- Elgar original reference
Edited by David Levi-Faur
Chapter 34: Varieties of Private Market Regulation: Problems and Prospects
34 Varieties of private market regulation: problems and prospects Frans van Waarden 34.1 THE CENTRAL PROBLEM: MARKETS NEED SOCIAL ORDER TO FUNCTION Are markets spontaneous social orders? Mainstream economics has long thought so. Freedom and competition should produce optimal allocation of goods and production factors and thus the greatest prosperity for all. Freedom would allow economic actors to pursue their interests, and competition would stimulate or even force them to do so. By contrast, many political theorists, sociologists and lawyers have started from an opposing assumption. For them, the “natural” societal condition is one of competition, destruction, uncertainty, insecurity and chaos (e.g. Hobbes 1968: 185). Social order is not a given, but a problem. Indeed, theft, deception, conflict and violence have often been the “natural” condition on unregulated markets. They are of all times and places, as history and anthropology can testify. Incentives and competition are usually not enough to get economic actors to engage in transactions and to invest. They must also believe in some minimum chance of success. Belief in the possibility and sense of investment and innovation depends on the nature and degree of uncertainties and risks. As these increase, transactions become more of a gamble and less likely. In the “natural” economic disorder, risks and uncertainties may be excessively large. “In such condition, there is no place for Industry; because the fruit thereof is uncertain: and consequently no Culture of the Earth; no Navigation, no commodious Building; and which is worst of all, continuall feare...
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