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thiness).71
Clifford Geertz was quick to employ this research paradigm™s analy-
tical results in his own studies of Moroccan and Indonesian rural mar-
kets.72 His work has inspired many economic anthropologists to
examine the structure of marketplaces in the developing world as pro-
ducts of informational scarcity.
Geertz begins with an observation:
[I]n the bazaar information is generally poor, scarce, maldistributed, inef¬ciently
communicated, and intensely valued. . . . The level of ignorance about every-
thing from product quality and going prices to market possibilities and pro-
duction costs is very high, and a great deal of the way in which the bazaar is
organized and functions (and within it, the ways its various sorts of participants
behave) can be interpreted as either an attempt to reduce such ignorance for
someone, increase it for someone, or defend someone against it.73

In order to avert informational insecurity and price-signal noise, bazaars
exhibit localization of trade, intensive rather than extensive price bar-
gaining, fragmentation of transactions, low levels of capitalization, and
stable ˜˜clientship.™™ Geertz contends that this ˜˜coherent form™™ that
develops from information scarcity is what differentiates ˜˜the bazaar
economy™™ from the industrial economy. Finally, Geertz emphasizes the
continuity in the bazaar™s culture despite institutional and economic
changes.74
Frank Fanselow presents his theory of the bazaar as a foil to what he
sees as Geertz™s exotifying presentation of the bazaar. Nonetheless his

70
George A. Akerlof, ˜˜The Market for ˜Lemons™: Quality Uncertainty and the Market
Mechanism,™™ Quarterly Journal of Economics 84 (August 1970), 488“500; and G. J.
Stiglitz, ˜˜The Economics of Information and Knowledge,™™ in The Economics of
Information and Knowledge, ed. D. M. Lamberton (Harmondsworth, England: Penguin,
1971).
71
Assad, ˜˜Formal and Informal Institutions in the Labor Market,™™ 931.
72
Clifford Geertz, ˜˜Suq: The Bazaar Economy in Sefrou,™™ in Meaning and Order in
Moroccan Society, ed. Clifford Geertz, Hildred Geertz, and Lawrence Rosen
(Cambridge: Cambridge University Press, 1979); and Clifford Geertz, ˜˜The Bazaar
Economy: Information and Search in Peasant Marketing,™™ American Economic Review
68 (May 1978), 28“32.
73
Geertz, ˜˜Suq: The Bazaar Economy in Sefrou,™™ pp. 124“5.
74
Ibid., p. 139.
64 Bazaar and State in Iran

approach also rests on the informational de¬ciencies in the bazaar
setting.75 He stresses the features of goods sold in the bazaar, rather
than the structure of society, as the main source of the bazaar™s insti-
tutional form. Fanselow, an economic anthropologist working on agri-
cultural marketplaces in South Asia, contends that the commodities
traded in the bazaar are largely nonsubstitutable; that is, they are not
standardized in terms of quality. ˜˜The standardization of product
quality and quantity is a condition for product substitutability, which
balances the information asymmetry between buyer and seller and
thereby becomes a precondition for the ef¬cient functioning of the price
mechanism. If quality and quantity are standardized, the seller cannot,
as in the bazaar, adjust them to price by adulterating and short-mea-
suring, but must instead adjust price to quality and quantity.™™76 In the
southern Indian bazaar that Fanselow studies, goods, buyers, and sellers
in the bazaar economy develop strategies and customs to mitigate the
perils of uncertain product quality and quantity. He claims that this is
markedly different from what we ¬nd in western settings where gov-
ernments, entrepreneurs, and producers ensure quality by establishing
trademarks, government quality checks, and exclusionary trade asso-
ciations that reduce information scarcity and asymmetry between buyers
and sellers by signaling the seller™s reputation, establishing consistency
in quality of goods, and standardizing weights and measures. In the
bazaar, information problems related to goods prevail, leading to bar-
gaining over quality and quantity, sellers enjoying competitive advantage
over buyers, and reduced price competition.
The informational approach to bazaars is an important breakthrough
in marrying cutting-edge economic theories to the cultural study of
bazaars. The bazaar™s peculiarities are less bizarre, whilst its norms and
practices are treated as more than epiphenomenal aberrations. The
bazaar-as-information-scarcity approach provides a convincing rationale
for what modernization theory labels ˜˜traditional™™ and ˜˜backward™™.
Unfortunately, political scientists and Iran specialists have not engaged
with these theories.
While Geertz and Fanselow use their approaches to distinguish the
bazaar economy from economies with less informational dearth, they are
less concerned with comparing across bazaars or studying variations and
changes within a marketplace. Since these anthropological studies
are limited to rural settings, they disregard the standardized goods

75
Frank Fanselow, ˜˜The Bazaar Economy or How Bizarre Is the Bazaar Really?™™ Man 25
(June 1990), 250“65.
76
Ibid., 252.
Conceptualizing the bazaar 65

(e.g. Pyrex dishes, packaged Lipton tea, Maxell cassette tapes) found in
contemporary Middle Eastern bazaars. Also, these studies are based on
peddlers, peasants, and village shopkeepers, who, unlike bazaaris in the
Tehran Bazaar, are not engaged in long-distance, large, and institu-
tionally complex transactions. Tehran™s prominent role in Iran™s
import“export business introduces new actors to the bazaar economy “
government ministers, national wholesalers, and producers. Thus, I
extend these analyses to the Tehran Bazaar by studying how members of
the bazaar and government of¬cials have sought to mitigate informa-
tional scarcities in certain sectors (carpets and tea), while relative
standardization in other sectors (e.g. china and glassware) has fostered
different organizational dynamics (Chapter 5).


The Tehran Bazaar as an embedded network
In order to grapple with the bazaar as a changing entity that has been
politically active and part of a highly politicized oil economy, I turn to
the diverse literature on markets and economies with debates over the
logic of economic action, the origins of institutions, and the historical
development of self-regulating markets. Instead of juxtaposing the
bazaar with ideal types (i.e. the modern, the capitalist bourgeois, the
formal, and markets with complete information) and conceptualizing
the bazaar in negative terms, I propose that the bazaar economy can be
studied in an analytical framework used to study all markets. In the
remainder of this chapter, I will develop a conceptual framework from a
modi¬ed economic sociology perspective that allows one to be true to
the complexities of the Tehran Bazaar, address broad theoretical issues
about operations of markets, study the internal politics of bazaars, and
analyze the Bazaar within the speci¬c political-economic conditions and
institutions of the Pahlavi and Islamic Republic regimes.


Beyond market and moral economy
The manner in which economies operate, change over time, and interact
with social and political settings has been among the central questions in
the social sciences. Historically, there are two distinct approaches to the
logic of economic actions; one is based on a universalizing set of pos-
tulates privileging individual utility maximization and the other begins
by situating economic action as inextricably bound to the historical and
moral context. I will refer to the former as the utilitarian approach and
the latter as the contextualist approach.
66 Bazaar and State in Iran

The utilitarian tradition that is the basis for neoclassical economics
and rational choice theory assumes that all actors are rational and self-
interested. Actors determine the cost“bene¬t ratio of all possible actions
and choose the actions most consistent with their ¬xed individual pre-
ferences. Markets are the aggregation of the interaction between sets of
isolated and interchangeable actors seeking to maximize their utility.
The utilitarian approach to economic action disavows the in¬‚uence of
structures and social relations on the economy. Classical and neo-
classical economics view actors as price-takers, and thus the identities,
social relations, and histories of trading partners are irrelevant.77 While
this deductive approach has been applied to industrial settings, many
economic anthropologists have argued that even peasant and pre-
industrial societies satisfy the neoclassical assumptions about rational
actors with well-de¬ned preferences, facing scarcity and acting as if they
comprehended the trade-offs involved in decision making (trade-offs
between economic and noneconomic goals such as status or leisure).
Since the 1960s economists have begun to incorporate notions that
complicate the standard model of competitive markets and place
exchange partners™ decision making within a nontransparent context of
exchange. As mentioned above, research and subsequent theories show
that imperfect information, asymmetric information, and various other
factors that lead to high transaction costs hinder the smooth operation of
the price mechanism. Therefore, from the utilitarian perspective, ˜˜the
puzzle™™ becomes why daily economic life operates seemingly smoothly
and is not fraught with disorder and distrust. Although these new
institutional economists complicate the pristine neoclassical world by
incorporating institutions (e.g. laws, regulatory agencies, and ¬rms), the
origins and functions of institutions are explained from the same
neoclassical principles (self-interest by rational atomized individuals)
and the drive for ef¬ciency, or what Oliver Williamson calls ˜˜econo-
mizing on transaction costs.™™ This general approach has in¬‚uenced
political scientists working on issues as diverse as peasant commu-
nities,78 economic development,79 taxation,80 and the impediments to
privatization.81

77
Albert O. Hirschman, ˜˜Rival Interpretations of Market Society: Civilizing, Destructive,
or Feeble?™™ Journal of Economic Literature 20 (December 1982), 1463“84.
78
Samuel L. Popkin, The Rational Peasant: The Political Economy of Rural Society in Vietnam
(Berkeley: University of California Press, 1979).
79
Robert H. Bates, Markets and States in Tropical Africa: The Political Basis of Agricultural
Policies (Berkeley: University of California Press, 1981).
80
Margaret Levi, Of Rule and Revenue (Berkeley: University of California Press, 1988).
81
John Waterbury, Exposed to Innumerable Delusions: Public Enterprise and State Power in
Egypt, India, Mexico, and Turkey (New York: Cambridge University Press, 1993).
Conceptualizing the bazaar 67

Meanwhile, for several decades, scholars in anthropology, political
science, and history have been adamant that the utilitarian approach
misinterprets economic action because it assumes away the contextual
and ethical components that are integral to human relations. Karl
Polanyi™s impassioned work on the rise of and subsequent backlash
against the ˜˜the price-making market™™ champions a research agenda
scrutinizing the assumptions of market society and formalist applica-
tions of neoclassical economics to primitive societies.82 Thus scholars
working in various ¬elds seek to uncover the substance of industrial and
preindustrial economies. These contextualists argue that trade and
economic activities in nonmarket societies cannot be explained by pro¬t
maximization or more generally means“end rationality. James Scott, for
instance, argues that peasant economies are based on subsistence and
fear of shortages that translate into particular de¬nitions of exploitation
and economic justice (e.g. ˜˜the norm of reciprocity™™ and ˜˜the right to
subsistence™™), rather than individual and objective cost“bene¬t ana-
lysis.83 Polanyi argues that economies in early societies were ruled by
principles of reciprocity and redistribution. Thus, demand and supply,
which is derived from rational calculations based on self-interest, do not
set prices; rather it is tradition, political authority, or conceptions of
fairness that do.84 It is only with the advent of the self-regulating market
in England during the nineteenth century that a new logic emerged
which disembedded the economy from society, commodifying land and
labor; and this is exactly what is presupposed in economic theory.
Hence, the contextualist approaches argue that modernization leads to a
decline in the embeddedness of the economy.
It is against both of these approaches that New Economic Sociology
emerged in the mid-1980s. A group of economic sociologists
consciously developed a theoretical framework that challenged both
approaches at once and sought to move descriptions of economies away
from generalizing statements. In his seminal work, Mark Granovetter
shows how both utilitarian and contextualist approaches to economic
behavior are based on similar functionalist conceptions of action and
argues for situating all social actions in ongoing relations.85 Granovetter

82
Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1957); Karl Polanyi,
Conrad M. Arensberg, and Harry W. Pearson, Trade and Market in the Early Empires
(Glencoe, IL: Free Press, 1957); and Marshall Sahlins, Stone Age Economics (Chicago:
Aladine-Atherton, 1972).
83
James Scott, The Moral Economy of the Peasant (New Haven: Yale University Press,
1976).
84
Sahlins provides evidence supporting this thesis.
85
Mark Granovetter, ˜˜Economic Action and Social Structure: The Problem of
Embeddedness,™™ American Journal of Sociology 91 (November 1985), 481“510.
68 Bazaar and State in Iran

argues that neoclassical economists and contextualists, or what he calls
formalists and substantivists respectively, conceptualize economic
action by resorting to arguments about human nature, rather than
structures and relations. The neoclassical economic approach has an
undersocialized conception of humans (homo economicus) enjoying a
fundamental character that is independent of social interactions and
membership and roles in communities. Contextualists and those
working in the moral economy school, on the other hand, present an
atomized story of human nature that sees devotion to community and
internalized and generalized norms, instead of motive and gain, as the
force behind individual action. Granovetter contends,
Both [conceptions] have in common a conception of action and decision carried
out by atomized actors. In the undersocialized account, atomization results from
narrow utilitarian pursuit of self-interest; in the oversocialized one, from the fact
that behavior patterns have been internalized and ongoing social relations thus
have only peripheral effects on behavior. That the internalized rules of behavior
are social in origin does not differentiate this argument decisively from a utili-
tarian one, in which the source of utility functions is left open, leaving room for
behavior guided entirely by consensually determined norms and values “ as in
the oversocialized view.86
Hence, Granovetter considers these approaches to be resorting to
overly mechanistic views of behavior; while homo economicus auto-
matically arrives at ends that meet its maximands, homo moralis arrives at
outcomes that meet the dictates of its socialization.87 Action in both the
over- and undersocialized approaches is determined by given attributes
and not existing and on-going social relations.88 The difference between
these accounts is the decision rule, not how individuals interact with the
economy and develop roles in relation to those around them.
Finally, these accounts seem to ignore the empirical evidence
demonstrating that economic behavior in preindustrial as well as
advanced industrial societies follows both logics (i.e. strict self-interest
and moral universe). Anthropological evidence shows that general-
izations about nonmarket societies do not hold and we have cases where

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( 55 .)



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