I just finished reading John McMillan's 2002 book Reinventing the Bazaar. Diane Coyle at The Enlightened Economist has recommended this book many times (including earlier this year), and it's a recommendation that I am glad I followed through on and I fully concur.
The subtitle is "A Natural History of Markets", but I don't think the title or subtitle quite do the book justice. Most treatments of economics, including in most textbooks, treat markets as a given, and fail to really explain the inner workings of market design. McMillan's book does an outstanding job of filling that gap. It seems to be getting rarer over time that I end a book with pages of notes on little bits that I can add to my teaching, but it certainly was the case with this book.
McMillan is neither a market evangelist nor a market skeptic. He cleanly dissects the more extreme arguments on either side, especially in the concluding chapter, and charts a more centrist path throughout the book. I particularly liked this passage:
The market is not omnipotent, omnipresent, or omniscient. It is a human invention with human imperfections. It does not necessarily work well. It does not work by magic or, for that matter, by voodoo. It works through institutions, procedures, rules, and customs.
The focus of the book is on explaining institutions and market design, using real-world examples of what has worked and what has not. There are several pages devoted to the 1980s reforms in New Zealand, which was interesting to see (although based at Stanford University, McMillan is a kiwi, so the use of New Zealand as an example should come as no surprise). However, I don't think everyone would quite agree with the conclusions about the success of taking the 'shock therapy' approach.
McMillian also commits a sin in my eyes by defining health care and education as public goods (which they are not, because they are excludable). I can forgive him that one indiscretion though, because the book is wonderfully written and easy to read. It helps that he and I appear to share similar views about the market, as his conclusion demonstrates:
The market is like democracy. It is the worst form of economy, except for all the others that have been tried from time to time.
I really enjoyed this book, and I highly recommend it to everyone.
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