by From David Westbrook and The Inequality Crisis Suppose we understand markets in fairly simple-minded fashion, as social contexts in which folks buy, sell, and invest. Markets have often been understood individualistically – homo economicus is not a friendly guy – and orthodox economics even proposed “methodological individualism” to be a cardinal intellectual virtue. But the social simply must be stressed at the present juncture. As digital enterprises make inescapably clear, markets are constructed through mutually intelligible communication. “The market” is not a place that exists ex ante, to which self-interested rational actors go to buy and sell. Instead, markets are socially constructed “spaces,” which can be real or virtual, in which economic communication and even law (most
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from David Westbrook and The Inequality Crisis
Suppose we understand markets in fairly simple-minded fashion, as social contexts in which folks buy, sell, and invest. Markets have often been understood individualistically – homo economicus is not a friendly guy – and orthodox economics even proposed “methodological individualism” to be a cardinal intellectual virtue. But the social simply must be stressed at the present juncture. As digital enterprises make inescapably clear, markets are constructed through mutually intelligible communication. “The market” is not a place that exists ex ante, to which self-interested rational actors go to buy and sell. Instead, markets are socially constructed “spaces,” which can be real or virtual, in which economic communication and even law (most obviously contract and property) happen, and “where” actors must conform if they are to participate.
To tell a story by now familiar: once upon a time, there were many markets, more or less geographically distinct, for much the same thing, say wine, to echo Adam Smith. Traders might connect different markets, but transportation was slow, expensive, and often dangerous. And, to echo Smith again, actors could be expected to seek market power, rents. But the extent of their wealth was limited by the extent of the market in which they operated.
In the fullness of time, the implementation of new technologies and the set of processes collectively referred to as globalization lowered the cost of transport and other barriers to trade, notably tariffs. Distance became much less significant. After the digital revolution, prices and other information, as well as digital goods writ large, could be transferred instantaneously, and at almost no cost. There are many ways to complicate this “just so story,” of course, but many geographically distinct markets merged, that is, the social contexts in which trade was conducted became much larger, both geographically and in terms of the number of people involved. While globalization may make an individual’s world feel bigger and more diverse, for markets, globalization mostly has meant consolidation and simplification, and, due to the instant transfer of information, virtual locality. The social contexts in which folks bought and sold became national, regional, even global. Airport shopping is much the same worldwide. LVMH sells globally branded cognac and watches and purses and suchlike from Rio di Janeiro to Hong Kong, and for a little while, Bernard Arnault was the second richest person on earth. Dominating enormous markets, unsurprisingly, results in great wealth.
Such wealth often concentrates – global markets tend to be “winner take all”.
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