Jonas's Reviews > 23 Things They Don't Tell You About Capitalism

23 Things They Don't Tell You About Capitalism by Ha-Joon Chang
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Jun 11, 2012

did not like it
bookshelves: nonfiction
Read in November, 2011

"23 Things" (for short) purports to be a rebuttal of commonly held views about the free market, capitalism and the science and profession of economics. Chang's position is pro government action and intervention (left wing, if you will), and he seeks to back it up with evidence and arguments.

I find it rather disappointing. It often addresses straw men and commonly held misconceptions about how economists think (rather than how economists actually think), and often fails to present opposing arguments fairly.

For instance, in Thing 1, "There is no such thing as a free market", Chang writes "Every market has some rules and boundaries that restrict freedom of choice". No shit, Sherlock? One rule which pro-market types are very much in favour of is (some form of) property rights. I think he either doesn't know the true position he's opposing or is choosing to not present it fairly. I don't know which of those explanations tars him the worst.

Later in Thing 1, Chang talks about child labour laws: "If you believe that the right of children not to have to work is more important than the right of factory owners to be able to hire whoever they find most profitable, you will not see a ban on child labour as an infringement on the freedom of the labour market".

Oh boy, where to start? First off, I personally find the phrase "the freedom of the labour market" grating---markets aren't a thing, in that they don't have agency. What's in question is the freedom of persons. (The phrase "only individuals act" might spring to mind, especially if you pronounce it "in-dee-vee-doo-als".) But I'll presume that the underlying definition of "freedom of markets" is "freedom of persons" and I'm just fussy about terminology.

Next, "the right of factory owners to be able to hire [...]". This makes the act of entering into an employment contract unilateral when it is really bilateral: it's not a contract unless you're allowed to not sign it.

Penultimately, "the right of children not to have to work" is just flat out mischaracterizing the situation: being forced to work, being allowed to work and being prohibited from working are three different things. Child labour laws in general are those which move children from being allowed to work (not forced to work) to(wards) being prohibited from working.

You might argue that if their alternative is to go unemployed and starve to death, they don't have any real alternatives and they're forced by necessity into the contract. If so, how does prohibiting them from entering into the contract help them? By the very assumptions, it starves them to death.

What makes children not have to work is wealth---being able to afford not to without starving---which cannot be regulated into existence out of the thin air. If child labour laws help children, why not prohibit all labour? Wouldn't that help everybody?

In Thing 4, he claims that the labour-saving nature of the washing machine has had greater impact than the internet. I'm not completely sure how those two effects are commensurate, but that in turn means I don't have any measure which proves the author wrong. What do find objectionable is that while he acknowledges some of the qualitative impacts of the internet, Chang emphasizes the change in point-to-point text transfer speeds as the One True Measure of the impact of the internet. Even *if* we limit ourselves to one-to-one communication, which I think is a serious mistake (would you be writing reviews on Goodreads if only one other person could read it?), other measures such as latency and price are surely relevant too. Also, given that the internet piggybacks on computers one-to-one communication enables many-to-many communication (e.g. by each of us communicating one-to-one with Goodreads) in ways that are mindbogglingly cheaper than with faxes (what the internet replaces, according to Chang).

Last point from me: in Thing 20, "Equal opportunity may not be fair", Chang makes the point that when children of poor parents can't concentrate in school because they're hungry, that's not equal opportunities. While true, the unfairness is the absence of equal opportunities, in direct contradiction of the chapter heading. My mind got boggled.

Chang goes on to write: "Fair competition can only be achieved when the child is given enough food---at home through family income support and at school through a free school meals programme." If I grant Chang the first part, that fair competition can only be achieved when children have enough food*, it doesn't necessarily follow that his way of doing it is the right way. Parents who can afford food for their kids might be neglectful and not provide it, and free school food might be insufficiently nutritious and sating that it helps the child concentrate. Home-made lunches, lunches bought and paid for at school or lunches bought elsewhere (in the---gasp!---market) are alternatives which Chang doesn't compare to his suggestion.

If I wanted to spend the time (I don't), I could find many more examples where Chang is slanting his presentation. In addition to arguments like the ones I quoted, he provides some statistics to back up some of his claims. I haven't checked those. However, they're all about extrapolating regressions, which I have some suspicion about if there's not also a solid theoretic underpinning leading you in the same direction. See also The Pretence of Knowledge.

While I would love to study and understand a coherent and evidence-backed theory that's less pro-market than my current position, I haven't found it yet. In particular, I haven't found it in 23 Things.
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Comments (showing 1-16 of 16) (16 new)

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Enzo Altamiranda Great review. What is your background?

Jonas Enzo wrote: "Great review. What is your background?"

Thanks :)

I'm self-taught. Mostly from (all episodes) and (a substantial fraction of the audio; some video), but I also read a textbook on introductory microeconomics.

If you're looking to get into economics, I can definitely recommend find the host, Russ Roberts, to be a great communicator, and he does a good job at being polite and fair to the guests he disagrees with (he's a classical liberal). There might also be quite some insight in a microeconomics textbook, if you don't choke on the math.

(I'm studying computer science and minoring in math as my day job.)

message 3: by Ugh (new) - rated it 4 stars

Ugh Thanks for an enjoyable and thought-provoking review. However, I think that while your points about child labour may be true, they don't affect the wider point that there is currently no truly free market. I wasn't sure on reading this 'thing' myself whether any free marketeers acutally say that there are any truly free markets, but rather that there *should* be, but I still found the 'point' interesting.

I thought your points about the internet were very well made.

Regarding thing 20 though, I think a better title would have been 'Equal opportunity *alone* may not be fair', but I think once you realise that it's fine. Also, I'm not sure how your alternatives to free school meals could be afforded by those in poverty?

Jonas Ugh wrote: "Thanks for an enjoyable and thought-provoking review. [...] your points about the internet were very well made."
Thanks for the praise; I'm happy to hear that I have stimulated some thought. That makes it more than worth the effort :-)

'Equal opportunity alone may not be fair'
Actually, I think the accurate description is "Equal opportunity is inextricably linked to equal outcomes" (for the preceding generation).

Whether one agrees is a different matter, but any investigation should note that most free market types argue that under a mixed/regulated economy the distribution of wealth is shifted around slower than under free markets. They may be wrong, but one ought to understand and refute their arguments.

One should also take account of my following point:

[child labour, OK, but still:] there is currently no truly free market
In which case Chang's observations about the current social system don't say anything about how truly free markets behave---in other words, Chang undermines his own efforts from the word go.

If you watch "How to Reach the Left", a talk by Roderick T. Long available at, he'll go into some more depth about what "free markets" are and aren't, and how people talk about it, but here's the short version:

In 2012 there have only been rough approximations to truly free markets, and it varies from place to place how free the markets are. The markets in the US in particular are not as free as people like to think and talk about. In particular, US conservatives like to talk about free markets but they rarely actually put them in practice. This skews public perception of what "free markets" actually means.

Jonas Oops, I forgot one point:
Ugh wrote: "Also, I'm not sure how your alternatives to free school meals could be afforded by those in poverty?"

My point was that Chang was overstating his case by not even looking at any of the alternatives; not that he was overstating his case because "here's this alternative which is better: [...]".

Anyways, one feature of truly free markets is that there's no central bank which inflates all the value out of people's money. Inflation happens to steal from people on fixed incomes---notably the working poor---the most, so under free markets the poor would be wealthier. Without agricultural subsidies, food would also be cheaper, and without taxicab medallions made incredibly expensive due to authoritarian intervention, there would be more money-making opportunities open to the poor.

This doesn't definitively prove anything, but I think it suggests that it's not unreasonable to believe that the poor likely wouldn't do worse under freer markets.

Also, thanks for a good challenge---I enjoy thinking about these things :-)

Erwin The book isn't an investigation of free market capitalism. The examples are chosen to be thought provoking and persuasive.

Ideology driven policy bankrupted the Soviet Union, and if you think a current account deficit is meaningful, then you should concede that it will bankrupt the US too.

Outcome is important, and outcomes in Asia for the last 40 years have been vastly superior to outcomes in the west.

"It doesn't matter whether it's a black cat or a white cat, if it catches a mouse it's a good cat". -Deng Xiaoping

Muhammad al-Khwarizmi There is a truly "free market" currency called Bitcoin, or as I like to call it, Buttcoin. It has been highly volatile and crashed majorly twice in the few short years of its existence. I would not be surprised if it crashes again in the coming months.

I'm all in favor of trying anarcho-capitalist and similar ideas and letting them fail on their own terms, so no one deigns to advocate them again. It is for reason that I look forward to the implementation of seasteading.

message 8: by Pritesh (last edited Mar 10, 2015 09:40AM) (new) - rated it 4 stars

Pritesh Desai The author has praised Norway often in this book. Isn't Norway rich because of oil deposits? I'm from India and things today are much better than they were 15 years ago. Opening up the Indian economy helped.

Carole His position is more centrist than left-wing - he clearly favours a mixed economy over a centrally-run economy.

Nicholas Why is it absurd to claim that a welfare state can enable economic growth? People can take more entrepreneurial risks if they know they have a basic level of financial security below which they will not fall. It makes it easier for people to invest time in education and skills development, raising their productivity. It redistributes income from high income earners who spend a relatively low percentage of their income to low income earners who spend nearly all of theirs, expanding overall demand for goods and services, and thereby enabling more firms to emerge, expand, and hire.

Steve His key point for me is that economics is not a science. There is no single right way of doing things but rather you choose economic policy that fits the end result you want.

What we have at the moment is not a free market but a market that is fixed in favour of the rich in order to protect their wealth and the protagonists want to convince us that there is no viable alternative. There is and that is the most important (but not the only) takeaway from Chang's book.

Muhammad al-Khwarizmi I think a solid positive economics (per Friedman) is entirely possible. It's not what we have right now though.

Andrew Hardly leftist. He is heavily biased toward Japanese corporate culture and Flexcurity.

Most left-wings would consider him as a hard right.

message 14: by JP (new) - rated it 5 stars

JP Oh boy. Well, I'm glad I didn't listen to your review before I read this book, which I thoroughly enjoyed. I find your review highly disingenuous and so, if you'll allow me, I would like to point out a few problems I saw in your review to re-encourage people to read Chang.

First, the book isn't an intense investigation into a series of specific articles or views, and so has to be pretty broad in its "things" that it chooses to disprove. Chang isn't setting up straw men, though you do seem to use some logical fallacies of your own. I will try to address your paragraphs point by point and I'm sorry if I ramble.

"Thing 1": You criticize Chang for mischaracterizing free market economics by saying that obviously you believe in some rules. He acknowledges this repeatedly. In fact, he says literally the same thing you're saying. That's the point of the chapter. But by having any rules we've already agreed that the market isn't 100% free. Since you've conceded this, he argues, we are now debating how much SHOULD be free (100% would have no gov. to enforce private property rights, 0% would have no "private" anything).

Your issue with employment being a bilateral agreement is a problematic free-market idea. Workers are grossly over-powered by employers, and so these "bilateral agreements" are really much more akin to unilateral ones because of the difficulty for laborers to leave one job negotiation and find a better bargaining environment with one of the employer's competitors (if I threaten to walk off the job if I don't get a concession, my boss has little reason to balk; if he threatens to fire me, I better change my behavior quick; this is why unionization is important). For a reasonable comparison to contract law, signing a contract with a company that forces aggressive anti-consumer claims doesn't require me to abide by those claims if I fight it later and the courts rule that those rules are "unconscionable"; one consideration of "unconscionability" in business is if there is no realistic competition that would allow me to choose a competitor who does not offer harmful contract conditions; such is the labor market, though we're too enamored with the idea that unions and the NLRB are "the problem" to have strong labor laws in this regard.

You resort to a reducio ad absurdum argument regarding child labor laws. Children working provides more workers, and those who won't fight back against injustice at that, which drives down the cost of labor. Employers, who controlled (at least at the time) the cost of living, could compel families to employ their children by raising that cost above the wages paid to a parent (or two). By legally disallowing children from working, the government both restricted the labor market, marginally increasing the bargaining power of workers, and forced businesses to pay the adult workers enough to afford their COL. There were still more than enough workers to produce and allow the economy to grow. It doesn't follow that the author suggests we legislate work away, since there wouldn't be enough workers to produce and allow the economy to grow. You're using a logical fallacy.

I do like that you pointed out the "Equal opportunity is inextricably linked to equal outcomes." Also that there are competing theories on that. Unfortunately, as shown by the effects on mobility and poverty of America's distributionally lacking social spending as compared with some of our European counterparts, free market economists would be empirically incorrect to argue that "under a mixed/regulated economy the distribution of wealth is shifted around slower than under free markets."

Your school lunch issue basically didn't add anything. First, inflation is a constant watchword of market fundamentalists, despite the fact that inflation has been essentially nonexistent in the US for decades. Further, before the central bank, our boom-bust cycles were devastating and both inflation and deflation were out of control. You can find a simple graph that depicts this: .

That is data turned into a graph from "How Much is That in Real Money" by McCluskey. Central banks are necessary and effective.

Further on the school lunch, while you're right that Chang doesn't use free market options to solve the "malnourishment" question of equality of opportunity, that's because it opens up a whole can of worms that isn't his task here ("No taxicab medallions would mean more cab drivers... Which would also mean lower wages.")

You read him looking for problems instead of simply acknowledging that he was often extremely reasonable and provided a helpful framework to rethink economic ideas that aren't solidly rooted in the real world. A perfect example is how you refuse to acknowledge that we could easily legislate food availability into our system and provide for poor children, and your counterarguments (if free school food is insufficiently nutritious then mandate otherwise; poor people can't afford home-made lunches; the working poor might not be home in the morning to make a home-made lunch for their kid, so then what - have the maid make it?) kind of typify exactly the kind of out-of-touch ideology that anchors free market economics.

The world really doesn't work the way a lot of free market economics says it does. Heterodox economics, however, is - by its very nature (utilizing other fields of study to help it) - much more inclusive and, while not perfect, MUCH more closely approximates reality and how best to manage it. THAT'S what Chang is trying to show here.

Lastly, I really am not trying to be critical of you, but simply of this review. If you're self taught and you looked at the sources you mentioned, then you learned from an exclusively free-market program. I really do applaud you for taking initiative in your education, since I also read to educate myself. One problem of self-teaching compared to a structured and balanced program led by professors who can expertly deconstruct biases and present useful information, however, is that you end up not critically examining beliefs as they emerge - I think your scathing review of an effective (if not rigorous and dense) book that really does show problems with orthodox econ is a perfect example of that.

I wish you the best! I really do :-) I always love interacting with members of the Goodreads community. And I'm sorry for coming across as haughty or holier-than-thou; it's often difficult (for me, and many other people) to have a discussion about topics like this without that tone creeping into our writing.

My Background:

UMass Amherst: BA in History - Social Theory and Political Economy focus
BA in Political Science - International Relations focus
Economics minor

Suffolk Law: Applied Legal Studies Certification

Private reading as seen in my books section.

message 15: by JP (new) - rated it 5 stars

JP #didntspellorcontentcheck

Morten Greve What a willfully stupid review...

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