Almost all economists believe in markets, and the tools economists use to analyze markets can be applied to a surprisingly large number of social interactions. Our attempts to use economics to examine questions that are traditionally the purview of sociology, psychology, and political science have not always been welcomed by those in other fields, and there’s no doubt that our methods are often applied naively without a full understanding of what researchers in other disciplines have learned. Nevertheless, I can’t help speculating on why the “market” for political candidates failed so spectacularly this year.
One of the most important factors in a well functioning market is shared, accurate information. When one firm charges a lower price than another for the same good or service, we expect consumers will flock to the lower price firm forcing the other firm to lower its price. If it cannot meet the lower price profitably, if it is a less efficient producer, it will be driven out of business. But that requires individuals to know about the price difference, and to be able to evaluate the quality of the two products accurately. If they cannot do this because of faulty information, then the market will not work as well as it could.
But market discipline goes beyond having accurate information on the price and quality of products. We also expect consumers to discipline firms that step outside of social norms. If a firm is caught lying about the quality of its product, treating its workers unfairly, short-changing customers, or engaging in other socially unacceptable behavior we expect that consumers will stop patronizing that business leading to its downfall. But this requires consumers to be aware of what a firm is doing. If people have been cheated by a business, but it is not widely known, the market discipline will be ineffective.
We don’t rely solely upon consumers voting with their dollars to ensure that markets create an environment for fair competition. When it is too costly for customers to discover that a firm is not playing by the rules – for example breakfast serial producers making unfounded health claims about their products – we expect the government to step in and use regulations and enforcement mechanisms to prevent these types of behaviors.
There are also cases where consumers may not care if, for example, a particular class of workers is mistreated or if a firm gains and advantage over its competitors through shady means. So long as they get a good deal at the store they are often willing to look the other way or refuse to believe the stories they hear. In this case, we also expect the government to enforce regulations about how workers can be treated and what constitutes fair competition so that one firm cannot gain an advantage over another by violating the social norms on safety, overtime pay, minimum wages, lying about a competitor (e.g. spreading false information), and so on.
Finally, we expect that everyone will have an equal opportunity to compete in the marketplace. Firms are not allowed, for example, to use pricing strategies designed to thwart competition and gain monopoly power. There is, of course, an inherent inequity in terms of who does and does not have the resources to open a business, someone may have an advantage due to inheritance for example, and the rules against gaining monopoly power have not been applied as stringently as I would like – there are plenty of imperfections to point to – but the idea that we should strive for open, fair, competitive markets is widely held.
In the marketplace that determines candidates for office, the first problem is that the opportunity to compete is limited by access to financial backing. I am not sure that this problem is worse than it is in other markets, finding the financial backing for a business is always challenging, but it does seem clear that the number of people who can contend for the presidential nomination in a given year is extremely limited and not well connected to a selection mechanism that produces the most qualified slate of candidates. Reducing the influence of big donors is a step in the right direction, but more is needed to broaden the number of voices that are able to contend for our highest political offices.
Another problem is that once the slate of candidates is determined, there is no way to enforce that competition is fair. Just as consumers may not always have the information they need to enforce market discipline, or they may look the other way when firms engage in socially unacceptable behavior so long as they benefit, voters may not have accurate information or may be willing to overlook some behavior so long as they see it benefitting them.
And when, for example, candidates engage in deception – outright lying in some cases – to gain an advantage there is no regulatory agency that can step in and fine them for false advertising, lying about a competitor’s “product,” and so on. Telling lies in a political ad may get you a few Pinocchios on a fact checking website, but it won’t receive the reaction from the government that would occur for lying about the gas mileage you can expect from a car.
We don’t even have a shared understanding of what the truth is. The media is supposed to be our safeguard against this, to expose candidates who deceive the public or step outside of social norms in other ways, but this process has broken down. There is no source of information that is trusted by both sides, and the echo chambers that control our political discourse – particularly those on the right – have invented their own truths. There are separate and distinct realities instead of an agreed upon understanding of what is fact and what is fiction.
The competitive market system cannot survive without accurate information, without social norms about what is fair and what is unfair, and without a way to discipline firms that violate these conventions. Our first line of defense is informed consumers who patronize businesses who play by the rules and penalize those who do not. Or second line of defense is for government to step in when consumers are unable or unwilling to provide the market discipline themselves. Both of these elements are broken or missing in the markets that bring us our candidates for office.
Voters are not as informed as they need to be, and the press has a lot to answer for in helping to create the echo chambers that allow misinformation to persist and prevail. In addition, there is no backup regulatory agency that can step in and discipline candidates who do not play the political game ethically. If there was such an agency, it would be subject to charges that it was behaving politically to favor one candidate or another, so the equivalent of the FTC or the CFPD wouldn’t work in any case.
Our only hope is voters seeking out the information they need, a press that can be trusted to provide that information, and support for and a belief in the legitimacy of the competitive election process that allows us to resolve our differences (as opposed to claiming the system is “rigged” in an attempt to undermine the legitimacy of the winner).
I don’t know if that is possible in a society that has become polarized to such an extent that winning is more important than playing the game fairly, a society where there is no shared truth and no respect for the process that chooses winners and losers. But anyone who is not disturbed by a system that can produce Donald Trump as a candidate for president needs to think long and hard about what will happen in the future if we do not find a way to fix the “market failures” in our political system and reestablish trust in the ability of democracy to move us forward as a nation.