Rupert Russell is a Harvard-trained sociologist and documentary filmmaker. His new, first book, Price War$, exemplifies Regulation editor Peter Van Doren’s dictum, “Prices matter a lot.” The book teems with stories of the causes and effects of price changes. Russell knows price theory. He writes: “ ‘The function of prices,’ [Friedrich] Hayek said, ‘is to tell people what they ought to do.’ ”

Van Doren has a corollary: "People don't like prices." Russell dislikes prices. In his view, they mislead and put people in dreadful circumstances. He knows how a price system is supposed to work—"prices could coordinate through a decentralised network that Hayek called a 'spontaneous order'"—but he does not see harmonious order in market prices. He explains, "As I had seen time and time again, from the Enlightenment through the British Empire to the Wall Street crash to the Financial Crisis, the rule of prices is chaotic."

World of chaos / This is a longstanding problem for economists. Where they see order, others see chaos. Why?

First, there is chaos in the world. Russell has toted a camera around the globe, filming it. He traveled to Mosul, Iraq. One might think the Islamic State created the chaos there when it attacked in 2014, but Russell sees markets as the cause. When the price of wheat rose substantially in 2011, Syrians strained to afford bread and rose up against their government. Abu Bakr al-Baghdadi filled the power vacuum with the Islamic State. The high price of oil in 2011 boosted the revenues he earned from selling Syrian oil and financed the Islamic State's attack on Mosul.

Russell also traveled to Ukraine after the Russian invasion in 2014. One might think Vladimir Putin's megalomania caused the turmoil there, but Russell again blames markets. A high price for oil filled Russia's treasury, financing the invasion.

Russell traveled to Venezuela, where people struggle to feed themselves and face other social maladies. Economists in general blame socialism for causing the retrogression in that country. Once more, Russell blames markets. In his view, "The Venezuelan apocalypse was made in the markets: the chavista regime was built on a wave of black gold and then suffocated by a shortage of dollars." By that he means Venezuelans shift between feast and famine as the price of oil rises and falls. When the price is high, the Venezuelan bolílvar appreciates, imports are cheap, and government spending expands. When the price falls, the bolílvar depreciates, imports become more expensive, and the government borrows dollars to finance spending. Russell adds that Donald Trump's administration prevented the current Venezuelan government from borrowing dollars, compounding the country's problems.

The market for oil and dollars is not the only source of turmoil in Venezuela, according to the author. He explains:

The chaos here is blamed on the failure of a "socialist" experiment. But what I had discovered was that most people's economic activity took place in an anarchic market of speculation, hoarding and violence. It was a fractal of finance capitalism. A mirror image—at every social scale—of the very free-market forces that had powered the chaotic decade.

Thus, he condemns the market process as an organizing system.

Cargo cult / Give Russell credit for traveling the world, putting himself in danger, and reminding us that all is not well. Credit him also for bothering to learn and share theoretical critiques of markets that supplement his empirical observations. This brings us to the second reason why he sees chaos: he listens mainly to economists who are critical of the price system. Joseph Stiglitz declared, "The invisible hand is invisible because it doesn't exist." Russell interprets this as "prices deceive. They can hide information, they can manipulate the unwitting and extract their wealth."

Robert Shiller introduced Russell to the role of narratives in markets. "In other words," Russell explains,

all the "information" that is factored into prices comes to speculators in the form of a story. There is no pure information that exists outside their interpretation of it.

Stories, whether true or false, influence prices. Russell adopts these perspectives and his training as a sociologist to formulate his own critique of markets and prices.

When critics complain that a financial market is not doing what it is supposed to, matching saving to investment, they liken it to a casino. Russell takes a different tack. He likens a financial market to a cargo cult. These curious phenomena among some Pacific islanders, as Russell explains them, consist of "prophets and followers." The prophets share a vision that God will deliver "cargo" in the form of goods, but followers must first offer some sacrifice in exchange. The prophets then take the sacrificial food or money, but the cargo never appears.

With respect to financial derivatives, Russell asks, "Had the financial alchemists on Wall Street adopted the same business model as the prophets in Melanesia?" He points to the "commodity index fund," which pools investors' money and buys a basket of futures contracts for oil, wheat, metals, etc. Russell scorns such funds because they increase the demand for commodities and cause prices to rise without having anything to do with fundamentals such as harvests or weather. He reports,

From 2004 to 2008, institutional investors parked their capital in commodity index funds, pushing up prices, and then doubled down in 2008 as the housing market collapsed, causing a sharp super-spike.

Thus, buyers are like the cargo cult followers, claims Russell. In his theory, their buying and selling caused the "Global Food Crisis" of 2008 and the violence that sprung from it.

The author traveled to Kenya to experience some of the effects of climate change. He met a goat herder facing drought who lacked water for his goats. The herder carried an AK-47 to protect against goat thieves, which were growing more numerous as water sources dried up. As the herder worried about gun battles over goats, researchers at the Pentagon and elsewhere worry about future armed conflict over resources. "It is already happening," Russell claims, "in Turkana, Kenya." The herder dreamed of leaving the country for urban life.

Russell also went to Kibera, a slum in Nairobi, to witness that urban life. He met a young woman who worked for wages. She did not worry about rainfall; she worried that her wages would fall short of the price of food. Prices, again, were the source of anguish. Russell shares Amartya Sen's understanding of famine: a low real wage is the problem, not a dearth of food.

Algos / Russell holds markets in contempt because even though food production rises over time, speculators increase its demand and price. We know the author's allegation that speculation through commodity index funds raises the price of food. To that he adds another villain: algorithmic trading. He describes the process as follows:

It can be just a small climate shock. A shock that is read by a satellite, turned into a prediction, fed into an algo, which anticipates that another algo has the same prediction, which creates incentive for all the algos to trade. The ensuing digital battle increases global prices and pushes the burgeoning megacities of the developing world towards the edge of chaos.

The "digital battle" the author refers to is what he sees as a zero-sum game between hedge funds determined to "raid each other's coffers."

Some traders are "trend followers," who buy when prices rise because they expect prices to continue rising. They presumably abandon their trend-following at some point and sell. Other traders are "contrarians," who "see the price go up and they bet against it; or if prices are declining, they buy." Russell paraphrases Milton Friedman's argument that speculators stabilize prices: "their bets only pay off if they are correct." In contrast, he summarizes Larry Summers's argument that there exists "a tipping point, a point at which enough trend followers could push prices from order into boom and bust and even chaos." The author takes the food price spikes in 2008 and 2010 as evidence that trend followers overwhelm contrarians and implies that speculation destabilizes prices. The reader may wonder whether other factors confound the author's story of cause and effect, such as diverting corn to produce ethanol or restricting international trade.

Climate doomsday device / Russell predicts that climate change will make life difficult for people besides the low-income residents of Kenya. He introduces the scary idea of a "climate-finance doomsday device." Initially, polar ice caps will melt and destroy oceanfront real estate. Lenders and insurers will go bankrupt. Manufacturing, transportation, and communication industries will break down. Then government officials will ban production and consumption of fossil fuels.

Reckoning that climate change will cause economic depression is incorrect, the author informs us:

The origin of this doomsday device … is prices. For centuries the global markets have priced carbon incorrectly. Fossil fuels are simply too cheap. Their price does not take into account the "external" costs passed on to other people in other places in other times. Yet these prices have coordinated the economy, nevertheless. By "telling us what we ought to do" they have created a spontaneous order that has brought environmental chaos.

The author heaps additional ridicule on the finance industry for lending to fossil fuel producers.

Problems / But there are problems with this story. For one, Russell writes, "I discovered that these three desires—steal money, reward allies, embolden the military—are how all oil exporters spend their bonanzas." Yet Norway exports oil, but I doubt anyone would characterize it as a misgoverned, rogue state.

Another problem: numbers give Russell trouble. He presents a graph with "Probability of Conflict" on the vertical axis, using negative percentages. When a hotel employee in Mogadishu notifies him that bombings declined from "every day to every other day," he figures that is "a 100 percent improvement."

History also causes him problems. He writes, "And in 2014, once Wall Street ceased to benefit from quantitative easing, Bernanke took his finger off the money button while unemployment remained historically high." In fact, unemployment in the United States peaked at about 15 million workers a few months after the Great Recession ended in 2009, steadily fell through 2014, and continued falling until the onset of COVID shutdowns in February 2020. In early 2014, the unemployment rate was less than a percentage point above its long-run average of 5.8 percent and gradually fell about a percentage point during that year. Neither the level nor the rate of unemployment in 2014 was "historically high."

Those errors, however, are not what undermine the author's case against markets. The serious problems are with his reasoning. There is no doubt that human suffering exists in the world. Russell exposes it and criticizes those who he thinks cause it. But he ignores the decline in suffering around the world as capitalism has improved living standards and health outcomes over the centuries. He downplays alternative causes of suffering. For example, he documents the corruption of Middle Eastern governments but rejects it as the cause of the Arab Spring in favor of his theory that speculators drove up the prices of wheat and bread.

To be charitable, Russell concentrates his criticism on financial markets, though he does not explicitly state that they are the only ones that deserve reproach. One wonders, if prices are so faulty, what should we look at when making investment, production, and consumption decisions? The author tries to persuade the reader that prices do not create heaven on earth, but he ignores that they can help lead us away from hell.