Living With Imperfections

By: Surbhi Tandon (Communicating Reality Intern, CCS)

We support free markets and the ‘market for information’ is no exception. Some misinterpret our position to mean ‘markets are perfect’, this is far from what we claim. The News of The World scandal shows market can be far from perfect, low ethical standards of market participants can have terrible consequences; but this is no reason to ask for more government intervention. If anything, the scandal only substantiates our political position. We would much rather risk unethical behavior by some in a competitive market than risk unethical behavior by a sole government supplier of news. The market has within it a self-correcting mechanism – competition. Of course more self-regulation by media houses and civil society might help.

A market is a network of human beings and it is only as ethical or unethical as the humans who constitute it. Unlike the government, a market has many players, and competition often tends to throw out the rotten egg. The problem is that—as the News of The World case shows—at times competition may encourage market participants to breech certain ethical norms. But overtime—more often than not—these breeches come to light and rotten players shut shop. Unlike neoclassical economics models, where under certain assumption, markets are perfect at each point in time, real markets take time to work. And this means that unethical practices can sometimes continue for long before being detected. Real markets like real people need time to function.

The question then is: how do we ensure rotten eggs are detected quick? Well there is no sure-shot way. A moral philosopher might talk of ‘ethics and society’ and that is a worthy debate. From the point of view of political-economy all we can do is ensure free entry and exist so that incumbents are challenged on all grounds. Running to the government is no solution; it has neither the incentive nor the ability to raise ethical standards – though it may be quick to pass a law or two. In fact, it appears from early news that many politicians in Britain were well aware of the tapping-story for years; we can’t trust such men to regulate the press.