More musings induced by my Econ course…
My textbook states that “market transactions are characterized by voluntary exchange coordinated by prices.” Except that there’s a big difference between “voluntary” and “well-informed.” One can do something voluntarily that is extremely poorly informed (examples abound), or one can be actively misled and misinformed.
One of the arguments that my text makes for why advertising exists, and works, is that it increases the information available to consumers. Which maybe it does, and maybe that was the original intent of advertising, but I would really debate that that is it’s primary function nowadays. But that’s not the point. The point is, market transactions are engaged in — purchases are made — voluntarily, by people who are more or less well-informed about goods, substitutes for them, their costs and value, etc. But I’m used to operating in an environment — that is, getting IRB clearance for research studies — in which participants must be fully informed.
But what if research were subject to the same criteria as markets? Anything you could convince your subjects to do would be fine, because it’s “voluntary.” Tuskegee-like studies could abound. Enough said, I think.
And what about the other way around, if markets were subject to the same regulation as research? Before you buy this pack of cigarettes, read this informed consent form and sign here. Do you have any questions? Do you need a translator to help you understand? If you’re under 18, a parent will need to sign for you. You can return your half-smoked pack at any time and we’ll give you your full money back. That would be a hell of a regulatory burden, but honestly I’m not sure if markets wouldn’t be more efficient for it, at least in the sense of having better information flows. They’d certainly be more ethical. Businesses would really have to identify all costs, including the costs to their customers and even to society at large, including non-customers.
With your last two posts, I think the dissonance you’re running into deal with the assumptions of neocalssical economics. Yesterday’s post revealed problems with production-cycle assumptions (i.e., there will never be such thing as a good with zero marginal cost because all goods must be produced). Today’s post is the concept of the maximization of utility, which we get to inductively by the rational actor assumption. This one strikes near and dear to my heart, as these assumptions have widely proliferated through modern social sciences – the exchange theorists rely heavily on these assumptions. I guess this is why Simon gave us bounded rationality.