Failures of the invisible hand

It’s true that self-interest in its place, used well and with the right limits, can be a force in society which is very powerful for the advancement of the economy, for human innovation, and for the comforts we enjoy in America today.  Such is the invisible hand doctrine and we can see that it has achieved some pretty big victories.  Everyone looks out for themselves and everyone benefits.

I think it’s time we acknowledged, though, that sometimes there are behaviors for which no one pays a price except everyone, and others from which no one benefits except everyone.

That is, there are plenty of things you could do that wouldn’t benefit you – that don’t make sense for you – but which would benefit the world, benefit society.  There are plenty of things that wouldn’t harm you – that make perfect sense for you – but which would cause a cost to humanity, to society.  And in those circumstances, the invisible hand malfunctions.  The invisible hand guides us powerfully toward those harms and away from those benefits.

Oh, there is good in people’s hearts, and when it’s called to our attention, sometimes behaviors that don’t make economic or individual sense become commonplace anyway.  (As long as it’s not too much trouble.)  And we have in many cases made laws which instead of promoting strict capitalism are designed to promote prosperity by, as it were, pushing the invisible hand back in the right direction.  Laws against behaviors where we find self-interest leads to intolerable inequities.  Tax revenues into things we think help everyone and taxes on things we think hurt everyone.  Etc., etc.

I’ll add that in many cases, the cure is worse than the disease.  Someone can easily make a law to fix a problem, to give the invisible hand a shove, and discover that there are unintended consequences which are worse than the original problem.  Hence long stories about government incompetence and the legend that it really needs to just leave us alone.

But the invisible hand left entirely alone is not a magical force for good.  Let’s not forget that.  Let’s not think that everything would be hunky-dory if the government would just let us engage in the free market with no restrictions whatsoever.  And let’s not forget that sometimes we need to appeal to people’s consciences, to guide them against just their own self-interest and toward the interests of the whole.  Unbridled capitalism could, in a society of good people, be a fine enough thing.  In a society where if it is legal, if capitalism will allow it to you, and if it is in your own self-interest, then everyone will declare it to be not merely legal but good – in that society, unbridled capitalism is death.  Literally death for the poorest, for those who cannot compete.  Death for the crippled, death for the retarded, death for the young children whose parents cannot support them.

Time to stop being abstract.  Time to give one concrete example of what the invisible hand has done to our society.  Just one.  There are many others I could add, but here’s one.

Advertising.

Imagine your life without advertisements.

Imagine that if you were looking for a given product, you could learn the facts about it, but no company would ever bombard you with emotional appeals about how much your life would be better if you only had this thing.

Imagine if there were no billboards.  No pop-up ads.  No spam.  No telemarketers.  No public landmarks or sports events covered in ugly endorsements.  No commercials. 

Now, I grant that marketing is what pays for at least a large percentage of a great many other things we enjoy in life.  For Google, for TV broadcasts, for so much more.

I also grant that once in a blue moon, I’ve actually seen an advertisement for a product I genuinely wanted and wouldn’t otherwise have known existed.  Something that, when I paid for it, I was truly glad I had.

But let me ask you:  If you could eradicate all advertisements from your life, what would you pay for that?

Consider this:  Because of self-interest, because the company wants, needs, for consumers to know about their product, it’s good for them to distribute the information widely.  Because once in a blue moon, they’ll hit me with something I want and I’ll pay for it, they’ll continue hitting me with hundreds of things I have no interest in.  As long as they pay less for a given advertisement than the profit they make off the products sold, they win.

What’s the key problem here?  They don’t need to pay me for my time, for the annoyance, for the waste that they caused me.  Telemarketing companies don’t need to pay for the productivity cost, for the destructiveness in family life they cause by calling at the wrong times, for the stress and the unpleasantness.  The only financial cost they have is the cost of using the phone lines and paying the telemarketers.  They don’t pay any cost to the people they hurt with their activity.  Meanwhile, they have financial rewards from literally everyone they benefit and likely some people they didn’t benefit.  (The latter would be people whom the product doesn’t really help, at least not more than whatever competition they were considering, but who were convinced by the rhetoric, emotional appeals, etc. to buy it anyway.)

I’ve seen and heard a few ads I was glad for, ads that got me to buy products that I was glad to have, products that were worth the price.  But I would happily give those products up if by doing so I could have an ad-free life.

That just considers the annoyance I face.  What of the social harm advertisements do?

Unrealistic expectations of female beauty.  Anorexia.  Rape.  Objectivication of women.

Materialism.  Greed.  Selfishness.  Inability to delay gratification.  Addictions.  Lack of discipline.  Dissatisfaction.  Ingratitude.

What if the advertising industry had to take responsibility for the women who starved themselves to death in part because of the things advertisers did to sell products?  What price could atone for that?  What price could make up for the slow poison of the constant fostering of the belief that things will make you happy?

If you could eradicate all advertisements from your life and the lives of all those you come in contact with, what would that be worth?

I’m not sure what the best solution is.  I’m not sure if there is a good solution.  But I am sure that when it comes to advertising, the invisible hand is not our friend.