Understanding The Elements Of Markets

Conceptualizing Markets 1

CONCEPTUALIZING MARKETS

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Conceptualizing Markets 2

Understanding the Elements of Markets

Introduction

Engendering market economies with market societies elicited a heated sociological

debate among early economists and sociologists such as Max Weber and Swedberg. Structuring

a market requires looking closely at the forms of interactions that occur between buyers and

sellers. A notable anthropological and philosophical argument among the sociologists mentioned

above is that markets are fundamentally competitive as the primary activity involves exchanges

among individuals. A vast body of literature presents an in-depth description of a market. While

some scholars portray the market as a free arena where buyers and sellers are unrestricted to

acquire goods or services they require, Max Weber presents a different point of view on what

constitutes a market. According to Max Weber, the most fundamental element of the market is

the exchange among actors whose motivations emanate from diverse interests and the different

ability to buy or sell commodities. This paper examines Max Weber’s social and economics

conceptualization of markets.

In his work of Economy and Society, Max Weber dedicates a brief section to the concept

of markets. According to him, a market exists where competition prevails even if only unilateral,

for opportunities of exchange among prospective actors, who are perhaps pluralistic in nature

(Swedberg & Weber1998). Max Weber identifies two principal components of a market: the

economic aspect of exchange and the social action of competition (Swedberg & Weber1998).

A market consists of buyers who compete for the position of buying particular

commodities (Swedberg & Weber1998). On the other hand, sellers engage in rivalry against each

other as they determine who will be in a position to sell (Tribe 2012; Gane & Kalberg 2013). In

this regard, Weber posits that the exchange in the market takes place between the buyers willing

Conceptualizing Markets 3

to offer the highest prices to the seller who can give the lowest prices for the commodities of

interest (Weber 1978). This situation creates room for a struggle between buyers and sellers.

Max Weber refers such a fight as haggling, which precedes the conclusion of the deal between

the two actors (Gane & Kalberg 2013).

It is critical to look at how Max Weber conceptualizes the two forms of interactions

between buyers and sellers, who are the principal parties of a market (Tribe 2014). In Chapter

one Max Weber’s work of Economy and Society, he defines competition as a formal non-violent

phenomenon that permits people to gain control over things that others are struggling to have

(Tribe 2012). Market rivalry receives regulation in numerous ways (Weber1978). On the other

hand, exchange entails a compromise of interests on the part of those engaged in it in the way the

commodities or other forms of benefits pass in mutual compensation (Tribe 2012). This

reciprocity implies that both exchange actors obtain mutual benefit (Gane & Kalberg 2013).

Nevertheless, the concept of reciprocity receives limited attention from Weber.

In the description of a market, Max Weber asserts that the particular type can be found in

one specified locality (Tribe 2014). The interactions that comprise a market include their natural

assemblage in a single place as it happens in a local market where parties travel long distances to

reach merchants (Gane & Kalberg 2013). Max Weber adds that competition for opportunities of

exchange is not limited to a particular marketplace (Tribe 2014). Rather, they can take place

outside the market, in society as a whole. For instance, an exchange involving a car succeeds an

array of activities (Gane & Kalberg 2013). First, the competition to sell the commodity starts

long before its production. Activities preceding the sale of the car include financing of the

manufacturing process, the hiring of workers, and marketing of the product among others (Gane

& Kalberg 2013). As such, Max Weber’s conceptualizes a market as more of economic than a

Conceptualizing Markets 4

social phenomenon (Tribe 2014). Long before the arrival of a product in the market, a plethora of

opportunities involving exchange among actors take place (Swedberg & Weber1998).

Max Weber assigns great importance to the market as an operational price-making

mechanism, which lacks in socialism (Tribe 2012). In this vein, it is typically hard to have an

entirely stable economy in a society where price-making mechanisms define the market (Tribe

2014). In fact, power and interests underpin the formulation of market prices (Tribe 2012). Max

Weber maintains that money prices are the consequence of conflicts of interest and compromises

emanating from power constellations (Tribe 2012). The price dictates how much power and

benefits an individual possesses to gain access to a certain commodity in the market (Gane &

Kalberg 2013). Therefore, people exchange with others having a set of different interests and

power that match mutually (Tribe 2012). Therefore, Max Weber depicts prices as instruments of

calculation, which estimate the quantifications of comparative chances in the haggling of

interests (Gane & Kalberg 2013).

In chapter two of the Economy and Society, Max Weber brings out the economic rather

than social characteristic of a market (Weber1978). The economist talks about the aspect of

regulation with a free market on one end and a regulated market on the other (Swedberg &

Weber1998). Of much importance to examine is the controlled market, where variables such as

tradition, convention, and the structures of interests are responsible for regulation (Gane &

Kalberg 2013). Max Weber maintains that market regulation obeys the structure of interests and

economic power of actors (Tribe 2012). Additionally, the socio-economist holds that the two

regulatory frameworks are visible in a free market. According to Swedberg and Weber (1998),

the market leveraged the creation of capitalist monopolies.

Conclusion

Conceptualizing Markets 5

Max Weber depicts a market as one that occurs on economic rather than social grounds.

The market creates opportunities for exchange whereby buyers relate to sellers from the

perspective of economic interests. A struggle exists in the market in that only the buyer willing

to offer the highest price exchanges with the vendor intending to offer the lowest price in the

market. According to Weber, a market comprises two industrial components including

competition and sharing. The two elements are non-violent. A series of opportunities for

economic exchanges and competition precedes market-based activities. Max Weber holds that

transfers can take place even outside a market. As such, the socio-economist views a market as

constituting mutually shared interests, which are economic in nature.

Conceptualizing Markets 6

References

Gane, N, & Kalberg, S 2013, 'Presenting Max Weber,' Canadian Journal of Sociology, vol. 2,

no. 3, p. 407.

Gane, N., 2012. Max Weber and Contemporary Capitalism. Palgrave Macmillan.

Swedberg, R. and Weber, M., 1998. The Idea of Economic Sociology. Princeton, New Jersey.

Tribe, K 2012, 'Max Weber: the works,' Economy and Society, vol. 1, no. 2, p. 282.

Tribe, K 2014, 'What is Social Economics?' History of European Ideas, vol. 40, no. 5, p. 714.

Weber, M., 1978. Economy and Society Volume One. Berkeley: University of California.

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