John O’Hagan, Professor of Economics
President Michael D Higgins rightly on occasion questions the role of markets for goods and services in our society. He, though, like many others, may be underestimating their role as a basis for freedom of choice.
The strongest argument for markets – such as those for clothes or restaurants – is not related to efficiency but to the freedom they allow. Consumers can choose what is best for them, they cannot be refused a sale because of their colour or creed and their purchases are anonymous.
Moreover it could be argued that freedom with regard to markets leads to and/or strongly reinforces freedoms in other areas, such as the freedom to vote, attend a particular church or marry who we wish.
There are limitations of course. Children are not allowed to buy whatever they wish by their parents. There are many markets that are regulated by the State or not allowed to exist at all. And the market for some services such as education and health has to be largely provided by the State. But here also freedom to choose matters greatly.
It is easy to understand that the contents of products bought should be listed on the packaging, or the adverse consequences, say, of cigarettes or alcohol or medicines highlighted. The market works properly only if each individual makes their choices with the benefit of as much information as possible.
But once they have this information, many believe it is up to the individual, and not the State or some other person/body, to decide what they should buy.
Our consumption of certain things affects others and hence should be regulated. The smoking of cigarettes is the most obvious example.
But what about driving a car that not only pollutes the air but also creates serious noise levels and risk of injury to those nearby? Or eating noisily in the cinema or on the bus?
The latter may seem frivolous but so did a ban on smoking decades ago. In fact the person then who asked someone to stop smoking, even in their own house, was considered the ‘offender’. When is the cost to others so ‘significant’ that it needs State regulation?
Some markets are not allowed to exist at all. For example, there is no free market in body parts or guns. The State also bans non-market choices, the most recent example being the choice of parents to slap their children.
There may be good arguments for this. But why not also ban parents from giving their children fast food to eat or from letting them have too much screen time? Where is the line between acceptable and objectionable State banning of personal choices?
Some markets are banned in most, but not all, countries, for example those in soft drugs or guns. Some have been banned in certain countries but later allowed, for example contraceptives in Ireland. The internet and ease of travel now make the banning of certain markets ineffective.
Most might agree with the banning of markets in goods such as blood, hard drugs or child pornography. But once you move away from these obvious cases the issues become much less clear-cut.
If the consumer has full information, or as much as anyone else, about the product/service, and if the consumption of that product/service does not impose significant costs on others, why ever ban the existence of a market?
Such a ban will only encourage the emergence of a black market and all of the criminality that goes with this.
Behavioural economists argue that people are led astray by their emotions or by cognitive deficiencies and buy things which are not in their self-interest to use. They argue that suppliers know this and will exploit it to the full.
And there is a continuum of consumers with varying degrees of susceptibility to such deception and manipulation, meaning it affects some groups in society much more than others.
This may be true, at least in part, but the same people argue that the political marketplace is similarly tainted by misleading information and false claims. If this is so, then who is to make decisions for us if not ourselves via free choice in the marketplace? The clergy or psychologists or the President?
The issues raised here pose questions to which there are no easy answers. Economists, it is true, cannot leave the issue of how preferences are formed and manipulated to psychologists or other ‘experts’, while lauding the benefits of the marketplace.
But economists are probably correct to assert that free markets should be the default option. At least until a convincing case can be made to the contrary, overall or in relation to some specific market, such as that for body parts or child pornography.
Free choice in the market should be abandoned only in the most compelling of cases. Once you start to restrict what people can buy, it is a lot easier to justify restricting other personal choices.