Reinventing The Bazaar. Study Notes by Zhipeng Yan. – 1 -. Reinventing The Bazaar – A Natural History of Markets. John McMillian. Chapter 1 The Only Natural. Reinventing the Bazaar has ratings and 47 reviews. Kafka said: My review is divided into (two) parts: Abstract and Reaction (e/ part words lo. With information “poor, scarce, maldistributed and inefficiently communicated, it is buyer beware,” says John McMillan, an economics professor.
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From the wild swings of the stock market to the online auctions of eBay to the unexpected twists of the world’s post-Communist economies, markets have suddenly become quite visible.
We now have occasion to ask, “What makes these institutions work? How important are they? How can we improve them? Eschewing ideology, he shows us that markets are neither magical nor immoral. Rather, they are powerful if imperfect tools, the best we’ve found for improving our living standards.
Paperbackpages. Published November 17th by W. Norton Company first published To see what your friends thought of this book, please sign up. To ask other readers questions about Reinventing the Bazaarplease sign up. Be the first to ask a question about Reinventing the Bazaar. Lists with This Book. Jun 20, Kafka rated it really liked it Shelves: My review is divided into two parts: Don’t let my critique fool you: My academic “shit-talking” is due to the fact that this paper was for school, where “critical thinking” is encouraged.
In fact, I think it was the book with the strongest case yet for markets and efficiency. I wish that McMillan were still alive today.
Anyways, read o My review is divided into two parts: Establishing how markets are inexorable, McMillan argues that they need to be well-designed in order to promote efficiency and maximum social good. The five elements required for markets to run smoothly are: Markets arise and adapt as needed from the bottom-up — and innovations by participants are their drivers — but often need the the government’s help to reach their full potential.
Markets need support from a set of rules, customs, and institutions that set up mechanisms ensuring full benefits are delivered Market participants’ need decision-making autonomy to voluntarily exchange according to their preferences — and competition fosters this autonomy, by restricting disproportionate distribution of market power between participants 6. But choices by themselves do not ensure competition, because people need to be able to compare their choices Search costs weaken competition, e.
Thus, the internet age has facilitated trade for both sides e. Trust and confidence that contracts and property rights will be protected is established through private and public sectors. Thus, market participants can substitute or complement the legal system or lack thereof by developing their own self-enforcing mechanisms 61, China agricultural reformbut the law is often needed for transactions that require large upfront investments and for economic growth.
Finally, externalities like pollution or resource depletion need to be collectively-enforced, regulated top-down through appropriately-set taxes or quotas, or through privatization Marshall Islands fisheries, Even better, quotas can be made tradable to achieve efficient allocation of caps, and alleviate government micromanaging burden Markets generate value through trade, i. Thus, markets are resilient and can even form in refugee camps, prisons, and under Communist regimes The decentralization of markets are the source of its dynamism 7as participants use local knowledge and make adaptations and innovations through trial and error to optimize efficiency.
Innovating economic organization can be as productive as technological innovations The internet revolution is an obvious: Markets and government have an uneasy relationship. Patents and intellectual property rights are an example of imperfect solutions maintained by the government at cost to users. Cost-benefit can be weighed to achieve optimum e.
Top-down price-setting without the use of market forces, e. Communism does not work because central planners lack the reinventibg of the massive amounts of information from the ground needed to manage every aspect of the economy.
However, market-supporting institutions are necessary for markets to be workable. NZ already had them — however, their state price controls caused distortions that required shock therapy, despite the societal pain.
Poor bwzaar need to foster markets and minimize inequality to achieve growth, but fail to do so because their markets, even if existent, are underperforming. Further, in both cases, corruption can inhibit growth through lack of investor confidence Russia — although self-restrained and strategic corruption, can sometimes help growth e. McMillan maintains that market design does not control what happens in the market, but it shapes and supports the process of transacting 9and that well-designed markets have to protected from both anti-market and free-market ideologues epilogue Ch.
Reinventing the Bazaar: A Natural History of Markets
McMillan makes a very strong case for a market economy, as long as it is well-designed. Some additional macroeconomic perspectives on net social benefit may also have strengthened the book. Cutthroat pricing can hardly be good for competition, as it may cause markets to fall into the trap of Gresham’s law There can be externalities that aren’t always so easily regulatable as his treatment on cap-and-trade may make it seem e. Or it can mean production of lower quality goods — freer information is not a guarantee of quality, as can be apparent by comparing many American products with say, Japanese or German electronics, auto, home appliances, etc — Demming was a guru in Japan but unfortunately ignored when he came home to the U.
It can also mean skimping on labor costs i. There was scant mention of worker rights in his entire treatise. This book seems to almost assume that everyone is an entrepreneur, or at least that efficient entrepreneurs or market participants should win most if not all of the time. In fact, there is ample validation of markets helping poor people throughout the book e. The only moment he comes close, is in discussion of compulsory licensing for patented AIDS drugs in low-income countriesbut even then, this is only the result of finding justification through cost-benefit analysis, in the strict financial sense.
Also, his authoritative grasp of microeconomic issues overshadows his perspective on macroeconomics, as evidenced for example by his extremely-superficial treatment of all that is needed to end poverty in developing countries, or further considerations on how so many social investments can indeed, if designed well, lead to economic growth later in many indirect ways.
It seems that Keynesian perspectives may be rather foreign to microeconomists’ rationales, providing for an incomplete picture on the limits of well-designed markets’ abilities to maximize growth and net social benefit. Sometimes it also takes well-designed fiscal policies. For example, information flow may cause students or workers to get training in less-marketable disciplines, but a well-functioning market by itself is very far from solving unemployment.
But perhaps these are all macroeconomic issues, and political courage required balancing macroeconomic expertise. This ahistorical account of markets had a little bit thr a misnomer for the second half of its title, and may be better called, Reinventing the Bazaar: In Defense of Well-Designed Markets. Hence, the title of this reaction. I would definitely recommend this as an alternative to Wheelan’s Naked Economics. McMillan’s main point is that markets are tools; and like all tools, they can have better and poorer designs, and can be used well or less well to achieve their end.
They are socially constructed. He critiques both Ayn Rand-style conservatives and libertarians whose faith in markets endows them with bazzar moral purposes and those on the left with similarly religious tenets that markets are evil.
I think there are stil I would definitely recommend this as an alternative to Wheelan’s Naked Economics. I think there are still plenty of assumptions that McMillan makes with which I disagree. Like too many economists, he sees growth as an imperative, and no thoughts about ecology or sustainable natural resource use interrupt this. And I strongly disliked his tendency to regard people as consumers first and citizens second. Still, he seems to have reinventint a wide range of viewpoints, and comes to some interesting conclusions about when strong property rights are effective and when they are not.
He argues that they intellectual property rights in the U. Mar 23, Ami Iida rated it really liked it Recommends it for: It is a book that explains the various auction. By applying a game theory, it will explain principle of various auctions. When I really read the book, I had a large amount of harvest about auctions.
Reinventing the Bazaar | W. W. Norton & Company
I get how to think “game theory”. Dec 23, Jerrod rated it liked it Shelves: This is a well written pop-economics books that takes as its main topic reinventihg benefits that markets bring and the limits of markets left to themselves. The author rightly views markets as systems of exchange that depend on the definition of property rights for mcmiillan types of goods.
He deftly points out the central planning fails do to decision makers not having and potentially being unable to obtain the proper information to make decisions that lead to efficient outcomes.
REINVENTING THE BAZAAR: The Natural History of Markets
He also makes the ast This is a well written pop-economics books that takes as its mvmillan topic the benefits that markets bring and the limits of markets left to themselves. He also makes the astute observation that property rights such as patents can be defined in such a way to make the market less efficient than otherwise.
For the author, it’s not the false dichotomous choice of markets of government. Kcmillan problem is one of market design. He views the essential role of government as defining and defending property rights sometimes used to address various externalitiesthough he also notes that this goes beyond just the justice system.
When addressing tradable fishing quotas, he notes that monitoring by officials is still necessary. I am of the same opinion of the author, but I had this feeling that this nuanced take on relnventing was still slightly under nuanced. Every time he talked of market failure either from externalities, informational asymmetries, etc.