The Invisible Hand?: How Market Economies have Emerged and Declined Since AD 500 Paperback – 29 April 2019

This book is both insightful and timely. The insight is about how market economies, which many consider to be a thoroughly modern manifestation, have existed in many stages in history. The author describes three market economies in detail: early medieval Iraq; the city states in medieval Italy; and the late medieval and early modern Netherlands. The particular focus is on the role of factor markets. Most interestingly, the author describes the cycle through which these economies grew out of thriving product markets, grew still further as "marketisation" increased through the rise of factor markets and then reached a point of stagnation or even decline, characterised by high levels of inequality and the assumption of power by elites. Within this cycle he charts how property and power were distributed and how this distribution evolved in line with changing political and economic structures (and the shape of factor markets). After these three detailed case studies the author provides a more panoramic view of how the same cycle has played out in modern England, the United States and Western Europe. Here is where the book's timeliness comes into play, since it is hard not to wonder whether we are not now at the final point in the cycle and about to enter a period of cultural and economic stagnation or decline. The author treads the right line: leaving out the politics and keeping to the history, whilst at the same time drawing out the significance of these lessons from the past.

A fascinating book with a disturbing message: our current form of society is inherently unstable. This is the consequence of a free market for all sources of our existence: labor, capital, land and other property. The book is the result of a research program of more than ten years by Bas van Bavel's group at the University of Utrecht.The group has studied economic developments in a number of historical societies, and from these selected three that at a certain stage of development had free markets for land, labor and capital. For these three detailed data were available.Analysis of these societies, Iraq (500-1100), Italy (1000-1500) and the Low Countries (1100-1800) revealed the same pattern of rise, growth and decline, even though they differed in many ways. There is a compelling logic in this pattern (for this reader), which greatly enhances credibility. Below I try to briefly describe this pattern; unfortunately, this does not do justice to the wealth of historical and economic information in the book.The periods described often started with unrest (uprisings, riots, etc.) which resulted in the societies becoming somewhat more egalitarian. Professional and interest groups, or cooperatives, played an important role in this. With the enforced regulations that affirmed and protected this greater equality (and some luck) further economic growth was possible in which a large part of the population shared. Surpluses of grown or manufactured products were traded in markets that grew with further development. Even more growth turned out to be possible when labor, capital and land also became readily available through suitable markets. For the initial period of this market development, the researchers from Utrecht still found positive effects for broad sections of the population, but these quickly diminished as soon as the markets were further liberalized. This liberalization was achieved by making the existing restrictive (protective) regulations less strict or even eliminating them. This created an uneven playing field on which already wealthy persons could easily (and legally) enrich themselves further. Their head start allowed them to hire expertise and perform all financial transactions on a larger scale. Even though total wealth was apparently still increasing, that was no longer the case for the common man. In the long run this led to the emergence of an elite that gained more and more influence through lobbying and sponsorship of political parties. This resulted in more regulations that favored this elite, gradually even succeeding in making the protection of their interests more and more paid by common means. The real economy suffered as a result, and investing in it became less profitable. The wealthy invested in places where a higher return could be achieved, e.g. in the financial sector, or in new markets abroad. In the end, the stagnation led to a return of society to where they started (for the common man, but usually not for the rich). This is what happened in the three extensively studied cases.In Chapter 5, van Bavel also looks at developments in England, the United States and Western Europe (1500-2000). I'm not going to tell his conclusions; you may guess them, just like our current place in the cycle.Although the book is definitely clear in terms of explanation, the readability could have been a little better for my taste. It is unfortunate that the message of the book receives so little attention in the press or public debate, it deserves an Old Testament thunder prophet, but the scientist van Bavel is anything but that. Although the author is pessimistic, I hope that this time the tide can still be turned. Read the book!

Very interesting historical research on the development and decline of markets. Markets aren't new to our age. They are born, live, grow and die. Thit has been going on for centuries.

Sehr lesenswert. Eines der vielen guten wirtschaftshistorischen Bücher der letzten 10 Jahre.Sollte zusammen mit Werken von Werner Abelshauser Pflichtlektüre für alle WiWis und VWLer werden.