What is ‘the market’?
March 27, 2012
What is being done in the name of ‘the market’ in 2012?
The government of Alberta is currently basing its decisions on energy strategy regarding oil refineries on ‘the market’. “Let ‘the market’ decide.” What is ‘the market’? Can we talk about ‘the market’ in policy making on energy? Or is it highly fragmented yet inextricably linked? Oil with natural gas? Labour market? Bitumen and crude oil? Which crude? Is the market upstream or downstream? Financial market? Is it a futures market, just-in-time, real time or just-too late?
Who are the players in ‘the market’?
The increase the market value of stocks owned by shareholders is the responsibility of the CEO’s of incorporated companies according to North American economists and the business community. In fact under U.S. corporate law a CEO who makes decisions that are not market-based, risks liability for a breach of fiduciary duty (Leibold, Annalisa M., “Aligning Incentives for Development: The World Bank and the Chad-Cameroon Oil Pipeline” (2011). Student Prize Papers. Paper 79. Yale Journal of International Law. Vol.36:167:184).
Leibold referred to the consortium (coventure) formed in 2000 by three energy companies (ExxonMobil:40%, Petronas:35%, Chevron:25%) that became one of the central players in the World Bank’s strategic plan to use oil extraction to reduce poverty in Chad. Leibold argued that it did not work as a development project because the profit-maximizing nature of corporations. The Chadian president signed a contract in 2004 for a much smaller royalty than other African countries received at the time. The Chadian share of profits was low. Loans for the project were provided by the World Bank’s International Finance Corporation.
As e-commerce relationships multiply exponentially to whom are the CEOs of mega-companies liable for breach of fiduciary duty?
To what extent is the market a complex interconnected dynamic virtual network?
To what extent is ‘the market’ rational in 2012?
To what extent is the ‘market’ related to the [physical/virtual] exchange of [goods/capital] in [physical] real time/space?
At what scale do rules change? Can there be rules of thumb for large-scale complex international markets?
“It is standard doctrine, at least among American economists and in much of the business community, that firms should maximize the stock market value.” Incorporated companies are ultimately accountable to their shareholders. (Joseph E. Stiglitz, “What is the Role of the State?” in Escaping the Resource Curse, supra note 154, at 3, 28-29) (“It is standard doctrine, at least among American economists and in much of the business community, that firms should maximize the stock market value.”).) Under U.S. corporate law, for example, a corporation’s board of directors must make decisions that reflect the profit motivations of shareholders or risk liability for a breach of fiduciary duty.” (The Yale Journal of International Law. Vol.36:167:184).
“The financial markets are accelerating: transaction volumes are up, latencies are down, complex cross asset trading up, revenue margins down. Recently markets have seen sudden spikes in volumes, and nervous volatility when the old rules of thumb broke down. Technology and global regulators have both changed those rules by increasing transparency, intensifying competition, and multiplying e-commerce relationships exponentially. Reforms such as Reg NMS in the US and MiFID in Europe have further increased the pressure, along with Basel II and the fair value accounting rules of the new International Financial Reporting Standards (IFRS). The IFRS require, for example, firms to mark more of their assets and liabilities to market, while Basel II is much more explicit about risk adjusted capital reserves needed. Now, when markets move, traders need to catch them on-the-fly to cut their losses and go with the flow to ensure compliance with all the rules and customer mandates. The difference between just-in-time and just-too late has just become bigger (Giffords, Bob; Palmer, Mark. “Can Real-Time Profit and Loss Tame the Turbulent Markets?” StreamBase White Paper Real-Time Profit & Loss. StreamBase Systems).”
transactions: just-in-time, just-too late
Market for Financial Advice
the market [is] [emerging/performing/balanced/sustainable/stable/nervous/unstable/accelerating/turbulent/crashed] [experiencing] [transaction/latancies/revenue margins] [sudden][spikes] in [demand/supply][side][transaction][volumes][up/down]
competition is [intensified/]
[Natural gas] is a [sustainable/unstable/emerging/performing/turbulent] market wherein the [volume/price/value/royalties] of natural [unis][gas][gas futures][gas company stocks] [rose/fell/remained static] [slowly/consistently/dramatically] because of [reduced/increased] [supply/demand][Profit/Loss] [new/failing/controversial] [technology] for [extracting/transporting][regulation/deregulation].
The ‘labour market’ is [flexible] with [increased/stable/decreased] mobility]
‘The market’ is [sustainable/unstable/emerging/performing/turbulent] as the [volume/price/value/royalties] of [futures/stocks/transactions] [rose/fell/remained static] [slowly/consistently/dramatically] because of [reduced/increased] [supply/demand][Profit/Loss] [new/failing/controversial] [technology] for [extracting/transporting][regulation/deregulation].
Callon, Michel. 1998. The Laws of the Markets. Blackwell Publishers/Sociological Review.
With the collapse of the planned economies of Eastern Europe, the market is extending its reach and at the same time claiming its universal applicability. But this is occuring while paradoxically it is becoming more difficult to define ‘the market’. The authors, all outstanding scholars in the booming field of socio-economics, explore how concrete markets are built up and stabilized. They give answers to questions such as the following: How are entities, material or nonmaterial, human or nonhuman, transformed into commodities? How are economic behaviours shaped by institutional arrangements? Is it possible to characterize the role of the social sciences and in particular of economics in performing markets and in enforcing rational behaviours?
Résumé: “Ce recueil regroupe plusieurs articles qui portent leur attention sur l’organisation des marchés. Michel Callon examine la place de la notion d’économie de marché au sein des théories économiques. Viviana A. Zelizer met en lumière une certaine prolifération des monnaies sociales dans la période actuelle. Michel Y. Abolafia considère que l’on doit appréhender les marchés comme autant de cultures spécifiques. Bai Gao s’efforce de mesurer l’influence des facteurs culturels et politiques sur l’évolution du mode de gestion japonais entre 1946 et 1996. David Stark analyse l’organisation de la propriété capitalistique en Europe orientale après l’effondrement du communisme. Mark Granovetter et Patrick McGuire décrivent de quelle manière l’industrie de l’électricité s’est développée aux Etats-Unis dans la première moitié du 20e siècle. Peter Miller étudie l’évolution des pratiques professionnelles dans le domaine de la comptabilité. Franck Cochoy présente le marketing comme une science de la performance et un savoir-faire au service du capitalisme. Hervé Dumez et Alain Jeunemaître examinent l’impact des politiques économiques sur le développement de l’industrie du ciment. Michel Callon pose le problème des limites des modèles mobilisés par les économistes.”
Michel Callon, developer (with Bruno Latour and others) of Actor Network Theory, is Professor at the Ecole des mines de Paris and a Researcher at the Centre de Sociologie de l’innovation there.
English Keywords:Market, Economic organization, Money, Culture, Economical Management, Japan, Capital, Property, Eastern Europe, Post-communism, Electric Power Industry, Economic Development, United States Of America, Marketing, Know How, Performance, Economics, Market Economy ; Economic Model, Accounting, Occupational Practice,
Mots-clés français: Marché ; Organisation économique ; Monnaie ; Culture ; Gestion ; Japon ; Capital ; Propriété ; Europe orientale ; Post-communisme ; Industrie électrique ; Développement économique ; Etats-Unis ; Commercialisation ; Savoir-faire ; Science ; Performance ; Science économique ; Economie de marché ; Modèle ; Comptabilité ; Pratique professionnelle ;