Market Institutions Behzad Azarhoushang

Outline The Meaning of Markets The Development and Expansions of Market Institutional Requirements of Markets Markets and Well-Being Types of Markets

The Meaning of Markets Markets are social organzations set up to facilitate distribution by exchange Market as places to buy and sell (physical location): A physical place where there is a reasonable expectation of finding both buyers and sellers for the same product or services (e.g. Historical bazzar, shopping mals and etc.) Market as social institutions: An institutions that brings buyers and sellers into communication with each other, structuring and coordinating their actions Institutions : ways of structuring social interactions, including both formally constituted establishments and the generally recognized patterns of organizations embodied in customs, habits and laws. Institutions which are primarily concerend with facilating exchange and other establishment dedicated to buying and selling (second definition of market)

Market as pure exchange „the market“ a pharse that people often use to mean an abstract situation of pure exchange or a global system of exchange relationships. Pro & anti free markets : Pro : free markets with very low government intervention (Laissez-faire economy) lead to economic growth. „ Anti : unregulated markets can increase inequality, poverty and enviromental degradation. The Meaning of Markets

The Development and Expansions of Market Market in ancient societies  Barter economy  Physical definition of market  Trust  Limited effects on people‘s life Market in Medieval Europe  Mostly For people who live in towns  Guilds as designer of market rules (Artisans and Merchants)  „Just price“ as part of Catholic church doctrine  No interest on loan

The industrial revolution  Moving toward modern markets (15th century onward)  Landowners moved toward market-orinted agriculture (hiring and selling)  Scientific agriculture (18th century in Britain)  Steam engine, steel making, weaving textile...  Increase in labour productivity  Decrease in labour to material and energy ratio  Different scenarios could be taken  Urbanization Chosen scenario  Workers as consumer  Reinvestment on equipment and factories  Higer output  Development of market The Development and Expansions of Market

Industrial and Market Culture Secularism Individualism Instrumental rationality Materialsim High pace of changes New way of management and discipline

Institutional Requirements of Markets Individualist institutions of property and decision making  Private ownership : ownership of assets by nongovernment economic actors.  Should exist both formally, in codes of law, and informally, in social norms.  Case of former Soviet Union countries  Social institutions of Trust  Implicit contracts : an informal agreement about the terms of exchange, based on verbal disscusions and on common norms, tradition and expectation.  Explicit contracts : a formal, often written agreement that states the terms of an exchange and may be enforcable through a legal system.

Markets and Well-Being Positive effects of markets on people well-being: Steady flow of information Resource allocation Freedom in decision making Innovation Improving living conditions Negative effects of markets on people well-being: Individualism Moral dilemas Enviromental effects

Types of Markets What is sold? Retail Markets Wholesale Markets Intermediate goods markets Resale markets Commidity markets Labour markets (market for selling or renting????) Financial markets Underground markets What Time period is coverd? Spot market Future market Long-term contract

Types of Markets How are prices determined? Posted price according to markup (or cost-plus) pricing which will determine market value (retail market) Auction market (Valuable artwork) Open auction (ebay) Dutch auction (cut-flower market) Sealed-bid auction (construction contraction, commercial real estates) Double auction (New York Stock exchange) Bargaining (Residental real estate)

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