Idea Transcript
John McMillian, Reinventing the Bazaar: A Natural History of Markets (New York: W.W. Norton & Co., 2002) $25.95 What do Maria Vargas Llosa, the Prophet Mohammed, H.L. Mencken, Mies Van der Rohe, Groucho Marx, John le Carre, Ray Kroc, Mark Twain, Vaclav Havel, Peter Sellers, John Donne, John Steinbeck and the Beatles have in common with competition policy? In reality not much, except as sources for quotes in John McMillan’s entertaining and enlightening recent work on what makes for a successful market. This is a mass market book about the essential questions of competition policy – why are markets good, what is necessary to markets function well, and what are the limits to markets? McMillian is a chaired economics professor at Stanford University and developed this book as a response to a challenge from the chairman of Sun Microsystems who wanted to know “what is a tenured professor going to teach me about the market economy?” (ix) Quite a lot if truth be told. McMillan’s response is charming and literate yet simple and rich in real world examples. As most competition professionals would endorse, McMillan begins with the proposition that workable markets require smooth information flows, protection of property rights, enforcement of promises, curtailment of side effects on third persons, and protection of competition. For McMillan, markets are in no sense “natural” (contrary to the sub-title of the book) and the critical question is thus one of market design. Good market design is not laissez faire but a combination of public and private decisions to create and maintain markets and to intelligently use public resources when markets cannot achieve vital societal goals. As the author notes: Market design consists of the mechanism that organize buying and selling; channels for the flow of information; state-set laws and regulations that define property rights and sustain contracting; and the market’s culture, its selfregulating norms, codes, and conventions governing behavior. While the design does not control what happens in the market... it shapes and supports the process of transacting. (9) McMillan offers a dazzling array of examples to illustrate how and why markets succeed or fail. These include the Tsukiji fish market in Tokyo, the U.S. government auction of broadcasting spectrum, the Dutch flower market, Ebay, improvised markets for necessities in prisoner of war camps, the failure of the market to provide life saving Aids drugs in the third world, global securities and commodities markets, the thriving but illegal private market in Accra, Ghana that has survived numerous waves of government persecution, the brokerage system for long distance truckers who do not want to return home with an empty trailer, high-end art auction houses, the way medical residents are matched with hospitals, and a first century A.D. military coup in ancient Rome where the army announced “that the Roman world was to be disposed of to the best bidder by public auction.” (69). The down side of examining so many different examples and issues in such a relatively short space is that it all blurs together a bit. But there is so much real life wisdom in this book
that is should remain one of the best mass market explanations of the broad strokes of competition policy for a long time to come. Spencer Weber Waller Loyola University Chicago