Capitalism Sucks II: Lying Liars

In a previous post, I argued that a fixation on economic growth is a societal prescription for misery.  It's certainly true that growth-oriented policy planning happens in non-capitalist economies; China, for example is renowned for driving its policies to meet ambitious annual economic growth targets (granted, China's economy has incorporated many market based "reforms", but its certainly not the Wild West of laissez-faire).  Today, I want to discuss one of the great market failures that all but the most delusional will admit is a significant short-coming of the invisible hand of the market - Capitalism gives us incentives to lie and deceive each other.

In the fictional world of perfect competition, producers compete with each other to produce the best products, and consumers judge the products available to them and choose the ones that best fit their needs.  Thus the invisible hand rewards those who create useful, desired contributions to society, and punishes those who don't. Utopia ensues.

In the real world, there is a major problem with the process described above.  Making consumers believe you have the best product is much easier than trying to design the best product.  That's right - in the world of free market capitalism, there is nothing to guarantee that the people selling your products will tell you the whole truth about their products.  In fact, since their livelihood actively depends on you wanting their product more than their competitors, they are strongly incentivized to HIDE THE TRUTH from you about the less desirable aspects of what they're selling.

An argument from physics suggests that its much easier to manipulate you with information than it is to persuade you with a genuinely better product - the laws governing energy.  Transmitting information has an extremely low energy cost compared to actually moving stuff around - look at how far our information technology has come compared to our physical technology.  For all intents and purposes, we already have the fanciest communication technologies ever dreamed of in the sci-fi of the 20th century, but we're still a long way from flying around on our own hover-boards or starship enterprises.

Further, 30 seconds of google research yields some data to support this conclusion.  A recent article in the Washington Post crunches the numbers for the pharmaceutical industry, and in all of the 10 biggest companies, significantly more was spent on marketing than research and development.  In most cases, nearly twice as much was spent on crafting their sales pitch as was spent on actually coming up with new effective drugs.  One would think that success in the pharmaceutical industry would particularly depend on actually being able to come up with better products, but that's not where all the biggest, most successful companies are spending their money.  They're working much harder to hypnotize you into buying what they're selling, rather than trying to rationally persuade you with something you might genuinely prefer to buy.