Mechanisms of the market

The preface to this book states that, while it is intended as a textbook, it examines only the core issue of whether markets work and what should be done if they fail. It is supposed to act as a bridge between concentration on graphical analysis by undergraduate classes and concentration on mathematical analysis by graduate students. Its inside cover notes that it is "designed for upper-level undergraduates and first-year graduate students".

The book assumes knowledge of intermediate microeconomics and basic calculus and proceeds by treating the various aspects of market failure as mathematical problems, solving them by calculus. This has several consequences. First, discussion of economic issues tends to be highly truncated. For example, the optimal size of government is considered in less than two pages. Second, there is virtually no discussion of policy and practice in any country. The focus is firmly on economic prescriptions derived from the usual abstract economic analysis. Third, there are very few references to other texts and articles; only 67 references are listed for further reading. This is surprising for a text designed for masters-level students, among others.

Compared with competitor volumes in public (sector) economics used outside North America, the book's coverage is narrow. A quarter of it is devoted to markets, another quarter to externalities and public goods, a further quarter to asymmetric information, the remaining quarter to imperfect competition and taxation.

In using only basic calculus, the book would appear to be of little value to students of more advanced mathematical economics. Therefore, it seems suitable only for honours undergraduates and taught postgraduates studying just economics and, within that group, those requiring illustration of basic calculus. For these reasons, the market for the book appears limited.

Stephen Bailey is professor of public sector economics, Glasgow Caledonian University.