“As soon as one observes the formation and operation of real markets, it becomes obvious that none of [their] dynamism is possible without deep involvement by entrepreneurs, managers, workers, firms, and governments. The people who run firms have to conceptualize opportunities, figure out ways to exploit them, and motivate others to help attain those ends. They have to obtain funding, secure raw materials, and build an organization. They have to figure out ways to stabilize their interactions vis-à-vis their principal competitors. Finally, the conflict between owners and those who work for them is under constant negotiation.
Moreover, firms operate against an extensive backdrop of common understandings, rules and laws. These are most often supplied by the government. One cannot overestimate the importance of governments to modern markets. Without stable, more or less non-rent-seeking states, modern production markets would not exist. War, plunder, and mercantilism would dominate and swamp entrepreneurs.
(…) These social structures, social relations, and institutions have not been created automatically in market society. They have been long-run historical projects ongoing in all industrial societies that have worked through waves of crisis (sometimes violent). Solutions that have been crafted required social experimentation during specific market crises and more general economic depressions (not to mention during upheavals produced by war and conquest). These events have pushed people to think about the ways that they needed to organize in order to make and take advantage of market opportunities.
(…) Technological change certainly can have independent effect on social structures. But technological change can have these effects only where the social organization exists that makes technology relevant. So, for example, a hunter-gatherer society has little use for highways and telecommunications. But a society in which lowering the costs of transportation and communications makes it easier for firms to move goods and services where there are opportunities to sell them gives huge incentives to firms that can figure out how to lower those costs.
(…) Similarly, competition produces social-organizational responses as well. Firms try to find ways to control the worst aspects of competition in order to continue to exist. Much of the market-making project is to find ways to stabilize and routinize competition. Much of the history of the largest corporations can be read as attempts to stabilize markets for these forms in the face of ruinous competition and economic downturns.
(…) In order to take advantage of new technology, firms need to establish stable relationships to their suppliers, workers, and principal competitors. The ability to establish these relationships is itself dependent on the production of stable societal institutions such as governments and law. In every advanced industrial society, governments, firms, and workers have solved their collective problems by producing rules to help stabilize their interactions. These solutions have varied historically and across societies. They depend greatly on the relative power of different groups to produce the modern state. Modern states have produced social welfare systems, money, and the rule of law and have worked to find solutions to the conflict between labor and capital. They have promoted competition, protected workers, and provided opportunities for basic research, thus developing new technologies. Stable, non-rent-seeking governments make the difference between societies where markets are possible and those where they are not.”
Neil Fligstein (2001), The Architecture of Markets – An Economic Sociology of Twenty-First-Century Capitalist Societies, Princeton, NJ: Princeton University Press, pp. 1 – 5.
First excerpt with more to come.