Econ 1: Spring 2016: U.C. Berkeley: "The Market" as an Institution
"Therefore shall ye lay up these my words in your heart and in your soul, and bind them for a sign upon your hand, that they may be as frontlets between your eyes. And ye shall teach them your children, speaking of them when thou sittest in thine house, and when thou walkest by the way, when thou liest down, and when thou risest up. And thou shalt write them upon the door posts of thine house, and upon thy gates..."
“The Market” as an Institution:
- We start from what look like to us deep truths of human psychology
- People are acquisitive
- People engage in reciprocity—i.e., want to enter into reciprocal gift-exchange relationships
- In which they are neither cheaters nor saps
- With those they trust…
- We devised property as a way of constructing expectations of trust…
- We devised money as a substitute for trust…
- And so, on the back of these human propensities for acquisition and for trusted gift-exchange, we have constructed a largely-peaceful global 7.4B-strong highly-productive societal division of la* bor:
- Built on assigning things to owners—who thus have both the responsibility for stewardship and the incentive to be good stewards…
- And on very large-scale webs of win-win exchange…
- Mediated and regulated by market prices...
- This is a very valuable and important societal institution…
- Economics is the study of how it—what we usually call “the market”—works…
- In analyzing the market as an institution, we need to cover:
- The success of the market
- The failures of the market
- The political-economic-sociological-historical context of the market
- The impact of a market economy on the other institutions and practices of society
- Plus there is the peculiar domain of “macroeconomics”
