Jp. Platteau, BEHIND THE MARKET STAGE WHERE REAL SOCIETIES EXIST .1. THE ROLE OF PUBLIC AND PRIVATE ORDER INSTITUTIONS, Journal of development studies, 30(3), 1994, pp. 533-577
This two-part article is an attempt to clarify the social conditions u
pon which the viability and efficiency of the market system rest. It s
trives to show that the 'embeddedness' thesis, that is, an explanation
based upon the existence of long-run personalties involving the use o
f reputation mechanisms among transactors, cannot fully elucidate the
question as to how the problem of trust is solved in market societies.
As explained in Part 1, there are difficulties of both theoretical an
d empirical/historical kinds and these explain why the 'market order'
needs to be sustained by private and public order institutions. In Par
t II, the role of generalised morality in backing or supplementing suc
h institutions is discussed in the light of game theory, and particula
r emphasis is put on the ability of moral norms to sustain honest beha
viour by generating the right kind of preferences and establishing tru
st. The vexed problem of the dynamics of norm emergence and erosion is
then addressed with a view to showing that norms of generalised moral
ity - perhaps contrary to moral norms in small groups - cannot be easi
ly created by fiat nor be expected to evolve spontaneously when they a
re needed to make economic exchanges viable. Ultimately, the cultural
endowment of a society plays a determining role in shaping its specifi
c growth trajectory, and history therefore matters. Finally, to illust
rate the theoretical discourse, reference is made to present-day Third
World countries. It is argued that economic norms of limited-group mo
rality prevail and do not readily give way to generalised morality.