10 - Trade and Economics

Summary

Belief in the merits of markets has achieved considerable conceptual hegemony. Of course, general critiques are common and, I think, powerful, but I will not take them up here. Instead, relying on Part I, this chapter considers special attributes of media products that undermine the applicability of the general assumption that markets achieve proper outcomes in the context of international trade.

The standard economic (and democratic) perspective treats consumers' own evaluations of their needs and interests as “sovereign.” Reliance on consumer sovereignty is questionable in some contexts, most obviously when the consumer is a child. Nevertheless, my claim is that, from the perspective of consumers' own preferences, markets predictably and dramatically fail to provide appropriate production and distribution of media products, thereby denying any real consumer sovereignty. Part I justified this claim by developing three analyses. First, markets work well, if at all, only with respect to “private goods.” Because media products have substantial “public-good” aspects – specifically, the possibility of substantially nonrivalrous use of media content – markets fail to produce enough, and they sometimes inefficiently favor less-desired, media products. Second, markets work well only if goods are properly priced, that is, priced at roughly their true cost. Substantial negative and positive externalities of media products result in improper pricing. This pricing leads to excessive demand for and an oversupply of media products with substantial negative externalities and to inadequate demand for and underproduction of those with positive externalities. Third, markets work well given the premise that they properly identify and measure people's preferences.