The Potemkin Market

Abstract

A few years ago, I holidayed in the Caribbean island of Cuba, still one of the last remaining communist countries in the world. Havana is a beautifully crumbling city, full of very talented but poor musicians, artists, dancers and mixologists.

When economists talk about markets, you envision something like a bazaar, where you have a bunch of sellers selling something like carpets or spices, which are pretty much uniform, with buyers wandering around haggling over the price. None of the buyers and sellers are large enough to affect the price in the market. Most real markets diverge from this ideal, because they have large buyers or sellers, and much of the work of economists is looking at how monopolies or oligopolies diverge from free markets. Real markets, made up of profit-making companies, whether they are small, oligopolies or monopolies, are what capitalism is.