Hmmm. I've always been taught that the market exists to provide liquidity. Those with excess capital meet those who have the promise of future gain over and above the present capital available.
In the short run, there is an equilibrium that is analagous to a physical phase change. The liquid transfers liquidity to a solid/static entity. This is the lender/borrower relationship. The lender becomes less liquid, and the borrower more.
In the longer run, when the borrower of capital makes a profit on the money borrowed, the whole system benefits...there is an incrementally larger amount of capital out there.
Conclusion: The capital generates the markets. Think of a barbecue. The capital is a bunch of ribs on the grill. The borrower is a hungry man. The man smells the ribs from a distance and comes looking. The ribs don't hop off the grill and look for him.
On the flip side, the hungry man can be seen as the lender, hungry for some fresh meat to pounce on to make a profit.
to the nameless poster: to an extent yes, a market won't function unless there are buyers so they certainly have an effect in generating the market too. But Henry Ford once said something to the effect of "if I asked the people what they wanted they would have said a faster horse". The point being that firms and capital have a tremendous ability to create markets. Sometimes of course they fail. Neil's barbeque analogy is good, and can be applied to firm/consumer. The capitalized firm has the ability to create something that the buyer might not realize they want. Or might not even really want, but just think they want. The smells of the barbeque and glow of the cathoid ray tube becomes a means of seduction.
All that is focusing on the wrong side of this statement though. The ability of capital to generate markets is not a new concept at all, although its not entrenched into the cannon yet. Galbraith is the best known proponent of this idea, and Fligstein is advancing it now. I'm pretty certain its included in the marxist tradition as well.
The potentially more radical side of the statement, is "the market does not generate capitalism", which goes against both the basic principals of both neoclassical and marxist thought. Which is that capitalism is something that emerges do to the rules of a "free market". The neoclassicalists see it as a roughly positive emergence, while the marxists see it as negative, but both start from a similar assumption. Of course historically its inaccurate as Braudel showed well.
What I'm arguing is that markets are *always* generated. On a small scale by individuals, and on a large scale by governments, firms, labor and consumers. And each time a market is generated its rules are created (and evolved) by the agents involved in the creation process. And because each market is generated with its own evolving set of guidelines the concept of a "free" market is null and void. Each market is different and _the_ _free_ _market_ _does_ _not_ _exist._
And that means there is a need for a whole other theory of the political economy...
Comments
hmmm, now that its published like that it suddenly seems almost pro-capitalism. Please rest assured its not...
Posted by: Abe | April 15, 2004 02:49 AM
yeah, but it's the consumers that give the consumables value - something is only worth as much as someone is willing to pay for it
Posted by: Anonymous | April 15, 2004 03:45 AM
Hmmm. I've always been taught that the market exists to provide liquidity. Those with excess capital meet those who have the promise of future gain over and above the present capital available.
In the short run, there is an equilibrium that is analagous to a physical phase change. The liquid transfers liquidity to a solid/static entity. This is the lender/borrower relationship. The lender becomes less liquid, and the borrower more.
In the longer run, when the borrower of capital makes a profit on the money borrowed, the whole system benefits...there is an incrementally larger amount of capital out there.
Conclusion: The capital generates the markets. Think of a barbecue. The capital is a bunch of ribs on the grill. The borrower is a hungry man. The man smells the ribs from a distance and comes looking. The ribs don't hop off the grill and look for him.
On the flip side, the hungry man can be seen as the lender, hungry for some fresh meat to pounce on to make a profit.
Posted by: Neil | April 15, 2004 11:20 AM
to the nameless poster: to an extent yes, a market won't function unless there are buyers so they certainly have an effect in generating the market too. But Henry Ford once said something to the effect of "if I asked the people what they wanted they would have said a faster horse". The point being that firms and capital have a tremendous ability to create markets. Sometimes of course they fail. Neil's barbeque analogy is good, and can be applied to firm/consumer. The capitalized firm has the ability to create something that the buyer might not realize they want. Or might not even really want, but just think they want. The smells of the barbeque and glow of the cathoid ray tube becomes a means of seduction.
All that is focusing on the wrong side of this statement though. The ability of capital to generate markets is not a new concept at all, although its not entrenched into the cannon yet. Galbraith is the best known proponent of this idea, and Fligstein is advancing it now. I'm pretty certain its included in the marxist tradition as well.
The potentially more radical side of the statement, is "the market does not generate capitalism", which goes against both the basic principals of both neoclassical and marxist thought. Which is that capitalism is something that emerges do to the rules of a "free market". The neoclassicalists see it as a roughly positive emergence, while the marxists see it as negative, but both start from a similar assumption. Of course historically its inaccurate as Braudel showed well.
What I'm arguing is that markets are *always* generated. On a small scale by individuals, and on a large scale by governments, firms, labor and consumers. And each time a market is generated its rules are created (and evolved) by the agents involved in the creation process. And because each market is generated with its own evolving set of guidelines the concept of a "free" market is null and void. Each market is different and _the_ _free_ _market_ _does_ _not_ _exist._
And that means there is a need for a whole other theory of the political economy...
Posted by: Abe | April 15, 2004 11:58 AM
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