Jason Furman's Reviews > Radical Markets: Uprooting Capitalism and Democracy for a Just Society

Radical Markets by Eric A. Posner
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it was amazing
bookshelves: economics, nonfiction, social_science

A brilliant, provocative work that is somewhere along the spectrum between economics and science fiction. The book is framed around a critique of economics that belies its central thrust—which is the unsparing discussion of how various systems straight out of mechanism design but often untethered from any psychological/historical/enforcement/implementation considerations could help make highly rational, utility/profit-maximizing agents better off.

Each chapter develops and presents a specific proposal: (1) abolishing private property and instead making all physical capital and tangible possessions effectively available for rent at any time by anyone that wants them; (2) shifting to “quadratic voting” where people have a budget for votes and can cast a limited number of them; (3) a new immigration system whereby everyone could bring an immigrant to the country to work here; (4) a rule to limit the largest asset managers from owning multiple competitors in an industry; and (5) a new system whereby users of Facebook, Google and other “siren servers” would pay people for the data they generate.

The chapters can be read independently of each other but they have a common form (a science fiction vignette about a future society organized along the idea, a political/economic/philosophical/historical grounding for the idea, the economics of the idea, responses to objections, and in some cases a smaller version of the idea to start with). More importantly, they have a common thrust which is to assume people are rational, assume essentially nothing about history or the status quo, and ask how the economy/society could be reconstructed in a radical fashion to give primacy to markets as a way to provide incentives, collect and transmit information, and make collective decisions—but without private property.

The book is strong and deep on the economic rationale for its ideas but weak on the objections and tradeoffs and in some cases even on the motivation. Take the opening idea, COST, that all people should declare the value of all of their property, pay a 7% annual tax on it, and anyone else could buy it at cost. This is intended to create a mechanism for the accurate revelation of value because too high and you pay more taxes but too low and you risk it being bought out. But what problem exactly is this solving? Just about the only problem identified by the authors is the hold up problem (or “monopoly problem” in their language), whereby a transportation line doesn’t get built because the last person refuses to sell their house for anything less than the full surplus. It is hard to believe, however, that this is the major reason for the misallocation of capital that Posner and Weyl lament and it seems like an awful lot of effort to solve the problem. Also, how would you shift from the current system to this? How would you force people to disclose all of their complicated assets? Do we care about privacy? How would uncertainty about future ownership affect investment incentives? How would people handle the complexity of the system when they already make systematic errors about much easier financial decisions, like retirement savings? Etc. This is just a few of the points one could ask about one of the chapters.

One point to add, largely unrelated to the core chapters, one of the parts of the book I found interesting and novel was the reformulation of some economic issues in terms of computation/computer science instead of economics/math. For example, the discussion of how hard it would actually be to solve the equations you would need to for central planning—along with speculation about what would happen if this ever became possible.

Overall, I think there is an important space for books like Radical Markets, there may be a few relatively small applications (spectrum licenses, more effective polling), but worth continuing to think bigger thoughts on the very small chance something with a big payoff does happen to work out. Plus, I like speculative fiction—and this can be read as an outstanding exemplar of the genre.
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