Response to "The Only Natural Economy"

1.) According to McMillan, the defining characteristics of a market are that information flows smoothly, property rights are protected, people can be trusted to live up to their promises,  side effects on third parties are curtailed, and competition is fostered. Markets are essentially controlled by everyone but they cannot work without structure. "Market design consists of the mechanisms that organize buying and selling; channels for the flow of information; state-set laws and regulations that define property rights and sustain contracting; and the market's culture, its self-regulating norms, codes, and conventions governing behavior" (9).

2.) There are many negative opinions in regard to the market system and I've encountered most of these through the news, television, or talk shows. What might cause some people to distrust markets is that there is a general mystery surrounding how markets work. People assume that the market economy is supposed to just run by itself and be successful. When free markets in certain countries or places fail, they probably have a difficult time believing in the market system. "Left to themselves, markets can fail. To deliver their full benefits, they need support from a set of rules, customs, and institutions" (14). Due to the mysterious nature of markets, or the lack of knowledge people have about how a market works and how it is successful, leads to this distrust.

3.) In my opinion, the market rules that are important for modern markets are lowering transaction costs (by entrepreneurs and governments) and a top-down market design in which the government provides a stable environment for the market to flourish with supporting institutions, property rights, laws, and regulatory overview. "While markets can do a lot, they do no work automatically. Unaided, the market will not take care of things" (14).

*Response questions to John McMillan's Reinventing the Bazaar, a natural history of markets.