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Radical Markets

Radical Markets

Uprooting Capitalism and Democracy for a Just Society
by Eric A. Posner 2018 368 pages
3.97
1k+ ratings
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Key Takeaways

1. Markets are powerful but flawed: A new approach is needed

Capitalism is blamed for increased inequality and slowing growth, yet no alternative has presented itself.

Market fundamentalism is outdated. While markets have been powerful engines of economic progress, they are increasingly failing to address key challenges like inequality, stagnation, and political polarization. The authors argue that these issues stem not from markets themselves, but from our outdated understanding and implementation of market principles.

A radical rethinking is required. Rather than abandoning markets or doubling down on existing approaches, the book proposes "Radical Markets" - institutional arrangements that allow fundamental market principles to play out more fully. This involves:

  • Extending market logic to new domains (e.g. voting, immigration)
  • Redesigning existing markets to be more competitive and efficient
  • Using technology to create new forms of markets

The goal is to harness the power of markets while addressing their current shortcomings, creating a system that is both more productive and more equitable.

2. Property is monopoly: Common ownership self-assessed tax (COST) can help

Property Is Monopoly

Private property creates inefficiencies. While private ownership encourages investment, it also allows owners to hoard assets and charge monopoly prices, leading to underuse and misallocation of resources. This "monopoly problem" is pervasive and causes significant economic harm.

COST as a solution. The authors propose a Common Ownership Self-Assessed Tax (COST) system:

  • Property owners self-assess the value of their assets
  • They pay a tax on this self-assessed value (e.g. 7% annually)
  • Anyone can purchase the asset at the self-assessed price

This system encourages accurate valuation and more efficient allocation of resources:

  • Owners can't set prices too high (to avoid taxes) or too low (risking losing the asset)
  • Assets more easily flow to those who value them most
  • Society benefits from increased tax revenue and economic dynamism

While radical, COST could dramatically reduce inequality, increase productivity, and generate substantial public revenue.

3. Quadratic Voting: A radical solution for collective decision-making

QV allows citizens to express their views in a fundamentally richer and deeper way than 1p1v allows.

One person, one vote is flawed. Traditional voting systems fail to account for the intensity of people's preferences, leading to tyranny of the majority and other inefficiencies in collective decision-making.

Quadratic Voting (QV) as an alternative. QV allows people to express the strength of their preferences:

  • Voters receive a budget of "voice credits"
  • They can spend credits to buy votes on different issues
  • The cost of votes increases quadratically (1 vote costs 1 credit, 2 votes cost 4 credits, etc.)

Benefits of QV:

  • Allows minority groups with strong preferences to influence outcomes
  • Encourages more informed and engaged citizenry
  • Leads to outcomes that maximize overall social welfare

QV could be applied to various collective decisions, from referendums to corporate governance, potentially transforming democratic processes and addressing many current political dysfunctions.

4. Immigration reform: Visas between individuals program (VIP)

A political backlash against massive migration is not inevitable.

Current immigration systems are broken. They fail to capture the enormous potential economic gains from increased labor mobility while generating significant political backlash.

The Visas between Individuals Program (VIP). This proposal would allow citizens to directly sponsor migrants:

  • Any citizen could sponsor a migrant worker
  • Sponsors would be responsible for the migrant's basic needs and compliance with laws
  • Sponsors would benefit from the migrant's labor or by placing them with employers

Benefits of VIP:

  • Captures more of the economic gains from migration
  • Distributes those gains more broadly among citizens of host countries
  • Creates personal connections that can reduce anti-immigrant sentiment
  • Allows for more flexible and responsive immigration levels

While radical, similar systems (like Canada's private sponsorship program for refugees) have shown promise. VIP could dramatically increase global productivity while defusing immigration as a political flashpoint.

5. Breaking up institutional investors: Restoring competition in corporate control

BlackRock, Vanguard, Fidelity, State Street. Most people might recognize the names of these companies, but hardly anyone knows what they do.

Institutional investors create hidden monopolies. Large asset managers like BlackRock and Vanguard own significant stakes in competing companies across entire industries. This common ownership reduces competition, potentially raising prices for consumers and suppressing wages.

A simple but powerful solution:

  • Ban institutional investors from diversifying within industries
  • Allow diversification across industries
  • Set a 1% ownership cap for investors who want to own competing firms

Benefits:

  • Restores competition within industries
  • Maintains benefits of diversification for investors
  • Improves corporate governance by giving institutional investors stronger incentives to monitor individual firms

This proposal would significantly reshape financial markets, but could lead to more dynamic and competitive industries, benefiting consumers, workers, and the broader economy.

6. Data as labor: Recognizing and compensating digital contributions

AIs run on ML systems that analyze piles of human-produced data.

The digital economy undervalues human contributions. Tech giants profit enormously from user-generated data, but users are not compensated for this value creation. This leads to inefficiencies and contributes to inequality.

Treating data as labor. The authors propose reconceptualizing data production as a form of work:

  • Users should be paid for valuable data contributions
  • This creates incentives for higher-quality data production
  • It allows people to specialize in valuable forms of data work

Potential benefits:

  • More efficient and innovative digital economy
  • New source of income for many people
  • Fairer distribution of gains from technological progress

While implementing this vision faces challenges, it offers a path to a more equitable digital future and could help address concerns about technological unemployment.

7. Radical Markets: A unifying vision for a more prosperous and equal society

Laissez faire (in its full true meaning) opens the way to the realization of the noble dreams of socialism.

A new synthesis is possible. The book's proposals aim to reconcile the seemingly opposed goals of market efficiency and social equality. By radically extending market principles, we can achieve many traditional left-wing objectives.

Key elements of the Radical Markets vision:

  • More competitive and open markets in all spheres of life
  • Broader distribution of capital ownership and returns
  • Harnessing technology to create new forms of markets
  • Empowering individuals through market mechanisms

Potential impacts:

  • Dramatic reductions in inequality
  • Increased economic dynamism and innovation
  • More responsive and effective governance
  • A more cohesive and cooperative society

While each proposal is powerful on its own, implemented together they offer a comprehensive reimagining of how to organize complex modern societies. This vision challenges both left and right to move beyond old debates and embrace a truly radical market system.

Last updated:

Review Summary

3.97 out of 5
Average of 1k+ ratings from Goodreads and Amazon.

Radical Markets receives mixed reviews, with praise for its thought-provoking ideas and critiques of current economic systems. Readers appreciate the book's ambition in proposing radical solutions to address inequality and market inefficiencies. However, some find the proposals impractical or potentially harmful. The book's strengths lie in challenging conventional thinking and sparking discussions about alternative economic structures. Despite concerns about implementation, many reviewers value the book's contribution to economic discourse and its potential to inspire new approaches to societal problems.

About the Author

Eric A. Posner is a distinguished legal scholar and Professor of Law at the University of Chicago. He has authored numerous books on law, economics, and international relations, including works on cost-benefit analysis, international law, and the balance between security and liberty. Posner's research spans various legal fields, including bankruptcy, contract, and administrative law. He has taught courses on international law, foreign relations, and game theory in law. A graduate of Yale College and Harvard Law School, Posner's current research focuses on international law, immigration law, and foreign relations law. He is also an editor of the Journal of Legal Studies and has published extensively in academic journals.

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