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 commodity produced and available for purchase is referred to as the supply of the commodity, while the total amount being sought for purchase is termed the demand. Because human wants are, in themselves, potentially infinite, it should be noted that in the study of markets demand must be effective, that is to say backed by money or purchasing power.
Note that a market need not be a physical location-as in the case of a Stock Exchange. It is any arrangement for bringing buyers and sellers together. Improvements in telecommunications networks have speeded up communication to such an extent that financial markets and commodity markets are now international in scope. The central purpose of certain regional political initiatives is to create larger integrated markets for goods and services, such as the European Economic Community, or the proposed Latin American Economic Community.
Mainstream economic theory mostly assumes that competition in markets is perfect. That is to say, there is a large number of buyers and sellers, none of whom can exert undue individual influence on the process by which the market price is fixed. Perfect competition, it is argued, ensures that there is an inherent tendency for supply and demand to adjust to each other through the prevailing price which, if all participants act rationally, will rise or fall according to the relative scarcity of the commodity and the competitive efficiency with which it is supplied by producers and purchased by consumers. Competition also explains the relationship between markets: all products are in competition with each other for a share of consumers' limited purchasing power, and all producers are in competition for access to a limited total stock of raw materials, machinery, labour, and investment capital. The competitive process will then penalize any departures from rationality among producers or consumers by driving them out of the market altogether.
Market economies are seen as placing the individual consumer in command of production. Each individual, using income derived in the main from his or her own productive activities, expresses his or her desires and preferences by the way he or she distributes this income for the various goods and services available in markets. This economic theory is associated with a political theory which places the citizen, as a voter, in ultimate authority over the production of public goods, such as education services, weapons, or art. The market system is thus argued to be democratic in essence.
A market is not the only method of allocating goods and services since a central planner could achieve the same result. One of the longest-standing debates in economics has been over which is the more efficient method. Hence the command economies of socialist countries are contrasted with the market economies of capitalist countries. In the market economy, also called free economy or free enterprise economy, the greater part of the activities of production, distribution and exchange are conducted by private individuals or companies rather than by the government, and government intervention is kept to a minimum. Exceptions are sometimes made in the provision and distribution of health services and education services, which are funded by and organized by central or local governments, in which case the term mixed economy would be more appropriate.
Markets are recognized to have some obvious disadvantages. They tend to have trade-cycles which mean that resources are periodically not fully employed. In the case of labour, under-utilization means unemployment , which threatens workers' living standards and this may in turn have a wide range of social as well as economic effects. An uncontrolled market system produces undesirable outputs as well as the goods and services sold on the market. The classic example now is environmental pollution, with waste products being dispersed into the atmosphere, rivers, and oceans. Markets have no morals. The production and sale of weapons, access to basic health care, scientific research, artistic products, and religious services are determined entirely by the level of demand for them. Most societies have value systems which are not wholly consistent with and subservient to the amoral functioning of the market, so that market outcomes may at times be judged to be socially unacceptable. Disadvantages such as these are quite separate from a range of practical imperfections in the functioning of any market. For example markets work best when there is perfect information available to all buyers and sellers, so that demand for commodities and the supply of them interact until prices reach an equilibrium . In practice, full information may not be available, or only at disproportionate cost, or information may be unequally distributed among market participants.
Since few social scientists have been entirely happy with the notion of perfect competition, one fruitful area for collaboration between economics and sociology is the attempt to develop a systematic account of how the empirical world supports or departs from the competitive ideal. From the outset, economics has sought to understand the distortions to economic processes introduced by any government which attempted to displace the effects of unregulated economic transactions with the political allocation of resources and commodities, even within a single society. Departures occur, however, because of monopoly and other concentrations of economic power and interest; or because of cultural or administrative barriers. All of these issues are central to the concerns of the sociologist of economic life but it is only in the study of labour-markets that any real attempt at integrating economic and social theory has occurred.
One of the few exceptions to this generalization is Robert E. Lane's The Market Experience (1991), which comprehensively reviews the literature on the market economy, drawing on material from economic philosophy, economic anthropology, economic psychology, and the sociology of work. Controversially, Lane argues that the research evidence from these fields offers a powerful critique of market economics, notably by demonstrating that two of its major premisses are mistaken: namely, that (contrary to mainstream economic theory) work is not a disutility, but is in fact one of the two major sources of lifetime satisfaction; and that monetary income, although a source of utility which does compensate for sacrifices at work, contributes little to a person's sense of well-being.

Dictionary of sociology. 2013.

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