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Jan 28, 2010

Capitalism vs. Tiger Woods


by Liberty and Power


Columnist Ron Hart has an interesting observation on the lessons to be learned from the Tiger Woods scandal (hat-tip to Nick Gillespie):
One great lesson learned is the value of capitalism and its ability to enforce good behavior. Accenture and Gillette are cutting Tiger's pay over this. The supposedly"immoral" free markets are speaking louder and with more reprisal than anyone

He's got a point there. Woods' commercial endorsement contracts are melting away like dew upon a sunny morn as news of his compulsive philanderies grows and spreads. But is it really true that markets punish bad behavior?

Here is a parallel case: The Hollywood blacklist of the late 'forties and early 'fifties. It is usually presented as a case of government oppression, and to some extent it was. A notorious congressional committee played a role in encouraging it. But it was also a market phenomenon. Why did the moguls who ran the studios dispense with the services of proven earners like Howard Koch and the Hollywood Ten? There were a few hard anti-Communists among the studio tycoons, like Jack Warner, men who would be willing to lose income in order to impose their own political opinions -- but surely most were too interested in making as much money as possible to want to do such a thing. No, they were worried about ticket sales. They knew that the millions of Americans who hated and feared Stalin would also hate and fear people who were trying to bring Stalin's system to America. They did not want that kind of animosity associated with their commercial products. Communism, Schmommunism. What they really wanted to avoid was anything controversial or unpopular. That is what they had always wanted.

I have never seen anyone on the front of a box of Wheaties who suffered from unsightly deformities, be they physical or moral. To be exact: what the market punishes (in the sense that it fails to reward it) is behavior that arouses popular anger and disgust. It punishes unpopular behavior.

Sometimes this is a good thing, because among the things that are unpopular are a lot of behaviors that are really bad. But it does have a down side as well. Ironically, markets do not encourage extremely individualistic behavior. Corporate board rooms are not the place to look for audacious Randian heroes and brooding Walden Pond hermits.

Markets impose a cost on extreme vice, and on extreme virtue as well. The very simple reason is that markets, as Ludwig von Mises pointed out many times, are true economic democracy: rule by the people. Rule by the people is rule by l'homme moyen sensuel, the middling man, the man in the middle.

This was also posted on my personal blog, "E Pur Si Muove!"


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More Comments:

- 12/19/2009

Jane, You make two good points, which I think I can accept as "friendly ammendments": 1) there are some positive traits that markets foster by nature (partly because they reward people, in the long run, for thinking ahead), and 2) they impose costs on all choices, including even being excessively servile toward the customer.

But I do think there would have been some sort of blacklist even without HUAC's revolting shenanigans. As Koch told the story, he was blacklisted because he ostentatiously welcomed a Chinese diplomat when he arrived in town and, as luck would have it, the very next day China invaded Korea. From that point in time he did not make a movie in the US for almost two decades.

Lester Hunt - 12/18/2009

Jane, You make two good points, which I think I can accept as "friendly ammendments": 1) there are some positive traits that markets foster by nature (partly because they reward people, in the long run, for thinking ahead), and 2) they impose costs on all choices, including even being excessively servile toward the customer.

But I do think there would have been some sort of blacklist even without HUAC's revolting shenanigans. As Koch told the story, he was blacklisted because he ostentatiously welcomed a Chinese diplomat when he arrived in town and, as luck would have it, the very next day China invaded Korea. From that point in time he did not make a movie in the US for almost two decades.

Jane S. Shaw - 12/18/2009

You are dealing with important matters here. Many people say that the market has no morality -- it simply reflects the morality of those who use it. That's consistent with your point, I think. At the same time, the market does provide moral discipline of some kinds. If you mistreat your customer, you pay the price. If you kowtow to the customer's prejudices, you may pay a price, too -- you lose the talents of Howard Koch in the case you mention. The only way that his name came to public attention was through the government's action (we're not talking about the content of his writing here, I think). Without government intervention, the market would do what it could to keep his services but not offend the customer.