why the “ market of ideas ” can fail – from an economist’s point of view
There is no shortage of disgusting and dangerous ideas in the world. An age-old question is whether free speech will see good ideas outweighing bad ones.
The proposition that good ideas eventually triumph in the “ideas market” dates back at least to 1644, when John Milton wrote in his anti-censorship tract Areopagitica:
Let [Truth] and the hook of lies; who has ever known the Truth put at the worst, in a free and open meeting?
But it may have been explicitly stated for the first time by United States Supreme Court Justice Oliver Wendell Holmes in 1919, in his dissent to a 7-2 decision in the Abrams v United States case. involving the First Amendment to the right to freedom of expression.
the ultimate desired good is best achieved through the free exchange of ideas – that the best test of truth is the power of thought to gain acceptance in market competition.
As old as this question is, it confronts us time and time again. Is it more dangerous to suppress the expression of a seemingly dangerous idea or to let it express itself freely?
He is at the heart of the controversy over the New York Times publication on June 3 of an idea many found repugnant.
This idea was “an overwhelming show of force to disperse, detain and ultimately deter offenders” in response to the widespread Black Lives Matter protests and isolated outbreaks of violence and looting. It was advocated in an opinion piece by US Senator from Arkansas, Tom Cotton.
Read more: By publishing Tom Cotton, The New York Times made a terrible error in judgment
Editorial page editor James Bennet has resigned as part of the newspaper’s mea culpa. A champion of the “ideas market” might argue that The New York Times did the right thing, or at least nothing wrong.
So what would an economist say, whose job it is to understand market behavior?
Economists and markets
Today economists generally love the markets.
The most famous result in the whole economy – the ‘first well-being theorem’ formalized by Nobel laureates Kenneth Arrow and Gerard Debreu – states that with the right conditions, competitive markets will allocate resources efficiently. maximum.
Yet economists – especially and including Arrow and Debreu – are all too aware that markets don’t always work well in reality. Information is often ‘asymmetric’, for example a seller knows more about the quality of a product than the buyer. There are âexternalitiesâ, costs borne by third parties, such as environmental damage that are not taken into account in market prices. Many markets are not competitive enough.
The failure of the insurance, used car and many other markets is well documented.
Why, then, why should we trust the ideas market?
Ideas are not products
Over the past two decades, economists have developed formal models that can speak of competition in ideas.
The starting point is to note that the nature of competition in an ideas market is fundamentally different from competition in a product market.
With products, sellers compete for customers by setting the price of their products. As economists Matthew Gentzkow and Jesse Shapiro put it:
Two firms compete against each other [in the product market] whether their products are substitutes from the point of view of consumers. A change in the price of one affects the buying behavior of the other’s customers. This type of competition is important because it limits the ability of firms to raise prices above marginal cost.
The ideas differ as follows:
Two companies compete against each other [an information market] if 1) they cover the same events and 2) at least some consumers will learn the facts reported by both. A change in the set of facts that one reports affects the information of the other’s customers. This type of competition limits the ability of businesses to control consumer beliefs.
A form of prisoner’s dilemma
The cleanest formal model of competition between parties trying to control people’s beliefs comes from a 2017 article by Matthew Gentzkow and Emir Kamenica (a former classmate and colleague at the University of Chicago).
The notion of âmarket of ideasâ argues that when there are more senders of information, more information will be communicated to consumers.
Gentzkow and Kamenica have shown that this is not necessarily the case. It all depends on the nature of the strategic interaction between the information senders.
Senders could be caught in some sort of prisoner’s dilemma, the game theory concept made famous by the movie A Beautiful Mind. It would be socially productive for more information to be revealed, but the private incentives of shippers lead to less disclosure.
Read more: The legacy of John Nash and his theory of equilibrium
For example, consider two manufacturers of pharmaceuticals of which they are the only ones who know the effectiveness. Half of their market is made up of customers who will only buy pharmaceuticals that they feel are likely to work well. The other half want their drugs to work too, but they will also buy if it only partially works.
In this case, each manufacturer has an incentive not to disclose information about the effectiveness of their product, even though they and consumers would be better off if they and the rival revealed more information. It’s like the consequences of unilateral action as A Beautiful Mind shows.
If the strategic interaction in the market for ideas takes this form, competition does not lead to winning out over the right arguments.
Gentzkow and Kamenica show that the crucial condition for competition to lead to more information to be revealed is that each shipper must be able to deviate unilaterally towards a more informative outcome for consumers. In the drug example, this would be each manufacturer disclosing the effectiveness of their own drug and that of their competitor.
Whether this happens in practice depends on important details regarding the nature of the ideas being discussed, the types of information permitted by law and, of course, whether the people receiving the information are rational.
In short, the answer to the question of whether the ideas market leads good ideas to prevail is: it depends.
Open discussion is not enough
Just because the idea market doesn’t always work, doesn’t mean it never works. There are very important non-economic reasons for valuing freedom of expression that go beyond the amount of information revealed.
But modern economics teaches us that competition in the market for ideas is different from competition in the market for ordinary goods and services. We don’t always have to conclude that heinous ideas will be thrown in the trash of history just through open discussion.