Behind the market stage where real societies exist ‐ part I: The role of public and private order institutions
- 1 April 1994
- journal article
- research article
- Published by Informa UK Limited in The Journal of Development Studies
- Vol. 30 (3), 533-577
- https://doi.org/10.1080/00220389408422328
Abstract
This two‐part article is an attempt to clarify the social conditions upon which the viability and efficiency of the market system rest. It strives to show that the ‘embeddedness’ thesis, that is, an explanation based upon the existence of long‐run personal ties involving the use of reputation mechanisms among transactors, cannot fully elucidate the question as to how the problem of trust is solved in market societies. As explained in Part I, there are difficulties of both theoretical and empirical/historical kinds and these explain why the ‘market order’ needs to be sustained by private and public order institutions. In Part II, the role of generalised morality in backing or supplementing such institutions is discussed in the light of game theory, and particular emphasis is put on the ability of moral norms to sustain honest behaviour by generating the right kind of preferences and establishing trust. The vexed problem of the dynamics of norm emergence and erosion is then addressed with a view to showing that norms of generalised morality — perhaps contrary to moral norms in small groups — cannot be easily created by fiat nor be expected to evolve spontaneously when they are needed to make economic exchanges viable. Ultimately, the cultural endowment of a society plays a determining role in shaping its specific growth trajectory, and history therefore matters. Finally, to illustrate the theoretical discourse, reference is made to present‐day Third World countries. It is argued that economic development is especially difficult in countries where norms of limited‐group morality prevail and do not readily give way to generalised morality.Keywords
This publication has 43 references indexed in Scilit:
- Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist SocietiesJournal of Political Economy, 1994
- DECLINING TO LEARN FROM THE EAST? THE WORLD BANK ON ‘GOVERNANCE AND DEVELOPMET’IDS Bulletin, 1993
- THE ROLE OF INSTITUTIONS IN THE REVIVAL OF TRADE: THE LAW MERCHANT, PRIVATE JUDGES, AND THE CHAMPAGNE FAIRSEconomics & Politics, 1990
- Economic Action and Social Structure: The Problem of EmbeddednessAmerican Journal of Sociology, 1985
- Against Parsimony: Three Easy Ways of Complicating some Categories of Economic DiscourseEconomics and Philosophy, 1985
- Microeconomics, Norms, and RationalityEconomic Development and Cultural Change, 1984
- The Economics of Caste and of the Rat Race and Other Woeful TalesThe Quarterly Journal of Economics, 1976
- The Market for "Lemons": Quality Uncertainty and the Market MechanismThe Quarterly Journal of Economics, 1970
- Non-Contractual Relations in Business: A Preliminary StudyAmerican Sociological Review, 1963
- Social Behavior as ExchangeAmerican Journal of Sociology, 1958