Market: Difference between revisions
Pestergaines (talk | contribs) Expanded def. + stub |
ArchiveBot (talk | contribs) Rewrite from the Austrian literature: replace dictionary definitions with sourced treatment, add archive citations |
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'''Market''' is | '''Market''' is the process by which the [[exchange]] of [[good]]s and services takes place among people acting under the [[division of labor]]. In the Austrian tradition the market is defined not as a place, nor as an institution, nor as the aggregate of buyers and sellers, but as a ''process'' constituted by their actions. | ||
==The market as a process== | |||
[[Ludwig von Mises]] made this the foundation of his treatment: the market is not a thing or a collective entity but a process, driven by the interplay of the actions of individuals cooperating under the division of labor. It has no purposes of its own, and the forces determining its state are the [[value]] judgments of those individuals and the actions they take on the strength of them.<ref name="humanaction_ch15">[[Ludwig von Mises]]. [https://freecapitalists.org/books/human-action/read/chapter-xv-the-market/ XV. The Market], ''[[Human Action]]''.</ref> | |||
This is a substantive claim rather than a definitional preference. If the market is a process, then its characteristic phenomena — [[price]]s, [[profit]] and loss, the structure of [[production]] — are outcomes of continuous adjustment rather than properties of a state of rest, and the analytical task is to trace how the adjustment proceeds rather than to describe the conditions under which it would cease. | |||
==Catallactics== | |||
Mises used the older term ''catallactics'' for the analysis of market phenomena, from the Greek verb meaning to exchange and also to admit into the community and to turn from enemy into friend. He preferred it to "economics" because it names the subject matter directly: the study of exchange ratios and of the market process that generates them.<ref name="humanaction_ch14">[[Ludwig von Mises]]. [https://freecapitalists.org/books/human-action/read/chapter-xiv-the-scope-and-method-of-catallactics/ XIV. The Scope and Method of Catallactics], ''[[Human Action]]''.</ref> | |||
==Equilibrium as a tool, not a description== | |||
Austrians make heavy use of equilibrium constructions while denying that they describe reality. Mises's [[evenly rotating economy]] is an [[imaginary construction]]: an economy in which the same transactions repeat endlessly, all [[uncertainty]] has been removed, and consequently there is neither [[profit]] nor loss and no function for the [[entrepreneur]]. Its purpose is precisely to isolate, by its absence, what entrepreneurship contributes to a real economy. | |||
The contrast with the mainstream treatment is sharp. Where general equilibrium theory takes the equilibrium state as the object of analysis and treats deviations as frictions, Austrians take the disequilibrium process as the object and treat equilibrium as a mental tool that would, if ever reached, abolish the phenomena being explained. | |||
==Competition== | |||
[[Competition]] on this account is a rivalrous activity rather than a market structure. It consists in entrepreneurs attempting to serve consumers better than their rivals do, by offering lower prices, better goods, or goods not previously offered at all. It is therefore compatible with a small number of sellers and is not measured by their number. This is the basis of the Austrian objection to the textbook model of "perfect competition", in which no participant does anything that would ordinarily be called competing. | |||
==See also== | |||
* [[Free market]] | |||
* [[Capitalism]] | |||
* [[Price]] | |||
* [[Competition]] | |||
* [[Entrepreneur]] | |||
* [[Exchange]] | |||
==References== | ==References== | ||
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[[Category:Economic concepts]] | [[Category:Economic concepts]] | ||
Revision as of 04:36, 16 August 2026
Market is the process by which the exchange of goods and services takes place among people acting under the division of labor. In the Austrian tradition the market is defined not as a place, nor as an institution, nor as the aggregate of buyers and sellers, but as a process constituted by their actions.
The market as a process
Ludwig von Mises made this the foundation of his treatment: the market is not a thing or a collective entity but a process, driven by the interplay of the actions of individuals cooperating under the division of labor. It has no purposes of its own, and the forces determining its state are the value judgments of those individuals and the actions they take on the strength of them.[1]
This is a substantive claim rather than a definitional preference. If the market is a process, then its characteristic phenomena — prices, profit and loss, the structure of production — are outcomes of continuous adjustment rather than properties of a state of rest, and the analytical task is to trace how the adjustment proceeds rather than to describe the conditions under which it would cease.
Catallactics
Mises used the older term catallactics for the analysis of market phenomena, from the Greek verb meaning to exchange and also to admit into the community and to turn from enemy into friend. He preferred it to "economics" because it names the subject matter directly: the study of exchange ratios and of the market process that generates them.[2]
Equilibrium as a tool, not a description
Austrians make heavy use of equilibrium constructions while denying that they describe reality. Mises's evenly rotating economy is an imaginary construction: an economy in which the same transactions repeat endlessly, all uncertainty has been removed, and consequently there is neither profit nor loss and no function for the entrepreneur. Its purpose is precisely to isolate, by its absence, what entrepreneurship contributes to a real economy.
The contrast with the mainstream treatment is sharp. Where general equilibrium theory takes the equilibrium state as the object of analysis and treats deviations as frictions, Austrians take the disequilibrium process as the object and treat equilibrium as a mental tool that would, if ever reached, abolish the phenomena being explained.
Competition
Competition on this account is a rivalrous activity rather than a market structure. It consists in entrepreneurs attempting to serve consumers better than their rivals do, by offering lower prices, better goods, or goods not previously offered at all. It is therefore compatible with a small number of sellers and is not measured by their number. This is the basis of the Austrian objection to the textbook model of "perfect competition", in which no participant does anything that would ordinarily be called competing.