Markets are about voting.

In both markets and democracies we vote. In elections the more votes a party or proposition gets, the more it can influence the political outcome. Something similar happens in markets. When you buy a particular ice cream, you are sending a message to the producer of that ice cream that you consider the ice cream sufficiently desirable to spend money on. It’s as if you’re voting in favour of that particular type of ice cream. If no one buys it, the company will stop producing it. If lots of kids like you vote for it with their pounds and pence, then the company will produce more.

Yanis Varoufakis, Talking to My Daughter About the Economy

The principle of the market is voting. Voting is simply ‘expressing preferences’. You could do that with ballots. That’s what the word ‘voting’ is usually associated with, but it’s just one specific instance of expressing preferences. You can vote with money, with ‘likes’, with ‘follows’. Nearly any action, if you think of it, is a vote in that it expresses a preference for that action as opposed to all the others you could

‘Voting’ in the sense it’s commonly used is a specific kind of market -the political market. It’s close to a communist one, where everyone has the same amount of money to spend on competing products. This is perhaps the harshest market in theory. The winner, the one with highest market share, gets the whole market, and the loser goes home. But it’s really much safer than that. With many markets around – different posts and levels – it’s not that losing one is the end. Just as there are high-end and low-end economic markets, with different companies and products competing in different ones as per their calibre.

But there is a profound difference between these two kinds of voting. In a democracy we have one single vote each. This is a prerequisite for the Greek concept of isegoria: giving different views equal weight. In markets, however, the number of votes one has is determined by one’s wealth. The more pounds, euros, dollars or yen you have, the greater the weight of your opinion in the markets where you spend them. It’s the same with shares in a company: if you own 51 per cent of the shares in a company, you are its absolute ruler, even if the remaining 49 per cent are owned by thousands of people.

Yanis Varoufakis, Talking to My Daughter About the Economy

The economic market – the free market for goods and services works just the same, but without the constraint that everyone has the same amount to spend. One voter’s vote – wallet – might be worth more than thousands of others’ votes. But the concept is the same – those goods / services, which is to say candidates, who get sufficient votes win, that is, remain in the market. Those who don’t are pushed out.

There’s a social market as well. The market for followers, for friends, for relationships. It has existed since before social media. The number of friends you have, the people who ‘vote’ for you, whether by spending time or affection or another currency. A likeable person might do well in the market, an unlikeable one won’t. That depends on the person as much as it does on the market. The product might be unpopular because it really sucks, which is to say a person might not have friends because they’re an asshole. But it might just be the wrong market, and, the same product could do well in another market. Just as someone might be popular in certain environments and not others. The usual product-market fit issues.

Social media helped blow up this market by expanding reach – quite the same way as the internet did for the economic market. You can find out about and purchase products the world over, just as you can find out and befriend people the world over. The currency has probably undergone dilution too though. A Facebook ‘friend’ isn’t likely to be equivalent to a ‘friend’. New currencies – like ‘likes’ and ‘follows’ don’t seem to mean much, if anything, not even a dime a dozen.

In this new-age social market, each person has a single ‘like’ or ‘follow’ per person. You can’t follow someone ten times because you think they’re great. It’s theoretically equal – no matter who you are, you can’t give someone more than one follow or like. But practically it’s unequal because if someone with a lot of followers follows someone, some of their followers will probably do so as well. Again, the same as the economic market – visibility matters. You can’t buy a product, or ‘like’ a person you’ve not come across, which is why people desperately push themselves on social media and their products / books on Amazon. And perhaps a human tendency too – if I look up to or follow A, and A follows B, I might not think too hard before following B.

The cultural market is the market of languages and cultures. A ‘vote’ for a language is learning (making the effort) to speak it and using it. You frequently hear laments about languages dying out. Whether you agree depends on how you think about languages in general. An integral part of your identity, a ‘heritage’, an emotional artefact? Or simply a medium to express your ideas in – use the one you find works best for you. The better the medium, the more demand in the market.

The same plays out in the economic market; the idea isn’t as jarring there for some reason. Some people are very attached to cars. Others, myself included among them, regard cars simply as objects to take you from point A to point B. The car itself isn’t important; only what it does for you is. Ditto for language. Those that fail to offer enough value die out, just the same as overpriced goods in the free market.

It’s the same for cultures – if culture is ‘a way of life’, then a vote for a culture is living that way. Those which die out are the ones which can’t compete in the market, whose adherents abandon them. In The 48 Laws of Power, Robert Greene describes how Athens was defeated by Sparta in the Peloponnesian War, and yet it was the militaristic Spartan culture that died out eventually. Not surprisingly. A ‘Spartan’ life is interesting to read about. Living it day after day is probably not that interesting.

The political market has the lowest degree of freedoms mathematically. It allows you to spend only one vote, and only once. Once you pick a product, you can’t pick any other (ignoring preferential systems). The social market relaxes one degree. It allows you to spend only one vote per person, but as many times as you want. You can’t follow the same person ten times, but you can follow ten people one time each. And the economic market relaxes both degrees. You can spend as much as you want on a product, and you can do so for as many products as you can or want to. You can buy ten bars of chocolate ice-cream as well as a dozen of vanilla.

There’s an environmental market as well. It’s explicitly defined as such – like the market for carbon credits. But it’s more basic than that. The decision to cut a tree or not is a preference just as the decision to undertake activities (be it using air-conditioning, taking a flight, setting up a factory) that emit greenhouse gases. You assess the benefits of the choice and then you decide whether to pay the price, just as in any other market. But this one differs from the others in a way.

Consider this: as humans, we now face the choice of either drastically reducing greenhouse gas emissions or letting the polar ice caps melt, which would cause the sea level to rise, resulting in the loss of millions of people’s homes and farms in low-lying coastal areas such as Bangladesh and the Maldives. Now suppose we’ve privatized the atmosphere, and the decision about what action to take lies in the hands of people whose wealth means they will never be affected by rising sea levels but who will face a reduction in their profits, perhaps even the loss of their jobs or businesses, if they reduce emissions. Is it right, do you think, that they as majority shareholders should make this decision while the people whose houses and farms will disappear under the rising waters should have no say? Do you see why the voting of shareholders will never protect the planet in the same way that democracy could?

Yanis Varoufakis, Talking to My Daughter About the Economy

In other markets, your choices usually affect you primarily, even if they do affect others along with you. In the culture market you vote for your language or way of life, in the economic market for your goods or services, in the political market for your candidate. The environmental market differs because it’s not necessary that your choice affects you as much as it does someone you don’t know. Just as you might be affected by the choice of someone you don’t know. What’s more, your choice is between a real, tangible benefit to you right now, versus an uncertain, intangible, far-off-in-the-future harm to people who might not even exist yet. It’s not an even fight by any stretch.

Inefficient Markets

None of these analogies are perfect markets. Cultures, languages, politicians, friends often come with baggage or accrued advantages. Ideas like McDonaldization, westernization reflect the unequal contests between cultural competitors. Nor is it a simple matter for someone to switch languages and cultures or candidates and friends.

But these factors exist in economic markets as well – high switching costs, lock-ins, default opt-ins. Just look at how many billions Google pays Apple every year to be the default search engine on its devices. If it’s hard to make a choice, it’s many times harder to shift from a choice already made, whether by you or for you. And switching costs, lock-ins, default opt-ins really magnify in power in non-economic markets. Take culture, religion, nationality – what would the world look like if people chose these for themselves from a blank slate rather than being born into them? I highly doubt it’d be the same.

Of course, markets intersect. Platforms where you hire the services of drivers, doctors, educators etc. are social and economic. The political market is nearly as social as it is political because of the way humans are, and economic too, because of human and logistic reasons.

I don’t think any of these markets are truly efficient. Though things have come a long way, you can’t really purchase any good or service from literally anywhere. And for all the social media that exist, I have my doubts about whether you can forge real friendships from different corners of the earth. At any rate, it’s suboptimal compared to actually knowing someone, which means there is a difference depending on where you happen to be. And that’s not what an efficient market should be like.

Similarly, a vote is restricted to an area, a constituency. So it might be that a product that isn’t great wins, not because of its merit, but because the other choices are even worse. And it might be that a great product loses because it has to compete with even greater ones. And thus the final selection isn’t really the same as selecting the top products in the market.

Maybe you wouldn’t even want a perfectly efficient market in some cases. There are barriers built into these markets, just like the barriers and tariffs between countries that affect free trade. You can’t cast a vote somewhere else no matter how much you want to. Which is a good thing, otherwise people living in one corner could determine the choices of people somewhere else while having no skin in the game.

Democratizing v/s Commodifying Everything

Your era will be typified by the momentous clash between two opposing proposals: ‘Democratize everything!’ versus ‘Commodify everything!’

Yanis Varoufakis, Talking to My Daughter About the Economy

The ‘democratize everything!’ approach is the communist market. In the context of that particular market, you hold that humans are equal. Politically, it would mean they should have equal say in electing people to office. Economically, it would mean that they should have an equal amount of money. Socially, they should have an equal amount of something I would imagine to be like Facebook’s ‘friend requests’ for want of a better term. At least, this is what you’d get if by ‘equal’ you meant equal opportunity. In the context of the market – an equal vote, an equal say in things.

If you mean equality of outcome, it gets even weirder. They should have equally good (or bad) political representatives. They should have equally good (or bad) products and services – probably only a single standard available for everyone. They should have the same number (and quality, if you could define it) of friends.

I don’t see how you could ever ensure any of this without tyranny – and it’s probably impossible even with it. Some people are better at drawing or dancing, others make friends easily, some have a knack for building wealth, others for organizing people. Pretending everyone is the same at everything seems idiotic and artificial.

The ‘commodify everything!’ approach is the free market where different people have different say. It’s not so much that different people’s votes count differently as it is that different people have different amounts of votes. So $1 is $1 whether it comes from a billionaire or a tramp, but the billionaire has billions of them and the tramp doesn’t. It’s also the belief that people aren’t the same, or more simply, are not the same at every thing. One person may be wealthy but friendless, another an impoverished social butterfly. They’re good and bad at different things and will never be the same, and it’s stupid to try to make them so.

Votes are either for collective things or individual things. ‘Social’ votes are the choices you make about things that affect many people – whom to elect as a leader, whether to build a hospital with everyone’s money, whom to ostracize and so on. ‘Personal’ votes are the private choices you make – say whether to spend your money on a burger or a book, or whether to befriend someone or how many friends to have.

It’s not that clear cut though. Is cutting a tree to use the wood to make something a personal or a social vote? As far as using the wood goes, it’s personal. But the possible impact – the depletion of reservoirs to sequester carbon – you could argue is social. Stretching the argument even further, you could say the aggregate of any personal choice is social. My decision to buy a sandwich for instance, plays a role in influencing the price of sandwiches in the market, which is after all simply a collection of individual actors. But I don’t want to split straws on definitions beyond a point.

I think ‘democratize everything!’ would be terrible for personal choices – others telling you what to buy, whom to befriend and so on. The more interesting question is about social choices. You can actually see both the approaches at work when you look at political markets democratizing everything and environmental ones (like carbon credits) commodifying everything.

Market failures exist and are commonly talked about. The tragedy of the commons where individuals maximizing their personal outcomes lead to a collectively sub-optimal outcome. Failures to assign value to clearly valuable things like clean air, wildlife, soil health which makes people neglect them. It’s not true that leaving it to the invisible hand will solve everything perfectly.

‘Democratization’ failures exist as well though. It hinges on you truly believing everyone is equal – equally capable of choosing, that is, in the context of that market. The first question around this is whether you have so much faith you’ll let others choose for you – especially for something that matters. Why say, elect political leaders by ballot yet not elect doctors, engineers, executives, bureaucrats, generals similarly? A cynic might answer because the doctor or engineer directly affects your life with their work, and that’s why you care to get the choice right.

The next question is whether you think others are capable of choosing. Why have referendums or plebiscites on certain emotive issues but not others, like monetary policy? If the latter is ‘too complicated’ for most people, how do we know the former isn’t as well? Market failures often skew resources – a few then hold disproportionate wealth or power. ‘Democratization’ failures can too, like a local leader distributing the largesse and benefits to his supporters and excluding his opponents.

Summing Up

Markets are preferences, based on voting. Many apparently unrelated things – religions, cultures, languages, friendships etc. can be viewed through the prism of markets, and therefore voting. When you see it that way, it’s interesting to ask how votes work in that market. What does a vote look like? Does everyone have equal numbers of them? Would you want it to be that way? And you might wonder whether there’s something to get emotional about as old preferences give way to new ones. Or whether it’s simply the market at work, people choosing what they want.