What Ha-Joon Chang Doesn’t Tell You About Free-Market Economists

Daniel Issing
9 min readAug 4, 2019


It doesn’t happen very often that books on economics become international bestsellers. Those that do often border on psychology (think Nudge and Thinking, Fast and Slow) or are bought mainly for signalling purposes (think Piketty — but check your premises!). Although exact figures are hard to come by, Ha-Joon Chang, a Cambridge development economist, can credibly claim to have joined this elusive club with his provocatively titled “23 Things They Don’t Tell You About Capitalism”. In what at first sounds like a bizarre conspiracy theory woven together by an all-too-imaginative mind, the author takes a stab at unraveling the ideology that fuels our economic system, or more precisely the assumption behind it, carefully concealed from the public eye. As Chang has it, many a disaster (such as the 2008 financial crisis) could have been averted had it not been for the prevailing neoliberal orthodoxy. Hardly an original thesis, one would think.

Why bother, then? I’m not a free-market economist (in fact, I’m not an economist at all), but I’ve spent many years alongside people to whom this description would apply. Whether or not their position is correct is debatable, but in order to even begin such a debate, it would be helpful indeed to know what their position is. And, alas, Chang adds his fair share of rather creative characterizations to the story. Which means that, while some of his arguments are indeed spot-on, he mostly oscillates between criticism that is interesting but besides the point and incredibly cheap shots. (Can you really tell the difference between a 2% and a 4% interest rate?, he asks at some point. I mean, sure, 35 years down the road, your savings will be only half of what they could have been, but why bother?) Nonetheless, I would expect many readers to take Chang’s claims at face value, and this is my modest contribution to isolate his most jarring shortcomings.

To his credit, Chang’s alternative to free-market capitalism isn’t some crazy utopian collectivization scheme, nor a proposal for anti-consumerist degrowth, but presents a potentially viable alternative to the free play of market forces. Paraphrasing Winston Churchill, he calls capitalism “the worst economic system, apart from all others that have been tried” and argues for a heavily regulated version thereof. Contrary to many other intellectuals from his camp, he clearly understands the importance of economic growth, and indeed holds that regulation and protectionism can often help boost it. This makes me hope that we can avoid the muddied waters of conflicting visions and have a productive debate about means and strategies instead.

There are a couple of things that stand out. Number one is than Chang, a left-liberal economist influenced by Joseph Stiglitz, turns out to be a rather serious nationalist. No, not the nasty KKK-style variety that most people associate with this word, but a nationalist still. Chang primarily judges economic policies by how much they contribute to national greatness; individual fates matter only inasmuch they add up to the greater scheme (yes, I’m being overly cynical here). For instance, when he attacks free-market economists for being inconsistent about immigration (“Most people in rich countries are paid more than they should”, chapter 4), it’s not because he wants them to support more open borders (as indeed many of them do, see the Open Borders campaign), but because he thinks this conclusion is so obviously wrong that it points to a serious deficiency in the free marketeers’ logic. Similarly, in “Capital has a nationality” (ch. 10), he seems to be happy that companies usually staff their important roles with compatriots, all talk about globalism and multinationals to the contrary. In a similar vein, “What is good for GM is not necessarily good for the US” (ch. 18) argues for national over individual interests.

Maybe this shouldn’t have been surprising, but I still find it a bit odd when a progressive economist thinks so low of internationalism and globalization. Indeed, when asked to comment on Trump’s economics policies — which you’d probably think of as the ideological polar opposite — , his main criticism seems to be that the administration’s anti-free trade stance isn’t radical enough.

Number two is the sheer amount of blatant misattributions that are too pervasive to qualify as fleeting errors. In fact, I’m not even sure Professor Chang and I would be able to agree on what we mean by “free-market economists”. The species that he’s most concerned with are conservative Reagonomists (who, he argues, have dominated the economic profession and shaped the world through institutions such as the IMF and the World Bank since the 1980s), not exactly the kind of people that come to mind when I think of laissez-faire. At the very least, that’s an unfortunate semantic confusion; at worst, it’s deliberate strawmanning. Take a look at the libertarian pantheon (the catholic-libertarian Acton Institute’s list of recommended readings, featuring some 66 economists/philosophers/social scientists, seem fairly representative to me), and compare how many of them Chang’s book refers to. The answer is four — Adam Smith, Milton Friedman, David Ricardo and Joseph Schumpeter — , and all of them appear mostly in passing. Long story short, most free-market economists should be surprised to learn what sort of things they’re supposed to believe in.

To wit, consider the huge bait Chang throws out right at the start. “There is no such things as a free market” (ch. 1), he boldly proclaims. But if you expect he’ll take the free marketeers by their own logic and turn them upside down, or something similar, you’ll be disappointed: He merely contends that our actions are just as often bound by community standards, customs and norms as they are by government regulations. This, of course, is something that liberals from at least Adam Smith all the way to Elinor Ostrom have always emphasized. It is true that some thinkers within the tradition did not stress very much the fact that these private arrangements can be just as coercive as an encroaching state, but this does not mean that they weren’t acutely aware of this dilemma. And sure enough, there are no references at this point.

Once warmed up, there’s little in the way to stop him. Part and parcel of the gospel of free-market economists are, apparently, the beliefs that we live in a post-industrial age (ch. 9), that Africa is a lost cause (ch. 11), that governments cannot pick winners (ch. 12), that we are living in unplanned economies (ch.19) and that more (public?) investment education is going to make countries richer (ch. 17). I admit that I was quite puzzled when I read this. We may or may not have moved beyond the industrial era, but this claim seems to be perfectly compatible with either stance on the free market vs. regulated economy debate; and ditto for Africa’s prospects. Chang commits a different — but related — mistake when he accuses free-market economists of believing that, after the fall of the Iron Curtain, economies are no longer “planned”. Much as I would like to give him the benefit of doubt, this really makes me wonder how serious he took the research for his book. To give just one example, here’s Hayek — who, despite being so dominant a figure in classical liberal though, gets no mention at all in the book — on the issue:

Planning in the specific sense in which the term is used in contemporary controversy necessarily means central planning — direction of the whole economic system according to one unified plan. Competition, on the other hand, means decentralized planning by many separate persons. The halfway house between the two, about which many people talk but which few like when they see it, is the delegation of planning to organized industries, or, in other words, monopoly.

Which of these systems is likely to be more efficient depends mainly on the question under which of them we can expect that fuller use will be made of the existing knowledge. And this, in turn, depends on whether we are more likely to succeed in putting at the disposal of a single central authority all the knowledge which ought to be used but which is initially dispersed among many different individuals, or in conveying to the individuals such additional knowledge as they need in order to enable them to fit their plans with those of others.

Nor is this an isolated problem. Because his references are so rare, and the allegations so sweeping, larger parts of the book are unfortunately no more than a caricature of real existing free-market economists.

Does that mean that reading Chang is a waste of time? To be perfectly honestly, I was about to put the book away after a few chapters. I decided otherwise, and in spite of my expectations, things took a turn for the better. The battlefields he chooses aren’t particularly innovative, but every so often, he manages to give a weary debate a fresh spin. The late Hans Rosling would not have been surprised by his argument that the washing machine has changed the world more than the internet (ch. 4). Similarly, he offers a nice case study why shareholder value maximization might not be a great policy for companies to follow (ch. 2), and a fairly balanced discussion whether the US really has the highest living standards in the world (ch. 10). I found myself very much in agreement with his take on entrepreneurship, which, contrary to conventional wisdom, is not some extraordinary quantity only the likes of Bezos and Gates possess, but something that is prevalent among the inhabitants of some of the world’s poorest places, where institutional stability is virtually unheard of (ch. 15). It’d be interesting to see what Chang thinks of Hernando de Soto’s theory of “dead capital”.

I hasten to add that Chang also has some chapters where he addresses free marketeers’ claims heads on. The kind of protectionism he advocates for developing countries is in sharp contrast to what any classical liberal would recommend. The same goes for his pleas to make markets less efficient — deliberately limit options for sellers and buyers because they’re not smart enough to understand the consequences of their actions for the economy as a whole. I’ll leave it to others to take up the task, but these would likely be the most interesting debates to be had.

It would be tempting to let the article fade out on this upbeat note, were it not for the actual ending of the book. After 22 chapters of economic analysis, chapter 23 suddenly concludes that “Good economic policy doesn’t require good economists”, as if it were a thing that just happened upon us. In there, Chang lists a few examples of countries that saw their own economic miracles at a time when the people in charge were technicians, engineers and others almost totally untainted by the teachings of economists left or right. Apart from the fact that he’s cherry-picking quite a bit here, one can only be baffled by the audacity of this claim: Suddenly, it’s not only free-market economists that do more harm than good, but economists as such!

I struggle to believe this is really what he means. Can you really write an entire book presenting economic arguments — maybe arguments that the mainstream of the profession disagrees with, but economic arguments still — and then insists that it’s really all of no use? If his claim had only been that in some (many) cases, economists’ policy recommendations did not lead to the desired results, or suggested that we need to incorporate more common sense beliefs/findings from other fields into economic theory, I’d have no quarrels. But instead, he argues as if we should throw all of economics out of the window and just rely on “good judgement” in its place, whatever exactly that might mean (my inner cynic translated that phrase as “whatever Chang thinks is correct”). Is this kind of intellectual surrender typical for heterodox economists? I would hope that the answer is no, but I’ve seen this kind of pattern in many places: Authors will argue that some propositions of mainstream economics don’t hold universally (e.g. the axioms of rational choice), offer vivid examples where they don’t check out, but refrain from offering an alternative how to improve them. Even behavioral economics, certainly one of the most interesting addition to traditional economic theory, often fail to go beyond establishing certain kinds of biases; where they might come from and why they may have evolved is rarely investigated.

A disappointing ending thus, and one that makes it unlikely the mainstream will take the heterodox camp more seriously. I, for once, can’t really blame them.



Daniel Issing

Book reviews, trail running, physics, and whatever else I feel like writing about.