Academic journal article The American Journal of Economics and Sociology

A Socio-Dynamic Understanding of Markets: The Progressive Joining Forces of Economic Sociology and Austrian Economics

Academic journal article The American Journal of Economics and Sociology

A Socio-Dynamic Understanding of Markets: The Progressive Joining Forces of Economic Sociology and Austrian Economics

Article excerpt

I

Introduction

IT IS A TRUISM that the market is very much an invisible feature of neoclassical economics (see Swedberg 1994). This should, however, come as no surprise, since this successful branch of the social sciences does not set out to understand the market in its own right. It is, and for the better part does Hot set out to be, anything other than the epitome of price theory, by means of which various combinations of assumptions are analyzed regarding their impact on prices and derivatives thereof, subject to highly formalized models. The strength of the assumptions is conducive to the predictive power of these models (see Friedman 1953). Prediction of price (stemming from the parametric character thereof) and not market understanding in general is hence at the core of this agenda. The market, when explicitly referred to, is depicted as a setup of various structural assumptions, a reflective foil known as the "competitive structure" that pertains to the number of actors, the nature of decision making, and the specificity of goods or elasticities of demand and supply, respectively (see Thin 1960, who depicts a "theory of markets" in this vein). Explicit references to the market then become either "over contingent" on the use to which it is put (Is the market, for instance, supply- or demand-side defined? In other words, is it identical to an industry in terms of adapted technology, or is it equivalent to chains of substitution?) or simply "empty," as seen when the market is depicted as identical to the aggregated demand curve (see Tirole [1988] 1995; Demsetz 1982). Apart from anything else, this hardly renders feasible an understanding of the market as a dynamic institution resulting from human action.

This said, it is indeed possible to come up with a few alternatives that pay due respect to the market more in its own right. Such ideas cannot be said to constitute a "remedy," as that would imply the failure of neoclassical economics in this regard. But this agenda cannot possibly be accused of something it does not set out to attain. Instead, such alternatives take on different perspectives by choosing to emphasize issues that point in directions other than prediction of price. There is an army of options to explore, but one clear choice is to home in on two specific facets that are mostly absent in neoclassical reasoning, what this paper terms social and dynamic properties of markets. They are discussed in this paper from within economic sociology and Austrian economics. That these two strands of thought are in fact reconcilable in this regard is safeguarded by a brief discussion of individualism.

II

The Market in Economic Sociology

WHEN TRYING TO GRASP THE MARKET FROM A SOCIOLOGICAL ANGLE, one could always debate whether what unfolds is a "sociology of markets" or a "market sociology." By this latter term is here meant an understanding of the market by means of sociological ideas and tools, while a "sociology of markets" (see Lie 1997) represents more of an overall market scrutiny seen from several theoretical angles) Thus, an emergent market sociology could start out with the idea of the market as a social structure as seen in "some kind of recurrent and patterned interaction between agents that are maintained through sanctions" (Swedberg 1994: 255). This structure can furthermore eventually be thought of as a network, a web of interconnected ties that impacts the manner in which this market is understood. (2) It is natural for such works on markets-as-networks to position themselves as an antidote to neoclassical economics. This is often accomplished rather explicitly. White (1981: 518), for instance, describes his own approach as "[the] embedding [of the] economists' neoclassical theory of the firm within a sociological view of markets," whereas Hagg and Johanson (1982: 31-39) chose to contrast the market heterogeneity of their own perspective with its neoclassical, mostly homogeneous, counterpart. …

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