In the first chapter of Reinventing the Bazaar, McMillan explains what he believes are the defining characteristics of a market. He begins by stating that "a market for something exists if there are people who want to buy it and people who want to sell it," continuing with the dictionary definition of a market, "a meeting together of people for the purpose of trade by private purchase and sale" (p 5). This indicates two defining characteristics of a market, the desire to buy and sell an item must be present, and an exchange between two individuals should take place. He then expands on this definition, claiming it is not detailed enough. McMillan believes that a key factor in defining a market is 'decision-making autonomy.' This autonomy is what creates a market transaction. An individual must be allowed to make their own choices in buying or selling a good, even if this autonomy is only the ability to accept or decline a transaction. A quote that struck me was, "No one is in charge of the market - or rather, everyone is in charge" (p. 7). This quote explains how no one person controls the decisions made in a market, everyones autonomy in their decision making combines creating the market. To review, the three main characteristics of a market: The desire of individuals to buy and sell, the existence of a transaction, some level of decision-making autonomy in this transaction.
McMillan touches upon peoples differing view of markets, while some people believe that the invisible hand of the market should be left unchecked, others think a market must be regulated to be successful. Many people believe that a market should be left to set itself, and that very few regulations and control should be imposed on a market as these factors only interfere with a markets inherent accuracy. These people believe that non-market action unhelpful and also may fear that the regulators of the market, likely the government, will become too controlling. This is understandable as the more rules and regulations placed on a market, the less decision-making autonomy the market participants have. As McMillan explained, this autonomy is crucial in the market functioning properly. Others are wary of complete autonomy in a market, believing that the market cannot be trusted to fairly control itself. With complete autonomy, decisions can be made that are not beneficial to the market and exploitation can occur. These people think the government should step in, creating laws and regulations for a market to follow that prevent negative market factors and protect people from becoming victims of a market.
It is clear to me that some regulation is needed in a market. McMillan states that a market will only be successful if "information flows freely through it," and "people can trust each other" (p 10). For these factors to be present in a market, some regulation is required. Rules that limit the ability for buyers and sellers to deceive each other foster trust in a market. Information about products being sold should be given to the buyer and information on similar products should be easily accessible. The government may need to create regulations that monitor the disclosure of information to a customer and the freedom of information. If a buyer knows that government law ensures the quality of goods, more market transactions will take place. Buyers will have more trust in sellers giving them a quality product. Even though this non-market action is needed to assist the market, I am also cautious of excessive government intervention. As a government expands it's control over a market, autonomy is lost. This autonomy is what fosters growth in the market as growth is due to "trial and error, through the market participants' everyday actions" (p 12). Without allowing the participants of a market to experiment and make their own choices, they will not be able to discover what are successful and unsuccessful ways to expand. New ways of business that reduce transaction costs are beneficial to everyone in a market, with excessive regulations on a market, these innovations would not be created.
Modern markets are governed by rules. The rules that allow for the freedom of information in a market and that foster trust are the ones that I believe are the most important because without these rules a market would not be able to move past a certain point. These rules are also crucial because they protect people from making bad decisions and also being victims of dishonest business. Some rules and regulations are necessary to create a successful market.
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