Books on economics are usually substantial, dry and rather worthy but not The Best Book on the Market. It is fast paced and as easy to read as a novel but it is still a authoritative guide to economics of free enterpise and the working of markets..
Dr. Eamonn Butler is a world-renowned economist and Director of the Adam Smith Institute, the free-market think-tank. He is well qualified to write on the workings of markets and not surprisingly he is an enthusiast for free markets and their contribution to economic growth. What may be surprising is his writing which is lively, clear and to the point and enables him to make The Best Book on the Market , How to Stop Worrying and Love the Free Economy such a slim volume, barely less than half the length of even a short novel.
Dr Butler starts his argument with an example of a seamstress in a Chinese street market and how her location and prices are established. He is able to explain that such apparently chaotic markets naturally form structures which may not be immediately obvious. Sellers of particulars goods do not spread themselves out to avoid competition but rather congregate in the same location which is why street names in many European cities are named after the trades that were once located there.
Butler then builds on the nature of commerce and exchange to encourage the efficiencies and accumulation of capital that comes from specialization. This then creates a virtuous circle to support further development of the enterprise and market. It becomes clear from these arguments why micro-finance in developing markets is so successful in helping to lift people out of poverty.
The colocation of vendors in markets facilitates buyers' access but also enables both vendors and customers to determine the appropriate price of goods. This provides a natural system that establishes supply and demands matched to the price customers are prepared to pay, and a vendors are prepared to accept. In The Best Book on the Market Dr. Butler is then able how such mechanisms drive out waste through effective feedback.
Dr. Butler contends that disrupting such information flows on pricing, supply and demand the market becomes less efficient. The result can be waste through over-supply or shortages because vendors are not prepared to sell (or even produce) their products at the controlled price. Hence centrally controlled economies tend not to be successful and often have the unintended consequence of encouraging a parallel black but free market where the natural pricing, supply and demand mechanisms work.
The Best Book on the Market argues that markets and commerce is based on trust and indeed other writers have described brands as a promise. Consequently the longer a brand or business has been in business the more that promise is (usually) trusted.
Butler also considers the importance and nature of property and how the rules associated with them influence the operation of markets. He takes it further to examine why reward for human effort and creativity is so necessary and the consequent need for intellectual property rights such as copyright and patents to be protected and respected.
Finally, The Best Book on the Market looks at how markets grow using as an example the challenges faced by Russia as it emerges as a market economy. Butler argues that the Russian government does not understand markets which is hardly surprising consider the country's history. Changing human behaviour and institutions is always a challenges and takes time; usually with occasional wrong turns.
He contrasts Russia with China as they both emerge as global economies. China has been growing more slowly but with less disruption which may be a consequence of history and the resulting political environment.
Dr. Butler then returns to his starting point and considers the embryonic business of his seamstress in the Chinese street market and how her business might grow. Initially sewing by hand, if she can retain or obtain enough capital to buy a sewing machine she will increase her productivity and will be able to start to grow her business.
Dr. Butler's makes a final point: "I'm sure it won't be income distribution, nor the communism of the past that will raise her ... It will be hard work, customer service, incentives, ambition and enterprise...". He clearly believes it will be her efforts and the free market that will allow her to succeed.
After a period of financial uncertainty and loss of confidence in the working of markets and a failure of regulatory frameworks it is perhaps a good time to step back and reconsider the nature of supposedly regulated markets. Politicians, regulators and business leaders should read Eamonn Butler's book. It will not take long and it will be time well spent.
This small book is an excellent introduction to markets and to explain the complex ideas of market economics in such a clear and succinct way is a magnificent piece of writing. It could even be described as light-hearted, even so it is also substantial in its content. It is almost certainly The Best Book on the Market.
The Best Book on the Market, How to Stop Worrying and Love the Free Economy by Dr. Eamonn Butler (2008, ISBN:978-1-90646-505-6) is published in hardback by Capstone Publishing.