James R. Otteson

If you don’t want to read my critique of this book please read the article in the following link. In 16 pages the author gives a far superior and more compelling presentation of why market economies are great but also lays out the flaws and dangers that need to be addressed. Read this and skip this book:

https://www.smf.co.uk/publications/the-market-economy-twenty-one-years-after-the...

I came to this book with a positive attitude. I broadly agree with the authors main thesis that market’s are a great human invention that has led to broad human prosperity and is far superior to the alternative (“extraction” or socialized economies a la the Soviet model). At first I gave the author the benefit of the doubt that his simple sounding arguments were just a stylistic method to explain complex economic ideas to a lay audience. But the more I read the more irked I was by how simplistic his arguments were—often becoming simple minded and down right disingenuous.

Perhaps the title gives away why this book is so awful. Instead of being a detached philosophical analysis of markets and morality it is a theological text written by a religious fanatic who sees any critique of his beloved “religion” as heresy.

The core argument of the text is:
1. The amazing growth in human prosperity since 1800 is the result of our switch to market economies
2. Market economies are inherently based on the moral principle of equality of human agency (Kant’s moral imperative)
Ergo based on utilitarian grounds (maximizing happiness defined as eudaemia - point 1) and Kantian morality (point 2) any “collectivist” intervention at all in market economies is going to make humanity worse off and is also immoral.

The rest of the book is a a discussion of the “flawed” ideas that are used to justify interventions of the sort the author feels are immoral, along with examples of how such interventions make us worse off.

I can write a whole book critiquing those flawed discussion, which I note earlier often are simple minded and disingenuous. But to save time I”ll go right to the heart: the flaw in his premises.

In terms of point 1, a more compelling case can be made that human prosperity since 1800 is a result of technological innovation (it is no coincidence that the cotton gin was invented in 1793) spurred on by:
1. The spread of Enlightenment values
2. European wealth from mercantilism and subsequent colonial “extraction”

In fact, it seems that the success of the market approach was precisely enabled by this technological innovation. The most effective use of any technology, since the beginning of human history, is based on co-operation and trust. Market economies turned out to be the most effective approach for leveraging trust and co-operation to accelerate the benefits of industrial innovations of the 19th and 20th century and information technology of the 21st.

Hence, we are compelled to accept two “heresies” against the author’s faith in markets:
1. markets are a means not an end and therefore they have no inherent moral value.
2. Like all human means, they need to be constantly evaluated, tinkered with, modified and improved.

As for the second “heresy”, one of the worst parts of the book is because of his fanatical faith the author downplays any flaws in market systems and refuses to consider improvements. His default stance is improvements will make things worse.

As for the second premise, Kantian morality is not a good guide for right action. Kant argues, for example, that if the police came to arrest my child the categorical imperative compels me to turn him in. Most humans would agree such behavior is repulsive and even inhuman. While Kantian morality is and should be an important consideration, humans have multiple competing values and deciding on right action is not feasible through some rational calculus. (BTW, the same critique applies to utilitarianism). This critique explains why Aristotelian virtue ethics is once again gaining popularity amongst philosophers.

Here is one concrete example (of many I could give) of how the above analysis applies to the authors arguments. The author claims that taxing the rich in market based economies sounds like a good idea. But doing so will cause distortion in the market mechanism by discouraging entrepreneurship and so make markets less effective and decrease prosperity. Even if we concede some of the wealth was accumulated through extraction, since we can’t possibly know how much, and since most of the wealth was accumulated morally (markets are moral after all), taxing the rich proportionally more, is theft and immoral.

1. Most of the super rich got there by exploiting flaws in markets to extract rent. They use their wealth for cronyism (buying laws beneficial to preserving their capacity to extract rent and protect their wealth). Even in the relatively meritorious world of technology entrepreneurship where parts of the wealth is definitely not extraction, once someone gets to that level of wealth, inevitably at least some of it will be gained by rent extraction. And someone like Bezos (who comes up several times in the book) has gathered most of his wealth by rent extraction. Sure we can’t come up with a precise evaluation of how much is rent and how much is through co-operative market wealth creation, but when we get to those large numbers does it really matter? Most importantly, there is no inherent “morality” in wealth accumulated in markets!
2. Let us concede for the sake of argument, that there are some theoretical billionaires whose wealth was 100% created without extracting rents, and taking more taxes from them than other people is morally “unfair”. But as individuals and as a society, we might justifiably value the distress of a poor person over the value to the billionaire of his buying another airplane or Ferrari or house in LA and so take a proportionally larger share of taxes and redistribute to less fortunate people without any ethical qualms. On the contrary, doing so is the right thing to do because we value fraternity over liberty in some cases.

I will conclude by noting the authors detachment from the suffering of poor people in his own country (“after all they aren’t living off $3 a day like people did before 1800l) to be a perfect example of how religious fanaticism leads one astray from right action and human values.… (plus d'informations)