By Donald Rutherford
- Puts the debate on market criticism into a context of the history of economic thought
- Analyses some of the earliest debates such as Plato and Aristotle
- Proposes four ways to cope with flawed markets
In Suspicions of Markets Rutherford reviews why Adam Smith, Hayek, Mises and others praised economic markets, with a view to understanding, in contrast, historical attacks on markets dating as far back as Aristotle. The market has long been criticized as an inappropriate method of allocation, encouraging market participants to misbehave for the sake of personal gain, and creating an impersonal new market culture. This book traces how such attacks have become more vociferous in recent centuries, especially with the rise of socialism. Most recently the critique has broadened to include toxic markets and the excessive marketization of activities hitherto external to the market. Analysing these major criticisms, as well as the value of regulation, utopias and virtue ethics as a means of avoiding future suspicions of markets, the author lays the groundwork for the reader’s own assessment of the arguments, and concludes by posing suggestions of how best we might cope with flawed markets in the future.
Table of Contents
- Introduction - “The market” is often used as a term of abuse as is “the free market economy” it creates. Markets are blamed for unemployment, exploitation and the commercialisation of society. Suspicions of markets are long-standing: for millennia, price controls have been used to reduce disliked market outcomes. Criticisms can be of market mechanisms, the market culture and behaviour in markets.
- The Case for Markets - The market is defined. Adam Smith made the most influential case for markets, arguing that exchange is a natural human propensity and essential to the division of labour and increasing economic welfare. Bastiat, Mises and Hayek also explain the beneficial power of markets.
- The Start of the Criticism: Aristotle - Plato, precursor and mentor of Aristotle, understood that even a utopian society requires markets but raised doubts about the retail trade. But Aristotle provided a powerful critique of markets by distinguishing value in use from value in exchange and explaining that the retail trade, by exchanging more than necessities, encourages an activity based on private gain.
- After the Greeks - Aquinas in his analysis of the just price continues Aristotle’s analysis of exchange within the context of justice. In the long periods from the sixteenth to the nineteenth centuries, there was a growing understanding of the merits of markets but some mild reservations about them.
- Nineteenth-Century Critics - Marx’s precursors in the nineteenth century widened the critique of markets to consider competition and profit. By asserting that exchange creates commodities he attempted to explain how markets are exploitative. Ruskin and Morris also provided important critiques.
- Later Critics - Of these, Karl Polanyi’s critique of 1944 provided the most powerful in the recent period, denying that markets are natural and arguing they are a poor way of allocating resources. Later objections to markets, particularly Sandel’s, Marquand’s, Hutton’s and Jenkins’ include the marketisation of society, the extension of commodification, and failure to respect persons and the environment.
- An Analysis of the Principal Criticisms - A consideration of the arguments that markets are inadequate and inefficient, impersonal, encourage extensive commodification, are guided by poor motivation, unfavourably affect the income distribution and create a different culture.
- How to Deal With Flawed Markets - Possible solutions to the problems raised by markets, regulation and utopias have their own problems. Virtue ethics is suggested as a way for taming markets.
About Donald Rutherford
Donald Rutherford is Lecturer in Economics at the University of Edinburgh, UK, having previously worked as an investment analyst and financial journalist in the City of London. He has taught a range of courses over the years, including labour economics, the trade cycle, economic policy and comparative economic systems. Rutherford has drawn on this breadth of expertise to write a dictionary of economics, first published in 1992. He currently specialises in the history of economic thought.