Introducing The Best Book on the Market

Wednesday April 23, 2008

Market forces: let’s have more markets and fewer politicians, says Eamonn Butler, director of the Adam Smith Institute

“Market” was the sixth word I ever learnt after “This little piggy goes to”. But I learnt first hand about the market as I watched my father serving customers at his car repair shop. And yet more as my mother added up the countless rows of pounds, shillings and pence in the business’s ledgers.

So when I studied economics, I knew something didn’t add up. The textbook writers were trying to make their subject a science, like mechanics. They treated people like robots, not human beings. By stripping out every trace of human psychology – irrationality, generosity, habit, ignorance – they stripped out everything that makes markets actually work.

And the trouble is that almost the whole of public policy is based on these daft ideas. Ideas have consequences, they say: but unfortunately daft ideas have daft consequences, which is why we’re in the public policy pickle we are today.

Thwart

But now I’ve written The Best Book on the Market, which explains how markets work, why they are a good thing, and why politicians who try to thwart them or ‘perfect’ them are instruments of pure evil. If you liked Freakonomics or The Undercover Economist, then I hope you’ll like this. It’s written in the same amusing, down-to-earth style that everyone – even politicians – can understand.

My dad features in the book, too. He started back when cars had starting handles, running boards, and thermometers on top of the radiator. One day, a customer came in, agitated that his thermometer was always going into the red. My father inspected the car and realized that the only fault was a misreading thermometer. So he put a blob of solder on the mechanism to stop it going into the red.

I could imagine this poor man taking his car fully laden into the mountains, with steam pouring from the engine, blissfully supposing that his engine wasn’t in fact overheating. Just like politicians when they try to keep down prices or keep up wages artificially. Their laws don’t actually change the reality under the economic bonnet.

Prices

The emperor Diocletian decreed maximum prices for bread. Bakers couldn’t make a fair return, and stopped baking. The American colonies tried to keep down the price of wheat, which nearly caused George Washington’s army to starve because nobody produced wheat any more.

That’s not ‘market failure’. That’s political failure. Mrs Thatcher was right that “you can’t buck the market”. Markets don’t do what politicians want because markets are human. They are just how human beings rub along together. And humans tend to do what they want, not what their political masters want. Let’s have more markets and fewer politicians, I say.

Dr Eamonn Butler is director and co-founder of the Adam Smith Institute

Link
The Best Book on the Market: How To Stop Worrying And Love The Free Economy