11 Markets as Social Structures

Richard SlI'cdbo'g

THE MARKET represents one of the most important economic institutions in contemporary society,l It has also become a key word in political discourse all over the world. Given this centrality, it is no wonder that there exists a huge literature on the concept of the market, the major works of which will be reviewed and commented on in this chapter, M)' main emphasis, however, will be to look at markets from a particular perspective, namelv as a specific rvpe of social structure, Social structure can be defined in J number of ways, but what is usually meant bv this term is some kind of recurrent and patterned interactions between agents that arc maintained through sanctions. In a discussion of markers as J specific kind of social structure, it ~ consequently not "en' helpful to define them sirnplv as price- making. mechanisms (as is often done in economic thcorv t, since this tells us little about the basic interaction involved. A more useful approach in this context is to view markets in terms of CXc/JllII,qC, especially if exchange is conceived oi in a broad sense, as Ronald Coasc docs when he defines the market as a "social institution which facilinrcs exchange" (1988. p.B),

Despite the tendency to speak of rill' market, as if one could easily locate some object with this name, markets have displayed a bewildering. amount of variation throughout hisrorv A survev of different kinds oi markets over time can be found in the first section of this chapter, "The Complexity of the Market Phenomenon." The way that economists have tried to come to terms with this complexity will be discussed in the next section, "The Market in Economic Theory," which not only presents the history of market analvsis in economic theorv from Adam Smith to the present, but also highlights attempts to see the market not only as a price-making mechanism but as a social phenomenon in its own right. A review of how sociologists have viewed the market can be found in "The Market in Sociology." The last section, "On Integrating the Economic and Sociological Approaches to the Market," ar-

glles that in order to fully understand the com plcxiry of the marker phenomenon, one needs to draw both on economic and sociological rhcorv, Two typologies of markets as social structures are presented and discussed, I also contend that most analysts of the market currently operate with an incomplete notion of the market, The outline of a full theory of the market as a social structure is suggested with the help of Max Weber's work.

THE CoMPLEXITY OF THE MAR.K.ET PHENOMENON

That the word IIIfl1'kcr describes mauv different phenomena can be illustrated by its semantic histor)', The term was introduced into the English language in the twelfth ccnrury or earlier (from the Latin 1II£I'C4tlll. meaning "trade" or "place to trade"). Soon it acquired three distinct meanings: (I) a physical marketplace; (2) the gathering at such a place; and c 3) the legal right to hold .1 meeting. at a rnarkerplacc.! In the sixteenth century market began to be used in the sense of "buying and selling in general," and soon it also mea lit "sale as controlled by demand and supply" (Oxfol'd English Dictionary 1989, P: 385). B)' the seventeenth century the term began to broaden to include the geographical area within which there was a demand for a certain product. The stock exchange of the nineteenth century increasingly was seen as the protorypc of the modern market. Economists subsequently have added a meaning of their own: the market as an abstract pricernaking mechanism that is central to the allocation of resources in an economy. The term market has also for a long time had an ideological charge, something that was reflected in the political slogan "the Magic of the Market. ,,3

Is it possible to find a theory that can make sense of all the different phenomena covered by the term market? One of the few historians who has tackled this question is Fcrnand Braudel, and his answer can be found in Civilizations atld Cap-

256 SJI'cdb"':q

italism, tsn-isa. Century. "The ideal field of obscrvation j Ior all enterprise of this sorr ]," states Braudel ([19791 1985, 2:26), "would cover all the markets ill the world, from the very beginnings to our own time. n In one chapter Braudcl (i 197911Yll5, 2:25-137) takes on this task, pre· senting the reader with a magnificent p~11l0f;\111a ofmarkets from around the world. Brandel, howncr, is ultimately skeptical of the idea that it is possihle to develop a theory to capture the csSCIlCC of ;111 markers:

How can one [Iikc , c.g., PoL.ltlyi I include in till: s.uuc •. .xpl.inatiou the pseudo-markets of ;1 Ill: ivur Babylon. lilt, priminv ... · (._·\L!Llllgl.· hahits of the Trobnand Is Lllldl'rs ill our 0\\'11 thuc , .utd Iht' markers of mcdi('\'J1 .utd pn:-indl1stri.ll Europe? I ;\111 1101 convinced Ih.H SII(h;\ thing is possihk-. (BLll/{h.'11 }I)7<JJ 1<),sS, 2:U,)

Whether it is possible to crcn«: " theory of mar kcrs will be discussed later in this d"'pter. In this sect ion I shall insle;ld present some historical ma

t c ri.il that illustrates rhc gre;H eOlllpkxily of the m.ukct phcnomcno» in gelltT;11.4 Little i!'i known about t he earliest markets ill hist orv, ;tit hough it is oticu arv,ucd rh.u thcv t"llh .. 'rged through trade bc-t wcv u diHrrcnl uihcs. Ap.ut from \\';11", trade rq11TscIlted OIlC of t hc It:\\, forms of inu r.uuon between the Iiist hUIll;1I1 conuuunirics. j\·Lukcrs seem ro have been regarded as neutral tcrruorv and WlTC typically suuat cd at the houud.uics of two couununiucs. \Vhilc sh;lrp b;u1!,aining w.is ;11 .. lowed wit h f()I"l'igIH .. TS, it usually W;1.' not allowed insid« the communirv, where exchange \\";1S Or:1 difh.Tcllt nature.

Wlu-n markets lirst ;11)1)t';lred is also uncertain.

A v.uict ,: of arci1;ll'ologic11 finding." indic.uc I h;)1 c xrcrn.i! rr.idc existed hy .\1 least SOOO 11.<' Soshells and objects of" ohsidi:lll frotu this period h.ivc , tor cxamplc , been touud hundreds of miles fi"oll1 their origins. Trade is likely to have r akcu plaee ~H (To!ogical boundaries, such as the l'dg<.' or a desert, where sedentary and nomadic trihc!'; mer. Other objt..:"l"t.',; .. - !'ilK" as fish, salt, ;lI1d irou-e-arc also unevenly distributed and have lOll!!, been sought alter in trade, At a relatively carl« stage certain individuals and even whole tribes seem to have devoted themselves mainly to trade. Evideuce exists trom ,1S early as 3500 B.C. of merchants from one community who lived in another community for purposes of trade. Networks of foreign traders soon also connected whole parts of the world, such as the Middle East and the Mediterranean.

During antiquity the old tribal marketplace, in Greece and Rome were replaced br new kinds of urban markets that were geared mainly toward the everyday needs of the citizens. External trade was protected by the Roman navy and grew considcrably more sophisticated through the usc of IH.'W institutions for maritime trade such as the commend a, or sea loan. The impact of this type of rr.idc Oil society was nevertheless negligihle since it was m,}inlr oriented toward the SIll;)1I market or the elite. Something sunil.u' W;)S true for much of the loug-disianr c trade during the carll' Middle Ages. A few centuries later, however, the urban market W;)S to go through a considcrnhlc chan~e. Much stronger efforts to control prices and qu.ility wcrc typic;llly IlLHfc during the Luter part of the Middle Ages, in c ombin.uron with attempts to force people to uudc ollly inside the city walls. Wholesale trade a, well as high-powCl"ed moncv deals mainly took place ill the so-called t:,irs that he!!.an to apIK;\r all over Europc. A special pe;lu' ruled at these f~,ir.s, guaranteed hy the IOLll prince

At sonic point in Wcst crn economic history markct s bcc.uuc dirl'"ctly associated with dynamic economic growth rather than hl'iJl~ 111<.'I"C places ftll' exchange. To what extent this tr.msition fi·om m;lI·ketpL\ccs 10 market cconolllY (Rothenherg 1992) \Va!'i due to the removal otouunodcd 111.11 l« c t rcgularion or to) say. ,1("':1I1C("S ill tt'chnology .lssoLiatcd with the Industrial Rcvolution is :l much de hated question, 111 terms of soci.il xuu«

t urc, an enormous changl' l1onctlH'kss took pbcl' ill the \':11"iOIiS markers durin!!, i hc scvcun-cmh :lI1d cighteenth centuries. Narion.il markc t s , tor cx.uu pie, were ere.ned first through the politicil rcvolUI ions ofthese rcut urics ill EngLlIld, Fr.uur, al1d the United SLUl'S. At .ihou: this rime snT!";ll new kinds of" spccialized markets also clint into lKillg. The mcdicv.il f:lirs, for cx amplc , were repl;1red by t r.u!c ccutcrs :ll1d more .idv.inccd forms of fin.mcial instit tu ions , such as the bourse. Whoksa!c tCHIc (h~llgnl in 111:1ny aspects, due to iunovalions ill rrausportat iou technology JS well as slor .. age facilities. Retail trade went through a ITVO lutiou of its OWIl ill the seventeenth ccnuuy through the proliferation of shops. Though there had existed a small market in labor "Iready in the Middle Ages, this type of market changed dramatically as people hegan to work in factories Jild moved into cities. Soon the four major types of markets that characterize modern capitalist soci .. ety had made their appearance: the financial market) the mass consumer market, the labor market, and the industrial market. This development tirsr

took place in the United States and in some European countries in the nineteenth century, but has since-at varying degrees of speed-s-come to characterize most other countries as well. A veritable market CCOIlOIll)" defined as an economy where most activities arc oriented toward sale in the market} has increasingly come into being. This market ecollomy was first mainly national in character, but as the twentieth century has evolved it has become inrcruationnl.

THE MARKET IN ECONOMIC THEORY

The key question of this section is the t()lIo\\'ing: How wcl] has economic theory been able to handle the complexity of the market phcuomcnon? To address this question I shall review ho«: the m.ukct has been analyzed throughout the hislory of economic thought from Adam Smith to the plesent. In doing so, I shall mainly tr.irc the cttorr to analyze the market as a priccmaking mechanism, hilt sl1.111 also hi~hliglll attempts to view the market as ;111 instuution ill its OWIl right. As to the 1()rl1lcr t;lsk~-tr~H'il1g, the idea of the m.ukct through the history of economic thollglll---aslollisilillgly liulc work h.is been done. lconomic historian DOlIgbss North (llJ77, p. 710) h.is, tor cx.uuplc , noted th.it Hit is a peculiar LId rh.u the litcr.nurc Oil economics .. COIlLlIllS so little discussion of the ccutrnl inst it ut ion th.u underlies Ilco-cbssic.ll ecollol1lics--the m.ukcr." AIHI s()(l()I()!\ist Bcru.ud Barbcr (1<)77,1'. 1<)) has Silllil;uly pointed out i h.u '\1 surprisingh' SIll;11I amount of;ltlcntioll lis] gi\'Cn (O the idea of the m.ukct I n i tltc ccouomics lucr.uurc 1.1>S lbrb(r explains th,: situ.n iou:

I should like to SII"l._'SS ih.u [whcu I did rcsc.ucf 011 Iht" m.ukcr] l had c vpcctcd to find the histor~' ofceoIHJIlli( Ihought full of disclISsiuliS of the ide a of rh c ruarkct . As J "'c.:11I throlLgh SOIlIC of thc litcr.iturc I was so :-'lIlpri~l'd to find pr.llticllly 110 dist:lI~,~iOIl at .r!l 111.11 I begall 10 test Ill)' linding with knO\dnlg.lhlf C()lle,lglll'S, All ofrhcm Solid Yl'S, lilq' would have expcctvd to find a lot, and, yes, (hl..~y were surprised Ih;\t l fouud solinlc . (Barber 1977, p. ,jO)

ILuber's conclusion was not that {he concept of t hc market was missing , but that it was implied rather than explicitly discussed. further cxumina tion of the literature in economics shows that Barber's and North's findings arc essentially correct. Only one classical work in economics devotes a full chapter to the market in general, the well-

Markets as Social Structures 257

known chapter "On Markets" in Alfred Marshall's Principles of Economics from 1890 (cf Marshall 1<)61, 1:323--30). Marshall, however, did not so milch analyze the market as a special institution in its own right, but rather .IS part of his more gellt.:)"al discussion of demand, supply, and value. To my knowledge, the only majo: economist who has written directly on the market in an exemplary broad manner is JO;ll1 Robinson ([ 1<)74J 1<)7<). Her article did not appear in a professional journal, however, hut was commissioned by all encyclopedia,

There exists even less material Oil the market ~IS a social phenomenon th.m .IS :J priCl.'-nLlkillg mechanism. (;eorge Stigler (1<)67, ]'. 2<)1), for c x.uuplc , h;IS noted t h.u "economic theory is (011 corned with markets [and I it is, therefore, .1 source of elllh.lrLISSIlH_'nt t h.rt so little attention I"" been paid to the theory or markers." Ronald Coasc has m;Hh_, the same point and has sketched ;) program lor ;1 hro,rd tlit.:<lI'y of markets. "AI though economists cl.nm to study t hc market," CO;ISC (19RH, p. 7) sucvscs , "ill modern cconorui.: tllcor), the market it scl lh.i« .ui cvcu more slLHiowy role than the Iirm.' Corucmpor.irv cconomists , he cominucs, arc interested oulv ill "the dctcrmi n.uiou or m.irkct prices" (Coasl' 19HH, p. 7), which he S,lyS h.is led to a sii u.u ion in which "dis cussiou of the m.ukct pbce uscll 11.IS l'l1lird~! dis~lppl';lred, "

The Ma"',ct ill Classical Pol itirnl Economy (ji-ollJ Adam Ssn itl: to Marx)

There exist IIUIl\, illlerestin~ dil"krellccs he tween the concept o-rtlle ll1'lI'kct'-ill cl;lssicli polii iLllccOIlOlll), and the 0111..' I hat W~lS to bcccuuc po f) ul.u around {he t urn or the ccnt urv through (he marginalis. rcvolution . First, (LIssiell economist» S;I\\' the market as synonymous with (it her a m.uketpbce or a geographic11 urc.i. III their eyes the market \\,:lS xomc r hillg (OIKITtC as opposed to the absuact market or lau crduy ccouomist«. Sl'c()l~dl the main cmphnsi« ill classicll politicli ecollom), had been (!11 production rather than Oil exchange. What decided price was in principle the amount of labor t h.u it took to produce;) commodiry-> 110t the forces of demand and supply, as t()(i.ly\ theorists would say, And third, what transpired in the market could mislead the analyst, it was argucd, especially when it came to price, because iucidcntal factors would typically result in a market price that was different from the natural price. It is true that the classical economists saw the mar-

25 R .)wcdllCl;1T

kct as an important institution within capitalism. They, however, assigned no analytical priority to the marker, and in their view production was tar more important t han exchange when it came to analyzing and understanding economic life.

Of the more than thirty chapters in 77" WCIliIh of Nations by Adarn Smith, only two deal explicitly with the market: "That the Division of Labor is Limited hy the Morket" (1776, book I, chap. 3) and "Otthc Narural and Market Price ofCommoditics" (book I, chop. 7). These two chapters discuss what Adam 'smith saw as ccutral to any ;1I1alysis of the market: the relationship between the market and the division of lob or, and how the market influences price. In Adam Smith's view, (11<.' wc.rlrh of;l conuuuuitv was the result oflabor, ;111d the productivity of labor was in turn determined hy how adv.mccd the division ofl.ibor was. All ordinnrv market town, he noted) could only animl a rudimentary division of labor while a Luger town, espccially if it was situ.ned 011 a river 01'011 till" border otrhc sea, tended to have a IlHJr<,' developed division of labor Businessmen also uSllally tried to "widen the markct ," he noted, t hnehy incrcasing the division of labor (11776 J 1976, p. 2(7). Ikouse of this !Jct, markets in ;1griniltllL11 products ollell progrcssed 10 markets in m.mufacturcd goolis, and the» to m.irkc t x abroad Smith was convinced t h,u larger markers mc.uu more wcah h; this \\';1S one of the reasons ",hy he so stl'ulIglr condemned mcrcanrilisui.

Ad.im Smith \\,;lS \'cry inter, .. 'stt~d in how prices .u'c formed, "The :lctu<l1 price of which ~llly COIll!llodity is conunonlv sold is c.ilk-d ir s market pritT, It IlUY either he abovc, below, or cX:\ClI~' the s.unc \\'ith ilS na III '-1 I price" (Smith 11776J 1976, 1'. 73) . Market p,in's were in principle gr.l\'iLHill~ to\\,anf their 1l,1I11r<l1 price level, ac - (ordinv, to Smith. l-or a long timc , however, lhe~' could he far above i hc natural price, The reasons I()r this vary---thcn: could he natural causes such as a droll!!,ht that drives tip the price of hrcad or perhaps ;1 buxincssman is hiding a vital piece of in form.uiou Iron; his competitors. Smith ~cncralh' is credited with posscsving a realistic view of competition; his description in The Wellith of Nations of "the higgling and bargaining" in the market [wars this our (Smith [1776J 1976, PI' 48ff). Adam Smith also believed that "an invisible hand" guided society and would ultimately reconcile the pursuit of private interests through market exchange with the general interest of society as a whole (Smith [1776] 1976, p, 456; cf. Davis 1<)90).

Through the works or David Ricardo and John Stuart Mill, political economics became more abstract, losing much of its interest in concrete economic institutions, including markets. The general thrust of their analyses was still that production decided the correct or the natural price, while the market price tended to be the result of accidental influences. Ricardo's Principlrs o( Politicai EC0I111"'-V an d Taxation (1817) contains, for example, a chapter to this effect entitled "On Natural and Market Price"; and in Principles oI Political ECOIWI11_Y (11l411) Mill assigns scientific priority to "the laws of l'roducrion. n Both Ricanto and Mill, however. also (reated a certain room in their ~lll;llyscs for a demand and supply analvsis. This is especially true of Mill, who oc cording to some conuncntators Ill:ly have sensed the changes ill economic theory that were ahead.

Like other classical political economists, K~HI Marx WJS of the opinion that production was more important tl1311 the m.ukct when it carne to deciding the price of a commoduv. Nonetheless, throughout ~LHX'S work one Gill also lind a number of iutcrcsriug observations Oil t hc m.irkct or "the sphere of circulation," as he preferred to (;1/1 it. First, Marx emphasized til;lt the market consists ofsch .... ial relationships. '<It is plain." he noted sarcilstic11ly in Capisnl, "that commodities canI10t go to the market and make exchanges 011 their own accouut " (/113/\ 111;671 1906, (>. 9(,). "\lallic" was not inherent ill ;1 conunoditv, hilt W:-IS rather I<a relation between pt'rSOI1S expresscd as a relation between thing'" (M;lI\ 1 J H()71 11)06, p. RS), Thc \\,:ly t har ccollomists spoke ,1hOlll prices, however, kd the illusion rh.u v;1111es wcr« not created b~' people but somehow constituted qualit ics of the objcct« themselves. A pcculi.u "m c rchan di sc tc tischisrn " ITSU!tcd, J\Lux said, ill which people proj(._·ctl'd life um o objects because they did not understand that t hcv rhcrusclvcx had created these val lies through t luir 1)\\'11 work (e.g, Cohen 197X, 1'1' 115<H)

Mar x also emphasized I hal all markets have a distinct history. J\1a1lY European and colonial markets had, for example, been crc.ucd through violence or t hrcat of violence, There was also all important legal and ideological dimension to the market, Marx argued. According to capitalist law, all market participants arc in principle equal and free, This, however, was little but an illusion; the market was no «Eden of the innate rights of man," Marx argued, hut rather a place where workers were forced to sell their labor power for a pittance to the capitalist. The secret key to the

workings of the capitalist economy was found in "the hidden abode of production" and not in the markct-s-vrhis noisy sphere where cvcryrhing takes place on the surface" (Marx [1867J 1907, pp. 195-96).

11Je Mal-gillalist Revolution an d the Creation of the Modem COIICept of the Mnrkct

Toward the end of the nineteenth century the concept of the marker in economic rhcorv underwent a dr.unaric chJllgc through the works of Walras, [cvons, Menger, and others. The differcucc between the new (HlCcpt of the market and that of the classical political ccouonusts \\';\S large. for economists like Adam Smith, the market had been something concrete but of limited analytical interest, since the market price \\'3S often influcnccd hy accidelltal events. Now, hO\\'C\'l'T, the thinking became almost reversed: the market became an abstract concept that acquired t rcmc ndous anaiytir a] interest as a price-making and rcsourcc-alloc.uing mcch.uusm. Historical and social approaches were firmly rejected during this period throllgh the Mctbodcnst rcu or the Hartle of Methods, which originated ill liermtlny·AlIstl'ia and soon spread to EngLlnd and the United States." The concept of the market \\.',15 thinned to such ;l degree rh.u John Neville Keynes S ... spoke of "the hvporhctic.il m.ukct " and W . .'i[,,,,icy JCVOIlS simply cquated thc analysis of till' market with a "thcorv of exchange" (Kcvncs Sr. [18911 1955, pp. 247-49; Icvons 1911, PI'. 74ff.). This, however, W,lS a price wort]: p;lyillt;, according to the llurginalist thinkers, since ULlllY ditlicuh theorctical problcn», th.u Iud haunrcd the early ecol1omists could be soln.·d Llsing tin: new .in.rlvsis. III particular, it hcc.uur possible to COIlCl'ptllalizc and model the whole economY:lS a svst cm of markers.

III order to present the ncwly emerged concept of the markct , it is convc nicut to start with (\\'0 defllling st atcmcut s that were often cited around the turn of the century and that arc still referred to in the economic literature:"

Economists understand by the term ,\/arJ.:ft, nor :111)' particular market place ill which things arc bought and sold, hut the whole region in which buyers and sellers arc in such free intercourse with one another that the prices of the sante goods tend to equality easily and quickly. (Cournor [IB38] 1927)

The more nearly perfect a market is, thc stronger is the tendency for the same price to be paid for the

Markets as Social Structures 25'.1

same thing at the same time in all the parts of the market. (Marshall 1890)'

These two statements show, first of all, that economists by the mid to late nineteenth century thought that the term market should be extended from simply meaning marketplace to also mean any area where buyers and sellers of a particular commodity could be located. As we know from the history of the term market, as summarized in the first section, this suggestion merely mirrored the everyday usc of this word (c .g., Oxford Englisb Dictionary 1989). What represented a novelty, however, was the fact that economists IlOW added a meaning to the word mnrkct. This new mcnniug is not entirely made clear in the Cournot and Marshall quotes, hut is hinted at hy the latter's lise of the 1I'0rd perfect. In all brevity, ;l "perfect market" was a vcr y abstract market, char actcrizcd by perfect competition and perfect in form.uion.? Ibrold Dcmsctz (1982, p. 6) has described the change that took place in ceo uomir theory: "Markets I !lOW J became cmpiri(;lily empty conccprualizations of the forums ill which exchange «>stlessly took place. The lcga I system and the government were I"" example I relegated to the distant background."

Even though criticism can be directed at the m.uginalist revolution; it must be: acknowledged th<1t one of its grc.u accomplishments was to conccive of the market as rhc central mcchnnisn: of allocat ion in ihc ccollomy. This idc.i IlO doubt rc[leered the change that had graduallv come about ill the \Vest: the economy was increasingly CCIl rcrcd around markets. It also implied that all mar kets ill all e((>I1olll), were intcrconuccn-d and rh,u a change ill any one of them would lc.id to changes ill another. 11:00 Wa)r;,ls, in particular, is credited with having pioneered general equilibrium analysis. According to W.,h-;ls (I 19261 1954, 1'. 84), "the whole world may he looked upon as a vast general market made up of diverse special markets where social wealth is bought and sold." Production, it m .. 1)' be noted, played little role ill Walrus's vision, which was also excccdingly abstract.

Of the major economists from this period Marshall was the only one who paid attention to the market as an empirical phcnomcuon in its own right. The key idea in his definition of the market, to repeat, was that wherever local prices for the same product were converging, the products became part of the same market. In his chapter on the market in Principles of Economics

260 SJllfdbCI'[f

Marshall also drew up a very ambitious program t(lf how to study "the orgauiz ation of markets" (i 1920] 1961, 1:324 ).'0 According to this progr.llll, when analyzing special markets, one would ILl\'C to take money, credit, and foreign trade into account as well as trade unions, employers' orgalliz atious , and the movements of the business eyrie. Some of these matters eventually Wl'TC discussed in JIII{lIst,.y and Trade (1919) and in Mourv, Credit & COIIIIIICrcC (1923), but Marshall never re.lll)' t.icklcd the market according to hi, original pian. Pulling together Marshall', thoughts trom his various works, it is clear that l\1arshall\ thinking about markets changni over the years. While in Principles or hOI/OII/;{J markets were prcdomiu.unlv seen ill terms of dCIll;lI111 and SlIPply, some thirty ),C;HS later he Clllph;lSizt'd the dimension of soc;.ll organiz;ltioll. In Industry a nt! Tra d .. Marshall ddincd the market ill the ",110"'ing m.mncr: "In ;111 its various signitkaliolls, .\ 'm.irkct ' refers to ~l ~rollp or ~r(lllps of people, some otwhom desire to obtain ccrt ai» things, and S()I\H.: of \\'110 111 are in a positioll to supply ",lUI the others w.uit " (Marsh.ill 1919,1'. IR2).

Fro", M""h"II's works, it is clc.u: ih.u he belicvcd the following II\'e f.ictors were important in the undcrsr.mding ofm.irkcts: SP;lCl", umc , form.ri n.'f!,lILuion, informal n:gllLHioll, and lamiliaruv between huyc:: .md seller, The .11ulysis of markets ill Principles ofEconnmics Iocuscs Oil the fIrst two of these five hl'tors, while the Lute!" three arc dis Ulssl'l1 more fully in l ndustrv ant! 'l radc. In rcl.itir ut to SP;KC,;\ market could be rit hcr "wide" 01 "","TOW" (M,1Ish.lll 119201 1961, 1:.,2526). The m.ukct arC,l could also gro\\' or shrink, de pcnding Oil tile circumstances. Tilt.' extent to wilich t imc W;\S LIken into account would ;,Iso af 1('Ct the m.ukct-c-wlu-t her the period in qucsr ion \\".1S "shon" (meaning rh,u supply \\'as limited to what W<1S at hand in the markct ), "longer" (meaning that supplv was influenced by the cost of producing the commoditv), or "very long" (meaning th.u the supply was influenced by tht' price of labor ;1I1d other mate ria! needed to produce the item in qucstiou; sec Marshall 11920] 19(,1, I: 330). A market could be "org.lllizcd" or not; b)' this Marshall (1919, 1'1'. 2S6 S7) meant that its procccdings were cit her formally regulated or not. The stock marker was an example of all or!\"nizcd market (Marshall 1923, Pl'. Rill'!'.). In tact Marshall-like many other economists from this period-s-saw the stock marker as the most highly developed form of the market. Markets could further be either "general" or "particular" (Marshall

1919, p. 182). By a particular market Marshall meant a market in which there existed some socia! bond between the huycr and the seller that made the transaction easier while a general market was in principle anonymous. Depending on the degree of informal regulation, ;1 market W;1S finally cit her "open" or "monopolisric" (MaTshaIl1919, 1'1'. 3951'1'.). In Marshall's opinion, competition usuallv differed depending on the type of market rhat was involved. The "fiercest and cruellest." form of competition was, for cxamplc , to be found ill markets that were about to become monopolistic (Mushall 19 19, 1'1'. 395-<)6).

The A ustria II School: The MaI'kef as a P,·OCCS.<

NcoAusui.m economics has its roots in th« work of Call Menger, who viewed the market ;lS the spoutaucoux and unint cudcd result ofhistori cal development (Menger 11883]1985, PI'. 139- 59). The two main figures in the nco-Austri.ui school arc Ludwu, \'011 Miscs and his student Friedrich \'011 I layck; m.lI1Y of their key ideas WCIT developed during or just .itt cr World W"r I. The intcllcctu»! interests of both Miscs and Hayek were uncommonlv broad Jlld included social theory;l.S well as economics. Miscs , I()I" eX;llllpk,'W;lS a good Ifiend of Max Weber. I Ie IVa, a member of the German Sociological Association and he Ill,Hit' frequent references to sociologicll works ill his f.lmous scmin.ir in the 1920s ill Vicuna. Both Hayek aucl l\·1ist's 31s() made significllH coutribu nons to the del"ute abour the cc ouomir n.u urc of socialism, m.iiulv hy argujll~ (Iut it \\,;1-" impossi hie to have a r.uional ccollomy without prier' making markets (sec t hc articles hy Misc« and Hayek ill Havck 1935; Iora history of the debate, sec Udehn 19RI; Hrus and l.aski 1989).

The ccnt crpiccc of nco-Austrian CCOIHJlllil...-S i-, undoubtedly its theory otthc market as a pr()ccs~ (c.g., Miscs 1961, [1966] 1990; Ilayck 1976; Shand 19S4) "The marker is not" place, .1 thin~ or a collcc rivc cru itv," :1S Mixes (19491 p. 2SH) put ir , "[ir ] is « procc..'ssl actuated by the il1te"pb~' of the actions of the various individuals coopcrat illg, under the division oflabor." According to the uco-Ausninns , the market emerges spontaneously; it is the result of "human action n as op' posed to "human design." A market is to its naturc dcccnn alizcd and primarily consritutcd through local knowledge about how much something costs and where opportunities arc to be found (sec csp. Hayek 1945, ]1946] 1948). As opposed to what economists call an economy, the

J11;Hket has no center but rather consists of "a network of many interlaced economics" (Hayek 1976, p. 108). This vision of the market is radically different from the neoclassical one, of which Miscs and Hayek were critical, As they saw it, all ofeconomics should he centered around the COI1- ccpt of the market; they suggested th,u the term economics he replaced by catnllactics.' ,

Keynes's Critique of the Law of Marlects

While tile nco-Austrian thcorv of the marker was to h.ivr little immediate impact, John M,l),nard Keynes's ideas had ;1I1 instant effect. Keynes's point of departure in General Tlicorv (193(,) was his observation that earlier economic theory had made an error in LIking Say's L1\\' of Markets tor gr,lllted, n.111H.·ly that supply creates its own demaJld or rh;H "till' economic system is .llways working at full capacity" (Keynes [1943]1954, p. (9)." lfouc looks at the 1"'11' things work in realiLY, Keynes Mgllcd, disturbing g .. lpS .nu] imhal .uucs exist between markets as well ,lS between demand and supply inside individual m.ukcrs. The result of these gaps ,lllll imb.il.mrcs was rh.u uncmplovmcut tcnded tn he const.uu in modern S()cietr .ind the rcollolll), sluggish ill gCller.II. Kl')llll'!'iIS solution for matching dcm.md .ind sup- 1'1)' and tllneby ellsurillg that the market worked propcrir was through the uu crvcnuou or thc st.uc. The Slate should, ill p.uricul.u, be rcsponsihie !()J' adjusting consumpt ion and investment

Keyncs's lack of l.uth in the idea i hat m.ukct s thr()lI~h their own working Gill cnsurc ;1 high level or productivity and ~cller~ll well·hcing ill so ciet)' is evident in his an.ilvscs of the two markets he was most interested in: the labor m.ukct .md the stock marker. Kcvncs noted ih.u according to classical and ncoclassica] ccouomics, all markers would cvcnt uallv clear and th,u conscqucurlv "uncrnploymcur cannot occur" (Keynes 1936, p. 16). Since unemployment dol'S exist, however, this aualyxis was ohviously \\'rong and a new t hcorcrical approach to labor markets was needed. III his analysis of thc stock markcr , Keynes also claimed that what was happening ill reality was quite different lrorn what should have been happening according to economic theory. On the modern stock market, Keynes said, most efforts were directed at "anticipating what average opinion expects avcragc opinion to ben (Keynes 1936, p. 156), This effort to guess what the price of a share would be like in the near future-rather than to calculate the future yield of

Markets as Social Structures 261

an investment -led to a number of problems, ill Kcyucs's mind. Again, the solution he advocated was for t he state to intervene and regu late the' market.

l n dustrial O,gall;zat;oll alld the Concept of Mal'ket Structure

The theories of industrial organization were to introduce ~l novel concept of the markctv rh« market defined ;IS all industrv-v-as well ,IS a tar more cmpirica] auirudc to the study of markets in gcucral. Like Kcvnex's ideas, the field of industrial organiz.nior: clIlcrged during the troubled interwar period. And also like Keynes, the rhcorcti Ci'I11S o( industrial orgalliz;ltioll wantl'd both to rebel ag.1inst the ncocl.rssical tradition and to remain within it. The new appro,KIt had its roots ill Marshall's Lnd u st rv II lid Trn dc, hilt the (;\('llyzing event for the 1'lllerg<..'llce of the field of induxtri.il organil.atioll \\',lS the publication in 1<)33 of Edw.nd Ch.unbcrlin'« TINo!'}' ofAloHo/,oliui( (;OIlJ/'(t itinu . Ch.unbcrlin's point of departure \\',IS ill ;1 critique of the theor~· of perfect competition, which he felt suffered (rom a III 1 III her of wLlk ur sscs. ln p.uticul.rr, the theory of pcrfect (0111- petition cousidcrc.: (Jlli~' ouc of the two b:y dements in competition, IUlIll'ly the number (If market .lCtors. The ditlcrcm ianon of products, Oil t hc other h.1nd, \\'.lS ignored. Product differcntiation , Ch.lI11heriin ;ng,lIcd, could l'lllergr ill ,11111111 her ot w.ivs , sHch 3S p.ucnt s, trademarks, ~llld ;Hivcrt iscrucut . Purclv s()ci.11 E1Clors could also m.ik« products diner licun one another, such ,1S "the rcpui.uion" of the seller, "pcrson.ll links" he tween buvcr-, and sellers, .uid "the gellcLll tone or ciur.Kfer (If his est.lhlishmcllt" (Ch.unhcrli« 1933,1'1' 56, (3). Chamberlin'» view otdiftcrcut iatcd products ll.ltUr.llly implied a new perspect ivc on markets, as the 1()llo\\'ing suucmcur makes clear: "Under IHll'e compct iiion , the m.ukct or c.ich seller is pcrtccrlv merged with those of his rivals ; now it is to he recognized that each is ill some lIle;)SUIT isol.itcd , so that the whole is not a single m.ukcr ofmanv scllcrs , hur a network of ITl.ucd markers, one for each sctlcr" (Chamberlin 1933, p. (9). Thc boundaries between markets now became e\'CI1 more dilhcuh to dctcrminc.':'

The next step ill the evolution of the field of industrial organization came a few years later through an important article by Chamberlin's Harvard colleague, Edward Mason (l939). According to Mason, it was imperative to study the price policies of corporations and to introduce more

262 SlVedberg

I I I I I 1 I 1 I

1 _

------ ....

BASIC CONDmONS
.. Technology .. -
Business attitudes
Price elasticity

MARKET STRUCTIJRE
Number of b'itcrs and sellers
Product di ercntiation
Vertical integration "'-



CONDUCT
Pricing behavior
Product strategy and advertising
Research and innovation

PERFORMANCE
Progress
Fuji employment
Equity c ntpirica l content into neoclassical price theory. Mason slIp;gcstl'd that this could be done through ;1 classific.uiou of empirical 1ll31Cri.11 in terms of "market structures." 1\11.15011 was somewhat uudell' in his Terminology, but in principle he claimed that Utile market , and market structure, must be defined with reference to the position of a single seller or buyer; land that] the structure of a seller's market ... includes 3\1 those considerations which he rakes into account ill dctcrmiuing his business policies and practices" (Mason 1939, p. 69). Once the market structure was known, Mason continued, it would be possible to determine the price response and, from there, the cffeet on the economy and on society as a whole.

Mason's ideas quickly generated a great amount of empirical research and were soon rc-

- ------- - -- ---I

1 1 1 I 1 I 1 1 1 1 I 1 1 1

I 1 1 1 1 I 1 1 1 1 I 1 1 1 1 1 1 I

1

,

, , ,

PUB~IC POLIcyl Taxes and subsidies Regulation And-trust

I I I

I

,/

FH_;t!IU·: I The Sr r ucturc ConductPcrtonn uicc P;IL1- dram :IS or I ()l}O. SOIll(." or the c xnmplc s inside c.uh box 11.1\'1: been removed. SOU,.u: Schue! and Ito" () ')'.10, 1'. S).

[erred to as the Snuct urc-Coudurr l'c rformnncc paradigm. According to this ;lpproach, the market W;\S seen as essentially identical to an industry. H "Market structure" W3S usually understood to mean slich t hiugs ;IS h.u-ricrs to cntry and conccu trarion of sellers; "market conduct" meant poli cics aimed at rivals and price setting policies; and "market performance" referred to more cvaluarive-political questions Stich as whether something was equitable or not (c.g., Caves 191\4). The most popular textbook in industrial organizarion still uses the Su-ucmrc-Conduct-Pcrformancc paradigm, even if it WJS quickly understood that the causality involved was more complicated than Mason had originally believed (Scherer and Ross 1990; see fig. J). The popularity of game theory in recent research on industrial

organization has also tended to displace interest from Mason's paradigm (Srhmalcnscc and Willig 1989; sec also Porter 1991).

Postwar Developments in the Research 011 Markets

Since World War II major developments have taken place in economic theory t har have added to the understanding of markets as price- making mechanisms, This is true both tor research Oil markets in general, which is the topic of this chap tcr , and for research 011 special markets such as l.ibor markets or financial markets (sec Tillv and Tilly, chap. 12 and Mizruchi and Stearns, chap. 13 in this HlHlfi/JooL) Gcncr.tl equilibrium theory has, for example, successfully t,l(kkd some dillicult tncorcticnl problems involved in analyzing interconnected markets (c.g., Arrow 1968). Game theory has pioneered the introduction of irucrsubjcctivity into mainstream economics by proposing a type or illlillysis ill which c.ich actor lakes the decisions of the other actors into account (c.g., Shubik 1982; Schelling 19X4). The Chicag() School has advocarcd a more ccntr.il place t(lr the m.ukct in economic lheory as well ,IS in policv questions. And finally there have been a number of illterc!'aillg .idv.mccs ill the economics of mform.uion. Thl' emphasis <Ill t hc roll' of knowlrdge in the working or m.ukcts has led to stlJdies ou "market l.ulurcs," "m.ukct sigll.llling," alld so on (e.g., Akcrlol I Y70; Spence 1974).

From the vicwpoin; or markers as social structures, however, some of lhis more recent rc sc.uch is less rclcv.uu The ;lb."Itr.H.-t model of I he market t h.it c.m he Ir nnid ill general cquilrbrium r\trory is, tor c x.unplc , unable {o h.mdlc lIIH':l11plo~'llll'lH, historical time, or signiliclilt cconouucs of scale (c.g., Davidsou I 'lSI; Hahn 198 I). Most studic« ill g;lllle theory arc likewise ahst r.ict and ofrcn t~lil to make a conucctiou to the social world (c.g. ICttioll.tlity & Sociciv 1992). The CltiCIt;o ccouomisi s havc , on the one hand, made a number of signilicanr advances by studying such topics .1S "implicit markets" (Becker), holl' the legal systelll can make till" marker work better (Posner), what inspires the public regulation of the market (Stigler), and how freedom and the market arc interrelated (Fricdmanj.!" 011 the other hand, the Chicago School tends to assume that the market represents something good a priori and to equate economic life in general with the market.

Nonetheless, quire a bit of current research in economic theory is of great interest to a theory of

Markets as Social Structures 263

markets as social structures. One example is Alan Blinder's research on what type of existing price theory best answers to thc way that prices arc acwally set. A preliminary report shows that some of the current theories can be eliminated while others need to be more carcfully studied since they roughly answer to the way that prices arc indeed set (Blinder 1991). A number of works look at the role that standards of fairness play in the market (e.g., Solow 1990). The most important insight of these studies is that people's sense of what is fair affects the workings of the market. Evidence indicates, fur cxamplc , that it is not (Oil' sidcrcd fair to exploit shifts in demand 1,)1' lowering wages or tor increasing prices, while it is per· nutted ill situations when profits arc thrc.ucncd (Kahncman, Knctsch , and Thaler· 198{)).

Dennis Carlton's work on market -dearing mechanisms represents another example of rc - search Oil markets that is of much interest to the view of markets as social structures (Caruon 1989), I·Ie argucd-s-somcwh.u like in cxpcrimcntal market cconomic s-e-rhat a varictv of diltcrcut mechanisms exists through which markets can clcar.!" Some markets clear through price, hilt these "auction markets" arc expensive to create and they ottcu 1:lil (sec t ahlc I). /\1.lny markets, C;UItOIl argllt.:'s, clear only through pricr in com binnrion with SOIlIl' other mcch.mism. This l.uu r mechanism can be social in n.uurc, such as the length of a buyer-seller rcl.uiouslup orthe seiler', knowledge ota buyer's need. In some Lasc.;, Carlton also says, no organized markets arc possihle at all ; one h.IS instead to rely Oil ot hcr solui ions , such i1S sulcspcoplc. Depclldillb on the busille.\s q'ck, m.ukcr-, Illay also clear at difl(__'ren( prices,

TAIIIII

Death Rates ()fhHlIIT~ l\1arkcls

AW C;cnn)

I

2

3

4

S

10

Probability vf 1~l'iJlJl at the GiJ'';H AJf( 01' J.(SJ

0.16 0.2~ (UI 037 OAO 0.00

Soltra:Cariton (1989, P 937).

The most powerful contribution ill recent economic thought 10 a social theory of the market can be found in the body of work known as New Institutional Economics. This approach has attracted scholars from several adjacent fields, (SPC-

264 SwedlJCI;t!

cially law and economic history. The three leading scholars in this field currently arc Ronald Couse, Oliver Williamson and Douglass North; and the key concepts include "transaction COSIS\H "property rights," "search costs," 'ICnfC)fCCI1lCrlt costs," and "mcnsurcmcut costs." These concepts have been developed either with the marker C\:elusively ill mind (such as enforcement costs, search costs, and measurement costs) or arc appli cubk- to the market as well ;1S to other economic institutions (such as transactio» costs and prop' crrv rights], New Institutional Economics Ius also attempted to direct attention to the market as a social institution in its OWIl right.

The idea ofuansoction cost s is that C\ciLlJ1P_C is not (oslkss and that it can at times pay to lise the m.ukct , while at orlur t imcs it is k'~s expensive to usc a firm. Although Coas« (1937) \\'as the first to t<JrlllllL1tl' this idea, Oliver \Villi"msoll made it better known througl: Marlrcts "lid Hirvnrchics (1975). The idc.i of l' rop<'l 1\' rights is t h.ir ceo nomic institutions 1l1<1y he ('_'onccptu;llized not ollly ill sl;lIHlard economic terms but also ill terms of It!!.;ll rights. In a m.ukct r\ch;\Ily,e ~ t<lr c x.uuplc , the huyer docs not so much acquire an object for a spccific pricc~ :lcconlilly, 10 this pcrspectin', as.l set of right:-; to the ohjl'tI in question (e.g., I-nrubot n ~lnd I'cjovich 1972; lurubotn and Itichtl..T 19YI). Sc.uch costs arc ill(lIrn:d ill the lo(;lting of potential buycr« JlHi sellers, whik: l'1l1(lI-lTIlKllt costs n, . .sulr from thr f~l(t 111;\1 rxrh,l1l~l' 1.'11(;111" COS(S for m.rintaininj; L\\\' ,lnd order ill and around the m:Hkel.r7 Mc.isurcmcnt (._-OSls~ tiu.illv, .1I'e i._-nst" ari"iin!-!, fi-olll " bllyer~s icscarch into whether a crl l;lin good th.u he or slH' w.uus (0 ~l(qllire ILlS the desired qualities (Bar/l'l I 9S2).

Armed with thi~ sct of COllccpts it bcnHlH's cOllsi<krably ca sjcr 10 'lllillyi'.c t hc workings oft hc markct . New l nsriuuioual l.conomic« h:ls .\lso dircctcd some attention spn·ilic1l1y at the m.nkct as ;1 distinct social inst inuiou . This is cspcci.illv the case with North ~11ld CO~lS(,. III a recent work called lnstit utions, lnuit utionnl C1lI11l11f an d Fronomic Pcrformn ncc (19<)0) NOr[ h sketches the main S(CPS ill the development of the markct , w.;in{.; the tools of New lnstirutional Ecouomics. lie also breaks with the common tendency to equate the marker with efficiency and points (Hit that some economic insriruuons-v-including [he ruarkct-e-may actuallv increase transaction costs rather than lower them. North (19<)0, p. 69) omeludes, that the market "is a mixed bag of institut ions; some increase efficiency and some decrease efficiency," The thrust of Coasc 's work is similar,

but displays some crucial diffcrvurcs. In an article from the late 19805 Coasc produced a text that is more or less a programmatic st arcrncut for a theory of the market as an institution (Coasc 1988). According to this article, economists have too often equated the market with the determination ofmarker prices, something that has led to a situ arion ill which "the discussion of the market itself has entirely disappeared" (Couse 19S5, 1'. 7). I Ie also at racks the notion of market strucrurc , :lrgl1- ing that milch research Oil market structures looks at such t:1({OfS as the number otIirms :l11<1 product differentiation, but tails to notice the market in its own right. As a way to remedy this ncglccr, CO;lSC (I 'IRS, 1'. S) s\11~gcsts that rcscurch should he di rccrcd at the marker 3S J "social inst itutiou which facilit arcs c:xch~\Ilge_H The physical srrucuuc of ~I market .is well as its flllc.'i and regulations cxist priIll:lrily to reduce the costs or exchange, according to Couse. When a market is highly organized, such as the stock marker, cutorccmcnt otthc rilles em typically he kft to its members. When lin the other lund a marker is sClttercd over a wide .uc.i, Coasc sll~gests, tht' state may have to imcrvcuc and rq!,t1late buying and selling if rhcr« is to he ;1 market at all.

Ti n: MARKET IN SOCIOLOGICAL TIIEORY

I sh:lll !lO\\' c xaminc the \\'~l)' so(iol(}~jsts lun' all;t1yzcd t hr market and ill p.ut icul.u how thcv have tried to deal with the (,.:olllp1cxity of the mar kef" phcuomcnou. It should first be noted ih.u so ciolo!!_ists have paid less .it t cut ion to the 111~Hkct tl1;111 economists. II should also he elllplLlsil.ed that sociolol!.ic;ll theory .md ccouomic thcorv havc more or less dc\'eloped indq)<,_'lldelltly or onc ;111 ot hcr. One unfort unat c o)llsequcnn: of thi~ ILlS been that ft'w of the insights gerlt'rated ill one discipline have been communicated to the other. Srluunpctcr (1954, I' 21) once joked a hout this, s;tying that ccououiists, as 3 result 1 had ended lip creating their OWIl "primitive s{}(iology" and so ciologists their own "primitive economics." There is some truth to this, bur as I shall try to show in this section, sociologists have also made SOIllC solid conrriburions to the understanding of markers.

The Market i .. Classical Sociological l11COI'Y

Of the early sociologists Max Weber was the most interested in markets. He thought that economics (Sozial'ikollomik) should be a broad sci-

cucc, including such topics as "sociology of 'the market'''; he also tried to sketch this type of sociology (Weber [1922] 1978, p. 81). But other sociologisrs v cspccially Gcorg Simmel and Emile Durkhcim-e havc touched on the market in their writings. Simmel was particularly fascinated by the role of mOlley in modern society while Durkhcim emphasized how normlcssucss (nllomh-) affected people's behavior in various areas, including the ecollomy (see Siuuucl [1907] 1978, [1908\ 195(); Durkhcim \1893\ 1994, [ 19S()\1983)

Weber look a Iivrly interest in the market and rhroughour his career he analyzed it from a variClY ofvicwpoiurs. As a roullg lawyer, for example, he p.uticip.ucd in a public invcsugarion of the stock cxch,ulge (see e.g., Kasler 1988, PI'. 63 (6). From t hc writ iugs that resulted, it is clear that Weber \\',IS especially interested in the nature of speculation and how stock exchanges have been org;1ni/ed in different W;lYS in diltcrcm placcs=-us exclusive gcntll'men clubs in London and New York or more dcmocr.nicallv in Paris, where onc could Sec workers in their rr.ulitional blue shirts on tile 110m of the exchange. Weber \\,;1S also I:l.scillalcd b~' rbc polirical dimension of the stock m.ukct , which he saw ;1S "a 111(.";1I1S of power ill the ccououuc struggle I he tween states I" (Web", \18941191;8, p. 322).

This emphasis Oil struggle is also cvidcut in \Vehl'r's lectures ~1 lew yc.lrs l.ucra« ;1 professor in economics. In the I Rl)()s Weber lectured ou cco nomic rhcorv in l-rcihurp, al1d Heidelberg and I()Ilowed prilluril~' J\.1l'llgl'r when it c.uuc (0 the m.irkcr . \Vcbl'r, however, also addcd his oWI1 distinc: (ol((,:h to uu sc lectures by ~Hguillg that "the price on (11(,' marker is ;1 result of economic siruggle (price slrug!\ic)" (Weber [18981 1990, p. 4S). The strllggk over prices, he explained, had two aspects th.u must he separated. On the one h.iud, there was ;111 "interest struggle" in thc market hetween the t\HI parries who ;:h.:tllally cng;lgcd ill an cxch.mgc; and, Oil the other h.1nJ1 there was a "struggle of competition" between all those who were potentially interested in ;111 exchange at the beginning of the proccss.

When Weber started to define himself as a sociologist about a decade later, he reworked his analysis of the market from the viewpoint of methodological individualism and the actors' understanding (VeYJtelJw). The result can be found in Economy ntld Society, where Weber defined the market this way:

Markets as Social StI'1lCtIJl'CS 265

A market may be said to exist wherever there is COIllpetition, even if only unilateral, for opportunities of exchange among J plurality of putcurial parties. Their physical assemblage in one place, as in the local market square, the fair (the "long distance market"), or ihc exchange (the merchants: market), only constit utcs the most consistent kind of market formation. It is, however, only this physical assemblage which allows the full emergence ofthc marker's most distinctive tc.uurc , viz.., di(kniJ1g.'~ (Weber 119221 197H, p. (,3S)

As he earlier had done in his lectures 011 economic theory, lVeber now also made a conceptual dis tinction between exchange and competition. Mor« precisely, social action in the market begill~ according to Weber as competition hut ends lip .IS exchange. In phase one I "the potent;,ll p.irtncrs .irc guided in their ofkrs by the pot cnu.il acuon Of;111 iudctcrmin.ucly large group of rc.il or im.iginary competitors rather than b~1 their OWIt .rcrions alone" (lVeber [1<)22\1978, 1'. (36). Plt."e 1\1'0 or thc fillal pILl\( is, howcvcr, st ructurcd dirkr cnt lv: "[T]hc completed barter const iuucs conso ci.uion only with the immcdi.uc par mer" (\Vcher [1922\ 1978, 1'. (35).'" As Weber S.1\\· it , ex ch;lngc in thc market was .rlso exceptional in th.u it rqHcscntcd the most iust rumcmal and (;lkul.1ting type ofsoci.il ucuon that w.rs possible hct wccu two human hcings. l.xch.mgc , he said, represents HI he archctypl' of .111 r.uiou.d social .ictiou n ,111<.1 coustiuncs, as such, ";111 abomiu.uion to c\'cry system offr.iu-rn.il ethics" (lVeb", \1922\19711, 1'1'.630, (37).

\Vebcr abo clllpha.-;izcd t hc clcmcut ofstrugglc or conflict ill the m.ukrt . 1 Ie used terms xuch ;1\ nutrlect JfrJl!iIJ/c and he spokc of "the h.utlc of 111,111 ,1g.lil1st m.ui ill the market" (Weher [1922[ 1978,1'1'.93,1(8). Compct it ion, 1'''1' example, he defined as ";1 'peaceful' con llic t ... insof.u J<.; it consist» in a t(H'Ill;llly peaceful .urcmpt to at t ain cout rol over opport uuitics and advantages which are also desired by others." Exchange, on the other hand, he defined as ";1 compromise otintcrcsts Oil the part of t hc panics ill the course of which goods or other advantages arc passed as rcciprocal compcns.ition" (Weber \1922\1978, 1'1'. 38,72). Weber also repeatedly stressed thaI mon crary prices arc always the result ofa power struggle bel ween the parties on the market.

Weber was ultimately interested in the interaction between the market and the rest of society. One angle through which Weber's analysis on this point can be approached is through his analysis of

266 Swedberg

the role that regulation pbys in the market. A market, Weber explains in Economy fwd Society, can either be free or regulated (Weber [1922] 1978, 1'1'. R2-85). In pre-capitalistic societies there typically exists quite a bit of "traditionalrcgularion" of the market. The more rational a marker is, however, the less it is formally regulated, he notes. The highest degree of "market freedom" or "market rationality" is reached in capitalistic society, where most irrational clcmcnts have been eliminated. III order for the market to be this rational and predictable, however, scvcra I conditions have to be tullfillcd , including the expropriation of the workers from the means of production (Weber 11922] 1978, 1'. 161). The c.ipiralist markcr , ill other words, was the result of :1 long historical process. How Weber envisioned (he historical evolution of the market (all be gleaned from FCOIwmy an d Society as well as from General Economic History.

The Attelllpt ill the 19S0s to Revive the Soci a! Analysis of the Mnrlret

Even I hough cnrlv sociologists h.id bid a solid fouud.uion for ;1 sociological approach to markcrs, tile idea of a sociology of markets did nor C1[(11 Oil. During the 1920s and 1930s almost no work W:1S carried out along these lines. After World War II .1IHI in the 1950s, however, an at, t cmpt was made It) revive tl ic !'iocial :llulysis of the m.ukct , The persons responsible for I his included Talcott P,HSOIlS, Neil Smelser, and K~Hl I'ol.myi. In J:ro1Jo11J,V a n d Soria." (I<JS6) Parxons and Smelser \\'CIT prim;uily int crcstcd ill sh()\\'ill~ thai economic theory and social theory could be intc ~Lltcd in a fruitful 111;11111(.'1', hut they also suggested some "startingpoints for a systematic devclopmcnr of a sociology of markets" (PJ.l"SOIlS '1I1d Smelser 1956, p. 175). The aUI hOI'S hinted thai one could conceptualize the market JS ;1 dis tinct social system in its own right, but most of their efforts were directed at another task, nJlllciy 10 show that markets differ not only in degree but also in "sociological rypc ," depending on their position in the social system as a whole (PJrSOIl~ and Smelser 195(', PI'. 3, 174). According to the A(;JL schcmc , they explained, the subsystem of the economy borders on the three other subsysterns and) depending Oil what boundary is involved, the market will be structured in a different way (see Smelser and Swedberg, chap. 1 in this Hllndbook). Parsons and Smelser's attempt to revive the sociology of markets in Economy and So-

ciety received little attention, however, compared to other parts of the book (Smelser 1992).

The analysis of the market that one finds in the work of Karl Polanyi is much less abstract than that of Parsons and Smelser, and it is also considerably more polemical. According to Polanyi ([195711971, p. 270), it was absolutely imperative to develop a new approach to the market-indeed, this constituted "our main intellectual task today ill the field of economic studies." In particular, Polanyi objected to "the cconomistic L111acy" of equating the whole of the economy with the market. By doing so, Polanyi charged, the true nature of the economy WJS distorted. Polanv] saw his. own work as ;111 attempt to develop J new typc of economics in which the economy was flrll1ly subordinated to society as ,1 whole.

Polauyi's first attempt to give body to his vision of a new kind of economics is found ill 11JC Great Transtormntion (1944). lIis aim in this work was to explain why markets have become so important in modern society, but to do so in a manner that differed from couvcurioual economics. The ccouornisrs, Polan)'i argued, usually began hy referring to mau's propensity to truck ~lnd barter and then sketching the natural progressiol1 lrom small historical m.ukcts to the giant modern markets. To Polanyi, however, this had linlc to do with the historical evolution of rc.il markets. J)rawil1~ on works by "lhuruwald, Pircnnc , and Hccksr hcr, he pointed out th.ir lrom vcry early 011 only two types of birl\' small-scale markct s had existed: the lor al market and "the cxtcmal m.irkct " (PoLlIlyi'.<.; urm ti". IOll!\,dist.lllce m.rrkcts; sec 1'0 I.",), i 119441 1957, PI' S('ff). Both of these types of markets had usually been regulated and neither had been dynamic enough to geller.lIe an economic break through. It WJS instead two watershed events ill European history, he claims, that were responsible for the emergence of the modern market economy: the creation by the mercantilist slate of "internal markets" (national markets) and the radical elimination of all market r<"'gubtiol1 during the middle of the nincrccni h century in England. In cIl1phasizing the role of mercantilism ill crcating narioual markets Polanyi followed the lead of Schmollcr (sec e.g., Schmollcr 118841 1896). Polanyi's interpretation of English history W3S, however, totally his own. During roughly 1830- 1850, Polanyi argued, all regulations of the market had been removed in an ill-advised and highly utopian attemplt to turn England into "One Big Market." Land as well as labor were suddenly

treated as if tile), were ordinary products to be bought and sold on tile market ("tile Commodity fiction"). Tile result was unspeakable misery for common people until countermoves were finally taken to protect society from "tile self-regulating market." But these countermoves had their own contradictory dynamics; he traces many of the key events of tile twentieth century-such as World War [ and World War Il=-ro the radical attempt in mid- nineteenth century England to rrausforrn all of socicrv into one giant market.

As part of the J.l1;llysis ill 'lJH Great Transfor- 11101;011 I'olauyi introduced a new terminology as well as :1 new t hcorctica! perspective Oil markets. This was little noticed at the time, perhaps because of the dramatic st ory that tile book told. In his work fro III the I <)SOs, however, Polanyi to. (used more directly 011 and developed the COIlccptual dimension of his analysis. He chose to present his new concepts ill the JlO\\' famous CSSJY "The Economy as all Instituted Process" (Polanyi [ I <)S7] 1 '171). I'olanyi beg.Hl b)' arguing that there exist scvcr.il diflcrcur wavs oforgallizillg the ccouomv: through "reciprocity," "rcdistrihurion," and "[m.ukcr] exchange." Just as it would he ~l mist.ike to think that all economy ell) only he org;lnized through market cxch.ingc , it would he all CITor to equate t r.idc with m.ukcts, and mo: ley wit h exchange: Trade ;llld 1ll0llCY, as Polanyi showed, 1);1\'(," existed in mallY different 1()('1115. Markr ts , he ;1150 said, were not as most cconoiuist« picture thrill. For a m.u-kct to exist, you need Ilrst of all J "dcm.iud crowd," a "supply crowd" and sOll1cthillg t h.u ell) work as .ui "eLJlIi\';)leIH:Y." To this should be added J number of funcuon.il clcmcru s, SlI(1:i as "physic~d site, goods present, custom, and law" (Polauyi [1<)57] 1<)71, p. 2(7). Btlt not even this amounted to the standard market of economic t hcorv, since priccs could be cit her set or bargained ("set-prin: markets" versus "price-making m.irkcts"}. Prices th.u tluctuarc frcqucmlv due to competition, Polauyi said, represent a L)irly late stage of development. Again, Polanyi's main point was to show that \\'hat economists saw JS the typical market was just one of l11~llly possible forms of organized exchange.

11" Rebi,·th of the Sociology of Markets

Polanyi's ideas about the market led to a long and bitter debate in anthropology; they have also been much debated by hisrorians.I" They had litrlc impact on sociology, however; during the pc-

Markets as Social Structures 267

riod 1950~70 almost no sociological works on the market appeared. During the 1 'I70s, however, sociologists started to become interested in stlldring markets again. Bernard Barber's essay on "the absolutization of the market" appeared in the mid·1970s, about the same time the German sociologist Klaus Heinemann (1'176) suggested that "a sociology of markets" should be created. A few sociological studies that touched Oil various aspects of markets also appeared (c.g., Bou.u luch 1973; Grauovcttcr 1974; Wallerstein 1974; Di· Maggio I 'I77~71l, Zclizer 1979). In one of these, Mark Granovct rcr pioneered a networks approJch to markets by looking at the role rhar acqu.uuLUKes and friends play ill joh scan hcs. III an other, lnunanucl Wallcrsrc iu presented ;) thcorv of "the modern world-system" ill which trade and international markets pia)' a kcv role. Also in Ol ganiz;1tion theory, researchers xr.urcd to hcconu interested ill markets, This W,lS p;uticlILtrly true tor those doing work Oil resource dependency and populatiou ecology (c.g., I'Id"kr and Sul.mcik 1975; Hannan and Freeman 1<)77).

Since the early I <JHO!' sociologists' in« .. .rcst 1(If markets has uucnsitic.! and a host of works h.ivc appeared. To dale, ;1 number or thcorct ic.i] .lppro.ichcs have hccu attempted with \'~uyillg de grecs ofsucccss. a soci.il suuctur.il ~\ppn)~H"h (e.g_. White I <)81.1; BUll I <)IB; B.,ker 1984; Podol11)' 1l)93)~ ;,1 social consuuct ionist approach (c.g., G.Hcie\ 19116; Smith 1990); a hismuc.ilcomp.ir.itivc .1 1'1' roue 11 (c.g., Hamilrou-Bigg.u, 1988; Lie 1<)<)2)~ a social svst cius approach (c.g., Luhm.iun 1<)8H)~ a social rules appro.uh (c.g., BlIl'ns .uid FI.H11 I <JfO); .1 g.'1\1e t hr orcuc.il .ippro.u h (01'1' 1<)87; Vanhcrg 1987); .111d ,\ c011flier appro.nh (e .g., Collins J <)90). S01\1e sociologIcal workv 11;1\'e also hccu inspired by rccrut rcouumi« works on the market) especially Oliver \Villialllsoll's Mnrkcts an d l licrnrrbi cs (e.g., Stinchcolllhc 1<)Il6; Powell 1<)<)0).

()IlC sociological theory of m.ukct s ill p.ut icular stands out= rhc so-called suuctur.il approach. This approach domin.ucs the dcb.uc 011 m.irkct s I'()(' two reasons: it represents the most sustained effort to construct a sociological thcory of mar kcts and it has attracted a number of unusuallv competent researchers. Three pcrsons have been primarily responsible for developing this type of analysis-Harrison White, Ronald Burt, and Wayne Baker. Yet the structural approach has its roots in a considerably larger group of sociologists and it has also been applied to topics other than markets (see c.g., Grauovcttcr forthcoming).

26 H S1I'fdlJe1;tJ

\Vh.1t charac tcrizcs structural sociology in general is its focus 011 social srrucrurc , its attempt to delincnt c structure in a vcry concrete manner (usually through networks), and a deep suspicion of psychological and cull ural explanations. By so Sh:Hply rejecting the notion that values} idcas , and culture arc central to sociological analysis, the structural approach 11;15 naturally led to some debate.

If one person deserves credit t()T having reignited sociologists' interest in markct s, it is Harri"1Il Whire (e.g., Whire 1979, Inla, 198Ib). \Vhitc \ research Oil markets, which began in the mid -19705, represents an aucmpt to raise basic questions about markers: H\Vhy do particular markets come into cxist cruc z ? Whv docs J ccrt ain market persist? Indeed, wh.it kind of obscrvabh: social structure is il market?" (While 1981;1, p. 2). The ,\Ilswcrs I(HlIld in \Vhitc's work have to a large extent been shaped by his diss:HisLlctiol\ with neoclassical economics, Contemporary economics, ;\lcordillg, to Whir«. ha.o;; pLlCtically no interest ill concrete markets and is preoccupied with exch3n!!.l' m.ukct« ;IS opposed to production 11Llrkct s. As a rOIlII, While (1990, p. 1l3) Sill''' "There docs Ilot exist a neoclassical theory of the market 1(111)'1 a pure rhcorv otcxchaugc."

White has been dccplv influenced byeconomic thcory ill his theoretical approach to markers. He refers positivcly to the au.ilvscs of Marshall and Chamberlin tl1H.1, lirst and foremost, he has gi"cll .. I sociolop,i(;ll bent to Michael Spence's theory of market si~Il:lilill~ (c.g., While I 97(" 1990). The imp.ic: of Spl'llce is p.uricul.ulv clc.u on thl' kcy katur« of \Vhitt:'s tllnny of m.nkct s; the Ilolioll that m.ukct s consist of" suucrurcs that an: H:prod ucc-d through signalling or communicanon betwe-e-n the p.irt icip.uit s. Till.' typic;ll market of which White writes is ;\ production market; the reason f()r this is lIut production mark r r s , <lS op· posed to I'xch;lIlge markets, an: charactcrist i« of industrial economics. A production markct , Whit c says, typiC1lly consists of about ;1. dozen of firms that come to view each other as constituting a market and .. ire perceived as such by the buvcrs, The o.:l1tr;ll mechanism in till." coustrtu.tiou of tl market is ils "market schedule," operarionalizcd by While as Wry) where Wstands for revenue and .v f()r volume (sec Leiter 1985). This schedule, accordillg to \Vhite, is considerably more realistic than the economists" demand-supply analysis. Businessmen know what it costs to produce something and try to maximize their income by determining a certain volume for rheir product.

And, if they calculate correctly, they locate a niche in the market tor their product, which their cus romcrs acknowledge by buying the volume determined. The closest to a dcfinit iou of a marker that can be found in White's work is the following' "Markets are tangible cliques of producers w.uch ing each other. Pressure from the buyer side erearcs tl mirror in which producers see themselves, not consumers" (While 19811>, p. 543).

Ronald Burt's research on markets dares 10 thc lllid-19705, specifically 10 his dissertation. III his first major studies of markets he used a special type of data , n.uuclv input-output t ahlcs Oil the U.S. manufacturing industrv (e.~., Burl 1982, 1983; fi,,, il replic;Hion, seT c.g.. Zie~kr 191>2; Yasuda 199:,). On the ['.lSis of this dat a Bun dcvclopcd a novel concept to decrihe the stru.tur« of a Ill'Hket~UstrllctUrtll aurouomv." All .utor, S3)' ;t firm, is autonomous or 110t, Burt S;IYS, de pending ou thc i()llo\\'ing three f'Klm,: (I) the rc L1tiollship between the firm and its compct it ors ; (2) the rcl.uionship hctwcvn the finn's suppliers: and (~) the relationship between the firm~s cus romcrs. Autonomy is ;11 a ma ximum I()I" the lum when ir has (I) no or ft·\\, competitors, (2) lllan~' ,\lHI small suppliers, and (~) manv and SII1;111 (\1S' romcrs. Bun showed cOIl\'illcingly tiL\! the higllcl" the degree of Stl'UCIUI';ll .uuonomv, the LlI"ger the profit. firms having ;1. high degree of market COil strainr would typiL;tlly also try to coopt their com pct itors and increase their profit through various means, ill(ludillg int c rlorkinj; dircctor.ucs. The empirical support f(lI" this LIst point \\';1S, h owr-vr r, less sirong.

Like Burl alld While, WaYlle B.tker hc~.tll 1<> develop ,\ structural appro;Kh to m.rrkcts in the 1970s. Initis dO(IOLll disscrr.uion, (;lllcd M"rl'fl.' 11.f Nrtworks (19X I ), Baker pr(snllnl hOI h .1 gell cr;ll t hcorctic.il ,Hgl1lllCIH lor a s()('iol()gic'lliheor~' of markets and ,I slurp, cmpu-ic.i! '\I1.1Iysis.21 l-cou omists, as Baker saw it, h.id developed an implicit rather t han an cxplicu analysis of the marker:

"Since "mnrkct ' is typically 3ss11l11ed- 1101 slud ied-·lllost cconomi« analyses implicitly ch.uact cr ize 'marker' as a 'featureless plane'" (Baker 19H1, p. 211). In rcalitv, however, markers arc nor Ito mogcnous hut socially structured in various ways. To analyze this structure constitutes the main task for "a middle-range theory of 'markct s-asnc t works'" (Baker 1981, p. IR~).

How this C1I1 be done with the help of networks analysis is clear from the empirical paT! of Baker's thesis, which has also been published separately (Baker 1984; see also Baker and Iycr 1992

XYZ Network:

ABC Network:

Markets as Social Structures 269

o = Clique Member D = Isolate

0= Tree Node 0= Dyad Member V = Liason

FIl;tII{E 2. Example.; of Market Network ... The liguro rcprc scur actual networks oftr.rdiug in optiou s dUl"il1~ the saute afternoon. Source: Baker (19N4, P: 792).

for a mathematical rendition). Using empirical material gathered from a national securities market, Baker showed that at least two different types of market networks could be distinguished: a small, rather dense network (XYZ) and a larger,

more differentiated and louser one (ABC; sec fig. 2). On this ground Baker argued that he had shown that the standard economic view of the market as an undifferentiated entity was misleading. Hut Baker also wanted to show that the social

270 Swedberg

srr uct u re of a market has an impact on the way the market operates; to do this he looked at volatility in option prices. He found that the fragmented, larger type of network (ABC) caused much more volatility than the smaller, more intense network (XYZ). "Social structural patterns," he con· cludcd , "dramatically influenced the direction and the magnitude of price volatility" (Baker 19114, p. 803). It was also clear from Baker's study the error of the old idea that a market is more perlect the more actors arc involved.

The structural approach to markets represents ~l major advance in a Humber of ways. Nonetheless, ot her sociological approaches to markets cxist. » tell' have directly challenged the struct 111".1 I approach. Some critics have, for example, pointed out that the structural approach lacks a cultural dimension (c.g., Zelizcr 1988; Zukin and Di Ivl.Jggio 1 ()l}O). A more general critique argues that it is necessary to include the legal-political dirucusiou of markets in the analysis as well:

Tilt: major downfall of thc network approaches 1S 111.l! Il1q' .1IT such sp;nsl' social structures that it is duliculr 10 see ho\\' they Gill account I<Jr what we oh scrvc , Put auurhcr \\ -, 1)', thcy cont.uu JlO model of politils, no social preconditions for market c xch.iugcs (i.c., notions ofpropcny rights, govntl.lIH.:e structures, or rules of rr.msactions ) and IlO \\';lY to hq"ill to conccptu.tli zc IlOW actors construct their worlds. (Hipt(_'in and lV1.lr;l chit a 1992, p. 20)

The first ch;nge· -th.u the structural approach i~Il()ITS till: cuh ural dimension of markct s-v-was first raised by Viviana Zclizer in an important progr.lI1l111atic .irticlc in the l.uc 1980s (Zelizcr Il)SS). Zelizcr makes clear- thai she is not intercstcd ill advocating a [ull cultural theory of mar kcr s , believing such a theory would (lot be very cflcrtivc (see also Hamilton and Biggar! 1988 lor ;1 similar argument). But she also emphasized that the ~()ci31 structural approach looks at culture with unwarranted suspicion , as if it were a kind of reIII I ian t from a dangerous Parsouinu past. This type ofattitude, however, rends to impoverish the sociological analysis of markct s ill several ways and can he characterized as a form of "social structural reductionism" (Zclizer 19811, p, 618). First, it rhrcarcns to sever the links between sociology and the exciting new literature in anthro po logy and social history on "marker culture" (c.g., Taussig 1980; Reddy 1984; Agnew 1986), Second, it prevents sociologists from fully understanding the role that different types of val lies play in the market.

Zclizer'~; own work illustrates the importance of considering many types of values for a sociology of markets, In her first major work, Morals an d Markets (1979), she analyzed how difficult it had been to establish a market in life insurance policies in the United States because of popular resistance to putting a price on human life. In her second book, PricilllJ the Priceless Child: '[he ChallllilllJ Social Vallie of Children (1985), Zelizcr studied the same process in reverse: how chil drcn around the rurn of the ccnt ury were rcmoved from the labor market and invested with a high cmotiona] value as opposed to a monetary value. Even money, as Zelizer (1989) has shown in her most recent studies, docs not always function as neutral "market moncv" hut plays different rolcs--as "domestic money" or "charitable money," for cxamplc=-dcpcudinp 011 how it is pcrccivcd.:"

The second major point Oil which the structural approach has been criticized, has to do with its failure to properly incorporate a lcgalpolitica' dimension into the analysis (Higsrcin and Mara drira 1992)-" Neil Higstciu's work on the American corporatiou, '/JJC Transjormntiun of Cortu» rate COII/I"oi (1990), C;11l serve as all illustr.irion of how one call exp;llld the structural analvsis ill this respect. According to Fligstein, iudusrrial markcts are created through the interaction of (orpora

t ious and do nor come into being by thcmselves 01 through advances in tcchnol()~~'. Alfred Chandler and Olivcr Williamson couscqucm ly arc wrollg to suggcst that the nHH.h.TIl American (orporat ion emerged as a more or less nu-ch.uucal response to the emergence of national markets ill the late nineteenth century. The final arbitrator of any market is, in addition, always the state; the state also plays a key role ill validating the gcucr.t! perception thai corporations hold of how to solve their competitive problems ("the cOllcept of COIltrol" in Fligstein's terminology).

TI1;lt i hc state plays a key role in structuring the market is also all important theme in many recent sociologic«! studies of the market. It has, f(lr example, been pointed out that ccrt ain actors try to lise the stut c to improve their own position in the market and thereby hypass competition ill the economic sphere (Etzioni 1988; for a similar ar gumcnt by an economist, sec Stigler 1981). Fol lowing Polanyi, it has also been argued that the state must somehow lower the level of "marketness" in the economy if thc market is not to selfdestruct (c.g., Rlock 1991), Campbell and Lindberg (1990) have noted that by manipulating

property rights the state can influence the IVaI' that a market works. Various state agencies, finaliy, regulate different markets and thereby maintain "the moral order" of a particular market and "trust" in the economic system as a whole (sec e.g., Shapiro 1984, 1987; Burk I9R8).

INTEGRATING TilE ECONOMIC AND SOCIOLOGICAL ApPROACHES

TO THE MARKET

As I noted in the first section, real-world markets have exhibited a great deal of complexity and variety throughout history. Interesting efforts to analyze markets as social phenomena in their own riglu=--and not only as price- making mcchanisms-e-uavc been made ill both economic theory and in sociology. In economics Marshall, I,,, example, drew up all ambitious program tor how to stlldy "the organization of markets." Even though he failed to complete it, one can find suggestive ;1ttcmpts at various typologies of markets in his work. Markets, according to Marshall, may he illl;tlyzcd according to such criteria as space, formal organizarion , tnl(lrlllal rcgulatiou, and the presence or ahscnc« of social bonds between buyers and sellers. Chamberlin was e'1u.1l1y as intercstcd as Marshall in undcrstauding how concrete markets operate; he ill p.irt icular emphasized the dilkrentialion of products (and hence markets) through parents, trademarks, reputation of the seller, and the like. Further steps toward a compin theory ofmarkct s can be "HInd in the works of the nco-Austrians (the market as a dcccutral ized process}, Keynes (gaps between and within markets; the role of cxpccrarious), and ill g~lll1e theory (market actors take each other's actions into account). Mall}' works in industrial eCOIlOIllics have made important contributions in this context as well, such as Dennis Carlton's research Oil market-clearing mechanisms. It is also clear tl1;11 the man}' studies Oil the role of inform.uiou in the economy have contributed to a 1110re C0111- plcx picture. And, finally, Nell' Institutional Economics has openly argued that the market mal' be understood as an institution in its own right and not just as a price-making mechanism. Couse et al. have drawn attention to the legal dimension of exchange and have introduced concepts that capture what transpires in the marker, such as transaction costs, search costs, enforcement costs and measurement costs.

In sociology, efforts have been made to analyze

Markets as Social Structures 271

markets as complex social phenomena in their own right. Weber, for example, emphasized the role that conflicts and social regulation play in structuring markets. More recent sociological at· tempts have seen as their primary task to show that markets do not simply consist of homogcnous spaces where buyers and sellers enter into exchange with one another, but that markets arc distinct networks of intcrncrion . Sociologists have also attempted to highlight the role that legal and political factors play in the functioning of mar kcts A debate has ensued between sociologists and New Institutional Economics about the extent to which efficiency can account for the srructurc of particular markets.

Even if considerable progress h;1S been made in understanding the social st ructurc of markets, there still exists a very strong tendellcy to analyze markets as if they were little but mechanisms for exchange. This is true for sociology as well as economics, and it has prevented a full theory of mar kcts from emerging. Markets, however, consist of more than the act of exchange, which is true CVCIl if we include legal and political factors in the analysis. Following Max Weber, [ suggest that the core of the market phenomenon docs not consist of one clcmcnt-v-cxchaugc-c-but of two clcuu-nts: exchange ill comhination with compel it ion (sec fig. 3). More precisely, the social structure of a

buyers X X X
exchange I
seller» X X X t:[(IlTRE 3. The Social St ruc r urc of Markr.."ts, Ac cording to M;n Weber. "A marker llIay he said to exist wherever there is crnnpc titiou , cvcn if only unitatcr.il, for opportunities of cxchaugc :llllonv, a plurality of potcutial parties. Their physical asscuiblagc in one place ... only cou st it utc .. ·S the most consistent kino of market fonuotion." SOI,,",C: Weber, ([1922[1978, 1'. (35).

marker is characterized by J special type of inter action that hegins as competition bctwccn « numbel ofactors (buyers and/or sellers) and that ends tip with all exchange for ,1 few oft hc actors. Whatever else there is to a market is secondary to this primary inrcractionai structure:

i\. market tll(\Y he said to exist wherever there is cornpetition, even if only unilateral, for opportunities of exchange among a plurality of potential parties. Their physical assemblage in one place ... only constitutes the most consistent kind of market formation. (Weber [1922]1978, p. 635)

272 Swedbcri;

Even though Weber saw competition as inrcgral to the structure of any market, he did not elaborate. Docs competition for exchange, tor example, extend beyond the market or is it limited to the marketplace? Whatever Weber's an swcr to this question may have been, it is clear that the concept of markets as competition for opportunities of exchange becomes more interesting if it also includes what goes on outside the marketplace-if it encompasses (to use Marshall's rcrminology) "competition in production" as wcl] as "competition in exchange" (Marshall (1890J 1925). More precisely it is when competition for opportunities of exchange starts to penetrate 1110st or society outside tIH." marker that the market progresses from heing a nondynamic force in society to bccominp; a dynamic one. That COJllpetition for opportunities of cxchaugc is tt'lt throughout society is exactly what characterizes modern capitalist society.

By conucct iug the clement of competition to rh.u of CXCh;1I1gc, ill till" m.mucr Weber suggl"sts, ;\ much 1'1.111<.:1' rhcorv of markets rh.m the current one emerges. The literature Oil competition can he directly integrated into the t hcorv of the m.irkct , For sPJce considerations, I can merely refer the reader to sources of interest and point out that the not ion of perl<"'ct competition is of lu tlc usc ill this context, as opposed to the more rc.ilis tl(._· theories ofcompetition that can also he found ill economic thought.l4 The much less voluminous sociologic;ll literature Oil cornpctuion call ;ds() he explored by the readeLl!'. To show how the theory of markers ClI\ he made more interesting hy incorpor.uing the clcmcnr of compcriuon in i hc m.mncr that Weber SlIggcstS, I shall turn Illy attention to ouc particularly brilliant sociological iutcrprct.uiou otcompcutiou , that of Georg Sim mel, cspcci.illv in his Suzio/ullie (Simmcl \1 <)08\ 1964; see also Simmcl 1<)03).

Competition, according to Sinuncl, can be characterized as a form of "indirect conllict " (( 1908 j 1<)64, p. 57). It dil'krs from ordinary forms of conflict in that it is not directed at the opponent hut rather consists of a "pnrallcl effort." Instead of trying to destroy an opponent, a competitor tries to surpass him or her. This means that extra energy is released and that so(icty benefits from the result of all efforts rather than just the winning one. Since the winner of the competition is to be picked by a third party, each competitor typically tries to divine the wishes of this third part)'. In Simmcl's nearly lyrical formulation:

Innurncrahlc times {competition] achieves what usually only love call do: thc divination of the innermost wishes of the other, even before 11l~ himself becomes aware of them. Antagonistic tension with his COIllpctiror sharpens the businessman's sensitivity 10 the rcudcucics of thc public! even to the point of cl.ur voyancc. [Sirumc! [I90H] 1961, p. (2)

Sinuncl also stresses that even though each competitor may be motivated by whatever he or she CXpCC1S to receive in exchange, he or she will nonetheless hove to produce wh.u thc c xch.iugc partner desires, if then: is to bc ;111 cxch.ingc. Competition, in other words, "offers subjccrivc motives as J means of producing objective so(ial values" (Sinuucl ( 1908 j 1<)64,1'. (0). The COIllpctitivc pr<Kess, as Simmc] (II <)OR J 1<)64, 1'. (0) depicts it, echoes Adam Smith's discussion of the invisible hand, ill rn.u what is '\111 uh im.uc aim for the individu.il" turns out to he ";1 menus J()J' the species lor] the group.l1

M;1I1Y of the comribuuons to the thcor~' of markets tl1;11 we have rcvicwcd=such ;IS the idcas of enforcement costs and rnc.isurcmcur C()stscall e.lSily be tilled into Weher's thcOl)' of thc market as competition for eXLh.1I1gC. And with t lic help of this l.ntcr theory it is "Iso possihk 10 devclop various typologies ofmarkets as SOLiJI suuc lures (see tablcs 2 .md 3). Historical m.ukct s, tor one tiling, differ considcrabl« from OIlC .uun lur, depending 011 the dq!,l'ec to which compcution reaches iut o soricrv. III the Middle Ages, 11:)1' ex ample, the t),pi(;ll city market did not 11.1\'(: 111w,:h otan impart 011 the rest olsocictv, In modern society, OJl rhr other hand, the m.rjor markets ;lIT ~lll fOI'Ill;ll1y trc c ;llld characterized hy rcnnpctuiou in the marketplace as well as by compcuuou in production. Enforcement costs and I1lC;lSllITlllCIH costs have varied throughout history hut h.ivc tended to decline and even out with the cmcrgence of the modern state and sland;lrdizcd weights and measures. Differences nonct hclcss cxisr between the various modern m.ukcts ;lS to enforcement costs and measurement costs. There exists, for example, little effective policing of the international capital market; it is otrcu ditlicuu to decide exactly what has been exchanged for what in the labor market. Other clements have been introduced iuro the typologies of markets in tables 2 and 3 in order to give a full picture of their social structure, Stich as number of buyers and sellers, whether the actors arc individuals or organizations or whether the actors arc organized.

A number ofcrcn r ivc clfort s hoth in coutr inpo r;uy economics and sociolo~)' have sought to rcpiJce the traditional approach to the market as simplya mechanism of exchange with a view that sees the market as a complex social phenomenon ill its OWIl right. These cftort s clearly arc still in all c.uly stage of devclopmcnt, even if considerable pn)l.!,rcss has been Illade during the last fL'\\' deodes. The ulrim.uc task is to develop an analytically intcrcstmg model that can be used cflcc-

Marlicts 11.< Social Structures 273

tively in empirical research. \Veher's suggestion that One call view the market as all interactional form of competition for exchange represents one way of accomplishing this. Still, the problem of understanding markets as distinct social struc HIres is hy 110 means solved and will no doubt continue to he one of the more urgcnt items Oil the agl'lHh of both economic theory and ceo nomic sociology.

T,\I't\ 2. The Soci.i] Structure of l Iistorical Markets (lde.ll Types)

Thc prehistoricli market (such ;1:\ m.trkctplarcs .it

[lie houud.uics o( sm.i!l communitics]

The early m.ukct

I()I- long disLlIl(C Holde (xurh as the "silk ro,u!" around thc timc ()fCIHi~()

Tile m.u kct ill the Middk 1\)'.(" ('11,·1, ,IS (ilY Ilurkt.,t~)

The modc rn c.rpit.il-

ist market (such .IS, c.g., LlpiLli m.rrkct s )

CoJJtjJditiolJ

Competition is low .uu! deu-s IIO[ c xtcud IK'VOIHl [he m.irkctplacc illt~) societ v ; fcw .\l'[nrs ill

1111..' m.irkct

(:olllpt.,titioJ\ between p,ofl.'ssiolLl1 tr.idcr-,

.uid mcrch.uus; ILHk "l"tt.'1l ill ,1 limited IWIll her of 11I\lIr~' ncms ,lilt.! C()1ll11ctitiOIl docs lint rc.nh dn'lll\' into Ihe pro.luct.vc (Jrg'llliz.1ti(1I1 of socictv

C()ll1pcliti(~n is lo(al and fitmlv rq~lILltl'd

ill tilt.' (ily; (JllIpctili\t.' l-ch.ivior olll~' l't.';lChn illto some Icvv .11"t.'.IS nt' socil'ly~ 0I11t.'rwisc t.'UllH)lHi( lr.ldilicll1,l!i'>m ruk-s

louu.illy free compcti tiou , which is nariou.il .ind iutcrn.uioual ; cruupet i[ ivc behavior

c x tcudx deeply into suciety ("colllpetitioll ill the murkct " as well as "competition in production ")

into

EwIJllJlJlt'

ILu[er and barg.lilllng; ruthless behavior directed towards :lll cvch.mgc panics, who ;11"t.' from a differellt community: ti..'\\" .1I1d iucflicir nt ways to hack

lip l·\:Ch.lllgt.'S (cxtrctuclv . high cutorccuu-m coSts)

There c xist several dil"fert.'nt \\·,lYS of org,lI1il.ing C\Ch.ll1ge ill noss cultural trodc ; huge and unprcdict.ihlc enforce mcnr (osts, hilt .llso cxucmclv higll profits rrsultuu; from the t.:XCh.lllgc

B.lrg;lillillg is tvpic.rl ;llld lilt.' c xch.uuic is h.1St.'d Oil 11<j{ vct sLlI\d.\l'dil.nl goods (high ruv.uurc mcnt costs); h.ng.lilli!lg is comnu m ; jlC.l(C of the nt.uk ctplacc i .... spcci.dly gu.u.uuccd , but .... till high cuforccmvm co st s

Various r.uiou.il mcchnnisms exist to LlciliLHC the cxchangt.' (low search costs); b.Hg;lillill!!, ollly at the m.ugiu ; fulllll;tC\Jillcry of the modern slate [0 back lip [he exchange (Io\\' enforcement costs)

274 Swedlm:if

The labor market

TABLE 3. The Social Structure of Modern Capitalist Market, (Ideal Types)

Competition

;1110

EwlJfllllJC

Till.' consumer market

TIll.': indusui.il market

Typically Illany sellers (individuals) versus few and powerful buyers (orgauiz arions); competition is regulated hy employers' organizatious, bv unions and by legislation; lack of mobilit}' Jlllong sellers often flukes compcriuon local

A limited number of buyers and sellers, 1I10S1 of which are organizations; private

as well as public rcgllbtion; polili(;11 iutcrvcntions ; competition is national and international in scope

Typically flow sellers (orgnniz.u ions] ~l1ld many huyns {individ uals), who arc tlllorganizcd; some public n:glliatidil hilt other wise free competition

Typic-lily lew buyers and sellers, ;111 or

which arc organizations: often networks of buyers ;1I1d sellers III

this type or market

Decentralized exchange (high search costs); little scope lor bargaining due to unions, employers' organizations and norms of fairness: measurement problems caused hy transmission of rights rcl.ircd to Jgt'llcy as opposed to properly

OIlt.:11 centralized

cxchaugc in t he tonn

of organized clcanng mechanisms (Io\\' search rusts); mnchincr« t'xists to hack lip exchange hut only 011 the na tioual lcvcl ; full property rights ar c transferred

Fixed prices and IlO b.ugairing: dcccu tLllized hut flxed places or exchange (shops) nulls, ctc.] means low scne" cosis ; filII property rights arc I rauslcrrcd

Exchange often rakes the t()rm of ncgoriarious .urd is toiallv dcccm r.iuzcd ; full pro~ll'n)' rights .u-c u.uistcrrcd hilt sdkr's obligations mav remain; oficn higll Sl'MCh (OSIS

Note All OpilJlisl ruar kcr s tend 10 he (mlll.llly free aud (orm"lIy r.HiI)1l.1L Ccuupc titiuu cvtcnd s deeply inr o socicl), ("cOJllpuitioll ill rlu- m.rrkct" ,'~ well J~ "couuu-ution ill production"}.

NOTES

I l-or helpful comments and information 1 would like to thank Bernard Barber, Ronald BUrl, Olof Dahlback , Cccili. Gil-Swcdbcr g , Mark Granovcucr, 1\:[I.:r I lcdstrom, Ibm Lind, John Meyer, Mark Mizruclu, Apostolis P;ljlJk.oSIJS) Neil Smelser, Linda Brewster Stearns and Charles Tilly.

2. For [he history of the English word nmrlect, sec Davis (1951), Agnew (1986, PI'. 27, 41-42) and G.'ford Ellgli!b Dict ionnry (1989). For [he turn of the century mc auing , see also 'JJu l'a[qY{u'c Dictionary of /'olilical J:collomy (1896) with its two entries: "Markets as a Place of Sale" and "Market {on the stock exchange)." Other terms for market arc Jtlq (Arabic), {llTom (Greek), bexar (Persian). mercbi (French) and Merkt (German). The earliest known term (or market is kitrtlm, an Akkadian word which also means "quay" (for different opinions whether it is appro· priatc to translate kitrmn as marker, sec Leeman 1960, pp. 1-2; Polanyi 1962,p. 117,Cuflin1984,p. 67).

3. Ac(oniinp, 10 one of Ronald Re.lg,lIl's undcrsccrcrar in otvratc , it W~l~, Rcag.tn himselfwho invcru cd tluv ~I()g.ln and inscn cd it in a speech delivered ;11 the 198 I ,HlIH',l) mcc+ing or tlu- lutcrn.ttional J\101ll't.lry Fund .ind the \Vorld Bank Croup. Sec Wallis (1984, r- 7) and Keag,lII (119811 1982, P: 855). The history of the market 01'1,111 ideologicll phenomenon still remains 10 he writt cn.

4. Especially the rollowing m.ucria! has been used for the first section of this chapter: Adelman and Morris (1978); Brandel (1977; 11979] I9HS); Britllell (1993); Curtin (lY84)j Ccrschcukron (1977); Hintze ([19291 1975); Huvchn (1897); l.ovc (1991); Maille (1889); Mokyr (1989); Pircnnc (1898; 1936); Polauyi (1977); Rostovtxcff {l955); Rothenberg (1')')2); and weber (j 1922] 1978; 119231 1981). The reader Illay also "'ISh to consult the following works: Agnew {I 986); Anderson and Latham (1986); Bohannan and Dalton (]962); Brown (1947); Elton and Costelloe (1889); Everitt (1967); Gecr rz (1979); Hicks (1969); Hirschman (1977; 1985); Hodges (1988); Lane (1991); Lopez (1971); PI arrnc r (1985). Stigler anti Sherwin (1985);. and Vcrfindcu (1963).

The literature on central place thcor y is also relevant in this context (sec specially Hcrr y 1967; Christaller [193311966; Losch [1944 J 1954; Skinner 1964-65; and Smith 1974).

S. According to a letter from Bernard Barber to the author. his article is heavily based on lectures that Talcott Parson .. gave at Harvard in the 1930s

6. The Rattle of the Methods ended with a dcvastanng defeat tor the Historical School of Economics. For an introduction to the war that the market wa ... conceived ofhy the historical economists, see the section devoted to this topic in Gustav Scluuotlcrs main work in economics, (;nlw{,.iJI dCI" AI{rrCIIICiIlOl Vo/bJl'irlJe/J(I[tI/{/Jrc (Scluuollcr 1904, pp. 473-77). Hen: the market is primarily defined as "a place and time where buyers .1I1d sellers. who ell~Jgc in l'\ch:lIlgc with one anothcr , come together" (Sclunollcr 1904, p. 474). Scluuollcr also emphasized the import ant role that social factors play in the constitu+ion of a market, such .1S power relations, legal and adminstrarivc rules. ami v.mous customs. l-or the W~t~' the members or the "young- 01" l listoric.il S~h(l()1 SJ\\' the m.u kct , sec especially Som b.u t ([ 191 ()-271 19M7, 2: I: I ssrr; 3:2:527-32) and Weber (119221 197X, 1'1'. X2- X5, 635-40).

7. 111 l'I"iu(iplo (If Economics M,1rsh,lll (! lY201 1961, 1:324·-25) cites the definitions of [cvous and ofCnuruot ; and in '/11( '/JJCOI".v ofPoiit icnl Economv }C\'OI1S (1911, p. RS) citc s Ih,lt of Com not. Auordillg to .stigler (1946, p. 92), "t\t.lfsh.,II's definition ofa nmrlect is geller.llly accepted." The on I" two definitions of a m.trkct that JO:lII Rohiuson (11974( 197(), p. 147) cites ill her overview article are those of COUrtlOI .utd l\brsh.lli.

8. Thc first quote comes frcuu t\ugll.stin Couruot's Rccbcrcbcs sur /(f princi prs /Un/hemaliq"o dr la tbroric do ,.idJ(J)o( UU8);1 s cited ill M.w.;i,.I1I's Principles (I/l:'(011(111/in If-oIH 1890. For the l\brsh.111 (1II01C, sec ~1.HshJII ([ 1'1201 1%1,1324)

<) Perko intonu.uinu IlJ01\S that ,III the actors ill the market ,HltUIIl,Hi(.IIl\' (and cosllc-,sl\,) have all thc nccvss.uv intonu.uion. PerrC(t compctition l·llC:11lS 111;11 there :HC S;) manv stu.ill scllcr s ill thc market 111:11 IHlIH: (all affect the price. l-ormorc details see,c.g., Kllight (! 191111<)85, Jlp. 7(1-7tJ) .111<1 Slig,kr (I 9bH).

10. M,Hsh,lll added 11K phravc "the ()q~:llliYJliOIi otmarkctv" in III<: tounh edition from IH9H ((I". l\br~h"IIII()201 IWII, 2:~S()). The idc.t (If a svstcm.uic surdv ofmarkct s is, however. prc scut .tlrcady ill t(le first cdillOIl·flOl1I IHIJO

II ln 1 H31 Archbishop Whaldy had sup.~ested rha t POlili(,11 nOllolilY should he renamed cnmtlacrics or "the science ofc xchaugc." The term never caught on since most l'COIIOl1li.QS kit that economics should have a wider scope than just exchange. A few individuals, however, found catnl/f1ttinuscllli (ur uunllnxy s« l Iayck preferred to call it) Sec Kirvncr (I t)76, p. 72).

12. Say's L\\\' of Markct s has been interpreted in a v.m(IY ut ways (Sl'C", I.' .g" Schumpctcr 1954, pp. 615-25; Sow-u 1972; Hlaug 19~U, rp. 152·86), Tu further coruplic atc runttc rs , Say himself spoke or ""/11 loi des dHUJurllff"-alld ac(ording TO Schnmpctcr (1954, p. 61 S), "the term Out lets [for dfllOlI(h("51 would render .say's meaning better [rhan markets I.'"

1~. Sec in this context also the views of Pigou and Ioan Robinson. According to l'igou, a market Oil be seen as "a nodal point at which a product, whose units arc perfect substitutes for each other, are available for purchase and sale" (Mason 1939, p. 68). To Robinson, a market was bounJed by ""a gap in the chain of substitutes'" (Mason 1939, p. 69).

Markets as Social Structures 275

14, Mason wrote in 1957: "When the term 'market' is used a Marshaltian industry is meant; that is, a census industry. Unless we can lise [r his ] conception of the market, and with it, properly rectified data, the field of Industrial Organization is a wilderness" (Mason 1957, p.5).

IS, For the contrast between (xplicil and implicit mar kct s in Gary Recker's work, sec, e.g., Becker (1981, p. ix ). Richard Posner discusses "the wealth maximization" theory of justice in, lor example, the first part of Economics o[ JlHlic( (1981 ), George Stigler (1971) OppOSl'S his 0\\'11 theory of regulation, according to which different groups vic for control over regulation, to the "protection of the pub lie" theory of regulation, Somewhat like the Austrian ccon ornists , Milton Friedman opposes the market to sorialivm 011 the ground that political fn .. -cdom is onlr possible when there is economic freedom (scc , e.g., Friedman 1962~ 119NI] 19M7; 119M21 1':JM7~ and Friedman and Friedman 1 <)HO). A CO III 111011 theme ill t he Chicago School is also th.u intcllcctu.rls tcud to despise the market (SCl', c.g., Stigler [1963119H4).

16. lixpcrimcntal economics tr.iccs its origius to an artjde by Edward Chamberlin from the late )':J4(ls th.u de scribes a classroom exercise in which a market \\"~lS simulated {Chamberlin 1948). For J bricfuu roducnon 10 the current st atc of c xpcrimcnt al economics. SCl' Smith and Williams (I <)<)2}; fur a gCllcr.ll introduction to the ficld , sec Davis and Holt (1l)<)3), According to Smith and William., (l992, p. 73), "cxpcrimcur.il market l'(OIHlInists hJ\"l' found that the choice of iustit utions is often the cssCllti:ll factor ill dctcrrniuing how ;1 market works-whether tr.rd illP. proceeds smoothly and whether thc market price doc-, ill fact converge 10 irs thcorvtic.rl level." lntc rcvting rcvult s Il;H'C also been reached about the rcl.uiouslup between a market's iustjtution.tl struct urc ;111t! the occurrence of"p(·(ulatiun.

17. Flu search l()~ts, sec. e.g., North and "1"110111,1\ (1973, p. 135). The concept or cuforccmcur covt s h~I" it~ root s ill the work (If l-rcdvric LUll' Oil protection custs .utd protection rent front the 1940~ .ind unw.trd . Sec Laue ( 1979)

1 N. t\n::ording to Weher'.~ origjn.tl plan for /:"(llUomy alld Socictv; the ;1llJlysi\ of the m.ukct W;IS to h;1.\·L' played ,I much lorgcr role than it ended lip doing. This \\·.15 In;lillly dill' to the E1CI th.tt Weber died before he cnuld finivh his projected chapter Oil I he marker. \Vh~lI exist .... , i" h,lbilllall~' referred 10 as ";1 fr.rgmcnr" (\Vehrr 1192211978, pp. 6,15- 40; for the original pl.ut , sec ibid., pp. lxv-lxvi].

19. By consuciauou , weber means a rational and inter CSI driven rcIanouship (Wcbn []<)22] 1978, pp. 40--41). The rC1SOII tor the usc of the word [m rtrr in this quotl' {rather than ( .. w!;nlllJd is Ih.1I Weber, at (his st.-lgc of rludiscussion in 1:'(OIIO"'Y n1/d So,iel)" had not yet nuroduccd IIl01K\·.

20.· l-or .a good sclccuou ofwritings from rhc dcb.uc in anthropology, sec Lc Clair and Schneider (196&); tor a rccent appraisal, sec Orlovc (1 ~86), l-or the reception of I'olanyi's ideas among historians, scc , cB-. North (1977); Silver (1983); and Curtin (1984), I'p. 58,67,70.

21. Simultaneously as Baker ~1I1d other u.s. sociologist s were formulating theories of markers as networks, a few Swedish business school economists were doing the sallie. For a history of the Swedish effort (which has mainly Iocllsed on industrial markets), see Johansson and Mattson (1992); for a representative product, see Hagg and Johans· son (1982).

276 Swedberg

22. A similar fascination with ..... rhc social construction of value" can also be found in the works of Charles W. Smith (1981; 1990). Auction" as Smith argues in hi' latest study, 3rC nor very good to use as a model for the perfect market (as economists tend to do), since tlley arc in principle only used when there c);i!l.u some di+liculty in assigning a price ill 3 standard way. Based on ethnographic research 011 a variNy of market', Smith (1990, p. 163) argu<, that "real aucrions are ... processes for managing the: ambiguity and uncertainty of value by establishing social meanings and consensus."

23. The reader may, however, note that mall)' structural analyses of the <conomy do rake the political-legal dimen· sion into account (set', c.g.. Mizrllchi 1992). Much of structural analyxis is also inspired by a general political economy mode] (c.g. Schwartz and Mintz 1985; Mizruchi ll1l1 $,hw,r17. 19R7).

24. The realistic theories of competition have their roots in rill' work (If A&'ul1 Smith and ;HC characterized hy till' 1',10 11,;11 compctition is seen ,1S active ;lnd IHlIlJidi"'(IIsionnl. In perfect cntupr titicu , 011 till: other hand, oilly price i,o; taken into :l(COUIH and the actur is p.lo;si\'c since he or .'i.llc (;11\1\(11 in i111)' \\,.'}' influence the price. An:ordil1~ to Slif,kr (1957, p. S), it was COUfI1ot who first lC.lrI11lll:1.led the COI1(l'PI ofpcrli..'ct cnmpctitiuu hr "t1tjill/i"/IJc.:OIllPl'li· rion as the situation in which p [or price [docs not vary wirl. '11 or qU;lIltil)'l-in which the (km;1I1d (urn,' I~cillg the firm is horizontal:" SChlllllllCtl.'r (11942] 19(,2. p, 13X) spoke (If "the bloodless concept of pall'ci (omp .. -tition" :1.11<1, ;1(. cording til I\",h.""," (197H, p. ~M). I'Ll11k Kl1i~ht liknl to poinl out that "in pcrtccr compcritiuu there is 110 (OIl1pCI;' tiou." For~' -"ug.gntt\'c .111.11)'si!i o(c.:olllpe:tilioll .IS ,I "di~ .. ·O\· lTy procedure," sec Hayek (II <J()X I I <)7M); !iCC also I J:1.Yl'k (ll <)46 J I <)48). For useful surveys of the history (If (()I11Pl" rinou in economic thought, sec Stigler (1957), Dennis (1977), Dcmsctz ( 1982).

25. Sol"iologio;l5 hisrork,\lIy 11,1\'e bccu mOH' iutcrcstcd in (PIUIll'lirioll " ... ,I p.l·l\n,11 !io(i.11 phl'I\()I\ll'I\OIl ,h.\I1 ill cnmpctiriou ill the: ccollom}, (scc , e.g., Park ;111...1 nurg.l'\.~ 1924; M.1I1I1heiI111192911952; von Wie.,e 1929). Sonic of thi .... 'i.(H.:iologk.·" htcrat urc is uoncrhclcss slIgg.l'Slh'c for ;l1l:1.I}'si.~ of economic cornpctirion, such ;'I~ Park and Hurg.l'Ss·~ dcfiniriun of cOillpetiriol\ ;IS "Inter.retion without soci:l1 couract " (1924, p. 506). During the Lut 1\:\\' years two cxccllcur gl'l1l'r;11 analyses of cmupcrion have appeared in c(oJlollli( s()ciologr: Abol.lfl:1 and Bigg:1rt (1991) and Run (I ()<J2). Sec also the creative manner ill which cruupc dtinn is used in l'figstcin (19(0) and rodolny (1993). tor a \15(' ful distinction bcrwccu competitio!1 and selection, sec Wel,« (119221 197X, p, 38).

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