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Markets are the foremost subject of economic science as market economics. Markets also are of interest for economic sociology, as indicated by the sociology of the market. Conventional economics and economic sociology treat markets in different ways, as economic mechanisms and as social creations, respectively.
In conventional economics, markets are mechanisms operating in various ways and forms. First and foremost, markets are mechanisms involving relations and laws of supply and demand. A similar conventional economic conception is that of markets as mechanisms and spheres of economic freedom, specifically free competition. Also, conventional economics conceives markets as almost automatic economic mechanisms operating with self-regulation and a tendency toward equilibrium and optimum. In a related conception, markets are spontaneous and impersonal mechanisms for economic coordination, originating in the concept of an invisible hand” of market competition. In particular, markets are conceived as mechanisms for efficient resource allocation as well as objective wealth distribution. Markets are seen as impersonal mechanisms for the determination of exchange values or prices. Lastly, in conventional economics markets operate as mechanisms of natural selection in the economy, of rapid economic growth, and of improved material welfare.
Economic sociology treats markets as social creations, complementing their treatment as economic mechanisms in conventional economics. Generally, for economic sociology markets are special cases of social categories or facts existing and involved in society. Markets and their functions, as elements of the social economy, are necessarily embedded in social relations and institutions, as Comte emphasized. Durkheim considers markets and economies particular forms of social facts, the origin and substance of which is primarily society. According to Simmel, market exchanges are not just economic facts but social phenomena because of their non-economic conditions, especially culture.
In particular, economic sociology analyzes markets as social institutions. For Durkheim, markets are special cases of social or public institutions, specifically those involving exchange forming the subject of economic sociology, together with institutions related to the production and distribution of wealth. He identifies the institutional or normative (non-contractual) ingredients of market contracts in that the latter are far from self-sufficient and instead subject to social regulations. Tonnies observes that society is present in all market contracts and exchanges. Weber treats markets as normative-institutional arrangements in that group formation through market exchange is substantively equivalent to associations formed via rational agreement or imposition of norms. He classifies markets into the most developed economic institutions of modern capitalism. The classical treatment of markets as social institutions has been adopted and refined in contemporary economic sociology.
Also, in economic sociology markets are analyzed in terms of social interactions and relations. In Weber’s view, the market is a sociological variable of the economy in virtue of being a set of social relations. Simmel describes market competition as a sociological condition and process involving social interaction. In contemporary economic sociology, social relations are crucial to markets viewed as embedded in networks of interpersonal ties and institutions (embeddedness).
Further, economic sociology considers markets social systems or structures. Durkheim characterizes markets and economies as social systems permeated by values. Pareto suggests that markets and the economy overall are integral elements of the social system but more general and complex. Contemporary economic sociology also approaches markets as special social structures. In addition, economic sociology treats markets as fields of power and conflict, as well as of cultural values.
- Schumpeter, J. (1954) History of Economic Analysis. Oxford University Press, New York.