Freedom of Speech?

This is a little off topic for me, but the recent Supreme Court decision defending corporate ‘freedom of speech’ is something worth commenting upon because it is based upon a free market doctrine drawn from economics.

The decision was in a case called Citizens United v. The Federal Election commission. By a five to four majority the Court decided in favor of the corporation’s right to spend money on what was a political campaign issue.

The decision hinges on what reading one has of the intent of the First Amendment. There are two choices:

• Speech should be protected no matter what the consequences
• Speech should be free, but can be limited if the consequences are taken into account

The majority followed the first of these two principles. Their notion being that speech must be kept totally free of any constraint and that any wrongful or harmful consequence from an act of speech will be purged or corrected by the to and fro of the ‘market of ideas’.

The minority view follows the second principle and acknowledges that there may be some forms of speech whose consequences are not thus purged or corrected. In this case the ability of a corporation to overwhelm other sources of speech and thus distort the market of ideas drove the minority to object to the decision.

This is a very clear example of the impact that economic theory has had on the law in recent years. There is a very influential school of jurisprudence based upon Chicago School economics that argues the role of law is to allow economic forces – the purging in the marketplace mentioned above – to work free from constraint. The argument goes further: it says that imposing rules that are beyond those necessary to create a market for ideas etc are likely to do more harm than good. Richard Posner, a professor at Chicago, is the leading light of this school of thought.

The problem with it is that is relies upon the naivety of the Chicago School’s economic theories, the basic notion of which is that a market is a superior allocative machine than any other form of allocation, including government or central planning. This idea is simple and elegant and is central to the neo-classical economic system that underpins efforts both to deregulate and oppose government programs. To see such a clear intrusion of economic thought into a legal case is thus very interesting to note.

The problem is that the Chicago School is wrong.

Very wrong.

What is not spelled out are the extreme conditions necessary for a market to be proven as a superior allocative machine. We come across statements about leaving things to the ‘market’ to decide is may walks of life, and often such statements are made as if the efficacy of market power is a proven scientific fact.

It is not.

It is simply a nice naive intuition.

The conditions necessary for a market to be scientifically more effective than a central government are so extreme that they are beyond utopian. They cannot exist in the real world. They include the assumption that all of us has equal, and cost free, access to all the information we need to assess our options. And I mean all. The assumption is of omniscience. Not only this but it assumes that we know all information regardless of time: we have equal access to all future events and therefore can adjust our decisions today in light of that future. Since this is an incredible – actually a near infinite – amount of information, the assumption is that each of us also has the cognitive skill and sheer brain horsepower to process all that information in real time. And, finally, none of us ever changes our minds about what we want – that’s against the rules since it would screw up the calculations.

It is with these heroic assumptions that Chicago School economists argue that markets are indisputably superior to any other allocative device. So ridiculous are these assumptions, and so open to attack, that they have to be made inviolable: they are made axiomatic. They are taken for granted and deemed beyond need for proof. Only then can we say that a market is a better device than, say, a government bureaucrat.

Of course we all ‘feel’ that markets are better, but my point is that we cannot prove that feeling as being a true statement. We should be suspicious of unfettered markets precisely because we cannot prove their benefits.

On the contrary, economics is rife with what are called ‘market failures’: examples of times when the market fails to live up to the hype. The recent economics crisis is a glaring example of such a failure. It takes only a cursory look around the real world to notice that the axioms of neo-classical economics are foolish. Yet such is its staying power and influence that the ‘market’ thinking that flows from it has intruded into all sorts of places. The popular book called ‘Freakonomics’ is based upon Chicago style economic thinking. And now the Supreme Court has made a major decision based upon a variant of it.

The Court, by throwing the burden of free speech into the market place, has endorsed the view that the market is efficient in the way the Chicago School argues it is. Anything less, and the decision could go hopelessly awry.

If, for instance, that the market for ideas can be influenced by a flood of money that effectively eliminates competition, then the decision does not protect freedom of speech, but rather it undermines it.

This is a point I have tried to argue here many times: the efficacy of a market stems from the existence of competition, which will eliminate weaker products and less well formed ideas. If competition is, in any way, limited or constrained, then we should expect the market to work against efficiency, not for it.

This simple point is why I have yet to find a business CEO who is truly a free market advocate: they want to limit not encourage competition. They are at heart central planners, not free market fans.

Similarly, the Supreme Court’s reliance on the marketplace of ideas is a naive one. Such a market does not, and cannot, exist without institutional rules allowing every single voice, however underfunded, to have an equal share of air time. Only in the context of equal opportunity of expression can we guarantee a market for ideas.

This decision, based as it is on a flawed interpretation of ‘the market’ is ultimately limiting, not protecting, free speech.