Academic journal article Journal of Australian Political Economy

'Thinking Socially' about Markets

Academic journal article Journal of Australian Political Economy

'Thinking Socially' about Markets

Article excerpt

For more than a century, the discipline of economics has been dominated by the neoclassical tradition of thought. This has bequeathed an understanding of markets as spheres of free exchange between autonomous, asocial individuals. Moreover, this understanding of markets is often reflected in mainstream public policy discourse. Yet the orthodox approach to understanding markets has proved inadequate for conceptualising the observed nature, practice and evolution of 'actually existing markets' (Chester 2010) in capitalist economies. As a result, it is contested on many fronts.

Useful alternative conceptions of markets and market activity can be found in the broad non-neoclassical modes of thinking about the economy. These include traditions within both heterodox economics and economic sociology. Indeed, it is the contention of this article that, despite some important differences, these approaches cohere around a 'social ontology' (Paton 2011) of markets. The shared conception of capitalist markets as socially constituted points to a clear methodological cleavage between the neoclassical and non-neoclassical approaches to market analysis.

Furthermore, an appreciation of the social character of markets prompts recognition of agency. The character of markets, and of the economy more broadly, can be shaped by the purposive activity of human agents, albeit, as Marx (1951) emphasised, not 'under circumstances of their own choosing'. This holds open the possibility of developing practical alternatives to the individualised 'market centric' discourse and practices that have come to dominate policy making across the capitalist world during the last three decades.

Following a brief outline of the conceptual foundations of the neoclassical understanding of markets, the article moves to a discussion of heterodox economics and economic sociology. We survey a range of different theoretical perspectives populating these two broad areas, exploring how they effectively understand 'markets' (whether explicitly or implicitly) as embedded in broader social institutions and processes. An interest in the social character of markets has also recently developed within neoclassical economics. We consider these developments before concluding with reflections on some of the policy implications of 'thinking socially' about 'markets'.

Markets in the Economic Orthodoxy

In orthodox economic theory. markets are the centre of a competitive price system which. on the basis of certain assumptions. tends to an equilibrium where supply matches demand. The implication of the analysis is that markets are effectively 'self-regulating' which, in turn, has broader implications for understanding the relationship between markets and states. The conceptual foundations of this theory derive from the nineteenth century 'marginalist revolution' which reflected a paradigm shift in economic thought. It introduced a specific set of assumptions about human behaviour as well as an associated set of methods of inquiry which came to define what counted as 'normal science'. Indeed, for the founders of marginalism it was a science that they wished to emulate in the study of economics (Barber 1967: 166167). They admired the precision and certainty they believed had been attained in the physical sciences and sought to recalibrate the study of the economy along similar lines.

To this end the marginalists expunged from the discipline some of the key conceptual tools and methods that had traditionally been used in the study of economic processes. For example, historical analysis and the concept of 'class' had been features of the previously dominant approach of the classical political economists, including Adam Smith, David Ricardo and John Stuart Mill (Hunt 2002: 48-50). The decline of the classical school and its analytical preoccupations was reflected in a change of name from 'political economy' to 'economics'. William Stanley Jevons, a pioneer of marginalism, encapsulated this shift in the preface to the second edition of his leading marginalist text, Principles of Political Economy:

Among minor alterations, I may mention the substitution for the name political economy of the single convenient term economics. …

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