A Fragile Alliance
New Horizons in Institutional and Evolutionary Economics series
Chapter 1: Emerging markets
Markets have been ever-present. However, the dominant role of the market system in the process of production, allocation and distribution of goods started with the (first) Industrial Revolution in England. Karl Polanyi (1944) speaks of the ‘Great Transformation’. Since then, markets have no longer been embedded in social relations. On the contrary, after this radical transformation the market system has determined social relations. Polanyi’s ideas are partly based on anthropological studies. He distinguishes between different forms of what he refers to as economic integration. The latter concerns the way the process of production, allocation and distribution of goods is organized and economic activities are coordinated. Before the (first) Industrial Revolution, economic systems were based on the fundamental principle of either reciprocity or redistribution, or on a combination of these two. Reciprocity or mutuality rests on the exchange of gifts in a symmetric situation. Redistribution presupposes a central authority that coordinates economic activity.
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