I have to admit that I never finished reading this book. It was taken out of my hands by the great library strike of '07. I made it about half-way, but I found that the book had lost steam and was only throwing out an interesting anecdote every dozen pages by the middle. If you are curious about it, around 50% of the book's ideas are in the first chapter (or the second, I can't remember); the rest is just fodder for interest.
The thesis was that market freedoms erode utility.
In a free market, buyers vote with their dollars to signal to sellers what they want. If consumers want baggy pants, then sellers who make baggy pants get rewarded. If one seller makes the baggiest pants, then they will sell more, because consumers want the baggiest pants. If one seller can make baggy pants for less, they earn more profit either by selling more baggy pants because their's have a lower price, or by retaining more profit per (g-)unit.
This all works pretty well, but micro-economics is built on a couple of major assumptions:
- Rationality: a consumer chooses between alternatives to maximize utility assuming:
- perfect knowledge: aware of all alternatives and their trade-offs in utility and price
- competence: ability to evaluate alternatives
- transitivity: if a=b and b=c then a=c
- Ordinality: choices can be ranked by level of utility
Swartz doesn't addresses these assumptions directly, but it's an underlying theme that some of them are false throughout his work.
Perfect knowledge is perhaps the simplest assumption to attack. Consumers simply do not have perfect knowledge, and produces regularly take advantage of this (otherwise their would be no need for advertising). The clearest example in the book was about restaurant kitchens. Imagine two restaurants where they appear identically equal in utility, except for the fact that one has a spotless kitchen, and the other has a dirty one. The cost of maintaining the clean kitchen puts the one restaurant at a disadvantage. Customers don't see the kitchen, so they don't know about it. Over time, the restaurant with the dirty kitchen will be more successful since it doesn't have the associated cleaning cost.
Bruce Schneier talked about lack of rationality (and asymmetrical information theory and The Market for Lemons) and how it relates to computer security in A Security Market for Lemons -- companies that spend R&D time on real security products get undercut by ones who don't because the consumers can't tell the difference.
The lack of rationality of consumers leads to a situation where economic profit becomes the only driver for producers. Making the best product doesn't matter if consumers don't have knowledge and if they can't competently evaluate alternatives. It becomes a game of who can convince consumer that they offer the best utility while cutting as many corners as possible. Ultimately, the market rewards whomever makes the most money, not who serves consumers best, so the producers race to the bottom.
The pursuit and exploitation of individual advantage in the service of profit is built into the ideology of the market. Those who fail to capitalize on their advantages will earn less money, or be fired by their bosses, or be driven out of business by their competitors.
You can see this in poisoned pet foods and leaded childrens' toys. Brands have become little more than advertising as everything is manufactured by outsourced low-cost producers.
The early part of the book focuses on attacking the application of market theory to social institutions. It argues that schooling, medicine and even baseball are debased when they are understood in terms of profit-making.
The medicine example is fairly long, but the gist of it was that doctors set up HMOs to serve their patients better. These got perverted by business types in the race to the bottom (the ones who didn't race went out of business because they weren't cost competitive with the ones that did), and they are left with the disaster of a health care system in the U.S. I don't remember the sport example.
Education is probably easier to explain. It talks about how the desire to quantify education has forced a market mentality into it. The need to quantify lead to metrics, and those metrics became twisted from being diagnostics to being the end goal. It goes like this: we need a standard test to asses education levels, then there is talk about evaluating teachers (and schools) based on how their students' score on the test (which was not its intent), so the teachers (and admin) respond by teaching to the test to maximize scores instead of working on general education. In the end, the standardized test score becomes the only thing that matters. This happened a lot at my old University in its quest to stay on top of the Macleans' University Rankings.
Another unfortunate example is how these metrics can extinguish the point of the activities. Students get rewarded based on number of books read, or something, so reading more (quantity) becomes the only goal. Students pick short books -- ones that are easy to read -- and read them as fast as possible. They don't think about what they read, they don't enjoy it, they don't reflect. They just read as fast as they can. The extrinsic reward, whatever it is, ultimately extinguishes the intrinsic motivation of the student.
Joel Spolsky talked about The Econ 101 Management Method to say the same things about software project management. Extrinsic motivation destroys intrinsic motivation, and what's worse is that your metric is never the thing that you really care about, but your employees end up only caring about the metric (since that's how they are measured).
Robert Austin, in his book Measuring and Managing Performance in Organizations, says there are two phases when you introduce new performance metrics. At first, you actually get what you wanted, because nobody has figured out how to cheat. In the second phase, you actually get something worse, as everyone figures out the trick to maximizing the thing that you’re measuring, even at the cost of ruining the company.
