Market system

Market system

A market system is any systematic process enabling many market players to bid and ask: helping bidders and sellers interact and make deals. It is not just the price mechanism but the entire system of regulation, qualification, credentials, reputations and clearing that surrounds that mechanism and makes it operate in a social context.[1]

Because a market system relies on the assumption that players are constantly involved and unequally enabled, a market system is distinguished specifically from a voting system where candidates seek the support of voters on a less regular basis. However, the interactions between market and voting systems are an important aspect of political economy, and some argue they are hard to differentiate, e.g. systems like cumulative voting and runoff voting involve a degree of market-like bargaining and tradeoff, rather than simple statements of choice.

Contents

Types

In economics, market forms are studied. These look at the impacts of a particular form on larger markets, rather than technical characteristics of how bidders and sellers interact.

Heavy reliance on many interacting market systems and forms is a feature of capitalism, and advocates of socialism often criticize market features. Competition is the regulatory mechanism of the market system. This article does not discuss the political impact of any particular system nor applications of a particular mechanism to any particular problem in real life. For more on specific types of real-life markets, see commodity markets, insurance markets, bond markets, energy markets, flea markets, debt markets, stock markets, online auctions, real estate market, each of which is explained in its own article with features of its application, referring to market systems as such if needed.

Protocols

The market itself provides a medium of exchange for the contracts and coupons and cash to seek prices relative to each other, and for those to be publicized. This publication of current prices is a key feature of market systems, and is often relevant far beyond the current groups of buyers and sellers, affecting others' supply and demand decisions, e.g. whether to produce more of a commodity whose price is now falling. Market systems are more abstract than their application to any one use, and typically a 'system' describes a protocol of offering or requesting things for sale. Well-known market systems that are used in many applications include:

  • auctions - the most common, including:
  • rationing (including the command economy of some states)
  • regulated market (including most real-life examples as above)
  • black market (the term 'black' indicating lack of regulation, or any trade, often illegal, operating in violation of official regulations)

The term 'laissez-faire' ("let alone") is sometimes used to describe some specific compromise between regulation and black market, resulting in the political struggle to define or exploit "free markets". This is not an easy matter to separate from other debates about the nature of capitalism. There is no such thing as a "free" market other than in the sense of a black market, and most free-market advocates favor at least some form of regulated market, e.g. to prevent outright fraud, theft, and retain some degree of credibility with the larger public. This political debate is out of the scope of this article, other than to note that the "free" market is usually a "less regulated" market, but not qualitatively different from other regulated markets, in any society with laws, and that what opponents of "free markets" usually seek is some kind of moral purchasing rather than pure rationing.

As this debate suggests, key debates over market systems relate to their accessibility, safety, fairness, and ability to guarantee clearance and closure of all transactions in a reasonable period of time.

Importance of trust

The degree of trust in a political or economic authority (such as a bank or central bank) is often critical in determining the success of a market. A market system depends inherently on a stable money system to ensure that units of account and standards of deferred payment are uniform across all players - and to ensure that the balance of contracts due within that market system are accepted as a store of value, i.e. as "collateral" of the holder of the contract, which justifies "credit" from a lender of cash.

Banks, themselves, are often described in terms of markets, as "transducers of trust" between lenders (who deposit money) and borrowers (who take it out again). Trust in the bank to manage this process makes more economic activity possible. However, critics say, this trust is also quite easy to abuse, and has many times proven difficult to limit or control (see business cycle), resulting in 'runs on banks' and other such 'crises of trust' in 'the system'.

However, market systems are usually flexible enough to be refined and have its detailed rules adjusted so as to regain the trust of participants relatively quickly - most market systems tend to degrade gracefully, with a few exceptions, e.g. hyperinflation, South Sea bubble, tulip boom, dotcom boom, depression, that are very damaging, but nonetheless relatively infrequent.

See also

References

  1. ^ Campbell R. McConnell, Stanley L. Brue (2005). Economics: Principles, Problems, and Policies. McGraw-Hill Professional. ISBN 0072819359. 

Wikimedia Foundation. 2010.

Игры ⚽ Поможем написать курсовую

Look at other dictionaries:

  • National Market System — ( NMS) Refers to over the counter trading. System of trading OTC stocks under the sponsorship of the NASD. Must meet certain criteria for size, profitability and trading activity. More comprehensive information is available for NMS stocks than… …   Financial and business terms

  • National market system plan — A national market system plan (or NMS plan) is a structured method of transmitting securities transactions in real time. In the United States, national market systems are governed by section 11A of the Securities Exchange Act of 1934. In addition …   Wikipedia

  • the National Market System — UK US noun (ABBREVIATION NMS) STOCK MARKET ► a system used in the US for trading shares electronically, and giving the latest share prices: » The New York shares of the company are listed on the National Market System under the symbol ASMLF …   Financial and business terms

  • National Market System - NMS — A system with two main functions: 1. To facilitate trading of OTC stocks whose size, profitability, and trading activity meet specific criteria. 2. To post prices for securities on the NYSE and other regional exchanges simultaneously, allowing… …   Investment dictionary

  • National Market System — The National Market System (NMS) is the national system for trading equities in the United States. See also Regulation NMS Categories: United States stubsEconomics and finance stubsStock exchanges in the United States …   Wikipedia

  • Market engineering — comprises the structured, systematic and theoretically founded procedure of analyzing, designing, introducing and also quality assuring of electronic market platforms as well as their legal framework regarding simultaneously their market… …   Wikipedia

  • Market failure — is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better off without making someone else… …   Wikipedia

  • market — marketer, n. /mahr kit/, n. 1. an open place or a covered building where buyers and sellers convene for the sale of goods; a marketplace: a farmers market. 2. a store for the sale of food: a meat market. 3. a meeting of people for selling and… …   Universalium

  • Market economy — Part of a series on Economic systems Ideological systems Anarchist  …   Wikipedia

  • market — In both economics and sociology a market is understood to be an area over which any well defined commodity is exchanged between buyers and sellers. Such commodities are considered to be of two kinds goods and services. The total amount of a… …   Dictionary of sociology

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”