We usually think of markets as places where things are bought and sold. In this common everyday usage, the word ‘market’ may refer to particular markets that we may know of, such as the market next to the railway station, the fruit market, or the wholesale market. Sometimes we refer not to the physical place, but to the gathering of people – buyers and sellers – who constitute the market. Thus, for example, a weekly vegetable market may be found in different places on different days of the week in neighbouring villages or urban neighbourhoods. In yet another sense, ‘market’ refers to an area or category of trade or business, such as the market for cars or the market for readymade clothes. A related sense refers to the demand for a particular product or service, such as the market for computer professionals. What all of these meanings have in common is that they refer to a specific market, whose meaning is readily understandable from the context. But what does it mean to speak of ‘the market’ in a general way without refering to any particular place, gathering of people, or field of commercial activity? This usage includes not only all of the specific senses mentioned above, but also the entire spectrum of economic activities and institutions. In this very broad sense, then, ‘the market’ is almost equivalent to ‘the economy’. We are used to thinking of the market as an economic institution, but this chapter will show you that the market is also a social institution. In its own way, the market is comparable to
more obviously social institutions like caste, tribe or family discussed in Chapter 3.
SOCIOLOGICAL PERSPECTIVES ON MARKETS AND THE ECONOMY
The discipline of economics is aimed at understanding and explaining how markets work in modern capitalist economies – for instance, how prices are determined, the probable impact of specific kinds of investment, or the factors that influence people to save or spend. So what does sociology have to contribute to the study of markets that goes beyond what economics can tell us?To answer this question, we need to go back briefly to eighteenth century England and the beginnings of modern economics, which at that time was called ‘political economy’. The most famous of the early political economists was Adam Smith, who in his book, The Wealth of Nations, attempted to understand the market economy that was just emerging at that time. Smith argued that the market economy is made up of a series of individual exchanges or transactions, which automatically create a functioning and ordered system. This happens even though none of the individuals involved in the millions of transactions had intended to create a system. Each person looks only to theirown self-interest, but in the pursuit of this self-interest the interests of all – or of society – also seem to be looked after. In this sense, there seems to be some sort of an unseen force at work that converts what is good for each individual into what is good for society.
This unseen force was called ‘the invisible hand’ by Adam Smith. Thus, Smith argued that the capitalist economy is driven by individual self-interest, and works best when individual buyers and sellers make rational decisions that serve their own interests. Smith used the idea of the ‘invisible hand’ to argue that society overall benefits when individuals pursue their own self-interest in the market, because it stimulates the economy and creates more wealth. For this reason, Smith supported the idea of a ‘free market’, that is, a market free from all kinds of regulation whether by the state orotherwise. This economic philosophy was also given the name laissez-faire, a French phrase that means ‘leave alone’ or ‘let it be’.
Questions
1. What is meant by the phrase ‘invisible hand’?
2. How does a sociological perspective on markets differ from an economic one?
3. In what ways is a market – such as a weekly village market – a social institution?
4. How may caste and kin networks contribute to the success of a business?
5. In what ways did the Indian economy change after the coming of colonialism?
6. Explain the meaning of ‘commoditisation’ with the help of examples.
7. What is a ‘status symbol’?
8. What are some of the processes included under the label ‘globalisation’?
9. What is meant by ‘liberalisation’?
10. In your opinion, will the long term benefits of liberalisation exceed its costs? Give reasons for your answer.
Please refer to attached file for NCERT Class 12 Sociology The Market as a Social Institution
