ABSTRACT
This chapter discusses the functional approaches broadly to include any arguments that specify functions performed by markets and dwell on what markets do as against how they are structured. The main problem is that functional approaches may fall short of full causal explanation – merely listing the beneficial consequences of an institution may not be enough to explain how it came about. Functionalist schools of thought have been significant in sociology, anthropology and psychology, though challenged by rival schools. The apparent accommodation of orthodox economics reflects the ‘gentlemen’s agreement’ made by Talcott Parsons and senior economists to carve out separate territories for the academic disciplines of sociology and economics. The saving and borrowing/lending functions ripen in the later stages of economic development, especially the capitalist era. Money, meanwhile, pervades formal economic activity and extends outwards into social and cultural matters.
