When open markets make sense

When profits align with positive outcome, free or open markets make sense.

When profits align with negative outcome they don’t. In these cases a social system is better for society. And in the end, bettering society should ALWAYS be the goal.

Pencils are good for society. If your company makes a higher quality pencil and more people buy your pencil, your profits go up AND society gets a better pencil. If you make a same quality pencil but for less cost (more efficiently), your profits go up AND society gets a good quality but cheaper pencil. Profits and outcome are aligned. You make money and society benefits.

If your company makes antibiotics what do you want to happen for you to increase profits? Naturally you want more people to get sick so you can sell more drugs. I’d say that was a negative impact on society. If you make a super effective, but more costly antibiotic who will buy it? The wealthy-sick? I would venture that would be a bad business model. If you decreased your production costs and lowered the price, you can sell more drugs to more people, but again, once you’ve (theoretically) cured everybody — where’s your profit going to come from? What company would ever enter into such a business model? Yeah, exactly! (And it’s a real growing problem.)

It turns out there’s a simple rule of thumb to determine when open markets make sense, namely, when profits align with a positive societal outcome.

  • Cars are good for society. The company that makes the best, lowest cost car will profit.
  • Airlines are good for society. The airline that transports the most people, for the lowest cost, safely and comfortably will profit.
  • Smartphones are good for society.
  • Surfboards, skis, yachts, clothes, shoes, food, drink, furniture, hotels, restaurants, and so on and so forth.

If society benefits from the service or product, the company that provides those services or products at the lowest price and the highest quality — will profit. In each of these cases true capitalism and the associated free/open markets make sense.

Profit + positive outcome = free markets.

So, when do free/open markets NOT make sense? Well, as noted above, if there’s a negative in the equation, anywhere in the equation, then free/open markets do NOT make sense.

For instance, healthcare, pharmaceuticals, and health insurance corporations only profit when you are sick and are forced to pay for a cure or protection. The sicker you are, or society is, the more money healthcorps make. A negative for society equals a positive for corporations. A bad equation.

In correlation, if society became illness free, if somehow a company created a drug that cured every disease, this would be great for you and me and everyone but would destroy that company’s as well as all other healthcorp’s profits; a rather big negative.

There are other inverted benefit sectors (negative = profit):

Fire. A corporation that benefited from putting out fires would naturally want more fires burning. More fires = more profit.

Police. A corporation that benefited from providing police services would naturally want more unrest, more violence, more mayhem in society. More chaos = more profit.

Hospitals. A corporation that benefited from fixing people’s injuries and illnesses would naturally want lots and lots of sick and injured people. More illness = more profits.

There are many other negative = profit (or positive = loss)

  • Disasters are bad for society (and their response and recovery aspects).
  • Crime and corruption are bad for society.
  • Poverty is bad. Air pollution. Water pollution. Loss of open-space.

If a thing is bad for you, me and society, then making a profit from it is NOT a good use of free and open markets. In fact, I would say that making money off of society’s misery, of any kind, is down right evil.

When there’s a negative in the equation the only solution is to build and manage a social system around it.

Socialism is not all bad. Open markets are not all bad.
Socialism is not all good and neither are open market systems.

We need a mix. The rule of thumb above can help us figure out which to apply when. Right now, healthcare is a for profit system making money on a negative affect on society. This is exactly why we must socialize healthcare.

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4 responses to “When open markets make sense

  • Anony Mole

    Our understanding of when capitalism is useful to society must change.
    That is, to date, society has treated capitalism like a cure-all. Let it run rampant and it will, it has! But now that we’ve seen what such unfettered constraints on this economic machine can do, we need to redefine the parameters under which we should allow it to continue.
    I have a simple solution: ask ourselves if a product or service, however it’s created or delivered, has a negative aspect embodied within it — then such products or services must be socially provided. If the product or service has only positive impact, then capitalism is a good choice for its delivery.
    Here’s a few examples.
    Capitalism Good (safer, cheaper, faster, higher quality, longer lasting, lower ecological impact):
    Smartphones, cars, travel (airline, taxi, train, ferry), apparel, hamburgers, pizza, food in general, air-conditioners, lawn chairs, , accounting, cleaning, hygiene products, toys, entertainment, housing, space exploration, mining…
    All of these things are good for people when their product or service is optimized — AND — they’re good for corporations in the business of providing them; the more the sell, the happy we and they are.
    Socialism Good (Capitalism bad) (some aspect of these have a negative impact on one or more parties):
    Military protection, law enforcement, incarceration, fire suppression, healthcare, pharmacology, judicial system, environment protection, regulations management…
    All of these things have a negative factor built-in to their existence.
    A company hired to put out fires only gets paid to put out fires, so, more fires are good for it. Bad for society.
    A company hired to protect you, based on arrests, only gets paid when it arrests. No arrests it goes bankrupt, bad for it.
    A company hired to take care of your health will fail if you never get sick, or will profit if you are constantly ill. Good for it when it’s bad for you.
    A company that creates medicine to cure ailments, only gets paid when society is sick. If society never gets sick again, bad for it, good for society.
    This applies to all of these.
     •If it’s good for the company, it’s bad for society. 
     •If it’s good for society, it’s bad for the company.
    Simple rule, simple to explain, easy to apply. (Impossible to enact.)

  • Anony Mole

    Which, to me, means that their entire business model is flawed. Car insurance, home insurance, physical thing insurance makes some sense — the more expensive, valuable or important it is the more the insurance should be; the more you don’t want to lose it the more it make sense to insure it and the more one would be willing to pay to insure it. The rich would insure their mansions and be able to pay the premiums.

    But I get your point. Insurance is akin to gambling which is designed to only benefit the house (AIG). Only with insurance, when you place your bet you’re hoping you don’t win — and so does the house. Which, when you think about it, is pretty messed up.

  • matt

    nitpick: health insurance companies _don’t_ want you to get sick whereas hospitals, pharmas, etc do. Insurance companies are kind of a weird creature with respect to their value to society. They want people to be healthy, but they would go out of business if everyone were always healthy.

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