The best books about how markets really work

Steven K. Vogel Author Of Marketcraft: How Governments Make Markets Work
By Steven K. Vogel

Who am I?

I first got interested in how markets really work when I wrote my Ph.D. dissertation on the “deregulation” movement in the United States, Western Europe, and Japan. I quickly discovered that deregulation never happened in the literal sense. In most cases, governments had to increase regulation to enhance market competition. They needed more rules to get “freer” markets. This sounds paradoxical at first, but it really isn’t. It makes perfect sense once you realize that markets do not arise spontaneously but rather are crafted by the very visible hand of the government. So I took that insight and I have been running with it ever since.


I wrote...

Marketcraft: How Governments Make Markets Work

By Steven K. Vogel,

Book cover of Marketcraft: How Governments Make Markets Work

What is my book about?

Modern-day markets do not arise spontaneously or evolve naturally. Rather they are crafted by individuals, firms, and most of all, by governments. So “marketcraft” represents a core function of government comparable to statecraft, and it requires considerable artistry to govern markets well.

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The books I picked & why

Book cover of The Great Transformation: The Political and Economic Origins of Our Time

Why this book?

I first encountered the idea that governments make markets when I read Polanyi as an undergraduate.

He challenges the foundations of economics by arguing that people are motivated by social standing more than by material wealth. And he introduces the concept of a “double movement” over time – a shift toward the self-regulating market followed by a turn toward social protection.

The Great Transformation: The Political and Economic Origins of Our Time

By Karl Polanyi,

Why should I read it?

11 authors picked The Great Transformation as one of their favorite books, and they share why you should read it.

What is this book about?

In this classic work of economic history and social theory, Karl Polanyi analyzes the economic and social changes brought about by the "great transformation" of the Industrial Revolution. His analysis explains not only the deficiencies of the self-regulating market, but the potentially dire social consequences of untempered market capitalism. New introductory material reveals the renewed importance of Polanyi's seminal analysis in an era of globalization and free trade.


Book cover of The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies

Why this book?

My view of markets has been heavily influenced by my colleague from the Sociology Department downstairs, Neil Fligstein.

He follows Polanyi in posing a direct challenge to the basic assumptions of economics. He argues that firms seek stability, not necessarily profit maximization. That is, they want to stabilize prices and keep the firm intact.

He also brings power to the center of his view of markets. Incumbent firms engage in power struggles. They use business strategies, like collusion, and political strategies, like lobbying for favorable regulations, to insulate themselves from disruptive competition.

The Architecture of Markets: An Economic Sociology of Twenty-First-Century Capitalist Societies

By Neil Fligstein,

Why should I read it?

1 author picked The Architecture of Markets as one of their favorite books, and they share why you should read it.

What is this book about?

Market societies have created more wealth, and more opportunities for more people, than any other system of social organization in history. Yet we still have a rudimentary understanding of how markets themselves are social constructions that require extensive institutional support. This groundbreaking work seeks to fill this gap, to make sense of modern capitalism by developing a sociological theory of market institutions. Addressing the unruly dynamism that capitalism brings with it, leading sociologist Neil Fligstein argues that the basic drift of any one market and its actors, even allowing for competition, is toward stabilization. The Architecture of Markets represents a…


Book cover of Reinventing the Bazaar: A Natural History of Markets

Why this book?

McMillan offers a highly readable and concise book on how economists understand market institutions.

I love to assign this book to my undergraduate students because McMillan makes sense of some fairly complex topics, such as auction design. And he covers a wide range of topics of current interest, such as corporate governance and intellectual property rights.

Reinventing the Bazaar: A Natural History of Markets

By John McMillan,

Why should I read it?

2 authors picked Reinventing the Bazaar as one of their favorite books, and they share why you should read it.

What is this book about?

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?"

Taking us on a lively tour of a world we once took for granted, John McMillan offers examples ranging from a camel trading fair in India to the $20 million per day Aalsmeer flower market in the Netherlands to the global trade in AIDS drugs. Eschewing ideology, he shows us that…


Book cover of The Code of Capital: How the Law Creates Wealth and Inequality

Why this book?

Pistor offers the legal scholar’s perspective on how law shapes markets, covering topics from corporate law to financial regulation and pharmaceutical patents.

She not only shows how law sets the rules for markets, but she demonstrates how the law can create markets and assets in the first place. She also goes beyond the formal law on the books to examine how crafty lawyers can reshape the law in practice.

The Code of Capital: How the Law Creates Wealth and Inequality

By Katharina Pistor,

Why should I read it?

3 authors picked The Code of Capital as one of their favorite books, and they share why you should read it.

What is this book about?

A compelling explanation of how the law shapes the distribution of wealth

What is it that transforms a simple object, an idea, or a promise to pay into an asset that creates wealth? Katharina Pistor explains how, behind closed doors in the offices of private attorneys, capital is created-and why this little-known activity is one of the biggest reasons for the widening wealth gap between the holders of capital and everybody else. A powerful new way of thinking about one of the most pernicious problems of our time, The Code of Capital explores the various ways that debt, complex financial…


Book cover of The Great Reversal: How America Gave Up on Free Markets

Why this book?

Why do governments have to make markets work?

Well for one thing, firms might prefer to collude rather than to compete, if given the choice. So we need antitrust policy to make them compete.

Philippon surveys developments over the past few decades, demonstrating how the United States has weakened antitrust policy and enforcement while Europe has strengthened it.

He also looks at particular sectors, with a particularly compelling chapter on how the U.S. financial sector has grown without delivering more value to consumers and investors.

The Great Reversal: How America Gave Up on Free Markets

By Thomas Philippon,

Why should I read it?

2 authors picked The Great Reversal as one of their favorite books, and they share why you should read it.

What is this book about?

A Financial Times Book of the Year
A ProMarket Book of the Year

"Superbly argued and important...Donald Trump is in so many ways a product of the defective capitalism described in The Great Reversal. What the U.S. needs, instead, is another Teddy Roosevelt and his energetic trust-busting. Is that still imaginable? All believers in the virtues of competitive capitalism must hope so."
-Martin Wolf, Financial Times

"In one industry after another...a few companies have grown so large that they have the power to keep prices high and wages low. It's great for those corporations-and bad for almost everyone else."
-David…


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