Lindblom - The Market System - Afghan Journalists' Committee

Market-System Coordination 51Black and gray markets. For various reasons, people ortheir rulers forbid some kinds of market transactions: forexample, in infants, sometimes in bodily organs, or inscarce concert tickets bought up and resold by scalpers. Ortransactions are taxed or otherwise restricted—some governments,for example, heavily tax the importation of automobiles.Participants may then move to illegal transactions,intermixing black markets with legal ones. Anyonewho has cheated on an income tax return may be a participantin an illegal market.In communist systems, illegal transactions are common.Consumers create networks of favors and reciprocalobligations in order to obtain objects and performances notavailable through legally established channels. Managers ofenterprises find that the planning system cannot be countedon to provide them with necessary inputs, which they thenarrange to obtain by illegal transactions with other enterprises.Planners understand that these illegal transactionsare necessary to make the system work, and they look theother way rather than suppress them. Not quite black, theseare gray markets.Black and gray markets account for a significant share ofmarket activity all over the world, though their magnitudeis difficult to estimate. They are found both in market systemsand in communist systems, sometimes obstructingand sometimes facilitating coordination.