The Democracy of the Market

On June 12, 2011, in Economics, by sean.rosenthal

Imagine people are shopping at Wal-Mart. With the store offering a diversity of goods, they can choose from groceries, personal hygiene products, entertainment goods, etc., and consumers choose everything they want at a price no higher than they are willing to pay. After putting what they want into a cart and bringing it to the cash register, shoppers purchase an entire cart full of goods they demand and pay for nothing less valuable than the money given up. Every sale represents a vote for the purchased product, and every ignored product signifies a vote against it. As businesses tally the votes of consumers, the quantity and prices of the products shift, bringing the supply of the products in line with their demand. Through the culmination of these votes, a clear will of the people emerges.

Of course, this process has shortcomings. When buying new products, consumers may spend money they later consider wasteful. Sometimes, the products bought will be defective or damaged; at other times, changes in the preferences or circumstances of the buyer transform what appeared to be a wise purchase into a wasteful expense. In response to new knowledge, tastes, and situations, consumers recast their votes the next time they shop, getting different carts reflective of their new demands. Although the market process, like all human institutions, diverges from perfection, changing consumer preferences result in adjustments that create an imperfect but constantly perfecting system.

Now imagine Wal-Mart finally responds to all of its protestors and decides to model itself off the democratic system. In advertising its change, it announces that it has designed its new methods to “promote the general welfare” and “ensure the public good.” Rather than allowing selfish individual preferences to dictate the market process, the public as a whole will now determine purchases in the same way it casts ballots in elections. How different would the transactions in the market look?

Immediately, the ability of consumers to choose what to put in their carts disappears. Rather than allowing consumers to choose carts full of both everything and only the things they demand, Wal-Mart provides consumers with two choices: Cart D and Cart R.[1] Both carts contain a large variety of goods, and both of them have a large price tag. For most customers, regardless of their vote, they will end up buying things they do not want and unable to buy things they do want. Unlike when Wal-Mart embraced the democracy of the marketplace, the “will of the people” offers only two choices.

Just as the consumer is considering the merits of both carts, the entire neighborhood walks into the store, seeking to exercise their democratic rights. Rather than the individual consumer choosing among Cart D and Cart R, Wal-Mart now lets consumers as a whole choose by a majority vote, ensuring that the final decision reflects the “will of the people.” In doing so, each voter realizes that, except in the extremely remote chance of a tie, no person’s vote will affect the outcome, meaning everyone else will choose for the consumer which cart to buy. In enabling everyone to choose, no individual’s choice matters.

To prevent any selfish consumers from disrupting the general welfare, Wal-Mart decides that, even if consumers do not vote for a cart, they will still be forced to pay for the cart and receive all of its contents. Whether wanted or not, everyone must accept whichever of the two options the majority chooses. To ensure no loopholes to this rule exist, Wal-Mart closes all of the stores of its competitors, making it a monopoly that provides only two choices. In defending this decision, Wal-Mart explains that its system improves markedly over that of Red-Mart, which has a monopoly in China and Russia. Whereas Red-Mart only offers Cart C, Wal-Mart, in providing for the will of the people, offers twice as many choices.

After the people cast a vote for their product, Cart D wins a large majority of the votes, making it a clear reflection of the “general will.” As a result of its victory, for the next four years, Wal-Mart will provide every member of society with Cart D, after which time a new election will be called to determine the will of the people once again. Some customers wonder why they choose their cart so infrequently, and Wal-Mart explains that it creates stability in an otherwise chaotic market. Additionally, as Cart D represents all consumers, they can hold the cart accountable, so there is no need for regular voting.

Almost immediately after the election, the contents of Cart D change drastically, offering substantially different products at a much higher cost. Remarkably, the most appealing items in the cart were the first to be eliminated, and the shiniest items in the cart turn out to be defective. The people who voted for it mumble angrily, but they concede the legitimacy of the change, realizing that Cart D represents the public welfare. After all, “everyone” voted for Cart D, so everyone owes unconditional allegiance to it.

Pondering over the imperfect system that has arisen after a true democratic system replaced the vagaries of a market democracy, the consumers consider their alternatives. They wonder what better and more accountable ways exist for determining what people should receive and at what price. After much thought, they resolve to continue the status quo, concluding that Wal-Mart’s democratic system succeeds far better than any other alternative. After all, look at the horrid results of Red-Mart.


[1] Other carts exist in the background, but the consumer has no meaningful chance of choosing these carts, and friends, family members, and Wal-Mart executives explain that consumers who vote for these other choices are wasting their votes.

 

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