What is a market? To most people it is a shopping center or an abstract space in which stock prices vary minutely. In reality, a market is something much more fundamental to being human, and it affects not just the price of tomatoes but the boundaries of everything we value.
Reading the newspapers these days, you could be forgiven for thinking that markets are getting ever more efficient—and better. But as Tim Sullivan and Ray Fisman argue in this insightful book, that view is far from complete. For one thing, efficiency isn't always a good thing—illegal markets are very often more efficient than legal ones, because they are free of concern for laws and human rights. But even more importantly, the chatter about efficiency has obscured a much broader conversation about what kind of economic exchange we actually want. Every regulation, every sticker price, and every sale is part of an ever-changing ecosystem—one that affects us as much as we affect it.
By tracing 50 years of economic thought on this subject, Fisman and Sullivan show how markets have evolved—and how we can keep making them better. This leads to fascinating and surprising insights, such as:
Why your 10,000 used car is likely to sell for 2,000 or less;
Why you should think twice before buying batteries on Amazon; and
Why it's essential that healthy people buy medical insurance.
In the end, The Inner Lives of Markets argues for a new way of thinking about how you spend your money—it shows that every transaction you make is part of a grand social experiment. We are all guinea pigs running through a lab maze, and the sooner we realize it, the more effectively we can navigate the path we want.
Fisman, a behavioral economics professor, and Sullivan, editorial director of Harvard Business Review Press, have created an entertaining overview of economic thought from WWII to the 2000s. Declaring the modern world to be "in the midst of a grand social experiment that has elevated efficiency above all other virtues," the authors set out to investigate how the market has affected people's lives and ways of thinking. To back up this premise, they delve into topics as varied as WWII-era POW camp economics, Major League Baseball, 13th-century Italian merchants, and the arrangement of prom dates. The authors claim that markets have played an increasingly intrusive role in recent years, closely tied to the growth of electronic communications as a disruptive economic force. This leads them to a question of regulation: how can we work to fix these intrusive markets? The treatment of the topic is witty and energetic. However, to benefit from it, readers will have to accept the premise that markets are having an outsized, personal effect on their lives a case that is not compellingly made.