The Market Myth
Tomas Björkman
82

“If we have no copyrights, the market will provide much less incentive for creative production.”

Have you ever heard anybody say that spending money is nonverbal communication? For years and years now I’ve known what nonverbal communication is… but for some reason I only just recently realized that spending money is a form of nonverbal communication.

I suppose “communication” can be defined as the transmission of information. Lately there’s been a lot of concern about “Fake news”… clearly the accuracy of the transmitted information is a serious issue.

You obviously put a lot of work into your story. Your story is a product… and if people enjoy it then they can communicate this verbally… and nonverbally. And by “nonverbally” I mean that they can “Recommend” your story.

Recommending a story is a really fast and easy way to transmit the information that the story matched your preferences. But… how does it compare to spending money? Which form of nonverbal communication is best at transmitting the most accurate information?

In your story you show quite a bit of concern about the market. As in… you perceive that the market is to blame for so many of society’s serious problems. But the market is all about using money to transmit information. And if you truly understand the significance of everybody using their money to transmit information… then I would think that you’d be more concerned with the absence of markets.

Right now we don’t have a market in Medium. Or, perhaps it’s a terrible market. In most cases, even when somebody really enjoys and benefits from a story, they don’t use their money to transmit this information. As you correctly observed, this means that incentives will be suboptimal. But also, people will be inaccurately informed… or… inadequately informed … or… suboptimally informed.

The public sector is far more massive than Medium. But, just like Medium… the public sector is missing a functional market. But, unlike Medium, people are required to “subscribe” to the public sector. Paying taxes really isn’t voluntary, it’s compulsory.

And the problem isn’t with taxes being compulsory, the problem is that people can’t use their taxes to transmit information about their preferences for public goods.

In your story you mentioned participatory democracy. Voting is certainly a form of nonverbal communication… but it’s a lot different than spending money. Voting is the same as Recommending.

Personally, I’ve never voted in my life. But I’ve certainly spent lots of money. And even if I had regularly and faithfully voted… would this form of nonverbal communication have transmitted more information about my preferences than spending has?

You mentioned Adam Smith and the Invisible Hand but you did not share the most relevant passage…

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations

You also mentioned Friedrich Hayek but you did not refer to his Nobel prize essay…

We must look at the price system as such a mechanism for communicating information if we want to understand its real function — a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement. — Friedrich Hayek, The Use of Knowledge in Society

If you’re going to attack these guys, then be a hero and go after their best arguments. Be the exception rather than the rule.

Accurately inform us why, exactly, voting is a better form of nonverbal communication than spending is.