The Practice of Defining Markets: A Comment on Charles W. Smith

Charles Smith in the Market

It is with great pleasure that I take this opportunity to write a short comment based on Charles Smith’s article, “Markets as Definitional Practices” (2007). This is also an opportunity to present and discuss how markets can be understood. Smith, as is known, has written many interesting texts (e.g., Smith 1981; 1989) that deal with markets, and the current one is no exception.

There are many things that I like with Smith’s work. I agree that the market is the most central “institution” of the economy, that the larger aim of economic sociology is to develop a theory of markets, and that ethnography is an indispensable strategy in this undertaking. He should also be praised for addressing markets in relation to money, which is all too rare in economic sociology.

Moreover, Smith has, in a way that resembles Weber, combined hands on knowledge of financial markets with an analytic outlook. Max Weber wrote two pamphlets (Weber [1893–98] 1999) for the Library of Workers in Göttingen on Die Börse (the stock exchange), which show many sociological insights, but as he grew older, Weber further developed his sociological thinking (cf. Swedberg 2000). Smith’s view on markets, if I may, has also become more sociological over time.

However, my comment is not, and should not be, merely a celebration of Smith’s work; that would be to demean it, as well as the important issue being researched. The issue at stake, as I see it, is markets. I want to point out some issues of disagreement, or where I think one should go further or, in some cases, in a different direction. Before I discuss Smith’s contribution I make a short summary of how I understand his arguments.

Summary of the Arguments

Today few economic sociologists disagree with the central statement of Smith, that markets are part of society. Put in the parlance of economic sociology, markets are embedded, not only in other markets (White 2002), but in the social environment at large. This almost self-evident “insight” must be seen in the light of the differentiation of subsystem, in the words of Luhmann, or spheres, in the words of Nietzsche, Simmel, or Weber. These changes took place in the 17th and 18th century (cf. Luhmann [1984] 1995:461). Regardless of the concepts used, it is clear that the economy has become more “independent.” Thus, though the economy has always been embedded, it has over time become less embedded.

The theoretical framework Smith develops aims to, “frame markets as evolving social practices in a wide range of more encompassing social practices” (2007:4). In Smith’s text, markets are presented as social units, in which actors define themselves and their activities by generating shared meaning as a result of actors taking on each others’ roles. This co-activity of market actors generates narratives of markets. A point made by Smith that he shares with Simmel, Weber, and Habermas, is that market activities, as Smith says, “spill over” to other parts of social life. What is meant hereby is not only the idea of market externalities, which economists as well as, more recently, Michel Callon (e.g. 1998) have addressed, but what is called “marketization,” or the “logic of the market.” This idea is common in economic sociology, and I do not think it is wrong, but it must be put in perspective. One should remember that also non-market activities spill over in markets. Markets, it has been shown, may also become more “ethical” (Aspers 2006). The literature suggests “flows” in both directions (Hirschman 1986:105–141), i.e., “to” and “from” the market economy.

What is a Market?

This is a straightforward question, and though I agree with much of what is said in Smith’s text on markets, I fail to see a definition or a description, which sets markets apart from other “social practices.” I therefore propose the following definition of a market: a social structure for exchange of rights, which enables people, firms and products to be evaluated and priced...