Herzog applied the “Page 99 Test” to Inventing the Market and reported the following:
This book is about markets, or rather, about the images of markets that we have inherited from the past and that continue to shape our thinking – as Keynes said, “Practical men ... are usually the slaves of some defunct economist“. Having studied economics and philosophy, I was struck by two things: first, how narrow the vision of mathematical economics is, and second, how important questions about markets are for core topics in political philosophy, for example for thinking about social justice.Learn more about Inventing the Market at the Oxford University Press website.
My PhD became a search for a better understanding of these interdisciplinary questions. I delved into the history of ideas, and I ended up with two authors who are among the most influential, but also the most misunderstood thinkers of the last 300 years: the “father” of economics, Adam Smith (1723-1790), and the German idealist philosopher GWF Hegel (1770-1831). In their writings, I discovered the resources for a better understanding of what markets mean for a society. The book compares their views and analyses their contributions to questions of political philosophy along four dimensions: the relation between individual and society, justice in the market, freedom in the market, and the market in history.
Page 99 is quite typical for the book in that it analyses the origin of an idea that is widely held, but seldom argued for, today: that market outcomes are somehow “deserved”. In Smith’s thought, we find the idea that well-functioning markets reward certain forms of behavior, such as hard work, reliability, and a genuine desire to serve one’s customers. If one receives a higher income because of these, it can be called “deserved”. But there are also cases – and these are quite widespread, especially in labor markets – where this model does not apply to reality because there is one-sided market power. To quote from p. 99:
The picture Smith draws of these wage negotiations [between workers and employers] is more akin to the relations between feudal lords and their dependants than to the ‘haggling and bargaining’ of a free market. More generally, whenever there is one-sided power that distorts prices—and this might be the rule rather than the exception in today’s markets—market outcomes cannot be justified as rewards for virtue along the line pursued here.As it turns out, Smith sees economic growth and a flexible labour market as solutions to this problem. This idea – that economic growth is a panacea for problems of all kinds – is one of the inherited ideas that we continue to believe in although they may not hold any more. The book as a whole is an invitation to challenge preconceived ideas about markets, and to discover a rich intellectual heritage that can help us to think about the future of our market societies.