Prominent economic sociologist Richard Swedberg has argued that economists have failed to develop a theory of the market that recognizes it as a “social phenomenon in its own right.” While this may be true of mainstream economics, the Austrian school’s theory of the market is much richer than the standard view. For Austrians, the market has always been a central concern. And Austrians have always argued that the market is a social structure where both exchange and competition occurs. Still, Austrians give little more than scant attention to the noneconomic sociality that occurs in markets. The market, however, is both a conversation and an arena where meaningful conversations can occur. This paper is an effort to focus attention on the market as a social space where social activity (beyond competition and exchange) takes place and where noneconomic relationships and economic relationships develop.
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Recall that Mises (1949: 257) insisted that the market is “not a place, a thing, or a collective entity” but that instead it is “a process.”
I describe these “conversations that express more than bid–ask” which often occur in markets as “extraeconomic” or “noncatallactic” interactions. Admittedly, the line between economic and extraeconomic phenomena is somewhat fuzzy and constantly shifting. Still, following Weber (1949), I believe that it is useful to distinguish between economic phenomena and what he termed “economically conditioned” phenomena, and contend that this distinction reflects the views of both economists and others about what the focus of our discipline is and, in fact, should be.
See Ikeda (2002; 2006, unpublished manuscript) and Lewis (2006, unpublished manuscript) discussions of the key role played by trust in the market.
Ikeda’s (2006, unpublished manuscript) discussion of the key distinction between confidence and trust is relevant here.
Note that the concern here is not just about theoretical aesthetics. Instead, as stated earlier, the goal is to expand our theoretical framework so that we will be able to evaluate the claims made by Gudeman and others about the social harms wrought by an expanding market sphere. Focusing on the extraeconomic relationships that can occur in markets is also an important first step in evaluating Rothbard’s provocative claim that markets are more essential for friendships than friendships are for markets.
I do not mean to suggest that economic relationships are not real or that business contacts are not meaningful. On the contrary, I believe that they often can be. They are not, however, the only real relationships and meaningful contacts that occur in markets. Indeed, real relationships that are not merely commercial relationships and meaningful contacts that cannot be reduced to mere business contacts are also developed and nurtured in markets.
By constructed, Lefebvre does not mean that they are physically produced; although, obviously, they typically are materially made places. Instead, he means that they are conceptually and socially constructed and designated as social sites of this or that type. As such, beaches, lakes, and mountains can similarly be thought of as social spaces. These spaces serve as sites where we go to relax and play, as spaces to which we escape.
As Lefebvre (1991, 191) writes, “Social space can never escape its basic duality … Is not social space always, and simultaneously, both a field of action (offering its extension to the deployment of projects and practical intentions) and a basis of action (a set of places whence energies derive and whither energies are directed)?”
The literature on social capital comes close to approaching the more complete picture of the link between social relationships and markets that I’m suggesting here. Unfortunately, because it is principally concerned with how social capital can be profitably employed in the market and other contexts, many of the writings on social capital commit the same sin of omission as Granovetter. Consider, for instance, Coleman’s foundational piece, “Social capital in the creation of human capital” (2000). In that article, Coleman uses the example of the wholesale diamond market in New York City to illustrate his point that preexisting social relations enable actors to achieve ends that would otherwise be unattainable (ibid.: 16). While negotiating a sale, he recounts, diamond traders routinely give other merchants a bag of valuable diamonds to examine in private, at their leisure, without any formal guarantee that the buyers will not replace any of the stones in an effort to get a better deal. This practice, which is essential to the smooth functioning of the diamond wholesale market, is only possible, Coleman (ibid., 17) explains, because merchants belong to “essentially a closed community,” sharing ethnic, religious, family, and community ties. Being caught stealing a stone would cost a merchant not just a single trading partner but access to the entire trading network as well as “family, religious and community ties” (ibid.). In this way, social capital within this segment of the Jewish community in New York facilitates the wholesale diamond market in that city. Although Coleman is right to stress how social capital within this community serves as an important economic resource, he does not consider how important these repeated and trust-filled economic dealings are in sustaining that community. It is undoubtedly easier to trust that a potential son-in-law will prove reliable when you already have a fruitful economic relationship with him and his family.
Greater connectivity in the sense that you have more media available for communication. More selective in the sense that you are better able to connect with precisely the kinds of people that you wish to build relationships with. Note also that the market also facilitates communication links that connect and promote exchanges between disparate and diverse communities. The Internet, for instance, allows for discussion across borders and across populations. I am grateful to Chris Coyne for helping me to focus on this point.
I am grateful to T. Clark Durant for helping me to appreciate this point. The Londoner who has American and Japanese colleagues and customers evolves certain social skills and habits as a result. This is also certainly true of the Londoner who has lived and worked in the United States and Japan for some time.
See Coyne’s After War (2007) for a convincing discussion of how a commitment to free trade on the part of Western democracies like the United States is more likely to bring about successful transformations in weak and failed states than is military intervention. As he suggests, since trade in goods across cultures also involves cultural exchanges, then free trade has the potential to sow the seeds of tolerance, understanding, and a willingness to agree to disagree that are necessary for global peace. Similarly, Bender (2002: 228) writing about the marketplace in ancient Greece notes that “the agora stimulated citizens to recognize the presence of others, persons with different needs and rights to be respected. It was a place for representation of difference in a way that implied common affiliation in a collective … The work of such a space is to enhance the capacity for tolerance and recognition in a world of difference.”
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I am grateful to Paul Lewis, Emily Chamlee-Wright, Stephen Gudeman, Sanford Ikeda, Chris Coyne, Nicola Virgill-Rolle, John Rolle, T. Clark Durant, and the participants in New York University’s Colloquium on Market Institutions and Economic Processes and the Mercatus Center Graduate Student Paper Workshop for the comments on earlier drafts of this paper. The standard disclaimer applies.
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Storr, V.H. The market as a social space: On the meaningful extraeconomic conversations that can occur in markets. Rev Austrian Econ 21, 135–150 (2008). https://doi.org/10.1007/s11138-007-0034-0
- The market
- Social space