THE MARKET SYSTEM

A roundabout but illuminating attempt to define a slippery economic construct.

“Although the market system is roughly familiar to all of us,” writes Lindblom (Economics/Yale Univ.), “not even economists wholly understand it.” That is understandable, given all the things that the market system is, at least in the author’s account: an “extraordinary social process,” a motivator and coordinator of human activity, a peacekeeper and cause of conflict, an ally and enemy of freedom, a destroyer and producer of inequalities. Lindblom observes that all existing societies make use of markets, but not all have developed mechanisms whereby the conjunction of buyer and seller takes precedence over any program of state planning; the market system, in his definition, involves the “societywide coordination of human activities not by central command but by mutual interactions in the form of transactions.” His insistence on the supremacy of individuals is not mere libertarian cant; he recognizes that certain market-state hybrids have proved effective, that the state can perform certain needed tasks that the market cannot, and that individuals and corporations are capable of extremely bad faith. But, he adds, at its best the market system is a pattern of cooperative behavior where people somehow overcome naked self-interest to act in ways that yield mutual benefit, and where individuals, by voting with their wallets, have a direct influence on how that behavior is conducted. The leading enemies of that cooperative system are not the statist ideologies of old, Lindblom suggests, but instead “reckless banking and incompetent governmental regulation of financial markets,” which can instantly undo the efforts of millions. But even where relatively unhindered and apparently smoothly functioning market systems prevail, and even where consumer goods are more and more available in an ever more marketized world, he notes that people are declaring themselves to be increasingly less happy—yet another of many puzzles that the market poses.

More readable than most studies of its kind, Lindblom’s overview raises as many questions as it answers—and offers much food for thought.