3. Markets and Development

This chapter explores the importance of ‘getting the prices’ right. Economic progress first requires a sound mechanism that achieves economic coordination in the face of uncertainty, human self-interest and limited rationality. While markets are highly imperfect, they nonetheless, on a comparative basis, are the best available system available to deal with these inevitable constraints of social life. Accordingly, societies that achieve higher degrees of economic freedom are those that do better on a variety of welfare indicators. Pro-market reforms, however, are best pursued in a bottom-up fashion by local organisations and change agents, who possess the crucial contextual knowledge needed to pace, sequence and structure the reforms to maximise their impact. This chapter accordingly documents policy reform efforts by local change agents in five different countries.This chapter also identifies two leading market-critical schools of thought: market failure theory and dependency theory. Both point to the weakness of neoclassical economics: its overly idealised conditions and absence of institutional analysis, as well as its inability to account for power relations. Consequently, this chapter also presents a ‘market process’ view, which allows for a greater appreciation for policy entrepreneurs and institutions.