Saturday, February 16, 2013

Markets are social institutions--we built those profits together.

The collective nature of markets and their dependency on the state to even exist are vitally important facts to understand when discussing policy questions.  Markets are social institutions that depend, not on individual actors making private decisions, but the collective whole and social investments to sustain and maintain. The true nature of markets and the dependency of state investment for markets to exist are under-appreciated within our current political and economic discourse. 

Especially at local levels of political debate, the "I don't depend on Government" small business narcissists tend to drown out the voices of actual economists when it comes to economic/market regulatory questions.  But markets are not what these self-made men and women [sic] claim they are; and their failure to understand (or maybe have YOU understand) what markets actual are skews the political debate in ways that just so happen to hide their rent-seeking and regulatory capturing ways from everyones view.

Debra Satz has a nice succinct explanation of markets: 

The New Shorter Oxford English Dictionary defines a market as “a meeting or gathering place of people for the purchase and sale of provisions or livestock” and as “the action or business or buying and selling.”6 But markets are not merely meeting places or a series of individual transactions: they are social institutions that must be built up and maintained.7 Initially markets may be thrown up spontaneously, but in the end they are socially sustained; all markets depend for their operation on background property rules and a complex of social, cultural, and legal institutions. For exchanges to constitute the structure of a market many elements have to be in place: property rights need to be defined and protected, rules for making contracts and agreements need to be specified and enforced, information needs to flow smoothly, people need to be induced through internal and external mechanisms to behave in a trustworthy manner, and monopolies need to be curtailed. In all developed market economies governments play a large role in securing these elements. 

For this reason it is mistaken to consider state and market to be opposite terms; the state necessarily shapes and supports the process of market transacting. In Lewis Kornhauser and Robert Mnookin’s memorable phrase, all (market) bargaining occurs in the shadow of the law.8 Transacting individuals depend on the state for their basic security when they walk to the corner store to purchase food for their meals; they expect the state to enforce health and safety requirements concerning food production and handling; and they expect the shop owner to be sanctioned if he fails to keep up his end of the transaction. The fact that laws and institutions underwrite market transactions also means that such transactions are, at least in principle, not private capitalist acts between consenting adults, as the libertarian philosopher Robert Nozick famously claimed, but instead a public concern of all citizens whether or not they directly participate in them.

Satz, Debra (2010-06-10). Why Some Things Should Not Be for Sale:The Moral Limits of Markets (Oxford Political Philosophy) (Kindle Locations 266-281). Oxford University Press. Kindle Edition. 

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