Kuttner starts cleverly by conceding just about everything that free-market conservatives espouse. He begins the first chapter with the sentence "Markets accomplish much superbly." Then, of course, he spends the rest of the book qualifying that concession.

Kuttner sets out to show how "free markets" in the United States have failed in banking and securities, airlines, health care, labour, telecommunications, and utilities. In each case, Kuttner starts with a "horror story" of ripped-off consumers, glutted markets, abused workers, or defiled rivers. He then argues that this "reality" makes mincemeat of free-market theory emanating from the University of Chicago Economics department. Further, he denies that these markets could possibly correct themselves by invoking Canadian economist, Richard Lipsey's, 1956 General Theory of the Second Best. That notion states that when multiple distortions of price and supply exist in a market, you just make matters worse by removing any one distortion. Kuttner concludes that since market reform can't work, government, by regulation or subsidy, must effect a pragmatic correction. He then gives examples of "successful" government interventions, e.g. support for scientific research.

Let's begin then. Are Kuttner's horror stories real? Let's say he accurately describes the events, then misdiagnoses the causes. For example, in discussing financial regulation, Kuttner relies heavily on John Kenneth Galbraith's interpretation of the Great Stock Market Crash of 1929 and its subsequent effect on the global economy. Galbraith claimed that unscrupulous stock speculators and unchecked banks created a financial pyramid scheme which when it collapsed took the global economy with it. Kuttner neglects, of course, to mention Washington's role in at least exacerbating the Great Depression by inflating the currency and wrecking global trade with the Smoot-Hawley Tariff.

Is Kuttner right that free-market economic theory is over-simplified and oversold? Kuttner takes great glee in exposing the occasional zealotries and disagreements among free-market economists as evidence of their inconsistency and bias. He wants to persuade readers that their economic reality is far more complex than free-market theory. He then invites them to join him in "effective" liberal pragmatism.

Kuttner's core mistake is his misleading comparison between the complexity of economic reality as he sees it, and the simplicity of free-market economics as he portrays it. Complexity comes in two kinds, just like fat—good and bad. Good complexity reflects the diversity of individual human desires and actions. It results from both the individual and the collective decision to allow the widest possible variety of human experience consistent with mutual consent. Bad complexity results from unnecessary and arbitrary restrictions on individuals desires and actions. That is, an individual is forced to take additional steps and to seek external approvals to fulfil a desire or perform an act.

Are free-market prescriptions simplistic? Yes, but the result is more good complexity. Does liberal pragmatism reflect more the reality of entrenched interests? Yes, but the consequence is more bad complexity. In every industry Kuttner examines, the cause of complexity lies in a government's acting on behalf of the regulated rather than the consumer. Kuttner simply ignores the evidence of "producer capture" presented by public choice scholars in, for instance, the air travel and financial markets.

Nor does the fact that free-market thinkers disagree among themselves hardly discredit their traditional prescriptions for public policy, e.g. balanced budgets, low taxes, and few but clear laws and regulations. Good government flows more from following a few simple rules than knowing the latest in economic research. Finance ministers are better off having read Milton Friedman's Free to Choose than the Canadian Journal of Economics.

Is Kuttner accurate that markets cannot be corrected by removing distortions? Such pessimism merely covers his desire for government to intervene in some markets and not to stop intervening in others. His purpose is most obvious in his discussion of monopolies. He fails first to ask the most important question about an alleged monopoly. "Is it the result of a temporary market concentration or permanent external distortion?" If a monopoly exists in a free market, you cannot say that the market has failed to correct itself. One can only say that it has not corrected itself, yet. It is fair to say that the only way a market will fail to evolve and become more competitive is if a government intervenes on behalf of one or more producers.

A "second best" free market is still better than either a "second" or a even "first" best regulated market. Why? A free or relatively free market has one paramount advantage; the ability to change in response to new conditions. As easily as a company achieved market dominance, it could lose it if it failed to anticipate emerging product trends. Even Bill Gates admits that Microsoft won't last forever; he just hopes to keep it going as long as he can. In contrast, government directed monopolies remain frozen at a single point in a market's evolution.

Finally are Kuttner's examples of successful public subsidies really convincing? He relies most heavily on the supposed benefits of government under-writing of scientific research. For instance, he argues that technological innovation, funded by government military research, brought down the cost of flying from 1930 to 1980; deregulation only lowered passenger costs minimally. His point is that "excess competition may be frustrating scale economies" supposedly made possible by public investment in aeronautics research.

Here again, he assumes that market success, like market failure, is a static state. Technological advances may well have reduced flying costs between 1930 and 1980, but that says nothing about the future. Government-funded technology may well give favoured competitors an edge in capacity and price, but competition remains the driving force in price and innovation. There is nothing intrinsic to airplane technology that would supersede the workings of supply and demand. Kuttner may find some airline executives and union leaders who don't like airline deregulation, but why should they count more than the interest of the consumer?

Kuttner points to his selective list of "productive" government subsidies in science and technology as proof that free market economists have it all wrong. No one denies that if government spends a lot of money some good is bound to happen to someone. The point is that such spending concentrates the benefit on producers, not consumers.

Market economics is about the choices people make and their consequences. That people make illogical choices and the consequences aren't immediately apparent doesn't refute that good choices bring good results, and bad choices, bad results. You don't have to look too far to find a government program begun for silly reasons that still produced an unexpected short-term benefit. The law of unintended consequences is a two-way street both for interventionists and market economists. Yet economics continues to hold its value precisely because in the long run the predicted disaster invariably occurs.

Beyond the economic debate, Kuttner insists that markets be watched and regulated because "Taken to an extreme, markets tend to destroy [liberal democratic values]." In making this extraordinary, ahistorical statement, Kuttner clings to two liberal myths—capitalism leads to ruinous competition, and competitors will do absolutely anything to succeed. In short, the amorality of the market makes man immoral.

But how exactly is individuals meeting daily the needs and wants of others without coercion immoral? That Kuttner does not answer, except to suggest that consumers are not free, and that any market success must stem ultimately from hidden forms of producer coercion. Nor does he show how it is that government officials only occasionally dependent on individual preferences possess some greater moral vision and force.

There is a moral limitation to the market. But it is not the pressure on individuals to compete, rather it is the temptation to use government to restrict the choices of others. The problem is not markets selling goods and services, it is governments selling influence over markets.