Read just the title of John Staddon‘s new book, The Malign Hand of the Markets, and you might get the wrong impression about the Duke professor’s primary message.

Free-market, limited-government advocates might cringe at the thought that a friendly academic is trashing the notion that freely operating markets improve our lives through a process that works like an “invisible hand.” Market critics might look to Staddon’s book for evidence to bolster their case against capitalism.

Neither side will get what it expects based on those presumptions. This reviewer won’t pretend to understand all of the arguments Staddon advances, based on his years of training and research in psychology and neurobiology. But it’s clear that Staddon understands that many of the problems associated today with financial markets stem from problems in the way they’re regulated.

He doesn’t call for deregulation, as many libertarians might hope. He doesn’t call for an additional layer of regulations on top of those in place today, as big-government types and anti-capitalists would endorse. Instead Staddon calls for a wholesale reform of the regulatory apparatus. He believes the entire regulatory structure ought to be simplified and restructured.

The rules I’m proposing don’t deal with “products,” with their names, or with categories, as does the present system. “Insurance” is highly regulated, “swaps” are not, even though both amount to the same reinforcement schedule for the people who buy and sell them. The rules I propose are aimed directly at the reinforcement schedules that these products and institutional arrangements embody, rather than just their names or the particular sub-sector of the financial industry where they reside. The idea is simply to make sure that the costs and benefits of any voluntary financial arrangement fall directly and completely on the participants and not on third parties. Many existing rules, like reserve requirements, which are cumbersome proxies for direct regulation of reinforcement schedules, could be completely abolished. The resulting system should be a great deal simpler than the ungodly mess we have now.

The trained economists in our midst will be better-suited than I to address flaws in the economic analysis, but Staddon’s work should prove valuable even to them. If nothing else, his outsider’s perspective on economic theory should remind free-market advocates of the need to present cogent arguments to intelligent, thoughtful people who’ve not spent years toiling in the world of supply and demand curves and econometric calculation.