Should Ideas Be Left to the Free Market?

The good folks at Organizations & Markets ask why economists haven’t paid closer attention to the economics of free speech. The classic piece on this is Ronald Coase’s “The Market for Goods and the Market for Ideas” (available from campus IP addresses).   Coase asks why the rationale for goods’ market regulation doesn’t carry over into the realm of the market for ideas. Here is how he characterizes the prevailing attitudes:

In the market for goods, the government is commonly regarded as competent to regulate and properly motivated. Consumers lack the ability to make the appropriate choices. Producers often exercise monopolistic power and, in any case, without some form of government intervention, would not act in a way which promotes the public interest.

Fair enough. But then,

In the market for ideas, the position is very different. The government, if it attempted to regulate, would be inefficient and its motives would, in general, be bad, so that, even if it were successful in achieving what it wanted to accomplish, the results would be  undesirable. Consumers, on the other hand, if left free, exercise a fine discrimination in choosing between the alternative views placed before them, while producers, whether economically powerful or weak, who are found to be so unscrupulous in their behavior in other markets, can be trusted to act in the public interest, whether they publish or work for the New York Times, the Chicago Tribune or the Columbia Broadcasting System.

Coase wrote the piece in the early 1970s, partly in response to federal regulation of commercial advertising, wondering whether there is a difference between firms schlepping products via commercial advertisements in the goods market is really any different than an article or an editorial in the New York Times.

Improbably, Time Magazine carried an article on Coase’s article and summarized his position nicely:

Coase challenged two assumptions that, he says, have created the distinction in public policy: 1) that consumers are able to distinguish good ideas from bad on their own, though they need help in choosing among competing goods; and 2) that publishers and broadcasters deserve laissez-faire treatment while other entrepreneurs do not.

It might be tempting for us to dismiss Coase’s argument as glib posturing, or as an example of economists being too clever for our own good. But how we define and constrain free speech is a central element of our political system.  President Obama, in fact, spent his weekly radio address admonishing the recent Supreme Court decision that removed many legislative controls of corporate campaign financing.  One would suspect that Coase was arguing to relax regulation of the goods market, not extend regulation to the ideas market, but the proliferation of the internet and other news sources has perhaps muddied the waters so much that the distinction is unrecognizable.

So, more to come, I suspect.

One thought on “Should Ideas Be Left to the Free Market?”

  1. Recently I went to the Rock and Roll Hall of Fame, one of the first exhibits there ( I think it is the second exhibit as you walk in the main room) is a wall sized picture and quote of Frank Zappa at a preliminary Congressional hearing prompted by the then Mrs. Gore of PMRC fame. You will recall this eventually resulted in the “Tipper Sticker” designed to alert potential consumers of “questionable” lyrical content.

    Dick Langlois of O and M makes an interesting point about the issue of moralisms, which seems applicable to my recent historical visitation, as does your post here:

    “The question of free speech seems to me a subset of the larger issue of what Calabresi and Melamed called “moralisms” (and what I once called “transcendental externalities”). If I say something that offends you, I am visiting an externality on you. But this is also true if I do something silently that annoys you (like, say, reading the collected works of Nicolai Foss in private). In this sense, the economics of free speech is bound up with the large literature spawned by Sen’s famous paper on the impossibility of a Paretian liberal.”

    I looked up Amrtya Sen’s paradox (first time I heard about the guy) and that is fairly interesting to me (probably more at the thought of the former Mrs. Gore forced to listen to “Darling Nikki” to make her moralistic choice than not):

    Amartya, Sen (1970). “The Impossibility of a Paretian Liberal”. Journal of Political Economy 78: 152-157. JSTOR 1829633

    “There is a copy of a certain book, say Lady Chatterly’s Lover, which is viewed differently by individuals 1 and 2. The three alternatives are: that individual 1 reads it (x), that individual 2 reads it (y), that no one reads it (z). Person 1, who is a prude, prefers most that no one reads it, but given the choice between either of the two reading it, he would prefer that he read it himself rather than exposing the gullible Mr. 2 to the influences of Lawrence. (Prudes, I am told, tend to prefer to be censors than being censored.) In decreasing order of preference, his ranking is z,x,y. Person 2, however, prefers that either of them should read it rather than neither. Furthermore he takes delight in the thought that prudish Mr. 1 may have to read Lawrence, and his first preference is that person 1 should read it, next best that he himself should read it, and worst that neither should. His ranking is, therefore, x,y,z.

    Suppose that we give each individual the right to decide whether they want or don’t want to read the book. Then it’s impossible to find a social choice function without violating “Minimal liberalism” or the “Paretian principle”. “Minimal liberalism” requires that Mr. 1 not be forced to read the book, so x cannot be chosen. It also requires that Mr. 2 not be forbidden from reading the book, so z cannot be chosen. But alternative y cannot be chosen either because of the Paretian principle. Both Mr. 1 and Mr. 2 agree that that they prefer Mr. 1 to read the book (x) than Mr. 2 (y).

    Since we have ruled out any possible solutions, we must conclude that it’s impossible to find a social choice function.”

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