By Steven K. Vogel
- Evaluates markets through a new concept, "marketcraft," which represents a core function of government comparable to statecraft
- Presents a new framework to understand both U.S. and Japanese economic models
- Analyzes both the theoretical implications and policy implications of marketcraft
Modern-day markets do not arise spontaneously or evolve naturally. Rather they are crafted by individuals, firms, and most of all, by governments. Thus "marketcraft" represents a core function of government comparable to statecraft and requires considerable artistry to govern markets effectively. Just as real-world statecraft can be masterful or muddled, so it is with marketcraft.
In Marketcraft; How Governments Make Markets Work, Steven Vogel builds his argument upon the recognition that all markets are crafted then systematically explores the implications for analysis and policy. In modern societies, there is no such thing as a free market. Markets are institutions, and contemporary markets are all heavily regulated. The "free market revolution" that began in the 1980s did not see a deregulation of markets, but rather a re-regulation. Vogel looks at a wide range of policy issues to support this concept, focusing in particular on the US and Japan. He examines how the US, the "freest" market economy, is actually among the most heavily regulated advanced economies, while Japan's effort to liberalize its economy counterintuitively expanded the government's role in practice.
Marketcraft demonstrates that market institutions need government to function, and in increasingly complex economies, governance itself must feature equally complex policy tools if it is to meet the task. In our era-and despite what anti-government ideologues contend-governmental officials, regardless of party affiliation, should be trained in marketcraft just as much as in statecraft.
James Kwam on The Washington Monthly wrote:"Marketcraft: How Governments Make Markets Work by Steven Vogel is a nice overview of the inextricable links between ‘state’ and ‘market.’ [...] Although the argument the book makes isn’t dramatically new, and I for one need no persuasion about having to think of markets as institutions which can be shaped and designed for better or worse, there are some nice insights. I liked the section on the language we use to perpetuate the ‘free market’ chimera: governments make ‘interventions’ rather than just ‘acting’; we speak of ‘redistribution’ rather than ‘distribution’. It was also a welcome surprise that the book doesn’t set out the usual straw man version of economics. The term ‘marketcraft’ (as an analogue to statecraft) is also very nice. Governments are always ‘intervening’ in markets even if unintentionally. For sure government failure is a real thing, yet there’s no way we can live collectively without collective actions. We call that government."
"Building on decades of comparative research into advanced industrial societies, Vogel lays out in impressive detail the myriad ways in which governments, private sector institutions, social practices, and cultural norms construct and shape markets. [...] Marketcraft covers an impressive amount of material, showing Vogel’s deep command over policy details, in relatively few pages. But most of the book is easy to agree with—yet another smart rebuttal of libertarian economic ideas. The most provocative section is the final chapter, which discusses the rhetoric of the market. [...] Vogel is obviously aiming at conservative ideologues who reflexively laud the market and vilify the government. But this dichotomy also permeates policy discourse in the center and on the left. The conceptual opposition between market and government is, at its root, a product of the way students learn basic economics—for better or worse, the predominant explanatory discipline of our time. [...] Vogel reminds us that the ideal competitive market never was and never will be. Before we can craft a market, we have to think about what objectives we want it to achieve."
Lecture about Marketcraft
Further Reading
- "Marketcraft and the Digital Economy" - opinion piece by Steven Vogel on The Regulatory Review
About Steven K. Vogel
Steven K. Vogel is the Il Han New Professor of Asian Studies and a Professor of Political Science at the University of California, Berkeley. He specializes in the political economy of the advanced industrialized nations, especially Japan. He is the author of Japan Remodeled: How Government and Industry Are Reforming Japanese Capitalism (2006) and Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries (1996). He has worked as a reporter for the Japan Times and as a freelance journalist in France. He has taught previously at the University of California, Irvine and Harvard University. He has a B.A. from Princeton University and a Ph.D. in Political Science from the University of California, Berkeley.
Table of Contents
Chapter abstracts taken from / links to Oxford Scholarship Online
CHAPTER ONE: The Marketcraft Thesis
Markets need rules, not simply to protect people and the environment from collateral damage, but to function effectively in the first place. This chapter presents this argument in ten propositions. (1) There is no such thing as a free market. (2) Markets have to be created. (3) Market reform is primarily a constructive enterprise. (4) There is no single market solution to a policy challenge. (5) There may not even be a more market-oriented alternative among policy options. (6) The government-versus-market dichotomy is fundamentally misleading. (7) The regulation-versus-competition dichotomy is fundamentally misleading. (8) A liberal economy like the United States is just as governed as a coordinated economy like Japan. (9) A coordinated economy like Japan requires more governance, not less, to liberalize its economy. (10) The information economy requires more market governance, not less.
CHAPTER TWO: The Elements of Marketcraft
How do you craft a market? This chapter reviews some of the key institutions necessary to make markets function and flourish. A modern market economy requires much more than the rule of law and the protection of private property: corporate law, accounting systems, banking regulation, capital market regulation, corporate governance, labor regulation, antitrust policy, sector-specific regulation, intellectual property protection, and the deliberate fabrication of certain markets. These mechanisms structure markets by defining market actors, such as corporations; constructing goods, such as intellectual property rights; establishing market arenas, such as stock exchanges; setting the rules of exchange, such as trading practices; and promoting competition via regulation. In all of the substantive issue cases reviewed in this chapter, government regulation and private-sector coordination are not impediments to markets, but rather preconditions to their creation, expansion, and dynamism.
CHAPTER THREE: Marketcraft American Style: Why the World's "Freest" Market Economy is the Most Governed
The United States not only regulates markets, like other countries, but the very market-like features of its liberal market model are themselves products of laws, practices, and norms. In fact, the United States, the “freest” of market economies, is arguably the most governed. This chapter first establishes that the US economy relies on a massive infrastructure of market governance by surveying the core features of the postwar model. It then illustrates how market reform (“deregulation”) is less a process of removing constraints than one of enhancing market governance by reviewing reforms since 1980 in specific substantive realms. And finally, it concludes with two case studies of American-style market governance with global impact, the information revolution and the financial crisis, one that spurred innovation and growth and another that destroyed value and undermined growth.
CHAPTER FOUR: Marketcraft Japanese Style:Why It Is So Hard to Craft a Liberal Market Economy
As the Japanese economy shifted from boom to bust after 1990, opinion leaders grew critical of the Japanese market system, calling for a dramatic shift toward the liberal market model of the United States. But what would it really take for Japan to “liberalize” its economy? This chapter argues that the Japanese government would have to do more, not less: it would have to build up the legal and regulatory infrastructure to support more competitive capital, labor, and product markets. This chapter reviews the core features of Japan’s postwar model and then examines market reforms since 1980 in labor relations, finance, corporate governance, antitrust, sector-specific regulation, and intellectual property rights. The final two sections present case studies of attempts at broader institutional change: Japan’s efforts to promote innovation along the lines of the Silicon Valley model and to spur the information technology revolution.
CHAPTER FIVE: Markeftcraft in Theory and Practice
This chapter advances three propositions. First, it specifies how the conventional framing and language of debates over market governance, such as the governments-versus-markets dichotomy, hamper public debate, policy prescription, and scholarly analysis, and offers suggestions for how to deploy more precise language, enhance conceptual clarity, and refine analysis. Second, it demonstrates how even the most sophisticated analysts of market institutions sometimes fail to appreciate the full ramifications of their own arguments. They fall into the same linguistic traps as their intellectual adversaries, for example, or they fail to capture the extent to which market behavior is learned, not natural, and market operations are constructed, not free. And third, the chapter concludes by demonstrating how conceptual misunderstandings can beget very real policy errors, and specifying policy lessons for both market liberals and progressives.
