Everyone Loses When Scholars Compare Markets to Myths

Too often, discussions about capitalism and inequality rest on an uneven comparison: real-world markets are measured against imaginary governments.

That is one of the central concerns Northwood University Economic Professor Michael Makovi raises in his review for The Independent Review, a journal of The Independent Institute. In the piece, Dr. Makovi reviews Understanding Political Economy: Capitalism, Democracy and Inequality, by Bob Hancké, Toon Van Overbeke, and Dustin Voss.

As Makovi explains, some scholars “uncritically compare real-world, imperfect markets to hypothetical, perfect, idealized governments.” From there, it becomes easy to dismiss markets and assume government intervention is the only credible solution to social problems.

But that framework is flawed from the start.

A more serious analysis, Makovi argues, compares real-world markets with real-world governments — both imperfect, both limited, and both capable of failure. Markets are not flawless, but neither are political institutions. In many cases, entrepreneurs and voluntary exchange can address social challenges more effectively than regulation.

Makovi’s review offers a more balanced and realistic way to think about capitalism, democracy, inequality, and the role of government. It is a valuable reminder that before passing judgment on markets, scholars should apply the same critical scrutiny to the state.

Read the full review here to explore what a more even-handed comparison of markets versus government looks like.