The Market as a Social Institution

Question 1

What is meant by the phrase "invisible hand"?


It refers to some sort of an unseen force at work that converts what is good for each individual into what is good for society. Interest of society is looked after automatically when individual interest is looked after maintaining judiciously. E.g. Sanitation in and around one's own home, protects ipso-facto the whole colony from mosquito-bite and malaria.

Question 2

How does a sociological prospective on markets differ from an economic one?


Difference between sociological and economic perspective on markets:

(i)    Economy approach is aimed at understanding and explaining how markets work in modern capitalist economies while sociological approach is based on the phenomenon of adherence of interests of society or all people to the looking after judicious way of an individual interest. Father of economics viz. Adam Smith himself has called this phenomenon or force as “invisible hand". He has angued that society overall benefits when individuals pursue their own self-interest in the market because it stimulates the economy and creates more wealth. Thus, sociological perspective observed markets as social institution.

(ii)    Economic perspective assumes economies/economy as a separate part of society because it has its own laws to guide. However, sociologists have attempted to develop an alternative way of studying economic institutions and processes within the larger social framework.

(iii) Economic prospects do study upon individual buyers and sellers and supports economic philosophy or laissez-faire (i.e. noninterference of government in private enterprises) or free market while sociologists view markets specific cultural formation of social institutions. According to them, markets are often controlled by particular social groups or classes and they have specific connections to other institutions, social processes and structures. They say economies composing markets are socially embedded.

Question 3

 In what ways is a market-such as a weekly market a social institution.


Weekly market as a social institution.

(i) These bring together people from surrounding villages and also attract traders from outside the local area.

(ii) These link local tribal economy to that of outside and establish economic relationships between tribal people and others.

(iii) The layout of the market symbolises, the hierarchical inter-group social relations.

(iv) Market system in weekly haats or markets acts as social hierarchy. Eg. The wealthy and high ranking Rajput jewellers and middle-ranking local Hindu traders sit in the central zones while the tribal sellers of vegetable and local wares sit in the outer circles. Refer to adivasi village market in Bastar (Chattisgarh).

Question 4

How many caste and kin networks contribute to the success of a business?


Contribution of caste and kin to success of a business.

(i)    Castes had their own systems of banking and credit E.g—Hundi (credit note instrument) allows merchants to engage in long-distance trade.

(ii)    A merchant in one part of the country was allowed to issue a Hundi that would be honoured by merchant in another place because of caste and kinship networks.

(iii)    Communities like Nattukottai of Tamil Nadu had developed their own trading networks. Their banking and trade activities were embedded in the social organisation.

(iv)    Banks were basically joint family firms and structure of business firm was the same as that of the family.

(v)    Prior to colonial period, there was Jajmani system or non-market exchange system in vogue. It was also based on caste and kin-ties.

(vi)    The structures of caste, kinship and family were oriented towards commercial activity and business was carried out within these social structures.

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