You Can’t Plan a Market: Transforming Culture from the Bottom-Up


The White Man's Burden by William EasterlyWhy has post-Soviet Russia not panned out to be the bustling, prosperous economy that the freedom folks predicted it would be? Is this the fault of the free market, or is there something deeper at work?

This week at AEI’s Values and Capitalism, I examine the question, channeling economist William Easterly to make the case that “you can’t plan a market.”

Although many Western tinkerers wrongly ignore the structural limitations in improving developing economies, many on the opposite side make the mistake of pretending that the structural stuff is a cinch.

I argue that it isn’t:

In our modern, polished system (with the wear-and-tear steadily increasing), we are tempted to look at other countries and think their problems are simple enough to be fixed by scribbling a couple solutions on paper and circulating it through the right hands. Even for free-market types, there is a rash assumption that all it takes is a magical structural concoction and a semi-functional government to get a poor country in motion.

Forget the individual habits and beliefs of the people on the ground. Forget the spiritual and cultural factors that limit or propel that society forward. Forget the psychological damage caused by previous (or current) totalitarian rule. “Just give them a market,” we say, “and let them be.”

As I say in the piece, “spontaneous order is not spontaneous order unless it is spontaneous.” Even in America, lest we forget, our thriving economic system did not come from the wave of a magical capitalism wand. Look no further than the 19th century to behold the painful and chaotic emergence of what we know today (and appreciate it).

To demonstrate this lesson, Easterly’s book points to several key market components that are difficult to “invent,” particularly from the top down: trust, property rights, social relationships/unity, peace, etc.

Such features — what Nick Schulz and Arnold Kling call “intangible assets” — must originate from the ground-up:

Every market (and democracy) needs checks and balances to prevent exploitative, opportunistic behavior, and the government will eventually need to enforce and cement those necessary rules (through land titles, contract reinforcement, etc.). But how exactly does one begin to develop and gain support for them in the first place? For each distinct culture and community, how does one find the necessary community impetus for embracing the core features of the market? How does one transform the culture to the point where it can properly invigorate and sustain it?

Using Easterly’s conclusions as a basis (including an unlikely tale from Communist China), I attempt to argue that such a transformation relies on a concentrated effort around individual initiative, local experimentation, and yes, spiritual transformation (not Easterly’s cup of tea).

Read the full post here.

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  • http://twitter.com/remnantculture/status/113685472571703296 Remnant Culture

    Why has post-Soviet, "free-market" Russia not panned out to be the bustling, prosperous society that we predicted… http://t.co/ffPmu7K

  • http://twitter.com/remnantculture/status/113687272276242432 Remnant Culture

    Spontaneous order is not spontaneous order unless it is spontaneous. My latest at @CommonConcept: http://t.co/Xz6gROe @bill_easterly

  • http://twitter.com/ericteetsel/status/113688397410865152 Eric

    Spontaneous order is not spontaneous order unless it is spontaneous. My latest at @CommonConcept: http://t.co/Xz6gROe @bill_easterly

  • http://twitter.com/commonconcept/status/113726150047563776 Common Sense Concept

    MT @RemnantCulture: Why has post-Soviet, "free-market" Russia not panned out to be the prosperous society predicted… http://t.co/nWmm5Km

  • http://twitter.com/remnantculture/status/113987905927651329 Remnant Culture

    You can't plan a market. http://t.co/Xz6gROe

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