John was a Kiwi economist (22 Jan 1951 - 13 Mar 2007)
I recommend McMillan's book. I read this book a very long time ago. Today, the book is even more relevant than it was in 2002. It is a lucid, full of meaningful stories, and an overall enjoyable read. It could help many young people, especially economists, think about the role of the government? Should the government intervene in the economy? How much? How? When?
McMillan had an interesting view about the market and the role of the government. He did not advocate more government intervention, socialism, or liberalism. He was neither for a free market nor for social policies. He wrote, "the market system is not an end in itself but an imperfect means to raise living standards. Markets are not magic, nor are they immoral. They have impressive achievements; they can also work badly." He thought that the "design of the market" matters the most. He believed that the evidence is that economic growth is good for everyone, including the poor, but he also believed that equity matters too. He cited evidence that countries with more equal income distributions grow faster.
I am not totally sure about that kind of thinking because McMillan must have had an implicit assumption that there is "a government" out there, a "designer" that can actually make a better market via rules and regulations. Where do we find such a government, I wonder?
In my view, the government may, and can, intervene in the market, but that intervention depends on the size and the scope of market failure. There must be robust, careful, and verifiable evidence of free market failure before the government is allowed to step in.
Here are some excerpts that I found interesting.
Chapter one, "On November 9, 1989, the people of Berlin joyously tore down the wall that for thirty years had divided their city. As the wall fell, so did communism and planned economy. On April 30, 1995, the U.S. government ceased controlling the internet. As entrepreneurs devised procedures for online buying and selling, electronic commerce burgeoned. These two dates denote the beginning of what has become, for good or for ill, the age of the market."
I think that the internet market could have been an amazing free market experiment. Unfortunately, we are getting more and more government interventions by the day. Be careful please when you blame the free market. We do not have a free market anywhere in this world. In fact we had more free markets in the past centuries than today. Is it funny (or not) that a Republican like Trump is against free market and a Chinese communist like Xi Jinping is for free trade?
Chapter Twelve, How did so many countries come to be centrally planned? [after WWII] . You might find this paragraph interesting. He writes,"Albert Einstein wrote an article in 1949 called "Why Socialism?" His answer: "the market economy brings crisis, instability, and impoverishment. The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of evil." The only way to eliminate this evil, he concluded, was by establishing socialism, with the means of production "owned by society itself." He advocated a planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child."
There are more stories like those in the book.
Einstein's view was shaped by the horrors of the Great Depression, no doubt. I cannot blame him. I hope that he lived to see the whole socialist tragedy. Socialism collapsed spectacularly in 1990 for good reasons. Does the free market make people poor? How do we answer this question? McMillan says, no it does not. We do not even have a free market experiment anywhere to examine. Instead, we have crony capitalism, nepotism, racial and social discrimination, subsidies, bailouts, tariffs and trade restrictive laws and regulations, etc.
PP. 25, John writes, "Rembrandt was an innovator not only in painting but also in commerce. He helped establish a full-fledged art market in the seventeenth-century Amsterdam." "Composers in Germany or so later switched from being long-term employees of aristocrats to producing for the open market. Handel and Telemann were vocal in their dislike of being subject to their employer's whims, and they paved the way for Mozart and subsequent composers to work freelance. In a 1781 letter to his father, Mozart said, doubtless exaggerating somewhat, believe me, my sole purpose is to make as much money as possible; for after good health it is the best thing to have."...Mozart saw the market as offering him creative freedom."
There will always be business cycles and depressions in the future just like in the past. Although many economists believe that government intervention gets us out of prolonged recessions. I highly doubt that we have evidence to support such an assertion. To the contrary, we have examples of policy error. These errors are persistent. They are costly to undo. There are many examples, but most known is that the Great Depression was a monetary policy error, Friedman and Schwartz wrote extensively on this.
McMillan tells some interesting stories about New Zealand's reforms in chapter 15. Imagine that the NZ government made rules and regulations for every bit in the economy including the color of Margarine, which had to be white not yellow so it couldn't compete with Butter!
Here is another story, he says, "The bizarre nature of the old New Zealand economy is illustrated by an anecdote from the industrialist Alan Gibbs. For the sake of employment, the government required television sets be assembled locally. When Gibbs went to Japan to negotiate a price for the components, he was greeted with disbelief. Because of the way the production lines were set up, the Japanese television makers could supply the separate components by placing workers at the end of the assembly line to take apart the completed televisions. Gibbs firm has to pay 5 percent more for the pieces..."
Many young Kiwis do not even know what New Zealand looked like before 1984.