Why Some Markets Work and Others Don't
A framework for understanding what's actually missing when a sector feels broken, chaotic, or “not really a market.”
The Problem
Some markets just work. The stock market, real estate, even eBay—you might complain about prices, but the basic system functions. Buyers find sellers, prices get discovered, disputes get resolved.
Other markets feel fundamentally broken. The art market. Healthcare. Higher education. NFTs. It's not that they need “reform”—it's that the basic architecture for a functioning market was never built in the first place.
This tool helps you diagnose which problem you're dealing with—and what would actually need to change to fix it.
The Trap Everyone Falls Into
When a market isn't working, the instinct is to fix the technology—add transparency, build better databases, create tracking systems, launch a blockchain.
But technology is just Layer 1. NFTs proved this dramatically: they built perfect infrastructure (transparent ownership, instant transfers, public price history) and the market still collapsed. Technology alone cannot create a functioning market.
Real markets need six layers, and they build on each other.
The Six Layers
Think of these like floors in a building—you can't build the second floor without the first. A market needs all six to actually work.
Infrastructure
Where most solutions stopCan things be tracked, transferred, and recorded?
The basic plumbing: Can you prove who owns what? Can ownership change hands? Can people see what's happening?
Authority
Is there someone in charge who can make rules stick?
Who sets the rules? More importantly, who can actually enforce them? If no one can, they're just suggestions.
Scope
Do the rules work everywhere, or can people escape them?
If rules only apply in some places, people will just go where there aren't any rules.
Temporality
Do people care about tomorrow, or just today's deal?
Are people building long-term relationships, or just trying to win each transaction?
Meaning
Do people agree on what makes something valuable?
Is there a shared understanding of quality, authenticity, and worth? Or does everyone have completely different ideas?
Alignment
Does doing well for yourself also help the whole system?
When individuals act in their own interest, does the system get healthier or sicker?
| Layer | Art MarketPre-Institutional | Digital ArtFailed Constitution | InternetConstrained |
|---|---|---|---|
1Infrastructure | Partial Fragmented across venues | Present Solved: provenance, transparency, exchange | Present Solved at protocol level |
2Authority | Absent No recognized rule-setter | Denied Platforms exercised but denied authority | Absent No native value-transfer authority |
3Scope | N/A No rules to scope | Collapsed Royalty enforcement collapsed under competition | Platform-bound Rules only within platform boundaries |
4Temporality | Weak Relational in institutional tier only | Collapsed Brief via royalties, then collapsed | Attention-cycle Attention cycles, not value persistence |
5Meaning | Informal Informal consensus among insiders | Absent No interpretive framework emerged | Metrics-based Engagement metrics substitute for meaning |
6Alignment | Misaligned Information asymmetry advantages repeat players | Misaligned Hyperfinancialisation rewarded extraction | Inverse User agency inversely coupled to platform value |
Pattern: Digital Art Markets (NFTs) solved Layer 1 completely—better than either Art Market or Internet—and still collapsed. This demonstrates that infrastructure without authority, scope, temporality, meaning, and alignment cannot constitute durable markets.
Try It On Your Sector
Wondering why a market you care about isn't working? Answer 18 simple questions (3 per layer) to see where the gaps are. Takes about 5 minutes.
From Diagnosis to Constitution
Identifying gaps is the first step. Building architecture requires working through what each layer demands in your specific context—who has authority, how scope can be maintained, what creates temporal continuity.
IRSA Advisory Engagements
We work with organisations, sectors, and policymakers to move from diagnosis to constitutional design. This includes:
- Detailed sector diagnosis using the Constitutional Requirements framework
- Identification of feasible authority structures and enforcement mechanisms
- Design of temporal continuity mechanisms (value persistence, stakeholder linkage)
- Alignment architecture to couple individual incentives with system health