Reinventing the Bazaar Chapter 1

1. What does the author see as the defining characteristics of a market? Select a quote (or quotes) from the text as evidence of his view.

McMillan described 4 defining characteristics of a market, purchase/sale, decision making/comptetition, flow, and rules/government. 

Purchase/sale

"A market for something exists if there are people who want to buy it and people who want to sell it"(5) By the definition that McMillan provides, a market is a meeting together of people for the purpose of trade by private purchase and sale.

Decision making/competition

"Decision-making autonomy is key. Participation in the exchange is voluntary; both buyer and seller are able to veto any deal..... they are free to make decisions-to buy, to sell, to exert effort, to invest- that reflect their own preferences." (5) The freedom to make decisions is further highlighted by the quality of competitiveness that markets presents: "descion making and comptetition, established rules. customs and spread of culture comptetition curbs any individual participant's power and, in most markets, prevents anyone from having a decisive effect on overall outcomes." (6)

Flow

Two qualities that McMillan describes as necessary for a successful market is communication and trust. In his words,  "a market works well only if information flows smoothly through it" (10) and "a market works well only if people can trust each other" (10)

Rules/Government

Finally, McMillan states that all successful markets must have an established set of laws for the participants to follow, without these, the market may become corrupt, or malfunction.
"Some pieces of a market's design are devised by the market participants themselves; other pieces are devised by the government...a basic part of the government's role in market desing is defining property rights" (12)

2. McMillan writes, "Markets provoke clashing opinions. Some people revile them as the source of exploitation and poverty. Others extol them as the font of liberty and prosperity" Have you observed these kinds of opinions? What might cause some people to distrust markets? What might cause other people to distrust government control over economic decisions? Do you personally lean one way or the other?

When I think of markets, I think of the local market from my hometown in Atlixco, Mexico. Every morning, this market grows to become the heart of the town. It crosses over four blocks, and sells everything from electronics to flowers. Because of my experience with this market I am probably biased in my opinion, which is that markets are the front of liberty and prosperity. I am aware that markets can be either beneficial or harmful to the parties involved. However, the majority of my experience with markets (digital and physical) has always been beneficial. McMillan says, "barganing power between buyer and seller is sometiems quite unequal. being able to veto any deal does convey some barganing power, but not necessairly much. Nevertheless, the opportunity to agree to an exchange or to decline it is a kind of freedom." (6)I believe that the equality between those involved in a market transaction is responsible for the mistrust of markets. On the other hand, the opportunity to control your buys and sells, as well as the freedom that a market presents is the reason that people may distrust control over economic decisions. In his book, McMillan states that a market seems to take a mind of its own. If a party has that perspective of a market, it is understandable that they wouldn't want a different force controlling it. 

3. McMillan uses folk football as an analogy for a completely lawless market and claims that modern markets are governed by rules (as are the modern sports of soccer, rugby, and American football.) What market rules would you say are important for modern markets? Why? 

 

As stated in his key characteristics of a market, rules are vital to the survival and efficiency of a market. An interesting aspect of today's modern technology is that markets are no longer a physical place people go to shop. When considering the vital rules for modern markets, one must consider digital markets as well. I believe that the key rules would have to lay out a groundwork of trust, not just for the customers, but for the sellers as well. This may include a prevention of violence, an equal exchange with the least corruption, the lowering of transaction costs, and the protection of the goods. As said above, a market will only work if there is trust amongst those involved.