The Regulatory Policy Institute Research Group

The political economy of markets

The word market is widely used in contemporary economic and political discourse, but usually without any clear sense of what it means or is meant to refer to. In a literal sense, people do not know what they are talking about. The first part of the essay therefore examines the question: what is a market?
The answer is that a market is an economic institution, i.e. a set/system of rules that structures, regulates or governs a particular set of activities involving exchange of goods and services. It encompasses both the system of rules and the activities governed by them and it serves a specific, particular purpose or function, which is to reduce the costs of exchange transactions

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