The Anti-Economist

Reading between the lines.
Feb. 7 1997 3:30 AM

The Anti-Economist

Robert Kuttner shops for a less dismal science.

Everything for Sale: The Virtues and Limits of Markets
By Robert Kuttner
Knopf; 410 pages; $27.50

38000_38362_adelman_cerealaisle

When Robert Kuttner's last book, The End of Laissez Faire, was published in 1991, it set a new standard in writing about economics for the general reader. It was so bad, and bad in so many ways, that it demanded a kind of respect. To mention only its most salient defect, here was a book announcing the failure of market economics at a time when anybody with the slightest curiosity about the world was transfixed by the sudden collapse of the main alternative to it: socialist central planning. Kuttner didn't so much as blink. He briefly noted the interesting events in Eastern Europe and observed, in passing, that they confirmed his thesis. Then, with no more time for distractions, he resumed his trudge through various learned sources (mainly works by John Kenneth Galbraith), denouncing "free markets" this way and that.

Advertisement

Give the man his due: Few writers have the dedication and single-mindedness to work so hard and see so little. But are these qualities now on the wane? Kuttner's new book, Everything for Sale, suggests they might be.

Note the subtitle, "The Virtues and Limits of Markets." Is there something to be said for markets after all? Not too much, it turns out. Of the book's 400-odd pages, at most 20 are about the virtues. And when Kuttner recognizes them, it's usually with reluctance. "Consumption is doubtless pleasurable," he concedes, doubtfully, "and nobody minds a high material standard of living." No indeed. Even in areas where Kuttner thinks markets are all right, he's sensitive to the drawbacks. Supermarkets work well on the whole, he reckons, but what a burden on the economy that there should be so many different kinds of breakfast cereal: "At my local supermarket, I counted more than 150 brands." Kuttner is also stern about cat food--although, in this case, he provides no data on the number of brands.

Nonetheless, Kuttner does appear to be inching to the right. He admits as much in his introduction: "In exploring different real-world markets, I come away with increased respect for the power of markets and the complexity of the story, yet with renewed conviction that the good society requires a mixed economy." Kuttner tirelessly proclaims his devotion to the "mixed economy," as though this sets him apart. But almost all economists take the case for a mixed economy for granted. Where Kuttner breaks with them is in judging the parts that government and market should have in the mix.

Kuttner's essential argument has been the same for many years. Faith in the virtues of markets rests on a theory whose assumptions are not just untenable but patently absurd: People are rational and perfectly informed, firms are too small to move prices single-handedly and seek only to maximize profits, and so on--an error that, for some reason, economists have failed to spot. It follows that markets do not work as well as they're supposed to, and that governments must play a large and active role in the economy. The properly functioning market economy exists only in the pages of economics textbooks. In the real world, a heavy dose of government is needed.

What is wrong with this? To begin with, the purported contrast between the blinkered maxims of economic theory and the penetrating insights of Kuttner's common sense is a fraud. Economists spend much of their time working out the implications of "market failure" caused by departures from the assumptions of the standard laissez-faire model. The textbooks are laden with theoretical opportunities for efficiency-promoting interventions by government: taxes, public spending, tariffs, regulation--you name it.

Just as Kuttner misrepresents what most economists think, so he exaggerates what governments in the real world can achieve. In theory, governments may be selfless, competent, and adequately informed. In practice, they aren't.

In much of his book, Kuttner implicitly weighs imperfect markets against perfect governments, thus evading the issue. He does not entirely ignore the branch of economics (public-choice theory) that is most concerned with analyzing government failure. He caricatures it briefly, calls it "banal" and "tautological," and cites its influence on mainstream economics as further evidence of the corruption of the academy. Be that as it may, the real choice is not between imperfect markets and perfect governments, but between markets that fail and governments that fail.

Kuttner would say that a good deal of his book is addressed to this question. Certainly, many pages are devoted to case studies of various kinds of regulation and deregulation: telecommunications, airlines, finance, health and safety, and more. As the cases pile up, a pattern recurs: The standard method of study, as Kuttner writes, "usually finds that the cost of regulation outweighs the benefit." Does Kuttner therefore revise his view that more regulation is usually better than less? Not at all. These findings only strengthen his conviction that economics is bunk. Again and again, he deems the beneficial effects of heavy regulation to be self-evident. Studies that come to the opposite conclusion only demonstrate the bankruptcy of "ghoulish" techniques such as cost-benefit analysis and provide more proof in general of the poverty of economics.

The core of the book, then, is Kuttner's prejudice against economics. He is not an economics writer; he is an anti-economics writer. That would be all right if he could offer some other coherent way to think about these issues, or even if his critique were arresting or persuasive. But he offers no alternative apart from his own privileged sense of what is obvious, and his attacks on economic method are mostly ill-informed or self-contradictory.

TODAY IN SLATE

Medical Examiner

Here’s Where We Stand With Ebola

Even experienced international disaster responders are shocked at how bad it’s gotten.

Why Are Lighter-Skinned Latinos and Asians More Likely to Vote Republican?

A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

The XX Factor
Sept. 22 2014 12:29 PM A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

Subprime Loans Are Back

And believe it or not, that’s a good thing.

It Is Very Stupid to Compare Hope Solo to Ray Rice

Building a Better Workplace

In Defense of HR

Startups and small businesses shouldn’t skip over a human resources department.

How Ted Cruz and Scott Brown Misunderstand What It Means to Be an American Citizen

Divestment Is Fine but Mostly Symbolic. There’s a Better Way for Universities to Fight Climate Change.

  News & Politics
Politics
Sept. 22 2014 6:30 PM What Does It Mean to Be an American? Ted Cruz and Scott Brown think it’s about ideology. It’s really about culture.
  Business
Business Insider
Sept. 23 2014 10:03 AM Watch Steve Jobs Tell Michael Dell, "We're Coming After You"
  Life
Atlas Obscura
Sept. 23 2014 9:01 AM Tristan da Cunha: Life on the World's Most Remote Island
  Double X
The XX Factor
Sept. 22 2014 7:43 PM Emma Watson Threatened With Nude Photo Leak for Speaking Out About Women's Equality
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
  Arts
Brow Beat
Sept. 23 2014 9:42 AM Listen to the Surprising New Single From Kendrick Lamar
  Technology
Future Tense
Sept. 22 2014 6:27 PM Should We All Be Learning How to Type in Virtual Reality?
  Health & Science
Bad Astronomy
Sept. 23 2014 7:00 AM I Stand With Emma Watson
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.