Becoming a Market Society My fascination with the way markets can change society started with
learning about lantern oil made from sperm whales prior to the 850 s.
As my professor in college explained, the light thrown off by candles
was rather dim and easily snuffed out by a whiff of air. Whale oil, on the
other hand, burned more steadily and made lamps simpler to transport,
thus helping people to extend their mobility and the number of waking
hours available each day. As people switched from candles to whale oil,
demand shot up and the whaling fleet doubled in size in just thirteen
years.
As whaling intensified to meet demand, the number of whales
killed climbed rapidly, peaking near fifteen thousand per year before
precipitously falling. Whales were poised for extinction until the
appearance of a new product called kerosene, made from refining recently
discovered crude oil. Its superior attributes all but snuffed out demand
for whale oil, and the whaling fleets disbanded. By understanding how
a market economy works, the professor told our class, it was easy to see
how households benefited and sperm whales were saved.
As I studied more, I learned how market economics could be
combined with mathematics to show all sorts of interesting numerical
outcomes, including validation of Adam Smith’s competitive conditions
for optimal prosperity. As such derivations commanded more attention
within the social sciences, scholarly agricultural-economics journals
filled their pages with mathematical formulas and Greek symbols.
Then one day, I read an open letter from a journal editor whose tenure
was over but who wanted to leave behind a few parting thoughts. There
were certain problems, he reflected, that agricultural economists were
unlikely to solve: what to pay for farmland, when to cut down a tree, how
much fertilizer to put on crops. The reason why, he concluded, was that
such problems lent themselves to elegant mathematics and few paid
attention to the results. His second thought was more succinct—the
more one runs over a dead cat, the flatter it gets.
I took his point. It was easy to get caught up in the mathematical
trees and miss how the forests—or market conditions—were quickly
changing. At the time, University of Chicago–trained economists were
advancing the idea that breaking up big trusts and corporations was
wrong. Big was better. Mergers and acquisitions benefited consumers