Tuesday, July 18, 2006

Accountability in a market

Accountability is another key concept in the comparison between market anarchy and statism. Markets have accountability, states don't. But to understand this, and to see why democracy does not improve the statist incentives in that regard, we need to understand how accountability works in markets.

Accountability is basically having to answer for your conduct. We want to see fraud punished, we want to see inefficiency removed, we want to see inferior alternatives eliminated. In essence, what we want is some kind of feedback system by which we can select the changes we desire and help eliminate the ones we don't.

In a market, this feedback process is called "profit". Profit is the signal given by consumers in a market that tells producers whether a given product is fulfilling a level of demand sufficient to justify its production. More simply : profit tells us if something is worth making.

All of my actions as an economic agent have a direct influence on other people's profit. The fact that I choose one brand over another (such as one brand of car over another) means more profit for one and less for the other, and so does the fact that I choose one kind of product over another (the subway system instead of a car).

In this feedback system, the producer is accountable to the set of his consumers, as people naturally seek the products that best fit their value profile. Products, and producers, which do not fit that profile are less profitable than those that do. My action of choosing another brand or product has a very small effect on this profit. If many people decide that another product fits their value profile better (perhaps because of higher quality, because of added properties, etc), then profit will go down, and the producers are therefore made accountable.

Obviously, in cases of fraud or defects, the producers must be made accountable in the immediate. People may stop buying, say, tainted meat eventually, but even selling the tainted meat at all is a coercive act (assuming it is advertised as good meat - no doubt there would be some market for tainted meat somewhere). And I think it is reasonable to assume that most people would desire protection from such actions. This is why anarchic protection agencies would no doubt stop such things from happening, just like the state does today.

So there are two levels of accountability in a market : the immediacy of legal order, and the economic shifting of demand.

There are other particularities of market accountability that differ from statist systems. Perhaps the most important process in accountability is the constant competition. In the market process, I am not forced to buy a given product because most people favour it. I may have more trouble finding alternatives, but as long as there is some profit in them, they will exist. It is a lot easier to find a Britney Spears song than a Lou Harrison piece, but they are both there.

Another difference is that in a market, the gamut of choices is only limited by the shelf space of the stores, the number and resources of the producers, and the number of profitable possibilities (and in the case of the Internet, only the latter two).

Once again, it's all about the incentive system. In a market, producers are motivated to provide a product that fits people's value profiles, or at least to pretend to provide such. Since it is in the consumer's interest to buy products which indeed fit his value profile, he will use some of his resources to weed out lying producers (through protection agencies, watchdog agencies, insurance, etc).

It is, of course, important to remember that "producer" and "consumer" are just relational labels which apply to the same private individuals. Anyone who participates in a market is, to a certain extent, a producer and a consumer.

Accountability is implemented through profit. Therefore, people who decry the profit motive are anti-accountability. More specifically, they seek to escape the judgment of their fellow men, or would like for that judgment to be ineffective. They do not wish their ideas to have to compete on markets - they want to have everything now. These people are useless to a free society, and become parasites. It is not a coincidence that priests, artists, scientists (apart from economists), are the first opponents of the profit motive.

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