Monday, June 02, 2008

"The Best Book On The Market": A Review

Book Review

Eamonn Butler: The Best Book on the Market: how to stop worrying and love the free economy, 2008. Capstone Publishing (a Wiley company), Chichester, ISBN 978-1-906465-05-6

This is a 'lightweight'book – only 160 pages including the index – but it delivers a heavyweight message about markets.

I have read weightier tomes on markets, not the least of the weightiest which were text books on economics, few of which connected with the real world, with precious few signs that their authors were connected in any way too. The lived among markets but seemed not to have wondered where all of the people who make up the markets all around them had gone to in their models of general equilibrium.

Many colleagues over the years have made reasonable livings consulting on how to make economies grow with what, at best, can only be described as disappointing results for the economies and the peoples concerned.

Something happened between their mastery of the certainties of neoclassical economics and their woefully inadequate advice to governments, NGOs, and charities, on how to counter poverty in what we used to call the Third World. Recent books on the ‘Washington Consensus’ suggest that its time is up, to be replaced with what?

It is the height of irony that communist China and Vietnam (but not, of course, North Korea or Cuba) have managed to initiate reforms to their stagnant, communist-planned economies that outpace in their growth results almost anything attempted elsewhere.

Maybe one reason is that few modern economists actually understand how markets actually work, where they originated from and how they make a difference, and, crucially, what undermines them wherever governments (and consultants who advise them) ‘intervene’ to correct what they regard as ‘market failure’.

Partly, this is because many modern economists have never really studied what makes real markets work. They have won Nobel Prizes, professional acclaim and tenured appointments with publications galore in how markets work in their mathematical world that is devoid of human beings with all their foibles and ill-defined ‘laws of motion’. They should be early readers of the ‘Best Book on the Market'.

In fact, many of them do not believe in markets at all and spend considerable time castigating markets in their lectures, articles, media appearances and conferences, in between their assaults on the political systems they live under, joined by assorted refugees from the collapse of Marxism who have re-surfaced on the wilder shores of the environmental movements.

They need to get out more.

A visit to places where markets are not allowed to work would do wonders for their sense of priorities. Even memories of state-run Britain before Mrs Thatcher’s privatisation programmes (unfortunately blemished by transforming many of them into private monopolies) would stabilise their fantasies about their compulsion to regulate everything, and their passion for controlling the ‘commanding heights of an economy'.

About a third of the population lived in state controlled housing”, Eamonn Butler reminds us. “Each morning, we would wake up to the state radio station, switch on the light (powered by state-produced electricity), maybe ignite the state-produced gas under a state-produced steel pan and cook a state-regulated egg in state-produced water. Then as you took the state-run bus or your state-produced car (running on state-produced fuel) to the state train station, you might get stuck behind a state-delivery truck parked outside the state bank. How you might wish that you could just pick up your state telephone and book yourself on a state airline to jet off (from a state airport, of course) to somewhere sunny’ (The Best Book on the Market, p 143-4).

No wonder, but sadly, the Left still holds a visceral hatred of Mrs Thatcher.

Eamonn Butler opens his delightful little book, in a street market in Lanzhou, the capital city of northwest Gansu Province, on the old Silk Road, that ancient market route from Europe to China, the history of which should be read about by all who pontificate to government ministers about the ‘errors’ of globalisation and who mislead militant protesters today.

Eamonn Butler brings his book to life from the opening paragraphs and lets the reader soak up the vibrant culture of humans in their pursuit of what Adam Smith called their ‘propensity to truck, barter and exchange’.

Those who have been to China will recognise the ubiquitous street market and the people in it that he describes; he also returns to thoughts about future for the ‘black- haired Lanzhou seamstress’ who fixed his trousers and who probably was working long hours in ‘some sweatshop’ to raise money ‘to run her own business’, which would ‘raise her and hundreds of millions like her out of poverty’.

And it will be markets, not politicians who will bring the great transformation about.

Call in at any stall in any street market anywhere in the world and observe sellers and buyers transacting their business in peaceful accord. These markets were in full cry millennia ago at the beginning of the Age of Commerce, and they still operate in the most unpropitious of circumstances everywhere that humans congregate. And that is a lasting impression on readers of Eamonn Butler’sBest Book on the Market’ - it fully deserves its title!

The key to the success of markets over every known substitute for them, tried and untried, and at every level of subsistence since a few humans changed from hunting to shepherding, and farming about 11,000 years ago, lies in their infinite capacity to adjust people to each others needs.

Taking the world as an experimental laboratory throughout history, those early few who discovered property, at the end of the last ice age, and stuck with what they had discovered, created a different world that was able in time, slowly and gradually, to give the chance of life to billions; those that stuck with low-technology hunting and gathering, who at first were the majority of the human species, numbering a few tens of thousands, remained dependent on low subsistence, shorter life spans, exposed to crippling diseases and the fortunes of small accidents, higher death rates (mainly from male violence) and enjoyed deep ignorance outside of the small parts of the world they inhabited.

Those (intellectuals) who hanker for a return to the ‘simple life’ have no idea of what they wish upon themselves and the rest of us. May they never find out the hard way.

Markets began in exchange, the division of labour and specialisation. Eamonn Butler develops this theme, using Adam Smith’s example of the manufacture of the common labourer’s woollen coat, to highlight the ‘great multitude’ of labourers, involved in spontaneous virtuous cycles that enhances the productive powers of labour, that reduces unit costs of inputs along the lengthening supply chains of output, and moves steadily to opulence as more workers are hired for rising real wages.

Butler notes how prices act as signals to self-interested individuals who learn to serve their own interests by serving the self-interests of others. Markets are not one-way streets, in which one gets all the benefits and the other gets what she gets. Market exchange is a two-way street, in which each gets something they value more than what they give to the other to get it. Otherwise they would not participate, which is the one great universal ‘law’ of markets.

Nobody does other than what they volunteer to do. The author shows how markets operate and why they are a superior and natural arrangement that is embedded deep in the psyche of all humans who participate in them from childhood onwards.

In nine short chapters or from 12 to 20 pages each, Eamonn Butler takes the reader on a tour de force around the realities of markets, providing practical guidance to markets, much of it excellent material for lecturers at all levels to students on all ages and politicians of all views, as well as those on the multitude of single-issue campaigns, Quangos, NGOs, regulatory bodies, and charities across Britain.

Eamonn Butler’s Best Book on the Market is a delight to read, well presented, and snip at £14.99 (but check online booksellers to ‘test the market’ first). I paid for my copy and consider it money well spent, which after all, is one of Eamonn Butler’s main points about markets.

[Full disclosure: Eamonn Butler is Director of the Adam Smith Institute and I am Fellow of the Adam Smith Institute]


Blogger Michael Kruse said...

Thanks for the review. I've put it on order at Amazon.

3:07 am  

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