Book Review: Morals and Markets by Daniel Friedman

Morals and Markets by Daniel Friedman is a very different book then I expected it to be. I expected morals to be more in the forefront but they were more in the background. Regardless, this book is very well written. The subtitle “An Evolutionary Account of the Modern World” is a much better description of exactly how the book is. The book is filled with many facts about the world and markets that are really interesting.

For most of the book Friedman looks at both sides of each issue. For example, he discusses short-selling and how people have viewed it to be morally bad, but it serves a good purpose of keeping businesses in check. The author tells stories like that and you see the moral struggle in the background.

Near the end of the book, he begins to show more of his pro-government side. When he discusses both sides of the debate for globalization, I think he gives too much creditbility to those who oppose it. Take this one example; the author states that “joining the global economy brings new vunerability” and his example is that if his county specializes in brussel sprouts and all of a sudden a fungus kills their crop. I do not understand why if this was a chance then people would use insurance or future markets to protect against risk. We know that these types of markets exist so why would be it ignored. Sure, it could happen once if we assume that the crops have a 99.9% chance of not having any problems where they need these sorts of things. This, of course, is still economic calculation and a risk that the farmer is taking. He knows that if the 0.1% comes true then he will go out of business.

What is wrong with him going out of business? Sure, we wouldn’t have brussel sprouts for a while but I am sure people will find something to substitute for it. At the same time, we would then bring new farmers who could manage the risk much better.

So overall the book is a very good read. It is well written and it presents a lot of issues and ideas that most people do not think about while adding a mountain of facts. The author seems to err more on the side of market failure than government failure, even though he gives a flavor of both.




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3 CommentsLeave a comment

  1. When I read the orginal manuscript I felt that Dan (just for reference my father) was guilty as charged above (I am much more economically conservative then he is). My big issue was how he characterized the “econ 2.0” of my industry (the Net), especially his comments that open source is economically viable in the long run (yes “open” source code is viable but given it away is not). He corrected several flawed assumptions I had made and correctly pointed out that the example I was complaining about was one of the most Libertarian models in any economic activity and that I was correct in the long term (but not the short term due to reasons outlined in a old blog of mine)

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  3. I’m a bit confused by your post. I haven’t read the book, so here’s how I’m interpreting what you’ve written: The author says globalization can be bad because it leads to increased risks. For example, with globalization, local markets often end up specializing so they can take advantage of economies of scale and profit from the expanded market. But, in the example of brussels sprouts, a blight or whatnot could wipe out the entire crop, and ruin a farmer. You say, “what’s wrong with the farmer going out of business? The market will find a better farmer.” Is my interpretation correct?

    Here’s what’s wrong, then. If the market remains local (rather than global), the farmer will diversify. Thus, when blights come and wipe out some of the products, there will be other products available that will be unaffected. Thus, the local, more diversified, economic model leads to more security (and less short-term wealth). The opinion that this is bad is based on a set of values–it’s better to be happy, healthy, and secure, than to be wealthier-until-the-next-massive-failure. There’s more freedom in the security offered by a local market than there is in the “freedom” to be at the whim of a global market.

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