Another Intro Econ Book
By Arnold Kling
Eamonn Butler’s The Best Book on the Market: How to Stop Worrying and Love the Free Economy gets right down to business, without any introduction explaining who is the target audience and what they should get out of it. Maybe the title (intended as a pun) and subtitle are enough of a clue.
It might be an airplane-read introduction to what Daniel Klein calls the Adam Smith/Friedrich Hayek view of economics. It might be something for the intelligent high school student. It might be a supplemental reading for a freshman college course.
If I were still teaching a first-year economics course for non-majors, Butler’s book would definitely be required reading. This book and Russ Roberts’ The Price of Everything would make a great one-two punch.
Standard textbooks present a picture of markets that is neat and antiseptic, but unrealistic and easy to dismiss. Instead, Butler is very forthcoming about human irrationality, imperfect information, and externalities.On p. 41,
It’s not a demand curve that sellers face. It’s more of a demand fog.
On. p. 43,
And information is definitely not perfect. It doesn’t grow on trees or float in the air. It’s not obvious, nor even objective. The information that you need to navigate through the market exists only in the minds of the individuals who make up that market. It is personal and local. To act on it, you have to discover it.
On p. 44,
Price isn’t some dead fact, the point where two curves on a graph happen to intersect. Price is alive. It’s dynamic. It tells us things, and it changes things. When shortages occur…a rising price sends the message far and fast
On p. 68,
Why is American healthcare so expensive? Because the medical profession is the most powerful mediaeval-style guild in America.
Anyone can write a book praising the virtues of perfect markets. Books that praise imperfect markets are, sadly, rare.
Why isn’t the Smith-Hayek outlook on the market taught as universally as, say, the adverse effects of racism? If the Senate is interested in having the NSF teach global warming, why aren’t there proposals to teach how markets work?
a) The Smith-Hayek view is wrong, because ___
b) The Smith-Hayek view is right, but you can be more popular if you reassure people that markets can and should be managed by government; in the end, what is popular sells better than what is right. The market chooses Stiglitzians.
c) There is some sort of conspiracy at work between educators and government to keep the Smith-Hayek view out of the curriculum.
I vote for (b).