In increasing order of seriousness.
As noted, the heart of the book is a well-written primer on let’s call it new economics. As such, this book would make a good supplement to an advanced undergraduate class. But the activism and attacks on MarketThink are occasionally distracting. Chapter 1, for example, opens with a
denunciation of inequality. Nothing wrong with that but Slee doesn’t even attempt to show that there is any
connection between rising inequality and the failure of MarketThink theories. He just lumps things he doesn’t like into one pile. If there were no asymmetric information, no
herding, no coordination problems and so forth I guarantee that there would
still be plenty of inequality.
For the most part, Slee illustrates the new economics with insightful, interesting and often new examples. But there are clunkers. I almost threw the book at the wall when he started talking about QWERTY. Surely, Slee knows that this worn-out example is a joke? The supposed superiority of the DVORAK keyboard was shown in studies conducted by … Dvorak. See here. It’s especially annoying that Slee did not reference, Winners, Losers & Microsoft.
As primer, it’s fine to illustrate with examples and move on but as an attack on markets one expects a balanced consideration of opposing theories. For example, Slee looks at beer micro-breweries vs. mass brewers arguing that we are currently stuck in the bad mass-equilibrium because micro-breweries rely on word-of-mouth but the institutions which sustain the word-of-mouth equilibrium only work when there are already lots of micro-breweries about which one can talk. Nice, but here is an alternative theory. Economies of scale made mass produced beer cheaper and when push came to shove consumers chose the cheaper good product over the more expensive but slightly better product (I don’t eat at 5 star restaurants every night). New technologies, however, have made micro-brewing more economic and as they have done so we are moving to the mass-customization world that Slee prefers. Consumers have gotten the best of all worlds – given scarcity – in both time frames. The beer activists in England that Slee likes moved the process along but in the direction that it was already going.
There is no comparative analysis in the book at all. No discussion, for example, of how free riding, asymmetric information, herding etc. distorts government choice. Also, no appreciation that what some of us MarketThink people really advocate is civil society which includes non-profits and voluntary collective action of all kinds. And, no we are not all corporate shills (p. 106).
It’s true that outcomes do not always illustrate preferences but often they do. Maybe people really do not want to walk to school. It’s subtle but Tom seems all too eager to call in the government to force us into the better equilibrium. I worry when people start talking about how government can help us to express our true preferences. Isn’t this what dictators always say? True freedom is oppression.
The chapter on power is terrible, I did throw the book against the wall. Perhaps in order to prepare us to welcome government as the deliverer of our true preferences, Slee wants to diminish the distinction between liberty and coercion. But a true liberal should never write things like this:
…the formal structure of democracy and free markets is not enough to rule out exploitation and plunder – characteristics usually associated with repressive regimes.
If Tom visits GMU (I happen to know he reads MR) he should watch out because I shall kick him in the shins stating, "I refute you thus."
More seriously, repressive governments around the world threaten, rob, torture and murder with impunity. Courageous individuals have died trying to escape such regimes while others have died fighting for their rights. No matter how great are differences in wealth, it is morally wrong to equate what goes on in repressive regimes with capitalist acts between consenting adults.