In the three lectures held on 22nd, 26th and 29th October, 2018 in the memory of Prof. Dwijendra Tripathi, we studied the broad historical evolution of businesses and markets. It was a story of expansion of the social circle. We discussed the macro-level implications of who are our friends and what is the nature of networks we make.
In the first lecture we learnt about the two types of exchange: one which is embedded in networks and hierarchies, and another that can rely on arm’s length interactions with strangers. We discussed how embedded systems of exchange like merchant guilds can persist due to a lack of incentives or information, or because of salience of identity in embedded exchanges.
In the second lecture we looked at the factors that can widen the social circle and give rise to impersonal and cosmopolitan social systems. We learnt that strong institutions, a trustworthy culture or “laissez-faire” markets alone can not be the recipe for the emergence of impersonal exchange as each of them are prone to corruption, decay and opportunism. We discussed the importance of incentives and formalization in impersonal exchange, and how trade and information shocks can play an important role in triggering a co-evolution between generalized institutions, standardized business norms, and impersonal exchange. We discussed how this process panned out in Northwestern Europe, and how the same processes may lead to growth in India, as long as the growth remained inclusive.
In the third lecture, we discussed the forces that drive such evolution. First we looked at the role of institutions on development, and specifically looked at formal, legal and local ethnic institutions. Next, we discussed the cultural ingredients that make functioning markets, and discussed the importance of historical persistence and trust, and how "market for ideas" influenced culture and institutions. Next, we discussed how technology influences the market, and discussed the importance of information and transport technology, and the media.