The Surprising Design of Market Economies (Constructs Series) by Marshall, Alex [Hardcover(2012/9/1)]

by Alex Marshall

The “free market” has been a hot topic of debate for decades. Proponents tout it as a cure-all for just about everything that ails modern society, while opponents blame it for the very same ills. But the heated rhetoric obscures one very important, indeed fundamental, fact—markets don’t just run themselves; we create them.

Starting from this surprisingly simple, yet often ignored or misunderstood fact, Alex Marshall takes us on a fascinating tour of the fundamentals that shape markets and, through them, our daily economic lives. He debunks the myth of the “free market,” showing how markets could not exist without governments to create the structures through which we assert ownership of property, real and intellectual, and conduct business of all kinds. Marshall also takes a wide-ranging look at many other structures that make markets possible, including physical infrastructure ranging from roads and railroads to water systems and power lines; mental and cultural structures such as common languages and bodies of knowledge; and the international structures that allow goods, services, cash, bytes, and bits to flow freely around the globe.

Sure to stimulate a lively public conversation about the design of markets, this broadly accessible overview of how a market economy is constructed will help us create markets that are fairer, more prosperous, more creative, and more beautiful.

Genres: Economics, Business

Unknown Binding

First published September 1, 2012

About the author

I was born in Norfolk, Virginia, and raised in the suburban wilderness of Virginia Beach. I went away to the Catholic, Polish lands of Pittsburg for college, and then ended up exiling myself in Spain for two years. I returned, and after a sojourn teaching school and visiting Central America during the war then, I became a journalist. I worked at The Virginian-Pilot for almost 10 years, after graduating from Columbia Journalism School in New York City. Leaving newspapers when my britches got too big, I got a fellowship to the Ivy League land of Harvard. I then came, like most moths, to the flame of New York City, where I still reside, in the fabled lands of Brooklyn.

Reviews

[Alex Marshall · Rating 5 out of 5]

Okay, I'm the author of the book, so I have to say I think this book is really good, and adds a lot to an ongoing conversation about how we create economies and our economy in particular. That being said, being an insecure writer type, I'm certainly open to criticism and don't believe the book is without its imperfections. But overall, I'm pleased with it.

[Christopher Mitchell · Rating 5 out of 5]

This was a terrific and highly recommended read exploring all the prerequisites necessary for a functionary market-based economy. An enjoyable lesson is essential civics knowledge.

[Harry Lane · Rating 5 out of 5]

This is, in my opinion, a very important book that ought to be read by everyone. Progressives commonly recognize, as conservatives do not, that there are no really “free” markets. Therefore, progressive thought tends to focus on the need for additional regulation. Marshall makes what is to me a surprising argument, namely that our entire concept of markets is tainted by the way the issue has been framed, and that there are potential fundamental alternatives that are not even being thought about.

The book is very readable. I will attempt a precis; material in italic is quoted from the book.

Chapter 1 – Coming into Being: In Praise of Markets

This chapter sets the tone for the book, which can best be conveyed by a few selected quotes:

The story of how economics moved from something that was seen as part of political or moral philosophy, which is to say thinking about how the world should work, to a science, which looks at how the world does work is a tragic one.

There is no free market. There are only markets, and government creates them. Markets are diverse in character and have different rules and boundaries. Whether a market corrupts of makes the world more moral depends on those rules and boundaries. A market where government establishes a price on Jews' heads obviously corrupts. A market that establishes a place to buy green beans does not.

Chapter 2 – Me and Mine: Property, the First Market

The buying and selling of property is one of the most obvious of markets, and one which is often used to illustrate the “clearing” function of markets. In this chapter, Marshall traces the development of the concept of property and shows that it has evolved over time (at least in the English-speaking world) from having the King own everything to the modern principle of “fee simple.” He shows that government, far from being in opposition to property, enables its very existence through mechanisms like deeds and requiring surveys to establish boundaries.

Chapter 3 – Lex Non Scripta: the Laws We Don't Make, or, the Common Law

This chapter strikes me as almost an aside, though Marshall says he wants to relate the common law to markets. I suspect he is laying a foundation for later discussion.

Chapter 4 – I Am My Brother's Keeper: Cooperatives

Cooperatives, at least in this country, do not comprise an entire market. But they do operate on different principals than their for-profit counterparts. Marshall shows through an examination of a number of coops how these benefit their members, and indeed the consumers they serve. One most interesting aspect is that a coop can function as both buyer and supplier, where in a for-profit such an arrangement would inevitably be a conflict of interest.

Chapter 5 – Trust: How We Cooperate to Compete

Again, an extract to convey a sense:

Healthy markets rely on trust and deteriorate if that trust erodes. Bruce Scott of the Harvard Business School, in his 2009 book “The Concept of Capitalism,” compares economic markets, where people meet either physically or virtually to buy and sell to the 'common,' the piece of pasture or grazing land used collectively by a village. Scott argues that just as the classic 'common' depended on villagers not abusing it by overgrazing, so the commercial commons depends on some sense of restraint and fair play by individual buyers and sellers.

Chapter 6 – Staking Claims on the Mind: Intellectual Property

Monopoly. An odious word, depicting a practice that is diametrically opposed to the spirit of a free market. Yet that is precisely what a patent or copyright grants. This chapter explores how the protections for intellectual property came into being, and the tension between these and the broader interests of society. On the one hand, the originator of an idea or creator of a work of art or literature deserves compensation for their effort. At the same time, the power of the state to protect these temporary monopolies can be abused, as in, for example, the way the pharmaceutical industry games the system. It is interesting that a totally free market as postulated by conservatives would not allow for these.

Chapter 7 – Little Commonwealths: Corporations and the State That Creates Them
Chapter 8 – The Future of Corporations

Marshall discusses the history of corporations and the wide variety of their governance. He emphasizes that corporations are creatures of the State, however much that is forgotten these days. There are other models than those currently in use in the US, and it might behoove us to adopt or adapt some of these to assure our creations serve a greater purpose than mere profit.

Chapter 9 – From Highways to Healthcare: Progress Through Infrastructure

It's not an economy that supports infrastructure (meaning schools, roads, water systems, Social Security, fire protection,libraries, courts, and so on); it's infrastructure that supports an economy.

Marshall argues that infrastructure (he prefers the term “public works) makes markets better, or indeed possible. Take libraries, one of my favorite public works, as an example. The availability of books was once limited to those who could afford them or who could join with like-minded people to create a lending library. As we progressed, governments began to support the creation of public libraries, greatly expanding the marketplace of ideas. Marshall further argues that those who theorize that markets drive infrastructure are wrong, citing schools and the interstate highway system as evidence. Those who evaluate the economics of public works accordingly often fail to assign them a realistic value by an order of magnitude.

Chapter 10 – Making Places

Are our transportation systems organized around the places we live, or the other way around? Marshall makes a strong case for the latter, and thereby the role of public works in making markets. There are some interesting observations as well on the effects of planning or its lack.

Chapter 11 – The Great Nineteenth Century Train Robbery

Railroads had an enormous impact on this country. There were undeniable benefits but they came at enormous costs. Some of those costs continue today. Marshall's conclusion:

What is clear from railroad history is that if government is to mix with private enterprise, something unavoidable in most instances, then it should do so in ways that serve its citizens, and that mission should come first.

Chapter 12 – A Socialist Paradise: the American Road System

The idea that transportation is built by the free market is simply false. It requires too much money, too much investment, and too much time. If you're not convinced, just take any road and look at its history.

Chapter 13 – Waiting for a Train Station

In which Marshall describes the effort to design and build a replacement for New York City's Penn Station.

There is these days a turning to the private commercial sector to do the job of the public sector. But private interests look after their own business more than the public's.

Chapter 14 – What We Did Before: Path Dependence and Markets

The QWERTY keyboard layout is illustrative of path dependence. This simply means the markets of today reflect the habits and usages of yesterday, and that these are slow to change. A realistic view of markets has to take this into account.

Chapter 15 – Police and Prisons: Freedom, Security and Democracy

Police and prisons, while they represent the government's ability to use force to obtain conformance to societal norms, have evolved over time. And, whether one regards them as a force for good, or an apparatus in need of extensive reform, they are part of the infrastructure that helps define modern markets.

Chapter 16 – Why Don't You Make Me? Government and Force

One view holds “that government is best that governs least,” which focuses on minimizing government's use of coercion. A more positive view would hold that freedom encompasses the ability to participate in governance; to come together to make government a tool for securing FDR's four freedoms.

Chapter 17 – Common Tongue, Common Culture, Common Markets

Markets and Societies work better when people speak the same language, when they have similar education levels, when they have similar values. These things do not appear by magic. So to have better-functioning markets, we actually need a more proactive state.

Chapter 18 – By Your Bootstraps: Developing Countries and Markets

South Korea has in the last half century risen from a poor, third-world country to a prosperous nation. Marshall avers this was achieved by intense involvement of the government in deciding which markets to participate in and how, and supporting their industries in international trade. He cites a number of other examples, both historical and current, to bolster this premise.

Chapter 19– Last Night Upon the Stairs: International Law

A brief exposition of the development of international law, which is part of the infrastructure facilitating international trade.

Conclusion – Making Better Markets

Drawing conclusions from the preceding discussion, several areas of possible improvement are proffered.

Afterword – My Own Story: A Circuitous Journey

Marshall discusses some of his background and influences shaping his views.

[Steve · Rating 4 out of 5]

Thought provoking book which outlines (primarily) government's role in setting up successful economies and developing nations. The author pays special attention towards discussing how government involvement leads to better designed transit (comparing the USA to other countries regarding roads and railroads).

Many interesting fun facts in the book; here's just one: Formation of better quality roads in the USA was actually pushed by cyclists through "The League of American Wheelmen, the major bicycle lobby" - the bicycle didn't perform very well on poor roads. The Office of Road Inquiry became eventually the US Department of Transportation (US-DOT).

Great read; rating scheme is as follows:
1 star - terrible and couldn't make it past the first chapter
2 stars - poor (poorly researched or written); in some cases I may have finished the book
3 stars - ok; book contains flaws or just wasn't too entertaining
4 stars - great book; may read again
5 stars - excellent book which I plan to definitely re-read.

[T · Rating 3 out of 5]

The first half of this book was pretty good; it walks you through how much of what we take granted in American society are products of government action (or inaction). It’s does a good job of helping you see the governments hand in the institutions necessary for “markets”.

The latter half of the book really falls off and I had to quit reading at page 200/240. The rigor of the anecdotes and histories dropped and the author’s own opinions ascended to fill the void. I don’t care at all what the author thinks or wants, unless the author can construct a tight logical argument to support their view.

Which leads into a frustration of the book: you walk away with a new awareness, but no concrete ideas for what a policy maker could do given our current situation. My motivation for reading this book was to gather ideas for how to design a market for space resources (eg from the Moon or asteroids). I have some minor new ideas, but I’m not much better off now than before I read the book.

I’d recommend the first half of the book, but then just skim the rest.

[Adam Rabiner · Rating 4 out of 5]

Journalist Alex Marshall takes issue with a certain school of dismal science orthodoxy that elevates and regards free markets as all powerful forces to which we must bow. Offering many counter examples, from cooperatives, to physical and cultural infrastructure, to intellectual property rights and international law, in which we create and design markets, indeed Marshall calls into question the stature of economics as a "science" to begin with. People, Marshall argues, create the rules, features, common law, and cultural traditions under which markets function. It's a persuasive counterpoint to those who put their belief and faith in the inexorable forces of the blind, neutral, marketplace. Since, we are the creators and designers of markets, rather than its slaves, it behooves us, Marshall argues, to (re)design them intelligently and in a fashion that provides us maximum benefit. It's a powerful and empowering notion.

[Robert Clark · Rating 5 out of 5]

Excellent and fun book that through interesting examples shows that our tendency to think about government and economy as seperate and competing social entities is misguided. We have been brainwashed into thinking about economics as almost a set of unchangable natural laws when to a large extent we design our economy and create its outcomes through the many law and infrastructure choices that are made on an ongoing basis.

[Leanne · Rating 5 out of 5]

I think this book is the best thing I've ever read about economics. It's a very methodical and insightful look at the background factors that influence and enable markets, with the author constantly asking: how could we change the way this is designed to get better results? "Better" being "more in line with our defined goals and values". And despite covering a lot of complex topics like legal structures, infrastructure, property rights, etc. this book was still a very enjoyable read.

[Marvin · Rating 4 out of 5]

The book fades a bit in the second half but the first several chapters will require you to rethink prior notions of how "free" the market is. Critically, those that blindly argue that government needs to "get out of the way" simply do not realize how much a role government plays in designing our markets.

[Synthia · Rating 3 out of 5]

This book would be a good addition to a SosC syllabus. The title is way more gripping than the content but the content isn't bad per se- lots of historical references, some philosophical (Hobbes, Locke)... It hits on different points but it's not a book that has impact. It's more like a long paper.