Mind, Society, and Human Action: Time and Knowledge in a Theory of Social Economy by Wagner Richard E

Author:Wagner, Richard E. [Wagner, Richard E.]
Language: fra
Format: epub
Tags: Industry, Economics, Finance, Business &#038
Publisher: T & F Books UK
Published: 2010-03-02T23:00:00+00:00

Exchange theory and market theory: what are the objects?

What is commonly called the theory of markets is actually a theory of exchange and not a theory of markets. The object of analytical interest in neo-Walrasian expositions of market theory is the equilibrium price of some product or service, and with markets and their characteristic features treated as data. The relationship is dyadic in character with a set of individual buyers confronting one or more producers. The central analytical issue concerns the equilibrium price of various products, with such constructions as asymmetric information being used as vehicles to move price in some particular direction as compared with what it would have been under some postulated condition of symmetrical information.

The Edgeworth-Bowley portrayal in Figure 5.1 shows the point. As between the two parties shown there, one price might yield position A while another price might yield position C. For instance, A might be an outcome with asymmetric information while C is an outcome with symmetric information. Furthermore, intermediate positions along B are also possible. There is no need to review the theory of exchange here. The central point is simply that the material that is examined under the heading of a theory of markets can be captured readily by the Edgeworth-Bowley construction as a matter of the distribution of gains from trade under various presumed conditions. The object of the conventional theory of markets is some equilibrium price, and price is the consequent of exchange. To be sure, the theory of price is pretty rudimentary, due at least in part to its adoption of the single-product firm as its archetype. Still, price and exchange are aspects of the same phenomena, and both can be illustrated by the same dyadic treatment.

There is, however, nothing dyadic about markets. Within a regime of

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