ABSTRACT
This chapter points out that the economy may be understood as existing within “three spheres” of activity: not only the business sphere (estimated at 70 percent of the economy) but also the core sphere, comprising economic activity that occurs within households and communities (14 percent of the economy), as well as the public purpose sphere, comprising government and not-for-profit activity (16 percent). The chapter then discusses markets, first by defining markets in different ways and then by listing the institutional requirements for smoothly functioning markets. Markets are further classified according to what is sold and how prices are determined. The chapter ends with a brief discussion of the advantages and disadvantages of markets, a topic that will be discussed frequently throughout the book.
