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where independent appraisal of past performance is lacking, actors know
that uncooperative behavior today will have costs in the long run. Long-
term relations also reduce uncertainty about the preferences of others, and
the accumulation of precedents helps diminish bargaining costs associated
with transactions.
Multiplex relations consist of interactions along multiple social dimen-
sions (commercial, social, political, religious, familial, neighborly, etc.), as
opposed to purely economic interactions. From an instrumentalist per-
spective, so long as the overall account is in balance, individuals involved in
multiplex relationships can overlook imbalances in particular areas. And
with a more structuralist bent, as actors interact on more dimensions,
preferences and beliefs become more similar, certainty about preferences
and the meaning of signals increases, and bargaining costs are reduced by
increased opportunities to make trade-offs on other fronts. Finally, as
relations endure, they are more likely to take on a multiplex nature.
Third, crosscutting ties facilitate exchange of information about
potential trade partners within the group. They are the relations that
bridge networks or connect members of the same level in a given group.
Gossiping allows for public shaming and champion making. Someone
who cheats can be betrayed to the community, while a reputation for
honesty can be identi¬ed and reenforced. Thus, crosscutting ties help
reduce monitoring and enforcement costs in situations where third-party
appraisal and records are absent (e.g. consumer reports, law merchants,
better business bureaus). Taken together, all these characteristics allow
groups to forge a sense of solidarity and corporate identity.
At the other end of the spectrum, relations resemble hierarchical
governance characterized by one-way and top-down channels of
communication, with speci¬c actions dictated, designated, and adjudi-
cated by a single legitimate authority. At the absolute limit “ pure
hierarchies “ these ties have a one-shot and coercive nature, with actions
based on command rather than deliberation, and between identity-less
agents in the hierarchy; in these acute cases it is dif¬cult to talk of
˜˜relationships™™ or ˜˜networks™™ since actors interact based on roles. In
less extreme cases, which I term ˜˜coercive hierarchies,™™ members of a
group interact over time, but interactions are sporadic and take place
without expectations and commitments for future interactions. A single
superior heads these networks with the vast majority of ties ¬‚owing to
and from that one actor or of¬ce. In this form of governance, cross-
cutting and multifaceted relations are muted, with relations in groups
limited to economic matters and fewer relations cutting across the
various networks. ˜˜[I]n the coercive approach,™™ argues Taylor,
18 Bazaar and State in Iran

hierarchical superiors treat subordinates as individuals, as social isolates, pro-
ceeding as if they were unconnected with one another (and by doing so may in
fact make them less connected); they make no use of (and so do not try to create
or foster) any capacities the governed might have to regulate their own behavior,
capacities they are endowed with in virtue of such local community or social
networks or organizations as may already exist among them “ or, in brief, in
virtue of such social capital as they posses.™™40
Consequently, subordinates have little opportunity or capacity to
negotiate relations with superiors. In terms of Hirschman™s triad, coer-
cive hierarchies allow only for ˜˜exit™™ or ˜˜loyalty,™™ with ˜˜voice™™ being
In between the communal relations and coercive hierarchies lie more
cooperative hierarchies that tap into communal structures. Long-term and
two-way channels of communication delegate responsibility to sub-
ordinates, making interactions more responsive and encouraging a sense
of vertical community. Like communal relations, cooperative hier-
archies allow individuals to develop multiplex and crosscutting relations.
Trust and reciprocity emerge, and crosscutting relations integrate actors
positioned in different hierarchical networks. Superiors are able to tap
into embedded local networks, work groups, resources, knowledge, and
channels of communication, while subordinates have some capacity for
˜˜voice.™™ Taylor writes:
Because relations between superiors and subordinates in hierarchy of this second
kind are characterized by long-term repeated interaction, cooperation, recipro-
city, and trust, we might say that there is vertical social capital within the
hierarchy. . . . governance of this type also makes use of and fosters horizontal
social capital (working through and with local communities, networks and
Finally, cooperative hierarchies exhibit greater group coherence since
potentially isolated clusters of actors are connected through ties that
bridge structural divides.
Taylor develops this typology and conceptualization of community in
order to explain why certain groups are able to produce social order
without third-party mechanisms, while others are not. His intellectual
enterprise is one of comparative statics, rather than tracing change within
a group. This book™s objective is to understand transformation from one
form of governance to another, and the empirical analysis begins by ¬rst

Taylor, ˜˜Good Government,™™ 3.
Albert Hirschman, Exit, Voice, and Loyalty (Cambridge, MA: Harvard University Press,
Taylor, ˜˜Good Government,™™ 4.
The puzzle of the Tehran Bazaar under two regimes 19

demonstrating that since the establishment of the Islamic Republic, the
Tehran Bazaar has moved from more cooperative hierarchies to a form of
governance that is dominated by coercive hierarchies.43

The argument
Why has this transformation occurred and what political consequences
has it had? As illustrated in Figure 1.6, I argue that the developmental
programs of the state embodying the change in the transformative
visions of the two regimes manifest themselves in (1) the institutional
setting and (2) the location of Tehran Bazaar™s networks by providing
opportunities and restrictions on commercial relationships and the form
of governance within the marketplace. While background changes in
socioeconomic variables (e.g. demographic changes, patterns of urba-
nization, increased literacy, and improved national transportation and
communication) cannot be bracketed out of the study, it is argued that
these factors are relatively constant before and over the period of the
study and thus unable to account for the variation in the Bazaar™s form
of governance.
First, the institutional setting of networks refers to the policies and
legal parameters (e.g. import“export rules, subsidies, urban planning
projects, and government agencies and companies) that shape ties by
creating and empowering actors and enabling and constraining actions.
These myriad institutions are born out of the grand developmental
agendas, or what I term ˜˜transformative programs of states,™™ and
therefore can be thought of as the ˜˜congealed tastes™™ of rulers.44 These
speci¬c policies, in turn, dictate how economic networks must be con-
structed in order to access resources and maneuver around government-
imposed limits. Networks may tie businesses and economic agents to
state institutions, they may employ localized norms and practices to
escape state institutions, or they may tap into state resources and divert
them for alternative ends. In all of these cases, a dynamic tension

I see parallels between my research question and Waterbury™s comments that variations
exist in patron“client relations. He writes, ˜˜[E]xchanges [between patrons and clients],
like the relationship itself, may be diffuse, multiplex, involving deference, physical
support, gifts, labour in return for the paternalistic involvement of the patron in all
aspects of the client™s life; or they may be single-purpose, speci¬c and quasi-
contractual.™™ John Waterbury, ˜˜An Attempt to Put Patrons and Clients in Their
Place,™™ in Patrons and Clients in Mediterranean Societies, ed. Ernest Gellner and John
Waterbury (London: Gerald Duckworth and Co., 1977), p. 332.
Institutions as ˜˜congealed tastes™™ is Riker™s term. William H. Riker, ˜˜Implications from
Disequilibrium of Majority Rule for the Study of Institutions,™™ American Political
Science Review 74 (June 1980), 445.
20 Bazaar and State in Iran

Pahlavi monarchy Islamic republic
1963“79 1979“Present

Islamic populism:
High modernism:
state incorporation
no state incorporation

Clientelistic regulation
Institutional Bazaar autonomy and
of commerce and
setting concentration of value
dispersion of value
and chain in the bazaar
chain beyond the bazaar
of networks

Form of Cooperative
governance hierarchies

Capacity for
High capacity Low capacity

Figure 1.6 Illustration of the argument

develops between state institutions and existing norms and informal
practices, the resolution of which sets the parameters for networks that
are intended to avoid, acquiesce in, or abuse state regulation. I will
demonstrate that the Pahlavi regime™s high modernist transformative
project resulted in the bazaars being ignored by the state and that there
was little attempt by the state to incorporate the Bazaar or directly
engage the institutions that reproduced its economic and political
autonomy and power for it was assumed it would simply pass away with
modernization. Conversely, while the Islamic Republic did not set out to
decommission the Bazaar™s prevailing practices and institutions, its
package of populist macroeconomic and nationalist trade policies
resulted in state incorporation of bazaaris via cooptation and cliente-
lism. The bazaaris™ responses, though shaped by the various state
The puzzle of the Tehran Bazaar under two regimes 21

institutions, combined multiple strategies to forge new networks and
consequently a new form of governance for the Bazaar.
Second, I examine how social relations are often situated in speci¬c
locations, reproducing identities, situating relations, and engendering
loyalties. For instance, bazaari ties are reproduced by and within the
con¬nes of the central marketplace “ in its stores, alleyways, ware-
houses, coffee shops, restaurants, and mosques. By the locations of
networks, I mean the physical spheres and spatial dimensions where
interactions take place and how ties transcend and are situated in rela-
tion to speci¬c locales. The physical locale(s) in¬‚uence(s) the breadth,
scope, and frequency of interactions, trans¬guring objective space into
relational space.45 The location and scope of networks are crucial to the
study of the Tehran Bazaar because while some commercial networks
are concentrated at certain times in the physical space of the covered
central marketplace (e.g. the prerevolutionary Bazaar), others stretch
well beyond the Tehran Bazaar, reaching distant provinces and coun-
tries (e.g. the postrevolutionary Bazaar). I argue that as networks expand
in terms of scope, as they did through the 1980s and 1990s, the internal
structure of those networks will adjust. The network ties connecting a
series of wholesalers and retailers in the close quarters of the china and
glassware bazaar are more likely to be employed on a regular basis, to
take on a multifaceted nature, and to be face-to-face than the post-
revolutionary network ties stretching from retailers in Tehran to
importers across the Persian Gulf in Dubai. Nevertheless, physical
proximity is not suf¬cient to produce active networks. Many groups
share a location and even a common social structural position (e.g. the
urban poor, ethnic minorities, and suburban housewives), but this helps
establish only a minimum condition of group identity formation and
consciousness.46 To move from being a passive network to being an
active one, physical space must become a social space through activities,
rituals, and interdependencies wherein individuals identify themselves
as part of a group and as distinct from others. The comparison between
the pre- and postrevolutionary Bazaar demonstrates how ongoing,
multifaceted, and crosscutting ties facilitate this trans¬guration.

On the impact of space on socioeconomic con¬gurations and political action see Ira
Katznelson, Marxism and the City (Oxford: Clarendon Press, 1992); Paul Krugman,
˜˜Space: The Final Frontier,™™ Journal of Economic Perspectives 12 (Spring 1998), 161“
74; Saskia Sassen, The Global City: New York, London, and Tokyo (Princeton: Princeton
University Press, 2001); and William H. Sewell, ˜˜Space in Contentious Politics,™™ in
Silence and Voice in the Study of Contentious Politics, ed. Ronald R. Aminzade et al.
(Cambridge: Cambridge University Press, 2001).
Bayat, Street Politics, pp. 15“19.
22 Bazaar and State in Iran

In addition, I examine the hand-woven carpet, tea, and china and
glassware sectors47 within the Tehran Bazaar to illustrate that the pro-
cess was mediated by the qualities of commodities traded (standardized
versus nonstandardized commodities) and the speci¬c state institutions
that pertained to each sector. While most discussions of bazaars treat
them as a uniform whole, my research revealed that important differ-
ences exist across the many sectors making up the greater Tehran
Bazaar. With this in mind, I conducted in-depth research on the hand-
woven carpet, tea, and china and glassware sectors to investigate dif-
ferent institutional settings and the consequences of these for the pro-
cess of commercial exchange in the Bazaar. Through cross-sectoral
analysis I evaluate alternative hypotheses for the generation of coop-
erative hierarchies and coercive hierarchies, and also trace the process
underlying my network-based argument. In particular, I show that
network ties in the Bazaar are conditioned by whether the commodity
traded is a standardized and substitutable good or not.48 In cases where
information regarding the quality or quantity of a good is scarce or
limited to sellers (e.g. carpets and tea) there will be a tendency toward
more embedded ties among producers, wholesalers, retailers, and con-
sumers in order to gain access to trustworthy information. In certain
cases, institutions (e.g. state agencies grading tea quality or trade asso-
ciations ensuring sellers™ quali¬cations) may help address quality eva-
luation, but informal institutions often remain essential means for
reducing these transaction costs. On the other hand, substitutable
commodities that have clearly de¬ned quantities and known qualities
are more amenable to hierarchical forms of governance. Finally, the


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