In your own words....

[TakeAStepBack]

Describe to me what a market is, how it functions, what its key components are, and when they were created, please.

Many thanks.

 

[oldfart]

Describe to me what a market is, how it functions, what its key components are, and when they were created, please.

Many thanks.

Markets are social constructs developed to enable trade. They can be barter or cash (using a numeraire). Originally they only existed face to face, but can now exist wherever participants can communicate, including electronic marketplaces.

All markets have at least two types of participants, buyers and sellers. Often a third type arises, market-makers or arbitrageurs. Sometimes people include a fourth category, those who regulate or enforce the rules of the market.

All markets have rules. These start off with the principle of voluntariness. Theft is a violation of the rules, as is coerced action. The participants must be free to advance their own interests as they see them. Other rules, first customary and eventually with sanctions, develop from there, such as how and when exchange is effected. Commercial law grows out of this.

Markets are remarkably hardy institutions, often thriving even when banned. They arise spontaneously in prisons and POW camps, gravitating quickly to a numeraire when there is no legal or stable currency. Physical disasters, social upheaval, and economic catastrophe all seem to encourage them. They are our economic lifeboats of last resort when all else fails.

Markets exist because they have social usefulness. They enable trade. They also send economic signals to participants about what is available and what is desired. The first is manifested as supply and the latter as demand. The participants can adjust both what they consume and what they produce based on the availability and demand for each traded item. An efficient market therefore automatically encourages the production of those items most valued in the community. The alternative to the market mechanism is a command mechanism, for instance when farmers are required to grow and pay to the government a fixed quantity of grain. Virtually all economies use some mix of market and command elements.

Most of what I describe has been in existence for eight to ten thousand years, to the domestication of crops and animals. Barter exchange is probably at least forty thousand years old, first within family groups and small tribes, and then expanding to seasonal meetings of larger groups. This is the stuff of economic anthropology, a rather arcane branch of learning, but one that has always fascinated me. This is probably not what you had in mind, but I certainly enjoyed writing it, and I did attempt to incorporate answers to all your questions.

Peace, Jamie

 

[TakeAStepBack]

No, that was exactly the type of answer I was looking for. The reason I posed the question, is because a friend put forth on another social media site, an article regarding human action that blatantly stated that markets are the construct of government. That without government no market would exist, and as i pointed out the fallacies within such an argument, the whining began.

So i thought i would ask here and see what other people thought in regards to markets, how they form, etc...

I would agree with your explanation 100% That is what markets are, they form from human interaction, you've positively nailed it in my opinion.

Thanks,

 

[eflatminor]

Describe to me what a market is, how it functions, what its key components are, and when they were created, please.

Many thanks.

Markets are social constructs developed to enable trade. They can be barter or cash (using a numeraire). Originally they only existed face to face, but can now exist wherever participants can communicate, including electronic marketplaces.

All markets have at least two types of participants, buyers and sellers. Often a third type arises, market-makers or arbitrageurs. Sometimes people include a fourth category, those who regulate or enforce the rules of the market.

All markets have rules. These start off with the principle of voluntariness. Theft is a violation of the rules, as is coerced action. The participants must be free to advance their own interests as they see them. Other rules, first customary and eventually with sanctions, develop from there, such as how and when exchange is effected. Commercial law grows out of this.

Markets are remarkably hardy institutions, often thriving even when banned. They arise spontaneously in prisons and POW camps, gravitating quickly to a numeraire when there is no legal or stable currency. Physical disasters, social upheaval, and economic catastrophe all seem to encourage them. They are our economic lifeboats of last resort when all else fails.

Markets exist because they have social usefulness. They enable trade. They also send economic signals to participants about what is available and what is desired. The first is manifested as supply and the latter as demand. The participants can adjust both what they consume and what they produce based on the availability and demand for each traded item. An efficient market therefore automatically encourages the production of those items most valued in the community. The alternative to the market mechanism is a command mechanism, for instance when farmers are required to grow and pay to the government a fixed quantity of grain. Virtually all economies use some mix of market and command elements.

Most of what I describe has been in existence for eight to ten thousand years, to the domestication of crops and animals. Barter exchange is probably at least forty thousand years old, first within family groups and small tribes, and then expanding to seasonal meetings of larger groups. This is the stuff of economic anthropology, a rather arcane branch of learning, but one that has always fascinated me. This is probably not what you had in mind, but I certainly enjoyed writing it, and I did attempt to incorporate answers to all your questions.

Peace, Jamie

I know we don't always agree on everything oldfart, but that's a pretty good definition I'd say. Well done.

 

[jon_berzerk]

No, that was exactly the type of answer I was looking for. The reason I posed the question, is because a friend put forth on another social media site, an article regarding human action that blatantly stated that markets are the construct of government. That without government no market would exist, and as i pointed out the fallacies within such an argument, the whining began.

So i thought i would ask here and see what other people thought in regards to markets, how they form, etc...

I would agree with your explanation 100% That is what markets are, they form from human interaction, you've positively nailed it in my opinion.

Thanks,

stated that markets are the construct of government. That without government no market would exist

that is just simply untrue

 

[oldfart]

No, that was exactly the type of answer I was looking for. The reason I posed the question, is because a friend put forth on another social media site, an article regarding human action that blatantly stated that markets are the construct of government. That without government no market would exist, and as i pointed out the fallacies within such an argument, the whining began.

I'm with you. Markets are social institutions, not governmental institutions. Government only gets involved in the role of rule making and enforcement. Markets can and do exist without that. Some modern markets could not exist without government and government can provide services that make markets much more efficient (standardized weights and measures, and all of the other things in Milton Friedman's famous essay). But markets can exist without them. And as I made the case, markets thrive in conditions of great stress, arising spontaneously when governments fail.

I'd also add that when markets fail, due to situations such as monopoly power or externalities, the best solution is government intervention to support behavior emulating markets, not to replace them with commands. So for example the solution to pollution is not banning it, but in adding a cost to producing it and letting producers decide whether to pay the cost or to change their production method to reduce the pollution.

 

[william the wie]

No, that was exactly the type of answer I was looking for. The reason I posed the question, is because a friend put forth on another social media site, an article regarding human action that blatantly stated that markets are the construct of government. That without government no market would exist, and as i pointed out the fallacies within such an argument, the whining began.

I'm with you. Markets are social institutions, not governmental institutions. Government only gets involved in the role of rule making and enforcement. Markets can and do exist without that. Some modern markets could not exist without government and government can provide services that make markets much more efficient (standardized weights and measures, and all of the other things in Milton Friedman's famous essay). But markets can exist without them. And as I made the case, markets thrive in conditions of great stress, arising spontaneously when governments fail.

I'd also add that when markets fail, due to situations such as monopoly power or externalities, the best solution is government intervention to support behavior emulating markets, not to replace them with commands. So for example the solution to pollution is not banning it, but in adding a cost to producing it and letting producers decide whether to pay the cost or to change their production method to reduce the pollution.

While I don't agree totally with your solution I could live with it. What I think the problem is with economic solutions is that they ignore national security which is run by rules imprinted deep within our brains as in suburbs originally meant outside the city walls or more often now the beltways. I think a better case could be made for rooting out militarily obsolete intrusions into the economy and see where that takes us.