UNIVERSITY OF THESSALY
2nd International Conference on Economic and Social History
"Markets" and Politics
Private interests and public authority (18th-20th centuries)
Volos, 10-12 February 2012
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Abstracts
- Nicholas Theocarakis The market as default mechanism. A history of economic thought perspective
This article attempts to trace the bias for the market in the history of political economy. It argues that political economy emerged in the 18th c. as a means of explaining how the surplus is distributed when the economic mechanism is separated from the political means of distribution. To do so the analysis has to go through the analytical notion of the competitive market. This is true for both the objective (labour) and subjective (utility) theory of value. The difference, however, with the subjective theory of value is that the market eventually became an allocating mechanism that led to optimality [and justice in distribution]. Thus, the efficiency of the markets was questioned only in the case of externalities or when, because of specific characteristics of the goods involved, a market could not function [as in the case of public goods]. Externalities could, however, be internalized by means of the Coase theorem and an efficiency frontier could be drawn between market and hierarchical allocations in the theory of the firm. There was, however, no notion of market embeddedness. All non-market allocations, were themselves dictated by the specific characteristics of the market situation. The market as default is inherent in the analytical structure of modern economics.
