The economy as instituted process pdf

The instituting of the economic process gives it unity and stability, producing something with a definite structure in society. The human economy is imbedded in institutions, both economic and non-economic. These three patterns are characteristic of instituted economies, though they don't constitute it. But aggregates of personal behaviors based on these three patterns by themselves create an economy.

There need to be pre-conditions in society that allow these patterns to be extablished. Only in a symetrically organized environment will reciprocative behavior result in economic institutions of any importance. Only when allocative centers have been set up can individual acts of sharing produce a redistributive economy. And only in the presence of price-making markets will exchange acts of inividuals result in fluctuating prices that integrate the economy.

Factors like kinship, neighborhood, etc are more likely to bring about reciprocating behavior. Division of labor or temporal issues may cause redistributive behavior. In early societies there was often a ban on haggling and barter, which precluded a price-based economy. Reciprocity was more dominant in older societies notably in the Pacific Islands, though not for basic consumables. Redistribution is still common in both old and modern societies, with Russia being an extreme example.

Trade is ancient, but markets in the formal economic sense are relatively new. What distinguishes trade from the questing for game, booty, plunder, rare woods or exotic animals, is the two-sidedness of the movement, which also ensures its broadly peaceful and fairly regular character.

From the catallactic viewpoint, trade is the movement of goods on their way through the market. All commoditiesgoods produced for saleare potential objects of trade; one commodity is moving in one direction, the other in the opposite direction; the movement is con trolled by prices: trade and market are co-terminous.

All trade is market trade. Again, like hunt, raid or expedition under native conditions, trade is not so much an individual as rather a group activity, in this respect closely akin to the organiaation of wooing and mating, which is often concerned with the acquisition of wives from a distance by more or less peaceful means. Trade thus centers in the meeting of different com munities, one of its purposes being the exchange of goods. Such meet ings do not, like price-making markets, produce rates of exchange, but on the contrary they rather presuppose such rates.

Neither the persons of individual traders nor motives of individual gain are involved. Whether a chief or king is acting for the community after having col lected the export goods from its members, or whether the group meets bodily their counterparts on the beach for the purpose of ex changein either case the proceedings are essentially collective.

Ex change between partners in trade is frequent, but so is, of course, partnership in wooing and mating. Individual and collective activities are intertwined. Emphasis on acquisition of goods from a distance as a constitu tive element in trade should bring out the dominant role played by the import interest in the early history of trade.

In the nineteenth cen tury export interests loomed largea typically catallactic phenomenon. Since something must be carried over a distance and that in two opposite directions, trade, in the nature of things, has a number of constituents such as personnel, goods, carrying, and two-sidedness, each of which can be broken down according to sociologically or tech nologically significant criteria. In following up those four factors we may hope to learn something about the changing place of trade in so ciety.

The Economy as Instituted Process First, the persons engaged in trade. Acquisition of goods from a distance may be practiced either from motives attaching to the traders standing in society, and as a rule comprising elements of duty or public service status motive ; or it may be done for the sake of the material gain accruing to him per sonally from the buying and selling transaction in hand profit motive.

In spite of many possible combinations of those incentives, honor and duty on the one hand, profit on the other, stand out as sharply distinct primary motivations. If the status motive, as is quite often the case, is reinforced by material benefits, the latter do not as a rule fake the form of gain made on exchange, but rather of treasure or en dowment with landed revenue bestowed on the trader by king or temple or lord, by way of recompense.

Things being what they are, gains made on exchange do not usually add up to more than paltry sums that bear no comparison with the wealth bestowed by his lord upon the resourceful and successfully venturing trader.

Thus he who trades for the sake of duty and honor grows rich, while he who trades for filthy lucre remains pooran added reason why gainful motives are under a shadow in archaic society. Another way of approaching the question of personnel is from the angle of the standard of life deemed appropriate to their status by the community to which they belong.

Archaic society in general knows, as a rule, no other figure of a trader than that which belongs either to the top or to the bottom rung of the social ladder. The first is connected with rulership and govern ment, as required by the political and military conditions of trading, the other depends for his livelihood on the coarse labor of carrying.

Tlris fact is of great importance for the understanding of the organiza tion of trade in ancient times. There can be no middle-class trader, at least among the citizenry. Apart from the Far East which we must disregard here, only three significant instances of a broad commercial middle class in premodern times are on record: the Hellenistic mer chant of largely metic ancestry in the Eastern Mediterranean city states; the ubiquitous Islamitic merchant who grafted Hellenistic mari time traditions on to the ways of the bazaar; lastly, the descendants of Pirennes floating scum in Western Europe, a sort of continental metic of the second third of the Middle Ages.

The classical Greek middle class preconized by Aristotle was a landed class, not a commer cial class at all. The trader types of antiquity were the tamkamm, the metic or resident alien, and the foreigner. The tamkarum dominated the Mesopotamian scene from the Su merian beginnings to the rise of Islam, i. The metic became first historically conspicuous in Athens and some other Greek cities as a lower-class merchant, and rose with Hellenism to become the prototype of a Greek-speaking or Levantine commercial middle class from the Indus Valley to the Pillars of Hercules.

The foreigner is of course ubiquitous. He carries on trade with foreign crews and in foreign bottoms; he neither belongs to the community, nor enjoys the semi-status of resident alien, but is a member of an altogether different community. A fourth distinction is anthropological.

It provides the key to that peculiar figure, the trading foreigner. Although the number of trading peoples to which these foreigners belonged was comparatively small, they accounted for the widely spread institution of passive trade. Amongst themselves, trading peoples differed again in an im portant respect: trading peoples proper, as we may call them, were ex clusively dependent for their subsistence on trade in which, directly or indirectly, the whole population was engaged, as with the Phoenicians, the Rhodians, the inhabitants of Gades the modern Cadix , or at some periods Armenians and Jews; in the case of othersa more nu merous grouptrade was only one of the occupations in which from time to time a considerable part of the population engaged, travelling abroad, sometimes with their families, over shorter or longer periods.

The Haussa and the Mandingo in the Western Sudan are instances. The latter are also known as Duala, but, as recently turned out, only when trading abroad. Formerly they were taken to be a separate peo ple by those whom they visited when trading.

Second, the organization of trade in early times must differ ac cording to the goods carried, the distance to be travelled, the obstacles to be overcome by the earners, the political and the ecological condi tions of the venture. For this, if for no other reason, all trade is origi nally specific. The goods and their carriage make it so. There can be, under these conditions, no such thing as trading in general.

The decision to acquire some hinds of goods from a definite distance and place of origin will be taken under circumstances different from those under which other kinds of goods would have to be acquired from somewhere else. Trading ventures are, for this reason, a discontinuous affair. Tlrey arc restricted to concrete undertakings, which are liquidated one by one and do not tend to develop into a continuous enterprise. The Ro man societas, like the later commenda, was a trade partnership limited lo one undertaking.

Only the societas publicanorum, for tax farming and contracting, was incorporatedit was the one great exception. Not before modem times were permanent trade associations known. The specificity of trade is enhanced in the natural course of things by the necessity of acquiring the imported goods with exported ones. For under nonmarket conditions imports and exports tend to fall under different regimes. The process through which goods are col lected for export is mostly separate from, and relatively independent of, that by which the imported goods are repartitioned.

Tlie first may be a matter of tribute or taxation or feudal gifts or under whatever other designation the goods flow to the center, while the repartitioned im ports may cascade along different lines. Hammurabis Seisachtheia appears to make an exception of simu goods, which may have some times been imports passed on by the king via the tamkarum to such tenants who wished to exchange them for their own produce.

Some of the preconquest long-distance trading of the pochteca of the Aztec of Mesoamerica appears to carry similar features. What nature made distinet, the market makes homogeneous. Even the difference between goods and their transportation may be obliter ated, since in the market both can be bought and soldthe one in the commodity market, the other in the freight and insurance market.

In either case there is supply and demand, and prices are formed in the same fashion. Carrying and goods, these constituents of trade, acquire a common denominator in terms of cost. Preoccupation with the mar ket and its artificial homogeneity thus makes for good economic theory rather than for good economic history. Eventually, we will find that trade routes, too, as well as means of transportation may be of no less incisive importance for the institutional forms of trade than the types of goods carried.

For in all these cases the geographical and techno logical conditions interpenetrate with the social structure. Gift trade links the partners in relationships of reciprocity, such as: guest friends; Kula partners; visiting parties. Over millennia trade between empires was carried on as gift tradeno other rationale of two-sidedness would have met quite as well the needs of the situation. The organization of trading is here usually ceremonial, involving mu tual presentation; embassies; political dealings between chiefs or kings.

The goods are treasure, objects of lite circulation; in the border case of visiting parties they may be of a more democratic character. But contacts are tenuous and exchanges few and far between. Administered trade has its firm foundation in treaty relationships that are more or less formal. Since on both sides the import interest is as a rule determinative, trading runs through government-controlled channels.

The export trade is usually organized in a similar way. Con sequently, the whole of trade is carried on by administrative methods. This extends to the manner in which business is transacted, including arrangements concerning rates or proportions of the units exchanged; port facilities; weighing; checking of quality; the physical exchange of the goods; storage; safekeeping; the control of the trading personnel; regulation of payments ; credits; price differentials.

Some of these matters would naturally be linked with the collection of the export goods and the repartition of the imported ones, both belonging to the redistributive sphere of the domestic economy.

The goods that are mutually imported are standardized in regard to quality and package, weight, and other easily ascertainable criteria. Only such trade goods can be traded.

Equivalencies are set out in simple unit relations; in principle, trade is one-to-one. Higgling and haggling is not part of the proceedings; equivalencies are set once and for all. But since to meet changing circumstances ad justments cannot be avoided, higgling-haggling is practiced only on other items than price, such as measures, quality, or means of payment. Endless arguments are possible about the quality of the foodstuffs, the capacity and weight of the units employed, the proportions of the cur rencies if different ones are jointly used.

Even profits are often bar gained. This method of haggling on profits at stable priees, which may have been fairly general in archaie society, is well authenticated from the Central Sudan as late as the nineteenth century. Administered trade presupposes relatively permanent trading bodies such as governments or at least companies chartered by them.

The understanding with the natives may be tacit, as in the case of tradi tional or customary relationships. Between sovereign bodies, however, Irade assumes formal treaties even in the relatively early times of the second millennium b. Once established in a region, under solemn protection of the gods, administrative forms of trade may be practiced without any previous Ircaty. The main institution, as we now begin to realize, is the port of trade, as we here call this site of all administered foreign trade.

The ] ort of trade offers military security to the inland power; civil protec- tion to the foreign trader; facilities of anchorage, debarkation and storage; the benefit of judicial authorities; agreement on the goods to be traded; agreement concerning the proportions of the different trade goods in the mixed packages or sortings.

Market trade is the third typical form of trading. Here exchange is the form of integration that relates the partners to each other. This comparatively modern variant of trade released a torrent of material wealth over Western Europe and North America. Though presently in recession, it is still by far the most important of all.

The range of tradable goodsthe commoditiesis practically unlimited and the organization of market trade follows the lines traced out by the supply- demand-price mechanism. The market mechanism shows its immense range of application by being adaptable to the handling not only of goods, but of every element of trade itselfstorage, transportation, risk, credit, payments, etc. The main interest of the economic historian today turns towards the questions: When and how did trade become linked with markets?

At what time and place do we meet the general result known as mar ket trade? Strictly speaking, such questions are precluded under the sway of catallactic logic, which tends to fuse trade and market inseparably. The catallactic definition of money is that of means of indirect ex change. Modern money is used for payment and as a standard pre cisely because it is a means of exchange. Thus our money is all-pur pose money.

Other uses of money are merely unimportant variants of its exchange use, and all money uses are dependent upon the existence of markets. The substantive definition of money, like that of trade, is inde pendent of markets. It is derived from definite uses to which quantifi able objects are put. These uses are payment, standard and exchange. Money, therefore, is defined here as quantifiable objects employed in any one or several of these uses.

The question is whether independent definitions of those uses are possible. The definitions of the various money uses contain two criteria: the sociologically defined situation in which the use arises, and the opera tion performed with the money objects in that situation.

Payment is the discharge of obligations in which quantifiable ob jects change hands. The situation refers here not to one kind of obli gation only, but to several of them, since only if an object is used to discharge more than one obligation can we speak of it as means of payment in the distinctive sense of the term otherwise merely an obli gation to be discharged in kind is so discharged.

The payment use of money belongs to its most common uses in early times. The obligations do not here commonly spring from trans actions. In unstratified primitive society payments are regularly made in connection with the institutions of bride price, blood money, and fines. In archaic society such payments continue, but they are over shadowed by customary dues, taxes, rent and tribute that give rise to payments on the largest scale. The standard, or accounting use of money is the equating of amounts of different kinds of goods for definite purposes.

The situa tion is either barter or the storage and management of staples; the operation consists in the attaching of numerical tags to the various objects to facilitate the manipulation of those objects. Thus in the case of barter, the summation of objects on either side can eventually be equated; in the case of the management of staples a possibility of plan ning, balancing, budgeting, as well as general accounting is attained.

The equating of such staples as barley, oil and wool in which taxes or rent have to be paid or alternatively rations or wages may be claimed is vital, since it ensures the possibility of choice be tween the different staples for payer and claimant alike.

At the same time the precondition of large scale finance in kind is created, which presupposes the notion of funds and balances, in other words, the interchangeability of staples.

The exchange use of money arises out of a need for quantifiable objects for indirect exchange. The operation consists in acquiring units of such objects through direct exchange, in order to acquire the desired objects through a further act of exchange.

Sometimes the money objects are available from the start, and the twofold exchange is merely designed to net an increased amount of the same objects.

Such a use of quantifiable objects develops not from random acts of bartera favored fancy of eighteenth century rationalismbut rather in connection with organized trade, especially in markets. In the ab sence of markets the exchange use of money is no more than a subordi nate culture trait. The surprising reluctance of the great trading peo- ]jles of antiquity such as Tyre and Carthage to adopt coins, that new form of money eminently suited for exchange, may have been due to the fact that the trading ports of the commercial empires were not organized as markets, but as ports of trade.

Two extensions of the meaning of money should be noted. The one extends the definition of money other than physical objects, namely, ideal units; the other comprises alongside of the three conventional money uses, also the use of money objects as operational devices.

Ideal units are mere verbalizations or written symbols employed as if they were quantifiable units, mainly for payment or as a standard. The operation consists in the manipulation of debt accounts accord ing to the rules of the game. Such accounts are common facts of primi tive life and not, as was often believed, peculiar to monetarized econo mies. The earliest temple economies of Mesopotamia as well as the early Assyrian traders practiced the clearing of accounts without the intervention of money objects.

At the other end it seemed advisable not to omit the mention of operational devices among money uses, exceptional though they be. In eighteenth-century Why- dah cowrie money was used for statistical ends, and damba beans never employed as money served as a gold weight and, in that ca pacity, were cleverly used as a device for accountancy.

Early money is, as we saw, special-purpose money. Different kinds of objects are employed in the different money uses; moreover, the uses are instituted independently of one another.

The implications are of the most far-reaching nature. There is, for instance, no contradic tion involved in paying with a means with which one cannot buy, nor in employing objects as a standard which are not used as a means of exchange. In Hammurabis Babylonia barley was the means of pay ment; silver was the universal standard; in exchange, of which there was very little, both were used alongside of oil, wool, and some other staples. It becomes apparent why money useslike trade activities can reach an almost unlimited level of development, not only outside of market-dominated economies, but in the very absence of markets.

Now, the market itself. Catallactically, the market is the locus of exchange; market and exchange are co-extensive. For under the catal- lactic postulate economic life is both reducible to acts of exchange effected through higgling-haggling and it is embodied in markets. Ex change is thus described as the economic relationship, with the market as the economic institution.

The definition of the market derives logi cally from the catallactic premises. Under the substantive range of terms, market and exchange have independent empirical characteristics. What then is here the meaning of exchange and market?

And to what extent are they necessarily con nected? Exchange, substantively defined, is the mutual appropriative move ment of goods between hands. Such a movement as we saw may occur either at set rates or at bargained rates. The latter only is the result of higgling-haggling between the partners. Whenever, then, there is exchange, there is a rate. This remains true whether the rate be bargained or set.

It will be noted that exchange at bargained prices is identical with catallactic exchange or exchange as a form of integration. Market institutions shall be defined as institutions comprising a supply crowd or a demand crowd or both. Supply crowds and demand crowds, again, shall be defined as a multiplicity of hands desirous to acquire, or alternatively, to dispose of, goods in exchange.

Although market institutions, therefore, are exchange institutions, market and exchange are not coterminous. Exchange at set rates occurs under re- ciprocative or redistributive forms of integration; exchange at bargained rates, as we said, is limited to price-making markets.

It may seem para doxical that exchange at set rates should be compatible with any form of integration except that of exchange; yet this follows logically since only bargained exchange represents exchange in the catallactic sense of the term, in which it is a form of integration.

The best way of approaching the world of market institutions ap pears to be in terms of market elements. Eventually, this will not only serve as a guide through the variety of configurations subsumed under the name of markets and market type institutions, but also as a tool with which to dissect some of the conventional concepts that ob struct our understanding of those institutions. Two market elements should be regarded as specific, namely, su p ply crowds and demand crowds; if either is present, we shall speak of a market institution if both are present, we call it a market, if one of them only, a market-type institution.

Next in importance is the ele ment of equivalency, i. Competition is another characteristic of some market institutions, such as price-making markets and auctions, but in contrast to equiva lencies, economic competition is restricted to markets. Finally, there are elements that can be designated as functional. Regularly they occur apart from market institutions, but if they make their appearance alongside of supply crowds or demand crowds, they pattern out those institutions in a manner that may be of great practical relevance.

Amongst these functional elements are physieal site, goods present, custom and law. This diversity of market institutions was in recent times obscured in the name of the formal concept of a supply-demand-price mecha nism.

Supply crowds and demand crowds were referred to above as sepa rate and distinct market elements. In regard to the modern market this would be, of course, inadmissible; here there is a price level at which bears turn bulls, and another price level at which the miracle is re versed. Results Citations. Citation Type.

Has PDF. Publication Type. More Filters. Parsons' main objection was that … Expand. Sociology and Economics: Crossing the Boundaries. Studies that cross the boundaries between sociology and economics help to enhance our understanding of both economy and society.

Economics has had a greater influence on sociology than vice versa. Since the mids, economic sociology has experienced an enormous upturn. In this context, the notion of "social embeddedness" as the organizing principle of economic sociology was of particular … Expand. View 1 excerpt, cites results. Handbook of Economic Sociology.