{"id":95951,"date":"2026-09-26T07:03:29","date_gmt":"2026-09-26T06:03:29","guid":{"rendered":"https:\/\/www.taxresearch.org.uk\/Blog\/?p=95951"},"modified":"2026-09-26T07:03:29","modified_gmt":"2026-09-26T06:03:29","slug":"what-is-a-market","status":"publish","type":"post","link":"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/09\/26\/what-is-a-market\/","title":{"rendered":"What is a market?"},"content":{"rendered":"<div>\n<p>What is a market? Economists often talk about markets as though they are natural forces that operate independently of society and government. In this Understanding Economics video, I argue that markets are simply tools for organising exchange.<\/p>\n<p>A market is any arrangement through which people buy and sell goods or services. Markets can work extremely well when there is genuine competition, people have adequate information, and buyers are able to walk away if the price or product does not suit them.<\/p>\n<p>But markets are not businesses, and they are not the same thing as capitalism. Businesses produce goods and services, while markets provide a mechanism through which exchange can take place. Capitalism concerns the ownership of capital and the returns made from it.<\/p>\n<p>There is also no such thing as a completely free market. Every functioning market depends upon rules governing property, contracts, money and acceptable behaviour, together with institutions capable of enforcing those rules.<\/p>\n<p>The problem comes when economists assume that idealised models such as perfect competition describe the real world. Monopoly power, unequal information, external costs such as pollution, and barriers to entry can all prevent markets from producing desirable outcomes.<\/p>\n<p>And some things should not be allocated according to whoever can pay the highest price, whilst essential services such as healthcare and education raise fundamentally different questions because society may decide that access should depend upon need rather than ability to pay.<\/p>\n<p>Markets can be useful, but they are not the answer to every economic problem. The important questions are whether a market should exist, whether it is working, how it should be regulated and whether another way of organising economic activity would work better.<\/p>\n<p>Knowing that is what Understanding Economics is all about.<\/p>\n<p><iframe loading=\"lazy\" title=\"YouTube video player\" src=\"https:\/\/www.youtube.com\/embed\/aEE6JfZSgOA?si=Vsa6FGg3YyQ2T7CY\" width=\"560\" height=\"315\" frameborder=\"0\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p>This is the audio version:<\/p>\n<p><iframe loading=\"lazy\" style=\"border: none; min-width: min(100%, 430px); height: 150px;\" title=\"What is a market?\" src=\"https:\/\/www.podbean.com\/player-v2\/?i=982ge-1b6b5eb-pb&amp;from=pb6admin&amp;share=1&amp;download=1&amp;rtl=0&amp;fonts=Arial&amp;skin=f6f6f6&amp;font-color=auto&amp;logo_link=episode_page&amp;btn-skin=c73a3a\" width=\"100%\" height=\"150\" scrolling=\"no\" data-name=\"pb-iframe-player\"><\/iframe><\/p>\n<p>This infographic supports this video:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-95953\" src=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Markets-550x825.png\" alt=\"\" width=\"550\" height=\"825\" srcset=\"https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Markets-550x825.png 550w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Markets-200x300.png 200w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Markets-768x1152.png 768w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Markets-267x400.png 267w, https:\/\/www.taxresearch.org.uk\/Blog\/wp-content\/uploads\/2026\/09\/Markets.png 1024w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/p>\n<p>&nbsp;<\/p>\n<p>This is the transcript:<\/p>\n<hr \/>\n<p>Hello, I\u2019m Richard Murphy, and this is Understanding Economics, the series of videos that I\u2019m making that explains economics in the way that I see it. Now, I stress this is about how I see the economy, and I do not agree with the great many other economists on how our economy works, but that is why I think this series is important. I am trying to explain how the economy really works, and I am suggesting that many of those economists don\u2019t really understand that because if they did, we wouldn\u2019t be seeing the mess we\u2019ve got all around us right now.<\/p>\n<p>And in this video I want to talk about something that is quite important, and widely misunderstood, and that is the question: what is a market? And this has to be understood if we\u2019re going to get the terminology right that we often use when discussing the way in which our economy works. And it\u2019s important that we know how the mechanism of a market works and when it should be used and when it\u2019s best to use another mechanism instead.<\/p>\n<p>A market, and let\u2019s be clear about this, is any arrangement through which people exchange things. It can be a place, and we\u2019ve all been to such things , they are called marketplaces, or it could be a website or simply a network of buyers and sellers. A price is asked for, and it is then discovered, or negotiated, by agreement, or else people walk away, and nothing is done.<\/p>\n<p>That is what happens in a marketplace. Decisions are made. And the resulting prices then help decide what gets made, who makes it, and who gets it. Markets are then just tools. They\u2019re not a set of beliefs. They are a way in which people exchange goods and services to mutual advantage.<\/p>\n<p>And let\u2019s be clear, markets are not businesses. A business produces goods and services to meet needs. A profit may be produced as a byproduct of doing that, but it may not be the goal of the exercise. Markets include items that are not necessarily produced with a view to profit. A market is where all those goods and services, wherever they are produced, are exchanged if that is the appropriate mechanism to do so.<\/p>\n<p>Competition means a business can lose its customers, its income, and its future, so every business is safer facing less competition, but markets only work if businesses face more. There is then a conundrum here. Businesses are against competition. Markets are for competition. That means businesses and markets are not the same thing, and very often they\u2019re working in conflict with each other. We have to understand that because markets are what keep businesses on their toes.<\/p>\n<p>And markets are not also about capitalism. Capitalism refers to a particular form of the private ownership of business, and it relies upon the payment of wages to workers. It puts returns to owners first and concentrates power in their interests. But big owners, especially financial investors, often own shares in many competing firms and gain when those firms do not compete. Markets then do not suit their interests.<\/p>\n<p>Markets are thousands of years older than capitalism. They work, but capitalism very often seeks to undermine them. And supporting markets does not then mean supporting capitalism. It can, in fact, mean the exact opposite because it can be about reducing the concentration of power amongst business owners, whereas capitalism tries to do the exact opposite.<\/p>\n<p>And I want to stress there are no free markets, even though many people, especially on the right wing of politics, like to claim there are. Every market depends on rules and the organisations that enforce them. Ownership must be defined. Promises must be enforced. Contracts are necessary. Money has to be used, and the government creates it. And law must be there to ensure that disputes are settled. All of these things are provided using mechanisms delivered by states.<\/p>\n<p>A free market then is usually just a reference to a market with fewer rules, but that can lead to abuse of market power, and many of those who promote the idea of free markets have exactly that goal in mind.<\/p>\n<p>The question then is not whether there should be rules. There have to be; you cannot have a market without rules. That\u2019s like trying to play a game of football without having a set of rules that everybody agrees by. The question is not whether there should be rules. It is who benefits from them. Removing the rules that keep competition fair lets powerful firms take control.<\/p>\n<p>And in this context, we do need to look at the misleading description of markets that many economics textbooks provide. Textbooks start with an idea of \u2018perfect competition\u2019, which requires there to be many buyers and sellers in every marketplace, and for everyone to be fully informed as to all the products that are available within the market and the prices that are being asked for them. And there must be ease of entry and exit from the market so that everybody can have access to the capital required if that is necessary for them to take part. And identical products must be traded so they can be substituted one for the other, so that prices are the only variation between different buyers and sellers.<\/p>\n<p>Now, real markets are almost never like this. Almost all of those conditions are entirely artificial. They will never be replicated in the real world in any situation that you will come across. Dominant firms, barriers to newcomers, and one side knowing more than the other are decidedly commonplace in most of the markets in which we deal, and we all know it from personal experience.<\/p>\n<p>Models simplify, and economic models have a benefit. I\u2019m not disputing that. But the problem with this model of markets is that it is treated as reality and policy is built on the basis of it, and it\u2019s not true. And we have seen the disasters that follow. The UK water industry is regulated on the basis that this model of a market actually works. Of course it doesn\u2019t. There is no market for water in the UK. It is an essential product. It is supplied by a few companies, and we have no choice about which one will supply us. And yet it is assumed that there is perfect competition in operation. And that is complete and utter nonsense.<\/p>\n<p>And the reality is that markets can work, but they can only work when competition is real, people are well informed, and they can choose not to buy. In other words, they can afford to walk away and still meet their needs. And that is critical because there are some things that people cannot afford, but which they do need to buy, and which markets can deny to them as a consequence of their inability to pay. And so we have to understand that that is a problem that markets can create.<\/p>\n<p>When markets do work, and I stress they can, prices do pass useful information between millions of people who will never meet, and we can all see that. We all trade online now. We all go to shops where we can make decisions, and sometimes we can go to another one and make an alternative decision instead. And nobody has to plan any of these things or determine outcomes for us. When that happens, it is a genuine strength of markets. We do get better social outcomes, and so markets are not inherently bad. I wish to make that point very strongly.<\/p>\n<p>The question is not whether exchange happens then, but whether the conditions exist for markets to work well. That is the vital point I\u2019m making.<\/p>\n<p>And markets can fail. Markets fail when monopoly replaces competition with power, and we can see this in many parts of our economy at present. I\u2019ve already mentioned water, but this is a problem with regard to the supply of electricity and other utilities. It is a problem with our supermarkets, of which there are too few to prevent what looks like monopoly power being in place, and there are other problems as well.<\/p>\n<p>Some costs, like pollution, fall on people outside the process of exchange, which is negotiated within the marketplace. We get misstated prices. We have a problem which economists call that of externalities. Somebody else picks up the cost, and the person in the market doesn\u2019t pay the true price for whatever they consume. That is a market failure.<\/p>\n<p>And another market failure arises when one of the people in the marketplace has more information about the product they\u2019re selling than the other one. This invariably is that the producer knows more than the buyer, and then abuse can happen.<\/p>\n<p>What is more, there is a problem that I\u2019ve already hinted at. In some markets, particularly when there is a shortage of supply, as, for example, there might be with regard to food and oil and other products in the UK, if we see the full consequences of the war that Donald Trump is pursuing unfolding, there will be people who want to go to the market and buy things, but they won\u2019t be able to do so because the market will only supply to those who are willing to pay the most for products when they are in short supply, and others will go without, even though the supply in question might be essential to them.<\/p>\n<p>Markets then can fail when it comes to essential goods. And in those situations, it is up to the government to intervene, and in the Second World War, we saw the consequence of that. We had rationing because that was the only way in which market failure could be prevented, because people needed food and other essential products and services, and the government had to intervene to make sure that everybody had access to what the market could not supply.<\/p>\n<p>There is, in other words, always a question to ask: which is what regulation is needed when we come to markets? Markets can\u2019t survive without regulation. The scale of regulation that they need is the question that we need to ask, and that is vital.<\/p>\n<p>It\u2019s also important to understand that there are situations where markets just do not belong. Some things should not be bought and sold. Votes, justice and people are the obvious cases, but all have been violated in our history. Others can only be supplied by monopolies. So markets can sometimes never produce fair outcomes. And any society that wants to provide healthcare and education and other services according to need and not according to ability to pay, must then suspend the role of markets in these sectors, because they cannot function in those circumstances. There is no price to agree.<\/p>\n<p>So the question to ask of any market is: should it exist? Is it working? How should it be governed, and what might work better? And let\u2019s be clear, markets are not the solution in every case. There are those who claim that is true, but it\u2019s simply wrong. Markets can fail, markets can compound injustice. So whilst they have merit in some situations, they are not the answer to every question inside our economy.<\/p>\n<p>But markets are not a problem in themselves. They are only a problem when they\u2019re badly governed. The task is to make markets genuinely competitive when that is possible, answerable to the people they affect, and capable of serving everyone. In those situations, we can allow them to operate because they will serve well-being. If we let them operate in other situations, they may well provide abuse. It is up to us to make sure that markets work, and it is the role of government to deliver on our behalf.<\/p>\n<p>This is an example of what my series on Understanding Economics is all about. We need to understand when, where, and why there must be intervention in the economy by government and others. And that is the point I\u2019m trying to highlight. There is a whole series of these videos. There is a playlist down below. I suggest you start with the first one because these things were recorded in an approximately correct order. And if you do, I hope you will begin to Understand Economics.<\/p>\n<hr \/>\n<p>Poll<\/p>\n<div id=\"polls-537\" class=\"wp-polls\">\n\t<form id=\"polls_form_537\" class=\"wp-polls-form\" action=\"\/Blog\/index.php\" method=\"post\">\n\t\t<p style=\"display: none;\"><input type=\"hidden\" id=\"poll_537_nonce\" name=\"wp-polls-nonce\" value=\"ab1a268e4b\" \/><\/p>\n\t\t<p style=\"display: none;\"><input type=\"hidden\" name=\"poll_id\" value=\"537\" \/><\/p>\n\t\t<p style=\"text-align: center\"><strong>When should markets be used to provide goods and services?<\/strong><\/p><div id=\"polls-537-ans\" class=\"wp-polls-ans\"><ul class=\"wp-polls-ul\">\n\t\t<li><input type=\"radio\" id=\"poll-answer-2323\" name=\"poll_537\" value=\"2323\" \/> <label for=\"poll-answer-2323\">Whenever genuine competition is possible<\/label><\/li>\n\t\t<li><input type=\"radio\" id=\"poll-answer-2324\" name=\"poll_537\" value=\"2324\" \/> <label for=\"poll-answer-2324\">For most things, with effective regulation .<\/label><\/li>\n\t\t<li><input type=\"radio\" id=\"poll-answer-2325\" name=\"poll_537\" value=\"2325\" \/> <label for=\"poll-answer-2325\">Not for essentials like healthcare and education<\/label><\/li>\n\t\t<li><input type=\"radio\" id=\"poll-answer-2326\" name=\"poll_537\" value=\"2326\" \/> <label for=\"poll-answer-2326\">Not when there are shortages and price rationing would be unjust<\/label><\/li>\n\t\t<\/ul><p style=\"text-align: center\"><input type=\"button\" name=\"vote\" value=\"   Vote   \" class=\"Buttons\" data-poll-id=\"537\" data-poll-action=\"vote\" \/><\/p><p style=\"text-align: center\"><a href=\"#ViewPollResults\" data-poll-id=\"537\" data-poll-action=\"result\" title=\"View Results Of This Poll\">View Results<\/a><\/p><\/div>\n\t<\/form>\n<\/div>\n<div id=\"polls-537-loading\" class=\"wp-polls wp-polls-loading\"><span class=\"wp-polls-spinner\" aria-hidden=\"true\"><\/span> Loading ...<\/div>\n\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What is a market? Economists often talk about markets as though they are natural forces that operate independently of society and government. In this Understanding<br \/><a class=\"moretag\" href=\"https:\/\/www.taxresearch.org.uk\/Blog\/2026\/09\/26\/what-is-a-market\/\"><em> Read the full article&#8230;<\/em><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[204,35,240,147,174,224,106,223,241],"tags":[],"class_list":["post-95951","post","type-post","status-publish","format-standard","hentry","category-economic-justice","category-economics","category-images","category-inequality","category-modern-monetary-theory","category-neoliberalism","category-politics","category-politics-of-care","category-understanding-economics"],"_links":{"self":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/95951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/comments?post=95951"}],"version-history":[{"count":7,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/95951\/revisions"}],"predecessor-version":[{"id":95997,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/posts\/95951\/revisions\/95997"}],"wp:attachment":[{"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/media?parent=95951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/categories?post=95951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxresearch.org.uk\/Blog\/wp-json\/wp\/v2\/tags?post=95951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}