Marc Gunther profiles Whole Foods CEO John Mackey

Michael Giberson

Marc Gunther has a good brief profile, “John Mackey: hippie, libertarian, CEO.” I haven’t read Mackey’s new book yet, but may try it this summer. If nothing else, Mackey will provide an interesting counter to Milton Friedman’s famous views on what is now called “corporate social responsibility.”

But Gunther’s essay makes an curious turn, shifting from profiling Mackey to editorializing against Mackey’s embrace of free-enterprise capitalism. Gunther writes:

He can be … [i]deological is his view that markets can solve virtually every problem. He writes, for example, that “in the long arc of history, no human creation has has a greater positive impact on more people more rapidly than free-enterprise capitalism.” Maybe so–although democracy has done a lot for people, too–but Mackey’s faith markets and distrust of government is so absolute that he seems willfully blind to the notion of market failure.

Gunther shifts back, briefly, into biography–college dropout, eastern philosophy, yoga, mediation, veganism–then returns to Mackey’s views on business. Turns out that Mackey thinks some businesses and even whole industries (big Phama, most of Wall Street) have gotten off track, so I wonder why the claim he is “willfully blind to the notion of market failure.”

After a few more details Gunther notes Mackey’s market-oriented optimism and winds up with:

Eventually, he may turn out to be right. But so far, markets have done an imperfect job at best of rewarding the better companies and punishing bad actors. Sure, Lehman Brothers, Bear Stearns and Countrywide all collapsed … [but] tobacco companies are doing fine. Factory farms — a favorite target of Mackey’s — are doing OK, too. Nor are markets solving the climate crisis, or protecting the human rights of factory workers in China or Bangladesh. Only governments can do that.

If it is true that “only governments can” protect human rights of factory workers, then at the least Gunther ought to be weighing the costs of government failure against the costs of market failure. And really, which is more serious, failure of competition in markets to weed out ‘bad actors’ rapidly or failure to protect human rights?

If we count that not all corrupt businesses fail quickly as some kind of failure of free enterprise, then ought we also count that not all corrupt governments fail rapidly as a failure of politics? Of course, corrupt markets and corrupt governments tend to go hand in hand.

And, by the way, “Nor are markets solving the climate crisis”? Tell me, Mr. Gunther, how well is democracy working on climate change policy?

Where is faith most misplaced, in markets or in governments?

Edmund Phelps explains “knowledge problem”

Michael Giberson

Occasionally we hear from readers curious about the blog name, “knowledge problem.” Edmund Phelps explains the knowledge problem in an excellent essay that appeared in the Financial Times. (Registration may be required for; the essay is also posted in full at the FT‘s Capitalism blog.)

Joseph Schumpeter’s early theory proposed that a capitalist economy is quicker to seize sudden opportunities and thus has higher productivity, thanks to capitalist culture: the zeal of capable entrepreneurs and diligence of expert bankers. But … most growth in knowledge is not science-driven. Schumpeterian ­economics – Adam Smith plus sociology – captures very little.

Friedrich Hayek offered another view in the 1930s. Any modern economy, capitalist or state-run, is a great soup of private “know-how” dispersed among the specialised participants. No one, he said, not even a state agency, could amass all the knowledge that each participant “on the spot” inevitably acquires. The state would have no idea where to invest. Only capitalism solves this “knowledge problem”.

There is much more in the essay than this brief clip reveals. In fact, the very next paragraph provides the one of the best brief explanations of Hayek’s central insight into capitalism. In addition to a little Schumpeter and a lot of Hayek, Phelps nods to David Hume and invokes some Frank Knight on uncertainty.

The whole thing is worth reading.

(HT to Greg Ransom at Taking Hayek Seriously.)

The Plenitude of Capitalism and the World Cup

Lynne Kiesling

Today’s Wall Street Journal has an article on a manifestation of the plenitude of capitalism: Wal-Mart is selling customized World Cup gear in the various countries where it operates around the world (US, Germany, England, Mexico, for example). My favorite:


Garden gnomes in England kit. If that’s not culture-specific marketing, I don’t know what is!