Karl Polanyi’s “The Great Transformation” (1944), published in the same year as Friedrich Hayek’s “The Road to Serfdom,” is as sacred a text to the opponents of free-market capitalism as Hayek’s is to the Chicago School.

To his devotees, Polanyi showed the free market to be the enemy of humanity in “The Great Transformation.” It was an alien form of social organization, he argued, created in 18th-century England only by state action propelled by ideologues. By displacing the natural social state — an idyllic system of mutual obligations that bound and protected individuals — the free market brought inequality, war, oppression, and social turmoil to just and peaceful societies.

“The Great Transformation” has attained the status of a classic in branches of sociology, political science, and anthropology. Stacks of it await undergraduate initiates each year in college bookstores. Citations to the work continue to accumulate in scholarly articles. Yet in economics the work is unknown — or, when discussed, derided. Thus the cruel irony of the term “social sciences.”

It is understandable that Polanyi believed that free markets would lead to political and social collapse. Born in 1886 in Vienna and raised in Budapest, he had, by 1944, witnessed World War I, the Russian Revolution, revolution and terror in his native Hungary, hyperinflation in Austria and Germany in the 1920s, the collapse of the international gold standard, the Great Depression, the rise of Nazism, the New Deal, and World War II — an era of unrest unprecedented in the modern world. The book begins portentously, “Nineteenth-century civilization has collapsed.”

Polanyi identified four pillars of this dying civilization — the international balance of powers, the gold standard, the liberal state, and the self-regulating market economy. By 1944 these all seemed to have been swept away. But, in truth, the first three were derivative of the fourth, the self-regulating market — the true fundament of this civilization. “The Great Transformation” of the title, Polanyi believed, was the imposition of the free market, an imposition that in turn spawned these other institutions, which in turn produced the collapse of 19th-century civilization. Hitler, Mussolini, and Stalin, Polanyi suggested, were the monster children of the free market.

History has not been kind to these prognostications. Free-market capitalism is a resilient and stable system in much of the world — particularly in English-speaking countries. It is the policy of world bodies such as the International Monetary Fund and the World Bank. It is conquering vast new domains in places such as China, Eastern Europe, and India. International trade barriers have been substantially reduced. The gold standard is gone, but has been replaced by floating exchange rates, set by market forces. Better monetary management has greatly reduced business cycle severity. Between the traditional enemies of Western Europe — Germany and France — all is gemütlich.

Further, while free market capitalism has its troubles, radical alternatives no longer beckon. The meliorist liberalism of John Maynard Keynes has proven sounder than the millennialist fervor of Polanyi. Measured by the success of markets, 19th-century civilization seems to be enjoying a renaissance.

The great puzzle of Polanyi’s book is thus its enduring allure, given the disconnect between his predictions and modern realities. The fans of Polanyi seem to be responding to his general belief that markets corrupt societies, and his assertion that free market economies are a shocking recent departure from a socially harmonious past. His great criticism is that by breaking the social connections between individuals, by reducing everyone to an isolated atom, markets create inequalities that previously did not exist.

But Polanyi was no better a historian than a prognosticator. Indeed, the more we learn of history, the more evident it is that the free market was not an 18th-century innovation, but one of mankind’s oldest social institutions. Medieval England, for example, had elaborate free markets in goods, labor, capital, and land. Forget groaning serfs, over-weaning lords, the lash of the whip; think private property, wage labor, market incentives, and social mobility. By 1200, a large class of landless laborers worked for cash, bought their food in markets, and rented their dwellings. The free market indeed has some claim to be the natural habitat of modern people, not a perverse and unnatural innovation. (We have evidence for extensive markets long before the time of Christ: in the Roman Empire, in ancient Greece, and in ancient Babylon.)

The Industrial Revolution in England did not represent a trade-off between gains for plutocrats and the horrors of poverty and unemployment for the poor. Instead, the greatest beneficiaries of the Industrial Revolution were the unskilled; this truly great transformation reduced the terrible inequalities that existed since at least the Middle Ages. The elaboration of the modern credit nexus eventually produced cyclical unemployment, but the Industrial Revolution also reduced the enormous annual shocks to income pre-industrial workers endured because of harvest successes and failures.

It is probably true, as Polanyi asserts, that hunter-gatherer and shifting cultivation societies were more egalitarian than later market societies. But he hopelessly romanticizes that world: “The Great Transformation” makes pre-market societies seem like a band of idyllic Christian brothers endlessly extending the helping hand, to background choruses of “Kumbaya.”

More dispassionate analysis by anthropologists writing since 1944 has shown that such communities were generally violent and sexist, with significant status differences, often including systems of slavery. Tight community bonds did not prevent assaults, murder, and sexual violence from being commonplace. In some societies, elaborate witchcraft superstitions led to lives lived in fear of denunciation and death. Recent accounts of the hill tribes of Papua New Guinea, the Ache of Paraguay, the Bushmen, the Hadza of Tanzania, and the Yanomamö show complex mixtures of compassion and cruelty, sympathy and indifference. This is no pre-market Garden of Eden.

Polanyi’s popularity thus represents the triumph of yearning and romanticism over science in disciplines like sociology. “The Great Transformation” ultimately offers more insight into the nature of the professoriat than it does to societies they study. As entertainment, while it has its moments of elegance, it lacks the perverse majesty and literary sparkle of other critiques of market society, such as Marx’s “Kapital.” Nor does it have the whacked-out crazy energy of Naomi Klein’s recent “Shock Doctrine.” But still those stacks of books await the undergraduates, proving that the free market in goods works better than that in ideas.

Mr. Clark is a professor of economics at the University of California, Davis, and the author of “A Farewell to Alms: A Brief Economic History of the World.”