MARKET
A market is any one of a variety of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on buyers offer their goods or services (including labor) in exchange for money (legal tender such as fiat money) from buyers.
For
a market to be competitive, there must be more than a single buyer or
seller. It has been suggested that two people may trade, but it takes at
least three persons to have a market, so that there is competition on
at least one of its two sides. However, competitive markets rely on much
larger numbers of both buyers and sellers. A market with single seller
and multiple buyers is a monopoly. A market with a single buyer and multiple sellers is a monopsony. These are the extremes of imperfect competition.
Markets
vary in form, scale (volume and geographic reach), location, and types
of participants, as well as the types of goods and services traded.
Examples include:
- physical retail markets, such as local farmers' markets, which be held in town squares or parking lots on an ongoing or occasional basis, shopping centers and shopping malls
- (non-physical) internet markets (see electronic commerce)
- ad hoc auction markets
- markets for intermediate goods used in production of other goods and services
- labor markets
- international currency and commodity markets
- stock markets, for the exchange of shares in corporations
- artificial markets created by regulation to exchange rights for derivatives that have been designed to ameliorate externalities, such as pollution permits (see carbon trading)
- illegal markets such as the market for illicit drugs, arms or pirated products
In mainstream economics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information. The exchange of goods or services for money is a transaction. Market participants consist of all the buyers and sellers of a good who influence its price. This influence is a major study of economics and has given rise to several theories and models concerning the basic market forces of supply and demand. There are two roles in markets, buyers and sellers. The market facilitates trade and enables the distribution and allocation of resources in a society. Markets allow any tradable item to be evaluated and priced.
A market emerges more or less spontaneously or is constructed
deliberately by human interaction in order to enable the exchange of
rights (cf. ownership) of services and goods.Historically, markets originated in physical marketplaces which would often develop into — or from — small communities, towns and cities.
Types of markets
Although many markets exist in the traditional sense — such as a marketplace
— there are various other types of markets and various organizational
structures to assist their functions. The nature of business
transactions could define markets.
Financial markets
Financial markets facilitate the exchange of liquid assets. Most investors prefer investing in two markets, the stock markets and the bond markets. NYSE, AMEX, and the NASDAQ are the most common stock markets in the US. Futures markets, where contracts are exchanged regarding the future delivery of goods are often an outgrowth of general commodity markets.
Currency markets are used to trade one currency for another, and are often used for speculation on currency exchange rates.The money market is the name for the global market for lending and borrowing.
Prediction markets
Prediction markets
are a type of speculative market in which the goods exchanged are
futures on the occurrence of certain events. They apply the market
dynamics to facilitate information aggregation.
Organization of markets
A market can be organized as an auction, as a private electronic market, as a commodity wholesale market, as a shopping center, as a complex institution such as a stock market, and as an informal discussion between two individuals.
Markets
of varying types can spontaneously arise whenever a party has interest
in a good or service that some other party can provide. Hence there can
be a market for cigarettes in correctional facilities, another for
chewing gum in a playground, and yet another for contracts for the
future delivery of a commodity. There can be black markets, where a good is exchanged illegally and virtual markets, such as eBay,
in which buyers and sellers do not physically interact during
negotiation. There can also be markets for goods under a command economy
despite pressure to repress them.
Mechanisms of markets
In economics, a market that runs under laissez-faire policies is a free market. It is "free" in the sense that the government makes no attempt to intervene through taxes, subsidies, minimum wages, price ceilings, etc. Market prices may be distorted by a seller or sellers with monopoly power, or a buyer with monopsony
power. Such price distortions can have an adverse effect on market
participant's welfare and reduce the efficiency of market outcomes.
Also, the relative level of organization and negotiating power of buyers
and sellers markedly affects the functioning of the market. Markets
where price negotiations meet equilibrium though still do not arrive at
desired outcomes for both sides are said to experience market failure.
Study of markets
The
study of actual existing markets made up of persons interacting in
space and place in diverse ways is widely seen as an antidote to
abstract and all-encompassing concepts of “the market” and has
historical precedent in the works of Fernand Braudel and Karl Polanyi.
The latter term is now generally used in two ways. First, to denote the
abstract mechanisms whereby supply and demand confront each other and
deals are made. In its place, reference to markets reflects ordinary
experience and the places, processes and institutions in which exchanges
occurs. Second, the market is often used to signify an integrated,
all-encompassing and cohesive capitalist world economy. A widespread
trend in economic history and sociology
is skeptical of the idea that it is possible to develop a theory to
capture an essence or unifying thread to markets. For economic
geographers, reference to regional, local, or commodity specific markets
can serve to undermine assumptions of global integration, and highlight
geographic variations in the structures, institutions, histories, path
dependencies, forms of interaction and modes of self-understanding of
agents in different spheres of market exchange. Reference to actual
markets can show capitalism not as a totalizing force or completely
encompassing mode of economic activity, but rather as "a set of economic
practices scattered over a landscape, rather than a systemic
concentration of power".
C. B. Macpherson
identifies an underlying model of the market underlying Anglo-American
liberal-democratic political economy and philosophy in the seventeenth
and eighteenth centuries: Persons are cast as self-interested
individuals, who enter into contractual relations with other such
individuals, concerning the exchange of goods or personal capacities
cast as commodities, with the motive of maximizing pecuniary interest.
The state and its governance systems are cast as outside of this
framework. This model came to dominant economic thinking in the later
nineteenth century, as economists such as Ricardo, Mill, Jevons, Walras
and later neo-classical economics shifted from reference to
geographically located marketplaces to an abstract "market". This
tradition is continued in contemporary neoliberalism,
where the market is held up as optimal for wealth creation and human
freedom, and the states’ role imagined as minimal, reduced to that of
upholding and keeping stable property rights, contract, and money
supply. This allowed for boilerplate economic and institutional
restructuring under structural adjustment and post-Communist reconstruction.
Similar
formalism occurs in a wide variety of social democratic and Marxist
discourses that situate political action as antagonistic to the market.
In particular, commodification theorists such as Georg Lukács insist that market relations necessarily lead to undue exploitation of labour and so need to be opposed in toto. Pierre Bourdieu
has suggested the market model is becoming self-realizing, in virtue of
its wide acceptance in national and international institutions through
the 1990s. The formalist conception faces a number of insuperable
difficulties, concerning the putatively global scope of the market to
cover the entire Earth, in terms of penetration of particular economies,
and in terms of whether particular claims about the subjects
(individuals with pecuniary interest), objects (commodities), and modes
of exchange (transactions) apply to any actually existing markets.
A
central theme of empirical analyses is the variation and proliferation
of types of markets since the rise of capitalism and global scale
economies. The Regulation School
stresses the ways in which developed capitalist countries have
implemented varying degrees and types of environmental, economic, and
social regulation, taxation and public spending, fiscal policy and
government provisioning of goods, all of which have transformed markets
in uneven and geographical varied ways and created a variety of mixed
economies. Drawing on concepts of institutional variance and path
dependency, varieties of capitalism theorists (such as Hall and Soskice)
identify two dominant modes of economic ordering in the developed
capitalist countries, "coordinated market economies" such as Germany and
Japan, and an Anglo-American "liberal market economies". However, such
approaches imply that the Anglo-American liberal market economies in
fact operate in a matter close to the abstract notion of "the market".
While Anglo-American countries have seen increasing introduction of
neo-liberal forms of economic ordering, this has not lead to simple
convergence, but rather a variety of hybrid institutional orderings.
Rather, a variety of new markets have emerged, such as for carbon
trading or rights to pollute. In some cases, such as emerging markets
for water, different forms of privatization of different aspects of
previously state run infrastructure have created hybrid private-public
formations and graded degrees of commodification, commercialization and
privatization.
Problematic
for market formalism is the relationship between formal capitalist
economic processes and a variety of alternative forms, ranging from
semi-feudal and peasant economies widely operative in many developing
economies, to informal markets, barter systems, worker cooperatives,
or illegal trades that occur in most developed countries. Practices of
incorporation of non-Western peoples into global markets in the
nineteenth and twentieth century did not merely result in the quashing
of former social economic institutions. Rather, various modes of
articulation arose between transformed and hybridized local traditions
and social practices and the emergence world economy. So called
capitalist markets in fact include and depend on a wide range of
geographically situated economic practices that do not follow the market
model. Economies are thus hybrids of market and non-market elements.
Helpful here is J. K. Gibson-Graham’s
complex topology of the diversity of contemporary market economies
describing different types of transactions, labour, and economic agents.
Transactions can occur in underground markets (such as for marijuana)
or be artificially protected (such as for patents). They can cover the
sale of public goods under privatization schemes to co-operative
exchanges and occur under varying degrees of monopoly power and state
regulation. Likewise, there are a wide variety of economic agents, which
engage in different types of transactions on different terms: One
cannot assume the practices of a religious kindergarten, multinational
corporation, state enterprise, or community-based cooperative can be
subsumed under the same logic of calculability. This emphasis on
proliferation can also be contrasted with continuing scholarly attempts
to show underlying cohesive and structural similarities to different
markets.
A prominent entry point for challenging the market model's applicability concerns exchange transactions and the homo economicus assumption of self-interest maximization. There are now a number of streams of economic sociological
analysis of markets focusing on the role of the social in transactions,
and the ways transactions involve social networks and relations of
trust, cooperation and other bonds. Economic geographers in turn draw
attention to the ways in exchange transactions occur against the
backdrop of institutional, social and geographic processes, including
class relations, uneven development, and historically contingent path
dependencies. A useful schema is provided by Michel Callon's
concept of framing: Each economic act or transaction occurs against,
incorporates and also re-performs a geographically and cultural specific
complex of social histories, institutional arrangements, rules and
connections. These network relations are simultaneously bracketed, so
that persons and transactions may be disentangled from thick social
bonds. The character of calculability is imposed upon agents as they
come to work in markets and are "formatted" as calculative agencies.
Market exchanges contain a history of struggle and contestation that
produced actors predisposed to exchange under c An emerging theme worthy
of further study is the interrelationship, interpenetrability and
variations of concepts of persons, commodities, and modes of exchange
under particular market formations. This is most pronounced in recent
movement towards post-structuralist theorizing that draws on Foucault and Actor Network Theory
and stress relational aspects of personhood, and dependence and
integration into networks and practical systems. Commodity network
approaches further both deconstruct and show alternatives to the market
models concept of commodities. Here, both researchers and market actors
are understood as reframing commodities in terms of processes and social
and ecological relationships. Rather than a mere objectification of
things traded, the complex network relationships of exchange in
different markets calls on agents to alternatively deconstruct or “get
with” the fetish of commodities. Gibson-Graham thus read a variety of
alternative markets, for fair trade and organic foods, or those using Local Exchange Trading Systems as not only contributing to proliferation, but also forging new modes of ethical exchange and economic subjectivities.
Most markets are regulated by state wide laws and regulations. While barter markets exist, most markets use currency or some other form of money.Any
investments made in markets should be carefully analyzed and read
through before investing if the market crashes value of stock may go
down leading to heavy losses
