A market is any one of a variety of different systems System is a set of interacting or interdependent entities forming an integrated whole, institutions Institutions are structures and mechanisms of social order and cooperation governing the behavior of a set of individuals within a given human collectivity. Institutions are identified with a social purpose and permanence, transcending individual human lives and intentions, and with the making and enforcing of rules governing cooperative human, procedures A procedure is a specified series of actions or operations[disambiguation needed] which have to be executed in the same manner in order to always obtain the same result under the same circumstances . Less precisely speaking, this word can indicate a sequence of tasks, steps, decisions, calculations and processes, that when undertaken in the, social relations In social science, a social relation or social interaction refers to a relationship between two , three (i.e. a triad) or more individuals (e.g. a social group). Social relations, derived from individual agency, form the basis of the social structure. To this extent social relations are always the basic object of analysis for social scientists and infrastructures Infrastructure is the basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function. The term typically refers to the technical structures that support a society, such as roads, water supply, sewers, power grids, telecommunications, and so forth whereby persons trade Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern traders instead, and goods In macroeconomics and accounting, a good is contrasted with a service. In this sense, a good is defined as a physical product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the and services The tertiary sector of the economy is one of the three economic sectors, the others being the secondary sector (approximately manufacturing) and the primary sector (extraction such as mining, agriculture and fishing). The general definition of the tertiary sector is producing a service instead of just an end product, in the case of the secondary are exchanged, forming part of the economy An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution,. It is an arrangement that allows buyers A buyer is any person who contracts to acquire an asset in return for some form of consideration and sellers to exchange things. Competition is essential in markets, and separates market from trade. Two persons 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.[1] Markets vary in size, range, geographic scale, location, types and variety of human communities, as well as the types of goods and services traded. Some examples include local farmers' markets held in town squares or parking lots, shopping centers A shopping mall or shopping centre is one or more buildings forming a complex of shops representing merchandisers, with interconnecting walkways enabling visitors to easily walk from unit to unit, along with a parking area – a modern, indoor version of the traditional marketplace and shopping malls A shopping mall is one or more buildings forming a complex of shops representing merchandisers, with interconnecting walkways enabling visitors to easily walk from unit to unit, along with a parking area – a modern, indoor version of the traditional marketplace, international currency and commodity markets, legally created markets such as for pollution permits, and illegal The illegal drug trade is a global black market consisting of the cultivation, manufacture, distribution and sale of illegal controlled drugs. Most jurisdictions prohibit trade, except under license, of many types of drugs by drug control laws. Some drugs, notably alcohol and tobacco, are outside the scope of these laws, but may be subject to markets such as the market for illicit drugs.

In mainstream economics Mainstream economics is a loose term used to refer to the non-heterodox economics taught in prominent universities. It is most closely associated with neoclassical economics, or more precisely by the neoclassical synthesis, which combines neoclassical approach to microeconomics with Keynesian approach to macroeconomics, the concept of a market is any structure that allows buyers and sellers to exchange any type of goods, services and information Information economy is a term that characterizes an economy with an increased emphasis on informational activities and information industry. The exchange of goods or services for money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment is a transaction A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. In accounting, it is recognized by an entry in the books of account. It involves a change in the status of the finances of two or more businesses or individuals. Market participants consist of all the buyers and sellers of a good who influence its price In all modern economies, the overwhelming majority of prices are quoted in units of some form of currency. Although in theory, prices could be quoted as quantities of other goods or services this sort of barter exchange is rarely seen. This influence is a major study of economics An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution, and has given rise to several theories and models In economics, a model is a theoretical construct that represents economic processes by a set of variables and a set of logical and/or quantitative relationships between them. The economic model is a simplified framework designed to illustrate complex processes, often but not always using mathematical techniques. Frequently, economic models use concerning the basic market forces of supply and demand Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. There are two roles in markets, buyers A buyer is any person who contracts to acquire an asset in return for some form of consideration and sellers A sale is the pinnacle activity involved in the selling products or services in return for money or other compensation. It is an act of completion of a commercial activity.[not in citation given]. The market facilitates trade Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern traders instead and enables the distribution and allocation of resources Categories: Economics terminology | Behavioral finance | Scarcity | in a society. Markets allow any tradable item to be evaluated and priced In all modern economies, the overwhelming majority of prices are quoted in units of some form of currency. Although in theory, prices could be quoted as quantities of other goods or services this sort of barter exchange is rarely seen. A market emerges more or less spontaneously or is constructed deliberately by human interaction in order to enable the exchange of rights (cf. ownership Ownership is the state or fact of exclusive rights and control over property, which may be an object, land/real estate or intellectual property. Ownership involves multiple rights, collectively referred to as title, which may be separated and held by different parties. The concept of ownership has existed for thousands of years and in all cultures) of services and goods.

Historically, markets originated in physical marketplaces A marketplace is the space, actual, virtual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie. the 'real world' in which products and services are provided and consumed which would often develop into — or from — small communities, towns and cities.[citation needed]

Contents

Types of markets

Although many markets exist in the traditional sense — such as a marketplace A marketplace is the space, actual, virtual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie. the 'real world' in which products and services are provided and consumed — 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 Market liquidity is a business, economics or investment term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. Money, or cash on hand, is the most liquid asset. An act of exchange of a less liquid asset with a more liquid. Most investors prefer investing in two markets, the stock markets A stock market or equity market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately and the bond markets The bond market is a financial market where participants buy and sell debt securities, usually in the form of bonds. As of 2009, the size of the worldwide bond market (total debt outstanding) is an estimated $82.2 trillion , of which the size of the outstanding U.S. bond market debt was $31.2 trillion according to BIS (or alternatively $34.3. NYSE The New York Stock Exchange is a stock exchange located at 11 Wall Street in lower Manhattan, New York City, USA. It is the world's largest stock exchange by market capitalization of its listed companies at US$12.25 trillion as of May 2010. Average daily trading value was approximately US$153 billion in 2008, AMEX, and the NASDAQ The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations," but the exchange's official stance is that the acronym is obsolete. It is the largest electronic screen-based equity securities trading market in the are the most common stock markets in the US. Futures markets A futures exchange or derivatives exchange is a central financial exchange where people can trade standardized futures contracts; that is, a contract to buy specific quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future, where contracts are exchanged regarding the future delivery of goods are often an outgrowth of general commodity markets Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchanges, in which they are bought and sold in standardized contracts.

Currency markets The foreign exchange market is a worldwide decentralized over-the-counter financial market for the trading of currencies. Financial centers around the world function as anchors of trading between a wide range of different types of buyers and sellers around the clock, with the exception of weekends are used to trade one currency for another, and are often used for speculation on currency exchange rates.

The money market The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit, federal funds, and short-lived mortgage- and asset- is the name for the global market for lending and borrowing.

Prediction markets

Prediction markets Prediction markets are speculative markets created for the purpose of making predictions. Assets are created whose final cash value is tied to a particular event (e.g., will the next US president be a Republican) or parameter (e.g., total sales next quarter). The current market prices can then be interpreted as predictions of the probability of 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 An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. In economic theory, an auction may refer to any mechanism or set of trading rules for exchange, as a private electronic market A private electronic market uses the Internet to connect a limited number or pre-qualified buyers or sellers in one market. PEMs are a hybrid between perfectly open markets (e.g. exchanges where there is no pre-existing relationship between buyer and seller - similar to eBay) and closed contract negotiations (such as a sealed bid tender, where, as a commodity wholesale market, as a shopping center, as a complex institution such as a stock market A stock market or equity market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately, 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 In modern societies the underground economy covers a vast array of activities. It is generally smaller in countries where economic freedom is greater, and becomes progressively larger in those areas where corruption, regulation, or legal monopolies restrict economic activity in various goods, services, or trading groups.[citation needed], where a good is exchanged illegally and virtual markets, such as eBay eBay Inc. is an American Internet company that manages eBay.com, an on-line auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. Founded in 1995, eBay is one of the notable success stories of the dot-com bubble; it is now a multi-billion dollar business with operations localized, 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 In economics, laissez-faire (English pronunciation: /ˌlɛseɪˈfɛər/ , French: [lɛsefɛʁ] ( listen)) means allowing industry to be free from state intervention, especially restrictions in the form of tariffs and government monopolies policies is a free market A free market is a market without economic intervention and regulation by government except to enforce ownership and contracts. It is the opposite of a controlled market, where the government regulates how the means of production, goods, services and labor are used, priced, or distributed. This is the contemporary use of the term "free market&. It is "free" in the sense that the government makes no attempt to intervene through taxes To tax is to impose a financial charge or other levy upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state such that failure to pay is punishable by law, subsidies A subsidy is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire, minimum wages A minimum wage is the lowest hourly, daily or monthly wage that employers may legally pay to employees or workers. Equivalently, it is the lowest wage at which workers may sell their labor. Although minimum wage laws are in effect in a great many jurisdictions, there are differences of opinion about the benefits and drawbacks of a minimum wage, price ceilings A price ceiling is a government-imposed limit on the price charged for a product. Governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable. However, a price ceiling can cause problems if imposed for a long period without controlled rationing. Price ceilings can produce negative, 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 level of organization or negotiation power of buyers, 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

Cabbage market by Vaclav Maly

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.[2] 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.[3] 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.[4] 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".[5]

Wetherby town’s market.

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.[6] 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".[7] 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.[8]

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.[9] 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.[10] 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.[11] 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.[12]

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.[13]

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 (pp. 53–78). This emphasis on proliferation can also be contrasted with continuing scholarly attempts to show underlying cohesive and structural similarities to different markets.[14]

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.[14] 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.[15] 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 certain sets of rules. As such market transactions can never be disembedded from social and geographic relations and there is no sense to talking of degrees of embeddedness and disembeddeness.[16]

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.[17] 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.

Size parameters

Market size can be given in terms of the number of buyers and sellers in a particular market[18] or in terms of the total exchange of money in the market, generally annually (per year). When given in terms of money, market size is often termed market value, but in a distinguished sense than the market value of individual products. For one and the same goods, there may be different (and generally increasing) market values at the production level, the wholesale level and the retail level. For example, the value of the global illicit drug market for the year 2003 was estimated by the United Nations to be US$13 billion at the production level, $94 billion at the wholesale level (taking seizures into account), and US$322 billion at the retail level (based on retail prices and taking seizures and other losses into account).[19]

See also

Notes

  1. ^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 28. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4.
  2. ^ Callon, M. (1998) "Introduction: The Embeddedness of Economic Markets in Economics." In The Laws of the Markets, edited by Michel Callon. Basic Blackwell/The Sociological Review pp 1-57 1998, p.2).
  3. ^ Swedberg, Richard (1994) “Markets as Social Structures” The Handbook of Economic Sociology. Ed. Neil Smelser and Richard Swedberg. Princeton University Press. 255-2821994, p. 258)
  4. ^ Peck, J. (2005) “Economic Geographies in Space” Economic Geography 81(2) 129-175.
  5. ^ (Gibson-Graham, J.K. (2006) Postcapitalist Politics. University of Minnesota Press,. p.2).
  6. ^ (MacPherson, C.B. (1962) The Political Theory of Possessive Individualism: From Hobbes to Locke. Oxford Clarendon Press. p.3
  7. ^ (Swedberg, 1994, p. 258
  8. ^ Harvey, David (2005) A Short History of Neoliberalism Oxford University Press.
  9. ^ Lukács, Georg. (1971) History and Class Consciousness. Trans. Rodney Livingstone. Merlin Press. London.p. 87
  10. ^ Bourdieu, Pierre (1999) Acts of Resistance: Against the Tyranny of the Market. The New Press.p. 95
  11. ^ Peck, supra, p. 154)
  12. ^ Bakker, Karen (2005) “Neoliberalizing Nature?: Market Environmentalism in water supply in England and Wales” Annals of the Association of American Geographers 95 (3), 542-565
  13. ^ (Mitchell, Timothy (2002) Rule of Experts. University of California Pressp. 270; Gibson-Graham 2006, supra pp. 53-78)
  14. ^ a b Swedberg, 1994, p. 267
  15. ^ Martin, Ron (2000) “Institutional Approaches in Economic Geography” Handbook of Economic Geography. Ed. Eric Sheppard and Trevor J. Barnes. Blackwell Publishers.Peck, 2005
  16. ^ Callon, 1998; Mitchell, 2002, p. 291,
  17. ^ Hughes, Alex (2005) “Geographies of Exchange and Circulation: alternative trading spaces” Progress in Human Geography
  18. ^ investorwords.com > market size Retrieved on April 17, 2010
  19. ^ United Nations, “2005 World Drug Report,” Office on Drugs and Crime, June 2005, pg. 16. [1]

References

Sources

External links

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