The United States loves free market capitalism. Almost any political action that would raise taxes, introduce tariffs on foreign goods, or regulate an industry is met with incredible pushback and extreme rhetoric. Most people don’t have a great sense of what communism or socialism really are, but those terms are used extensively whenever the government proposes a new regulation or program that might interfere with a market. Free market capitalism is the heart of the United States, at least in rhetoric.
However, as Yuval Noah Harari writes in his book Sapiens, “there is simply no such thing as a market free of all political bias.” Markets on their own are not perfect. Clickbait headlines and designed obsolescence of smartphones are two frustrating examples of imperfect markets. In both instances, unequal information and misaligned financial incentives provide motivation for the producer to provide sub-par products. These examples are relatively harmless, but they do contribute to a larger problem within markets – a lack of trust between consumers and producers.
Harari continues, “the most important economic resource is trust in the future, and this resource is constantly threatened by thieves and charlatans. Markets by themselves offer no protection against fraud, theft, and violence.” Clickbait headlines have made me distrust internet links and headlines that sound juicy. I make it a point to never click on a Yahoo! article after being burned too many times by clickbait headlines when I was younger. I simply don’t trust what appears to be valuable information on the internet – a problem that has larger spillover effects as our population comes to distrust any information. In terms of smartphones, government regulation actually did play a role in changing the problem of designed obsolescence. Apple was deliberately slowing down older devices in an attempt to force users to buy newer devices – Apple claimed they had to slow phones down to prevent battery degradation and damage to the devices (eye roll). The result has been better performance of older smartphones for a longer lifetime.
“It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support … the law.” We make investments and purchase goods when we can trust the market actors and that our investment will payoff in the future. I continue to purchase Apple products because I have seen an improvement in the problems of designed obsolescence and devices failing to function after just a year. Market intervention from the government helped stabilize the market and ensure that consumers had access to better products. However, I still don’t click on many articles, especially if the headline sounds like clickbait. I still don’t have trust in internet information, a space that the government has done little to regulate. The market on its own hasn’t established that trust, and as a result I make deliberate attempts to avoid the market. Free market capitalism, in these two examples, actually seems to work a bit better when there is some regulation and intervention, something that seems to contradict the general idea surrounding markets in the United States.
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