The Function and the Functioning of Markets

Abstract

Chapter 3 takes a more specific look at markets in particular. In the top-down perspectives, specific ways in which markets function are posited. Individuals react to the information that is being made available to them in specific ways, and under specific constraints. When we assume a bottom-up perspective, general laws of market functioning no longer hold, which does not mean that there were no stabilizing structures. Still, without systemic constraints that are postulated at the outset of analyses, different ways for markets to function can emerge. Individual capability and motivations, or the characteristics of goods being traded, can have an influence. Such differences and changes, among markets and within a market over time, are normal outcomes of individual economic behavior.

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