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Markets Don't Fail!

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Especially recommended for professional and academic library reference collections, as well as Political Science and Economics Studies student supplemental reading lists, Markets Don't Fail! by Brian P. Simpson (Assistant Professor, School of Business and Management, National University, La Jolla, California) fundamental economics issues ranging from Capitalism, Socialism, and the Mixed Economy, to Monopoly, antitrust laws and predatory pricing, "externalities", economic inequality, public goods, and asymmetric information. So expertly written as to be accessible for even the non-specialist general reader with an interest into how free markets work, and concluding with an Epilogue, Markets Don't Fail! is enhanced with a substantive bibliography and a comprehensive index.

Markets Don't Fail! is a book that needs to have been written--to enable both undergraduate students and intelligent lay persons to better understand the true nature of laissez-faire capitalism. This book defends the market economy against the many attacks made today by contemporary economists. Ranging from the theory of economic monopoly and its basis in the doctrine of pure and perfect competition to the theory of asymmetric information, the author point by point thoroughly demolishes the myriad varieties of alleged market failure. A skillful blending of economics with its foundations in philosophy.

Markets Don't Fail! is a defense of free market economics. What makes this work so unique is that it not only defends free market economics on *technical* grounds but it also defends this system on *moral* grounds. It should be noted that in addition to being a professor of economics, the author is also an Objectivist. Thus, his moral defense of capitalism employs the ideas of novelist and philosopher Ayn Rand.

Although there are many technical arguments, most of the value of this work stems from the Dr. Simpson's refutations of both the philosophical and moral standards often used when a free market is said to have failed. For example, it is often claimed that capitalism is bad because it leads to income inequality. While he does not deny the veracity of this claim, Dr. Simpson nevertheless asks why should incomes be equal? After all, individuals typically have different levels of motivation, different goals, different access to resources, different training and exert different levels of dedication.

This book is filled with many other important defenses of capitalism. A few other important issues addressed include the intentional subjectivity of many of the antitrust laws, the unrealistic assumptions that are the basis for developing "perfect" competition theory, how problems stemming from externalities, such as air pollution, can be handled in a free market and how consumers can be sure of the quality and safety of products under capitalism.

If you are interested in both Objectivism and economics or if you are simply intrigued as to how free markets are morally justified, this is an excellent book for you. If you are interested in this work, then I also recommend Andrew Bernstein's The Capitalist Manifesto, which offers a compelling historic and moral case for laissez-faire capitalism.

This book is essentially a list of arguments based upon false dichotomies and taking everything to an imaginary extreme. For example, the author wishes as one point to argue that egoism and criminality are not related, and so he suggests (p. 18) that criminals are acting against their own self interest. This is because either 1) they will get caught and the punishment will be worse than the crime, or 2) they will spend their lives avoiding authority, and thus will be acting in ways severely detrimental to their own self interest. I think we all know that this is an incredible oversimplification. Many criminals die long before they are caught, many don't worry much about the authorities because they are careful in their crimes, and the rest obviously decide that the trade-off is a good one. If criminals are not attempting to improve their own well-being, I don't really know what they are doing. Anyway, I can certainly come up with situations where it is clear that the criminal would not get caught and would not have to fear authorities. Is criminality OK under those circumstances? Or, if I know that someone else will get blamed and I can get away with it and never have to worry about the "authorities", does that make criminality OK? What about if the President promises to pardon me? And so on. Similarly, the entire argument about how acting "altruistically" is really acting to bring about one's own demise is pretty silly in today's economy where sustinence can be purchased for far less than the median income.

The chapter that I was most interested in was the one on externalities, but I was as disappointed with this chapter as with the rest. The author dismisses the entire discussion of negative externalities by suggesting that it would be silly to ask Henry Ford to compensate buggy-producers for the fact that he drove them out of business. But that is COMPETITION, not an externality. Surely the author knows the difference. Never does the author argue why Pigouvian taxation is a bad idea when it comes to pollution, and it doesn't really seem to cross his mind that his Henry Ford example does not prove his point. He says that we can use the courts to sue in clear-cut cases of damage, and just suck it up in cases where, for example, cars produce pollutants that cause damage. Why this is a better solution than simply asking the markets to internalize the costs is never explained (except that then Henry Ford would never have invented the automobile).

All in all, I can't imagine anyone would find this really worth the time to read, unless they were trying simply to convince themselves of an argument that they already believed. But even for that there are better books.