Telecom Regulatory Authority of India (TRAI) wants to compel broadcasters to limit the amount of advertising to 12 minutes per hour, as compared to the current 21 minutes.
Firstly, this is an assault on the basic freedom of association and disassociation. No one is forced to buy a TV or to watch it. No one is forced to produce programming and “serve” the viewers. The production and distribution of programming is a voluntary transaction. Why should consumers be free to compel people to “provide them” with programming at whatever terms they dictate? Are the people in the broadcast industry the slaves of the viewers? Is their life purpose to provide programming for you and me? Or is their life their own? In a free market, they serve us because it is in their interest. It is only in a free market that arrangements are voluntary and mutually beneficial.
But irrespective of the moral issue, this restriction—like all other restrictions intended to tip the balance in favour of one party at the other’s expense—will ultimately harm the party it is supposed to benefit. The volume of goods and services in the market is intimately connected to the terms of exchange that bring the most number of buyers and sellers into the market. If government sets the terms in “favour” of one party, the terms necessarily become less favourable for the other. Not gaining the terms he or she wants, the other part is free to refrain from producing goods for the market. Not only is this not good for him or her, consumers will be less well provided than they would like and be willing to pay for.
In this case, what people don’t understand is that the advertising is paying for the programming they enjoy. They only see the nuisance of advertising interrupting their enjoyment. But if there is no (or less) advertising, they won’t have the programming at all (or it will be provided at a lower quality). If the advertising is capped by mandate, potential providers will be less willing to provide programming and TV services for the market because the reward will not be higher than their opportunity cost. They will do something else instead. Advertising is one of the prices we pay for persuading people in the broadcast industry to work for us.
(A close friend assures me that he watches TV for the advertising, not the programs.)
This does not mean that we will always have to bear the same costs for goods. Competing entrepreneurs are constantly trying to discover how to offer better terms to consumers. I remember clearly in the 90’s, for example, that people were incensed by the level of unwanted spam they were receiving in their email inboxes. There was a hue and cry of calls for government regulation to fix this “market failure,” but before these regulations could take root, competition solved the problem. Email service-providers heard the demand for spam-free email and competed with one another to provide it to consumers. In an open market, broadcasters do the same. They try to discover the level of advertising, fees, technology, and the quality and quantity of programming that will bring the most viewers to their product. If enough consumers want to pay for advertising-free content, entrepreneurs will provide it. Satellite and cable boxes and online TV sources like Netflix already allow people to pay in fees rather than watch advertising.
Since I became interested in economic and libertarian ideas, I have always admired the ingenious ways people solve problems without resorting to force.
According to many academic economists, the market is unable to provide what economists call “public goods,” i.e., goods which are “non-excludable.” Once such goods exist, you can’t restrict who has access to them. The argument goes, therefore, that, since entrepreneurs cannot restrict a public good only to those who pay for it, no one would have an incentive to pay, and thus entrepreneurs don’t have an incentive to provide the good. The “non-excludability” is a barrier to what would otherwise be mutually advantageous gain. Some of these economists conclude that government must, therefore, compel people to pay for public goods. Broadcast television is a classic example of a public good. Once it is broadcast, it is impossible to stop anyone with a TV from watching. How would you get them to pay? Operating on this premise, the British government, for example, charges a tax to everyone who owns a TV and hires hordes of snooping inspectors to spy on the British public like a petty KGB with costly monitoring equipment to “catch” people who have not paid the tax.
Such economists, however, should look around and see how many public goods are actually provided in the market without force. Advertising is a wonderful example of how peaceful people can discover ways of overcoming barriers to mutual benefit. Government authorities like TRAI can make themselves look good because the public is ignorant of the costs that such regulation imposes on them.
We need to start trusting free people to provide us with ever increasing benefits if we only leave them free to do so. And we will only gain this trust if we understand how markets work.