Gen-Xer, software engineer, and lifelong avid reader. Soft spots for sci-fi, fantasy, and history, but I'll read anything good.
How Markets Fail promotes a view that I think ought to be common sense to Americans, but seems to get lost in today's climate of mindless, media-fueled political hysteria: that free markets, while they provide many benefits that can't be achieved through central planning, will malfunction without rules and external guidance. The 2008 housing crisis and subsequent market collapse was nothing less than a textbook failure of government to step in stop lenders and banks from playing a game that everyone paying attention knew was deeply risky, however profitable the bubble was for players in the short term. And the bailouts that followed were proof that allowing irresponsible pursuit of private gains can lead to socialized losses, the opposite of what free markets are supposed to do.
How Markets Fail is a book in three parts, each of which is geared towards readers who haven't had more than superficial exposure to the topics discussed -- if you have, you'll probably want to skip ahead. The first part is a condensed history of modern free market economics, introducing readers to influential figures like Adam Smith, Friedrich Hayek, Vilfredo Pareto, Milton Friedman, Robert Lucas, Cecil Pigou, and John Kenyes, then connecting them to present day economists like Alan Greenspan and Paul Krugman. If, like me, you lack formal training in economics, you'll find handy explanations of a few terms and ideas you might have heard bandied about before.
The second part of the book focuses on where utopian free market ideology breaks down, in light of game theory, behavioral psychology, and other modern, scientific fields of analysis. Cassidy does an admirable job of keeping his arguments balanced, putting forth sober talking points that don't assume villainous motives on the part of any group of people. Rational self-interest, while it often propels trading relationships that work to the mutual benefit of everyone involved, can also lead to behavior that’s destructive to the best interests of a community. Consider, for example, factory owners who know that installing environmentally-friendly machinery is better for everyone, but can't realistically risk committing to this expense if they don't expect that their competitors will. Or health care markets that incentivize insurance providers to jack up premiums for customers who aren't healthy. Or the tendency of large-scale businesses to overcome smaller ones, thus enabling a few elites to dominate markets and pay themselves exorbitant salaries while driving down wages for those beneath them. At least, Cassidy makes a convincing case that different markets have different patterns, and need to be thought about differently, with a reality-based view towards human needs and behavior.
Part three is an overview of the recent subprime mess, illustrating from a high level the chain of events that led to the meltdown, and the laissez faire policies that enabled them (which Cassidy blames primarily on Alan Greenspan, the one person he really criticizes). I thought this part was well-presented, and did a lot to hammer home the points in part two. Protecting individual foolish home buyers from themselves isn’t the government’s job, but stopping actions that fool a lot of people at once and lead to a national blowout *is* the government’s job.
Where the book fell a little short for me, though, was in its lack of coherent ideas on how to make government intervention effective. I'm rather skeptical of libertarian views and think it's impossible for governments not to intervene in markets and corporate activities that are global, whether ideology makes them do it sooner or later. However, as we know, Washington DC can be about as agile and precise as King Kong swatting at planes (or not, if they're bringing him gifts of bananas), and people determined to make a profit will always find a way to get around regulations, bend them in ways not intended, or even help write them, fooling the public with benevolent-sounding language while craftily selling out the public's best interests. What criteria should DC use to decide when to give economic matters serious attention and when to push issues it doesn't have the fine-grainedness to handle well back to markets? How do we deal with a world where some corporations have more clout than actual cities, states, or even countries? There aren't easy answers.
Acknowledging the problem is the first step, though, and I think that How Markets Fail will help many readers do that.
Spoiler alert: the takeaway from Thomas Piketty's dry but much-discussed book is what most citizens of the developed world already know: income and wealth inequality in first world countries, particularly the United States, are at levels not seen since the Gilded Age. As much as I've personally benefitted from globalism and technology, it’s obvious that the lion’s share of the profits from these trends has gone to a small elite, while many Americans are being left behind in an economy that no longer places great value on their skills (or gives a damn about educating their kids).
No doubt, the timing of the book’s publication has something to do with the big splash it made -- these are clearly issues on a lot of minds -- but Piketty brings some cool analysis to the current reality, helping the reader understand how to see it in terms of historical data. As he argues, all economic evidence suggests that this disparity is likely to continue to grow, driving modern countries towards a form of society not seen since 19th century Europe. There, he shows, there was less economic growth than in the 20th century, which meant that a small upper class that controlled most of the capital received most of the income, consolidating its dominance through inheritance. Piketty brilliantly illustrates this point with references to classic 19th century novels, wherein protagonists aren’t trying to better themselves in careers in which advancement is limited, but are focused on marrying well. Only the shock of two world wars ended this reality, creating a few decades of growth-through-rebuilding and relatively egalitarian prosperity for Western Europe and the US.
Piketty dives down into the weeds of numerical data, graphs, charts, and comparison tables to make his point, which doesn’t always make for an ideal audiobook listen. Though there’s a PDF supplement, dedicated readers might want to get the book in print. Still, the gist is clear. We can no longer count on the rapid expansion and population growth that drove the wheels of US industry in earlier days. Return on capital is now a better bet than return on growth in most sectors of a 21st century non-emerging economy, with the start-up costs for high-tech industries or rental properties favoring the already wealthy. Even the apparent exceptions, such as software development (my own field), kind of prove the rule, in the sense that they only provide jobs for a small class of highly-skilled workers, sometimes to the detriment of the less-skilled.
However, Piketty’s proposed solutions, as much as I agree with their goals, seem naive given current politics. He advocates more confiscatory taxes on the global top 1%, more transparency in the financial systems of all countries, and stronger international laws related to seizing the assets of tax dodgers. I don’t know about his fellow French citizens, but to even suggest to a certain segment of the US electorate that their country might not actually be a meritocracy, or that it be more subject to some international body of law, would trigger instant howling outrage. Never mind that most of that group will never be wealthy themselves -- they would still rather live in a decaying shack, imagining their interests to be aligned with those of the billionaire Koch Brothers, than ever agree with some “socialist” French academic.
Piketty emphasizes his faith in democracy, but there are a few things I wish he’d discussed more, even if they fall outside the purview of economics. The long-term implications of technological advances on the job market. The tendency of big government and big business to end up in bed with each other. How the people can take back ownership of the political system and the machinery of production without going down the failed route of Communism.
Still, I’m glad this book is being talked about. If the Boomer Generation is still earnestly clinging to the “American Dream” ideals it once knew, it’s pretty clear to younger generations that the system isn’t so meritocratic or upwardly mobile as it once was. I think that Piketty, a Gen-Xer himself, is speaking more to this demographic than the one currently in charge. After all, to quote a certain Gen-X musical, the aging Koch brothers are “just for now”.
That said, your kids might give some thought to marrying one of their heirs.
I think anyone who's a fan of Pixar's films will enjoy this well-researched, thoroughly readable book. Price begins in the 1970s with the backstories of the company's key members, and proceeds forward, providing an engaging condensed history of computer graphics and animation along the way. We learn about Pixar's early days trying to find its way as a subsidiary of Lucasfilm, and its struggles to stay afloat after being purchased by Steve Jobs. We see its tumultuous history with the cantankerous Apple founder and an increasingly corporate Disney.
The book's real treat, though, comes when Price discusses the development of the groundbreaking movie Toy Story, a project that underwent many changes from conception to final version, driven by the stubborn commitment of John Lasseter and other leads to get everything right. For example, to find the dynamic between Woody and Buzz, they watched a series of buddy movies and studied the mannerisms of the voice actors. This fanatical attention to detail, combined with top-notch talent and a certain amount of humility on the part of the team when it comes to accepting that some creative ideas must be thrown out in service of quality, demonstrates itself again on subsequent projects. It's nearly as much fun to read about the evolution of Monsters, Inc., Finding Nemo, The Incredibles, and other films. When Pixar's human strengths are mixed with the advantages of the medium, challenged by its constraints, or freed by its newness, the result is a fertile, back-to-the-drawing-board approach that will hopefully continue to generate compelling works and new creative tools for years to come. As a video game developer, I found their process very inspiring to read about.
As histories of companies go, Price is clearly writing from the position of an admirer. What dirt he dishes up is mostly on Jobs and Disney. But, he knows how to tell the story most readers are after, and it's to his credit that he makes the technological, artistic, and business facets of his narrative interesting, without getting too bogged in the details of any one. I think that any reader interested in film, computer graphics, or simply innovation in general will enjoy it.