Book review: The Economics of Success: twelve things politicians don’t want you to know

In today’s climate, as free market capitalism struggles to shake off its association with the ills of the past few years, and calls for more and deeper regulation of markets abound, it is refreshing to read an unashamed defence of the open market and an assault on the assumption that government intervention is an optimal solution.

This ought not to come as a surprise, since the author is director of the Adam Smith Institute. The Economics of Success is robust in its refusal to meet on ground chosen by free market critics. As Dr Butler points out, anti-capitalists are eager to argue about the actual experience of capitalism versus the imagined reality of an anti-capitalist society, but less keen to frame a discussion pitting the reality of capitalism against the reality of tried alternatives, or the theory of capitalism versus the theory of an anti-capitalist alternative.

His argument follows that of FA Hayek, though he has 70 more years of history from which to gather examples to illustrate his arguments. The book does not have the urgency of Hayek’s The Road to Serfdom — given the circumstances in which Hayek was writing — but it is a reminder of the drivers of the free market economy. The key principle — that markets are better arbiters of supply and demand than bureaucrats or politicians — appears constantly under pressure, as our political leaders respond with regulation and legislation to an enormous variety of perceived problems. Butler’s argument is that these interventions distort efficient pricing, which undermines market efficiency and leads to criticised outcomes, which are then wrongly laid at capitalism’s door.

Dr Butler gives a number of examples of such distortions and the effect of the reversal of some of them. His description of the lifting of price and wage controls in post-war Germany is interesting, though I cannot judge whether they were solely responsible for Germany’s subsequent recovery to European pre-eminence.

Many commentators refer to the greed or caprice of the market causing unfair outcomes. The book’s strength is to reiterate that markets in themselves are not greedy. Also, capriciousness in the economy largely emanates from governments, regulators and bureaucrats making large and flawed decisions on our behalf, rather than millions of us making small decisions based on our own circumstances and knowledge.

Andrew Herberts is deputy head of private investment management (UK) of Thomas Miller Investment