Illusion of Free Markets [Hardcover]

Harcourt's "The Illusion of Free Markets" is exactly the kind of book you should be reading right now. It's an impressive study of one of the most influential ideas in Western history in its origins, evolution, and the continual danger it poses for democracy.

Harcourt presents the reader with two engaging stories that highlight the contradictions of neo-liberalism, the "grain police" in royal France and the modern Chicago Board of Trade. The grain police were an organization dedicated to regulating grain markets and enforcing prices in the name of the public good, and were used as an example of an il-liberal institution by many early pro-market thinkers. However, the Chicago Board of Trade, perhaps one of the best examples of neo-liberal trade in action, is also defined by strict codes and harshly enforced rules of behavior, without which this vitally important market wouldn't even exist. Harcourt asks the reader why this change in perception in Western political culture occurred, and carries out a Foucaultian historical genealogy of the relationship between liberalism and criminality, or, the strange paradox of liberalism's dual faith in a "natural" economic order and the imperative to constantly correct the behavior of human individuals.

Much of the first half of the book is dedicated to documenting the co-evolution of the concept of an attainable "natural order" in economics and the way early political theorists conceived of criminality. The French physiocrats argued that economics naturally ordered itself, while human behavior required strict regulation. However, the Italian theorist of human punishment Cesare Beccaria began to influence Western political philosophers as diverse as Quesnay, Benetham, and even the Chicago school of law and economics in modern times. Beccaria believed that there was no natural order in human society, and that in order to create freedom, economic and social behaviors needed to be conditioned by the state. Interestingly though, Beccaria's writings on social delinquency became an integral part of liberal political economy, while the economic dimensions of his thought were left in the dustbin of history in favor of a faux-physiocrat faith in the existence of an attainable natural economic order. This led to the two central components of classical liberalism that we see today in neo-liberalism: The claim that human behavior needed to be strictly regulated, but be left unfettered in the economic sphere.

From this point onwards, Harcourt explores the various permutations this ideological concoction has taken in the modern neo-liberal world, particularly under the influence of Chicago economics. We see how the paradox led to a so-called liberalization of markets that coincided with a sudden increase in the size and power of the state. Harcourt briefly visits the Jacksonian era to provide more background on the development of the American penitentiary, which in combination with the Reagan Revolution in the late 20th century has resulted in unprecedented levels of mass-incarceration in tandem with a supposed growth in so-called freedom. He also shows that this trend is at work in other Western nations as well through various governmental strategies.

Towards the final chapter, Harcourt points out to the reader that liberalism's penal-economic chimera is the reason why the American banking elite can run off with billions in taxpayers' money, while a petty criminal will spend months in jail for merely stealing something. Through a variety of historical twists and turns, we've arbitrarily decided that the banker's behavior corresponds to nature's order, while the petty criminal is violating the laws of natural liberty.

I must caution readers of this review. Although Harcourt is deeply critical of the neo-liberals, his analysis is actually very fair. He doesn't "blame" the Chicago school for America's oppressive penitentiary system so much as simply demonstrate the role their influence played in creating it. Like Foucault himself, he sees the evolution of human thought and practice as prone to sudden changes and shifts beyond any individual's control. He is no conspiracy theorist, as he himself makes clear.

I highly recommend this book, but would also recommend that it be read alongside Michael Perelamnn's The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers. Its labor-centric approach to neo-liberalism critique would make an appropriate counter-part to Harcourt's penal-governmental approach.

The author has done an excellent job in this book.He carefully shows how the entire edifice of "modern" economic thought,as applied to markets,government and prisons, is based on the act utilitarianism of Jeremy Bentham's rule to Maximize Utility.This required economists to accept Bentham's claims, about the ability of the average man and women to have the skills and knowledge to quantify all probabilities and outcomes exactly in a manner that would always result in the attainment of a maximal benefit or outcome,as correct.Keynes had already demonstrated in his A Treatise on Probability in 1921 (1908 Cambridge Fellowship Dissertation)that Bentham's model,resurrected by Frank Ramsey as the personalist,or subjectivist Bayesian, approach to probability,was a very special case that had very limited applicability in the real world.

One error that appears in this book is the belief that there was some kind of connection or agreement between Adam Smith and Jeremy Bentham on areas in economics and ethics.In fact,Smith ,a virtue ethicist who recognized the great damage speculative behavior can do to an economy, completely rejected Bentham's positions in toto.
I recommend this book for purchase.

Fascinating ideas. But golly such repetitive writing. The editors did the author a disservice but not streamlining his arguments. I'm a generalist and my love for the subject isn't strong enough to drive me through repetitions of the same idea in slightly different clothes.