corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...
,
commodity In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...
,
cost Cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it i ...
,
communication Communication is commonly defined as the transmission of information. Its precise definition is disputed and there are disagreements about whether Intention, unintentional or failed transmissions are included and whether communication not onl ...
, channel,
consumer A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
, circumstances) to provide a more complete picture of the nature of marketing in 1981. Robert F. Lauterborn wrote about the Four P's in 1990 He instead advocated a four Cs classification which is a more consumer-oriented version of the four Ps that attempts to better fit the movement from mass marketing to niche marketing: *
Consumer A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
: do not focus on product, study consumer wants and needs *
Cost Cost is the value of money that has been used up to produce something or deliver a service, and hence is not available for use anymore. In business, the cost may be one of acquisition, in which case the amount of money expended to acquire it i ...
: forget price, instead understand the consumer cost to satisfy that want or need, even driving time versus time spent with family matters *
Communication Communication is commonly defined as the transmission of information. Its precise definition is disputed and there are disagreements about whether Intention, unintentional or failed transmissions are included and whether communication not onl ...
: forget promotion, instead focus on communication and create dialogue *
Convenience Convenient procedures, products and services are those intended to increase ease in accessibility, save resources (such as time, effort and energy) and decrease frustration. A modern convenience is a labor-saving device, service or substance ...
: forget place, instead think about convenience to buy, know each market subsegment


Sociology


Economic rationality

Max Weber Maximilian Carl Emil Weber (; ; 21 April 186414 June 1920) was a German Sociology, sociologist, historian, jurist, and political economy, political economist who was one of the central figures in the development of sociology and the social sc ...
defines the measure of rational economic action as the: # Systematic distribution of utilities between present and future # Systematic distribution of utilities between various potential uses # Systematic production of utilities by
manufacture Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of the secondary sector of the economy. The term may refer to a r ...
or transportation by the owner of the means of production # Systematic acquisition by agreement of the powers of control and disposal over utilities, mainly by establishing
corporate A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the state to act as a single entity (a legal entity recognized by private and public law as "born out of s ...
groups or by exchange Opposition of interests is typically resolved by
bargaining In the social sciences, bargaining or haggling is a type of negotiation in which the buyer and seller of a Goods and services, good or service debate the price or nature of a Financial transaction, transaction. If the bargaining produces agree ...
or by competitive biding: # Utilities, goods and labour are at the disposal of the individual without interference from others # Transportation can be seen as a part of the process of production # It is indifferent whether the individual is prevented from using force to interfere in the controls of others by means of a legal order, convention, custom, self-interest or moral standards # Competition for the means of production may exist under various conditions # Anything which may be transferred between individuals by compensation may be an object of exchange # Conditions of exchange may be traditional, conventional (exchange of gifts) or rational (motivated by profit or need) # Regulations may threaten the source of supply Money may classified as: * Coined money is called "free money" or "market money" when it is coined by the mint without limit of amount * It is called "limited" money or "administrative money" if the issue of coinage if subject to a corporate group * It is called regulated money if the kind and amount of coinage is subject to rules Weber defines: * Market situation: all the opportunities of exchanging a good for money that are known by the participants * Marketability: degree of regularity that a good tends to be an object of exchange in the market * Market freedom: degree of autonomy enjoyed by the participants in price determination and competition * Market regulation: restrictions on marketability and market freedom, done by tradition, convention, law, voluntary action Weber defines "formal rationality of economic action" to designate the extent of quantitative
calculation A calculation is a deliberate mathematical process that transforms a plurality of inputs into a singular or plurality of outputs, known also as a result or results. The term is used in a variety of senses, from the very definite arithmetical ...
or
accounting Accounting, also known as accountancy, is the process of recording and processing information about economic entity, economic entities, such as businesses and corporations. Accounting measures the results of an organization's economic activit ...
and "substantive rationality" as the degree a group of persons is or could be adequately provided with good by means of oriented course of social action. A prominent entry-point for challenging the market model's applicability concerns exchange transactions and the ''
homo economicus The term ''Homo economicus'', or economic man, is the portrayal of humans as agents who are consistently rational and narrowly self-interested, and who pursue their subjectively defined ends optimally. It is a wordplay on ''Homo sapiens'', u ...
'' assumption of self-interest maximization. , a number of streams of economic sociological analysis of markets focus on the role of the social in transactions and on the ways transactions involve
social network A social network is a social structure consisting of a set of social actors (such as individuals or organizations), networks of Dyad (sociology), dyadic ties, and other Social relation, social interactions between actors. The social network per ...
s and relations of trust,
cooperation Cooperation (written as co-operation in British English and, with a varied usage along time, coöperation) takes place when a group of organisms works or acts together for a collective benefit to the group as opposed to working in competition ...
and other bonds. Economic geographers in turn draw attention to the ways exchange transactions occur against the backdrop of
institutional An institution is a humanly devised structure of rules and norms that shape and constrain social behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions and ...
, social and geographic processes, including
class Class, Classes, or The Class may refer to: Common uses not otherwise categorized * Class (biology), a taxonomic rank * Class (knowledge representation), a collection of individuals or objects * Class (philosophy), an analytical concept used d ...
relations, uneven development and historically contingent path-dependencies.
Pierre Bourdieu Pierre Bourdieu (, ; ; ; 1 August 1930 – 23 January 2002) was a French sociologist and public intellectual. Bourdieu's contributions to the sociology of education, the theory of sociology, and sociology of aesthetics have achieved wide influ ...
has suggested the market model is becoming self-realizing in virtue of its wide acceptance in national and international institutions through the 1990s.


Abstraction, market agencement and framing

Michel Callon traces the history of how the market as a place (fairs, flea markets, fish markets) became an abstract concept (market for ideas, dating market, job market) which he calls the interface market model. This abstraction proceeds in three layers: * Sellers, buyers, platform goods * Competition * Institutions The interface market model thus establishes that: # Agents and goods are distinguable # A transfer is a communication of property rights # Competition develops between agents # A transaction consists of monetary payments The limitations of this model are: # They do not take into account the material composition of market activities # They bracket out the constructive process of creating supply and demand, which leads to underestimating the crucial role played by bilateral transactions and the initiation of these transactions # They create unrealism through the concepts of aggregated supply and demand and bring about difficulties in comprehending the actual mechanisms for establishing prices # They create a total impasse on the complex processes that result in a separation between agents and goods # The hypothesis that goods are platforms precludes us from recognizing they are processes # A description of agents that underestimates their diversity, heterogeneity, and plasticity Callon offer the market agencements (heterogenous assemblage) model as an alternative, its features being: # Competition is the struggle to establish bilateral transactions that are never identical # Innovation is fundamental to commercial activity # Goods are processes # Proliferating agents, plastic identities and networking Market agencements function through framing, that is action is oriented to a strategic goal (obtaining bilateral transactions), for example market oriented passiva(c)tion: # Detaches the good and liberates it from all those who participated in its elaboration and profiling # Renders it apt to provoke courses of actions and to contribute to their realization (that is, imbues it with uses) # Ensures that its behavior is at least to a certain extent controllable and predictable # Organizes the attribution and transfer of
property right The right to property, or the right to own property (cf. ownership), is often classified as a human right for natural persons regarding their possessions. A general recognition of a right to private property is found more rarely and is typicall ...
s Callon identifies the activities necessary for framing: # Rendering goods pass(act)ive # Activating agencies capable of evaluating and transforming these goods # Organizing their encounter # Ensuring the attachment of the goods to the agencies # Obtaining consent to pay # Setting a price and compelling payment–actions that combine and interweave with one another, with possible feedback loops and iterations


Embeddedness

Alfred Marshall wrote: According to Max Weber the spirit of capitalism as preached by
Benjamin Franklin Benjamin Franklin (April 17, 1790) was an American polymath: a writer, scientist, inventor, statesman, diplomat, printer, publisher and Political philosophy, political philosopher.#britannica, Encyclopædia Britannica, Wood, 2021 Among the m ...
is directly connected with utilitarianism,
rationalism In philosophy, rationalism is the Epistemology, epistemological view that "regards reason as the chief source and test of knowledge" or "the position that reason has precedence over other ways of acquiring knowledge", often in contrast to ot ...
and
Protestantism Protestantism is a branch of Christianity that emphasizes Justification (theology), justification of sinners Sola fide, through faith alone, the teaching that Salvation in Christianity, salvation comes by unmerited Grace in Christianity, divin ...
. Luther calling was not a monastic one but involves the fulfilments of obligations imposed by one's position in the world. The pursuit of money and earthly goods was not viewed positively by
Protestantism Protestantism is a branch of Christianity that emphasizes Justification (theology), justification of sinners Sola fide, through faith alone, the teaching that Salvation in Christianity, salvation comes by unmerited Grace in Christianity, divin ...
, the
Puritan The Puritans were English Protestants in the 16th and 17th centuries who sought to rid the Church of England of what they considered to be Roman Catholic practices, maintaining that the Church of England had not been fully reformed and should b ...
s however emphasized that
God In monotheistic belief systems, God is usually viewed as the supreme being, creator, and principal object of faith. In polytheistic belief systems, a god is "a spirit or being believed to have created, or for controlling some part of the un ...
blessings, like in the
Book of Job The Book of Job (), or simply Job, is a book found in the Ketuvim ("Writings") section of the Hebrew Bible and the first of the Poetic Books in the Old Testament of the Christian Bible. The language of the Book of Job, combining post-Babylonia ...
, applied also to material life. The limitation of consumption inevitably results in
capital accumulation Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form ...
, therefore, for Weber, the Puritan's idea of the calling and ascetic conduct contributed to development of capitalism:
saving Saving is income not spent, or deferred Consumption (economics), consumption. In economics, a broader definition is any income not used for immediate consumption. Saving also involves reducing expenditures, such as recurring Cost, costs. Methods ...
is an ascetic activity.
Embeddedness In economics and economic sociology, embeddedness refers to the degree to which economic activity is constrained by non-economic institutions. The term was created by economic historian Karl Polanyi as part of his substantivist approach. Polanyi ...
expresses the idea that the economy is not autonomous but subordinated to politics, religion, and social relations. Polanyi's use of the term suggests the now familiar idea that market transactions depend on trust, mutual understanding, and legal enforcement of contracts. Michel Callon's concept of framing provides a useful
schema Schema may refer to: Science and technology * SCHEMA (bioinformatics), an algorithm used in protein engineering * Schema (genetic algorithms), a set of programs or bit strings that have some genotypic similarity * Schema.org, a web markup vocab ...
: each economic act or transaction occurs against, incorporates and also re-performs a geographically and cultural specific complex of social histories, institutional arrangements, rules and connections. These network relations are simultaneously bracketed, so that persons and transactions may be disentangled from thick social bonds. The character of calculability is imposed upon agents as they come to work in markets and are "formatted" as calculative agencies. Market exchanges contain a history of struggle and contestation that produced actors predisposed to exchange under certain sets of rules. Therefore, for Challon, market transactions can never be disembedded from social and geographic relations and there is no sense to talking of degrees of embeddedness and disembeddeness. During the 20th century two common forms of critique were made: * Categories of 19th century
social science Social science (often rendered in the plural as the social sciences) is one of the branches of science, devoted to the study of societies and the relationships among members within those societies. The term was formerly used to refer to the ...
such as
class Class, Classes, or The Class may refer to: Common uses not otherwise categorized * Class (biology), a taxonomic rank * Class (knowledge representation), a collection of individuals or objects * Class (philosophy), an analytical concept used d ...
,
modernity Modernity, a topic in the humanities and social sciences, is both a historical period (the modern era) and the ensemble of particular Society, socio-Culture, cultural Norm (social), norms, attitudes and practices that arose in the wake of the ...
or the West were social constructions * These categories were artificial and not universal These are common themes in interpretive
social science Social science (often rendered in the plural as the social sciences) is one of the branches of science, devoted to the study of societies and the relationships among members within those societies. The term was formerly used to refer to the ...
,
cultural studies Cultural studies is an academic field that explores the dynamics of contemporary culture (including the politics of popular culture) and its social and historical foundations. Cultural studies researchers investigate how cultural practices rel ...
and
post-structuralism Post-structuralism is a philosophical movement that questions the objectivity or stability of the various interpretive structures that are posited by structuralism and considers them to be constituted by broader systems of Power (social and poli ...
. However, as Timothy Mitchell points out this mode of thought tends to put aside the real, the natural and nonhuman: the idea that a universal processes exists such as modernity,
capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...
and
globalization Globalization is the process of increasing interdependence and integration among the economies, markets, societies, and cultures of different countries worldwide. This is made possible by the reduction of barriers to international trade, th ...
should not be taken for granted. An emerging theme is the interrelationship, inter-penetrability and variations of concepts of
person A person (: people or persons, depending on context) is a being who has certain capacities or attributes such as reason, morality, consciousness or self-consciousness, and being a part of a culturally established form of social relations suc ...
s,
commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...
and modes of exchange under particular market formations. This is most pronounced in recent movement towards
post-structuralist Post-structuralism is a philosophical movement that questions the objectivity or stability of the various interpretive structures that are posited by structuralism and considers them to be constituted by broader systems of Power (social and poli ...
theorizing that draws on
Michel Foucault Paul-Michel Foucault ( , ; ; 15 October 192625 June 1984) was a French History of ideas, historian of ideas and Philosophy, philosopher who was also an author, Literary criticism, literary critic, Activism, political activist, and teacher. Fo ...
and Actor Network Theory and stress relational aspects of person-hood, and dependence and integration into networks and practical systems. Commodity network approaches further both deconstruct and show alternatives to the market models concept of commodities.


Social systems theory

In
social system In sociology, a social system is the patterned network of relationships constituting a coherent whole that exist between individuals, groups, and institutions. It is the formal Social structure, structure of role and status that can form in a smal ...
s theory (cf.
Niklas Luhmann Niklas Luhmann (; ; December 8, 1927 – November 11, 1998) was a German sociologist, philosopher of social science, and systems theorist. Niklas Luhmann is one of the most influential German sociologists of the 20th century. His thinking was ...
), markets are also conceptualized as inner environments of the economy. As horizon of all potential investment decisions the market represents the environment of the actually realized investment decisions. However, such inner environments can also be observed in further function systems of society like in political, scientific, religious or mass media systems.


Economic geography

Wilhelm Launhardt Carl Wilhelm Friedrich Launhardt (7 April 1832 – 14 May 1918) was a German mathematician and economist. Launhardt was born in Hannover, the capital of the Kingdom of Hannover. He studied and taught at Hannover's technical school. Following ...
, a location theorist, wrote: Transportation can be carried either by stone-paved roads or railways, the former not being fully developed by private capital alone. A widespread trend in
economic history Economic history is the study of history using methodological tools from economics or with a special attention to economic phenomena. Research is conducted using a combination of historical methods, statistical methods and the Applied economics ...
and
sociology Sociology is the scientific study of human society that focuses on society, human social behavior, patterns of Interpersonal ties, social relationships, social interaction, and aspects of culture associated with everyday life. The term sociol ...
is skeptical of the idea that it is possible to develop a theory to capture an essence or unifying thread to markets. For economic geographers, reference to regional, local, or
commodity In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...
specific markets can serve to undermine assumptions of global integration and highlight geographic variations in the structures,
institution An institution is a humanly devised structure of rules and norms that shape and constrain social behavior. All definitions of institutions generally entail that there is a level of persistence and continuity. Laws, rules, social conventions and ...
s, histories, path dependencies, forms of interaction and modes of self-understanding of agents in different spheres of market exchange. Reference to actual markets can show
capitalism Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit. This socioeconomic system has developed historically through several stages and is defined by ...
not as a totalizing force or completely encompassing mode of economic activity, but rather as "a set of economic practices scattered over a
landscape A landscape is the visible features of an area of land, its landforms, and how they integrate with natural or human-made features, often considered in terms of their aesthetic appeal.''New Oxford American Dictionary''. A landscape includes th ...
, rather than a systemic concentration of power". Problematic for market formalism is the relationship between formal capitalist economic processes and a variety of alternative forms, ranging from semi-
feudal Feudalism, also known as the feudal system, was a combination of legal, economic, military, cultural, and political customs that flourished in Middle Ages, medieval Europe from the 9th to 15th centuries. Broadly defined, it was a way of struc ...
and
peasant A peasant is a pre-industrial agricultural laborer or a farmer with limited land-ownership, especially one living in the Middle Ages under feudalism and paying rent, tax, fees, or services to a landlord. In Europe, three classes of peasan ...
economies widely operative in many developing economies, to informal markets,
barter In trade, barter (derived from ''bareter'') is a system of exchange (economics), exchange in which participants in a financial transaction, transaction directly exchange good (economics), goods or service (economics), services for other goods ...
systems,
worker cooperative A worker cooperative is a cooperative owned and Workers' self-management, self-managed by its workers. This control may mean a Company, firm where every worker-owner participates in decision-making in a democratic fashion, or it may refer to one ...
s, or illegal trades that occur in most developed countries. Practices of incorporation of non-Western peoples into global markets in the nineteenth and twentieth centuries did not merely result in the quashing of former social economic institutions. Rather, various modes of articulation arose between transformed and hybridized local traditions and social practices and the emergent
world economy The world economy or global economy is the economy of all humans in the world, referring to the global economic system, which includes all economic activities conducted both within and between nations, including production (economics), producti ...
. By their liberal nature, so called capitalist markets have almost always included a wide range of geographically situated economic practices that do not follow the market model. Economies are thus hybrids of market and non-market elements. Helpful here is J.K. Gibson-Graham's complex topology of the diversity of contemporary market economies describing different types of transactions, labour and economic agents. Transactions can occur in
black market A black market is a Secrecy, clandestine Market (economics), market or series of transactions that has some aspect of illegality, or is not compliant with an institutional set of rules. If the rule defines the set of goods and services who ...
s (such as for
marijuana Cannabis (), commonly known as marijuana (), weed, pot, and ganja, List of slang names for cannabis, among other names, is a non-chemically uniform psychoactive drug from the ''Cannabis'' plant. Native to Central or South Asia, cannabis has ...
) or be artificially protected (such as for
patent A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an sufficiency of disclosure, enabling discl ...
s). They can cover the sale of public goods under
privatization Privatization (rendered privatisation in British English) can mean several different things, most commonly referring to moving something from the public sector into the private sector. It is also sometimes used as a synonym for deregulation w ...
schemes to co-operative exchanges and occur under varying degrees of monopoly power and state
regulation Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...
. Likewise, there are a wide variety of economic agents, which engage in different types of transactions on different terms: one cannot assume the practices of a religious
kindergarten Kindergarten is a preschool educational approach based on playing, singing, practical activities such as drawing, and social interaction as part of the transition from home to school. Such institutions were originally made in the late 18th cen ...
,
multinational corporation A multinational corporation (MNC; also called a multinational enterprise (MNE), transnational enterprise (TNE), transnational corporation (TNC), international corporation, or stateless corporation, is a corporate organization that owns and cont ...
,
state enterprise A state-owned enterprise (SOE) is a business entity created or owned by a national or local government, either through an executive order or legislation. SOEs aim to generate profit for the government, prevent private sector monopolies, provide goo ...
, or community-based
cooperative A cooperative (also known as co-operative, coöperative, co-op, or coop) is "an autonomy, autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned a ...
can be subsumed under the same logic of calculability. This emphasis on proliferation can also be contrasted with continuing scholarly attempts to show underlying cohesive and structural similarities to different markets.Swedberg, 1994, p. 267 Gibson-Graham thus read a variety of alternative markets for fair trade and
organic food Organic food, also known as ecological or biological food, refers to foods and beverages produced using methods that comply with the standards of organic farming. Standards vary worldwide, but organic farming features practices that cycle resou ...
s or those using
local exchange trading system A local exchange trading system (also local employment and trading system or local energy transfer system; abbreviated LETS) is a locally initiated, democratically organised, not-for-profit community enterprise that provides a community infor ...
as not only contributing to proliferation, but also forging new modes of ethical exchange and economic subjectivities.


Anthropology

Economic anthropology is a scholarly field that attempts to explain human economic behavior in its widest historic, geographic and cultural scope. Its origins as a sub-field of anthropology begin with the Polish–British founder of anthropology,
Bronisław Malinowski Bronisław Kasper Malinowski (; 7 April 1884 – 16 May 1942) was a Polish anthropologist and ethnologist whose writings on ethnography, social theory, and field research have exerted a lasting influence on the discipline of anthropology. ...
, and his French compatriot,
Marcel Mauss Marcel Israël Mauss (; 10 May 1872 – 10 February 1950) was a French sociologist and anthropologist known as the "father of French ethnology". The nephew of Émile Durkheim, Mauss, in his academic work, crossed the boundaries between sociolo ...
, on the nature of gift-giving exchange (or reciprocity) as an alternative to market exchange. Studies in economic anthropology for the most part are focused on exchange but they a complex relationship with the discipline of economics, of which it is highly critical: for example Trobianders described by Malinowski deviate from rational self-interested individual.Malinowski, Bronislaw. ''Argonauts Of The Western Pacific – An Account of Native Enterprise and Adventure in the Archipelagoes of Melanesian New Guinea'', Read Books Ltd. Bronisław Malinowski's path-breaking work, '' Argonauts of the Western Pacific'' (1922), addressed the question "why would men risk life and limb to travel across huge expanses of dangerous ocean to give away what appear to be worthless trinkets?". He begins by describing trade in the South Sea: The economic situation can vary considerably depending on the tribes and islands: for example the Gumawana villagers are known as efficient sailors and for their skill in pottery, they are, however, island monopolists keeping the trade in their own hands without improving it. In a series of three expeditions, Malinowski carefully traced the network of exchanges of bracelets and necklaces across the Trobriand Islands and established that they were part of a system of inter-tribal exchange: it is known as the Kula ring, a closed circuit in which necklaces of red shells go in a
clockwise Two-dimensional rotation can occur in two possible directions or senses of rotation. Clockwise motion (abbreviated CW) proceeds in the same direction as a clock's hands relative to the observer: from the top to the right, then down and then to ...
motion and bracelets of white shell go in anticlockwise motion. Malinowski goes on to explain: In the 1920s and later, Malinowski's study became the subject of debate with the French anthropologist, Marcel Mauss, author of '' The Gift'' (''Essai sur le don'', 1925). Malinowski emphasized the exchange of goods between individuals and their non-altruistic motives for giving: they expected a return of equal or greater value (colloquially referred to as " Indian giving"). In other words, reciprocity is an implicit part of gifting as no "free gift" is given without expectation of reciprocity. In contrast, Mauss has emphasized that the gifts were not between individuals, but between representatives of larger collectivities. He stated that this exchange system was clearly linked to political authority. He argued these gifts were a "total prestation" as they were not simple, alienable commodities to be bought and sold, but like the " Crown jewels" embodied the reputation, history and sense of identity of a "corporate kin group", such as a line of kings. Given the stakes, Mauss asked "why anyone would give them away?" and his answer was an enigmatic concept, "the spirit of the gift". A good part of the confusion (and resulting debate) was due to a bad translation. Mauss appeared to be arguing that a return gift is given to keep the very relationship between givers alive; a failure to return a gift ends the relationship; and the promise of any future gifts. Based on an improved translate, Jonathan Parry has demonstrated that Mauss was arguing that the concept of a "pure gift" given altruistically only emerges in societies with a well-developed market
ideology An ideology is a set of beliefs or values attributed to a person or group of persons, especially those held for reasons that are not purely about belief in certain knowledge, in which "practical elements are as prominent as theoretical ones". Form ...
. Rather than emphasize how particular kinds of objects are either gifts or commodities to be traded in restricted spheres of exchange,
Arjun Appadurai Arjun Appadurai FRAI (born 4 February 1949) is an Indian-American anthropologist who has been recognized as a major theorist in globalization studies. He is an elected fellow of the Royal Anthropological Institute of Great Britain and Ireland ...
and others began to look at how objects flowed between these spheres of exchange. They shifted attention away from the character of the human relationships formed through exchange and placed it on "the social life of things" instead. They examined the strategies by which an object could be " singularized" (made unique, special, one-of-a-kind) and so withdrawn from the market. A marriage ceremony that transforms a purchased ring into an irreplaceable family
heirloom In popular usage, an heirloom is something that has been passed down for generations through family members. Examples are a family bible, antiques, weapons or jewellery. The term originated with the historical principle of an heirloom in ...
is one example whereas the heirloom, in turn, makes a perfect gift.


Mathematical modeling

Although
arithmetic Arithmetic is an elementary branch of mathematics that deals with numerical operations like addition, subtraction, multiplication, and division. In a wider sense, it also includes exponentiation, extraction of roots, and taking logarithms. ...
has been used since the beginning of civilization to set prices, it was not until the 19th century that data was systematically collected and more advanced mathematical tools began to be used to study markets in the form of
social statistics Social statistics is the use of statistics, statistical measurement systems to study human behavior in a social environment. This can be accomplished through opinion poll, polling a group of people, evaluating a subset of data obtained about a gro ...
.
Business intelligence Business intelligence (BI) consists of strategies, methodologies, and technologies used by enterprises for data analysis and management of business information. Common functions of BI technologies include Financial reporting, reporting, online an ...
is also dated to the 19th century, but it was with the rise of the
computer A computer is a machine that can be Computer programming, programmed to automatically Execution (computing), carry out sequences of arithmetic or logical operations (''computation''). Modern digital electronic computers can perform generic set ...
that
business analytics Business analytics (BA) refers to the skills, technologies, and practices for iterative exploration and investigation of past business performance to gain insight and drive business planning. Business analytics focuses on developing new insights ...
exploded. More recent techniques involve
data mining Data mining is the process of extracting and finding patterns in massive data sets involving methods at the intersection of machine learning, statistics, and database systems. Data mining is an interdisciplinary subfield of computer science and ...
and
marketing engineering Marketing engineering is currently defined as "a systematic approach to harness data and knowledge to drive effective marketing decision making and implementation through a technology-enabled and model-supported decision process". History The term ...
.


Size parameters

Market size can be given in terms of the number of buyers and sellers in a particular market or in terms of the total exchange of money in the market, generally annually (per year). When given in terms of money, market size is often termed "market value", but in a sense distinct from
market value Market value or OMV (open market valuation) is the price at which an asset would trade in a competitive auction setting. Market value is often used interchangeably with ''open market value'', ''fair value'' or '' fair market value'', although t ...
of individual products. For one and the same goods, there may be different (and generally increasing) market values at the production level, the wholesale level and the retail level. For example, the value of the global illicit drug market for the year 2003 was estimated by the
United Nations The United Nations (UN) is the Earth, global intergovernmental organization established by the signing of the Charter of the United Nations, UN Charter on 26 June 1945 with the stated purpose of maintaining international peace and internationa ...
to be US$13 billion at the production level, $94 billion at the wholesale level (taking seizures into account) and US$322 billion at the retail level (based on retail prices and taking seizures and other losses into account).United Nations, "2005 World Drug Report", Office on Drugs and Crime, June 2005, p. 16

File:Existing Home Sales Chart - Mar 09b.png, United States home sales (blue) File:2008 UK Book Sales Value.png, Book sales in the United Kingdom File:LPO Market Size and Growth.png, Size and growth of the legal outsourcing market File:Global Mobile Applications Store Revenue.svg, Global mobiles applications market size


See also

*
Grocery store A grocery store ( AE), grocery shop or grocer's shop ( BE) or simply grocery is a retail store that primarily retails a general range of food products, which may be fresh or packaged. In everyday US usage, however, "grocery store" is a synon ...
* Justice and the Market * Knowledge market *
Market economy A market economy is an economic system in which the decisions regarding investment, production, and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a mark ...
* Market engineering *
Market information systems Market information systems (otherwise known as market intelligence systems, market information services, or MIS, and not to be confused with management information systems) are information systems used in gathering, analyzing and disseminating infor ...
*
Market microstructure Market microstructure is a branch of finance concerned with the details of how exchange occurs in markets. While the theory of market microstructure applies to the exchange of real or financial assets, more evidence is available on the microstruct ...
*
Market town A market town is a settlement most common in Europe that obtained by custom or royal charter, in the Middle Ages, a market right, which allowed it to host a regular market; this distinguished it from a village or city. In Britain, small rura ...
* Shopper marketing


References


Further reading

* Pindyck, Robert S. and Daniel L. Rubinfeld, ''Microeconomics'', Prentice Hall 2012. * Frank, Robert H., ''Microeconomics and Behavior'', 6th ed., McGraw-Hill/Irwin 2006. * Kotler, P. and Keller, K.L., ''Marketing Management'', Prentice Hall 2011. * Baker, Michael J. and Michael Saren, ''Marketing Theory: A Student Text'', Sage 2010
online
* Aspers, Patrik, ''Markets'', Polity Press 2011
online
* Bauer, Leonard and Herbert Matis (1988) ''From moral to political economy: The Genesis of social sciences'', History of European Ideas 9 (2), 125–143. * Nathaus, Klaus and David Gilgen (Eds.), ''Change of Markets and Market Societies: Concepts and Case Studies''. Historical Social Research 36 (3), Special Issue, 2011. {{Authority control *