How a No Vote Works in the Market

(FEE) – This November, I chose not to vote for a presidential candidate, but maybe not for the reason you’d think.

I didn’t choose to withhold my vote from one candidate because I wanted to help their opponent; I realize that’s illogical because voting isn’t a zero-sum game.

I didn’t do it just because I know my vote isn’t decisive, either; I’m fully aware that I have somewhere around a 1-in-60 million chance of affecting the outcome of the Presidential election.

I chose to not vote for a Presidential candidate because I’m an advocate for liberty, and after some consideration, I realized my reasoning was rooted in my understanding of the virtues of a free market.

In a free market, it’s imperative for consumers to say “no” to entrepreneurs and products— in fact, the market depends on it.

Overcoming the Information Problem with the Use of Knowledge

The information problem is the problem we all face, and fundamental to our existence as humans is our quest to find ways to communicate better.

This is ok; failure – being told “no” – is the market’s way of communicating a different kind of message.

F.A. Hayek describes this problem in his salient work, “The Use of Knowledge in Society.” Hayek points out that at its nature, knowledge is bound to location and time, which is why we need to find a way to communicate it as quickly and efficiently as possible. Hayek sees the price system as the solution; he writes, “We must look at the price system as such a mechanism for communicating information if we want to understand its real function.

However, a key point Hayek makes is that the price system is an imperfect system. It’s quicker and more successful than central planning, but its speed comes at a cost: prices only communicate the bare minimum – as Hayek notes, “only the most essential information” – to make decisions. People don’t know why or how a price rises; they just know it’s telling them to consume less.

Entrepreneurship and Allocation

Now, being an entrepreneur is risky. Anyone can do entrepreneurial things, but most people don’t make a career out of it because the uncertainty is too much to handle. Entrepreneurs must perceive demand, never with total certainty, and guess that people will say “yes” to their venture, not “no.” But to paraphrase Lionel Robbins’s famous observation, we have ends to achieve, and only scarce means to work with, so our goal is to find the best use for those means. In other words, people are going to say no so they can allocate their means – time and money – to achieve their ends in the best way.

Entrepreneurs engage in a trial-and-error process because they don’t have all the knowledge – they just have some idea of what demand could be – and they invest in their educated guess. This is okay; failure – being told “no” – is the market’s way of communicating a different kind of message.

Cleansing, er, Creative Destruction

In a market where people have the freedom to choose the people and products they want, saying “no” is how we say that resources should be put to different use. Saying “no” to an entrepreneur is telling them the cost of offering their service is too high; it sends a signal that someone else could be doing what they’re doing better, or that their goods could be put to better use in a different way. It’s also our way of saying something isn’t worth it; it doesn’t match our subjective valuations, and it’s not up to our standards.

Saying “no” is the market’s way of participating in the guess-and-check process.

In short, saying “no” is absolutely saying something, and it’s saying something equally if not more consequential than saying “yes.” If I’m a terrible ballerina, I don’t want to go through life without someone telling me I’m a terrible ballerina, especially when I could be applying myself to something that’s my comparative advantage. Being a ballerina means I’m not benefitting myself or others.

Saying “no” is the market’s way of participating in the guess-and-check process.

Both consumers and producers participate in the guess and check process, and they both do it to reach the same end: optimal allocation.

Remember: prices are how buyers communicate to sellers. If buyers only said “yes” to new products even if we didn’t like them, resources would never allocate to where we optimally want them. If buyers never said “no” to existing sellers and kept buying poor products, sellers would have no reason to change – after all, they’re earning profit, right?

Image Source: Pixabay.com

Image Source: Pixabay.com

A Different Market for Lemons

In the American political system, citizens have the right to vote. Yet each November, parties select a candidate in a winner-take-all primary, then bully their party into voting for the chosen candidate, regardless of his individual values. It’s bad enough that we vote for people, not policies, but voting for parties instead of people is a step in the wrong direction.

Despite what others may say, there’s no shame in saying “no” to a candidate, just like there’s no shame in saying no to an entrepreneur.

In the market, saying “no” means rejecting a good or service, and that’s how you do your part to make sure resources go to their best use. There are a lot of us in the market, so our method for communicating is limited to the bare minimum. So, we say “no” in that way because it’s the best method we have. Yet, why do we think it’s a good idea to support a candidate by voting for them, even though we dislike nearly everything about them? What kind of message does that send them? It’s certainly not telling them they need to change what they’re doing; in fact, it’s doing the opposite.

Due to the fact that you can’t actually vote against someone, the way you say “no” to a candidate is by withholding your support from them. Despite what others may say, there’s no shame in saying “no” to a candidate, just like there’s no shame in saying no to an entrepreneur. If someone shouldn’t be in office, tell them, for your sake and everyone else’s! Communicate your subjective valuation of their services by saying yes or no. Everyone has a comparative advantage, and if someone should be doing something other than becoming president, you have a duty to communicate that to them.

Conclusion

A lot of people have told me that it’s time to pull my head out the clouds, because, at the end of the day, either Trump or Hillary will be the president. And they’re right! I’m not disputing that. At the end of the day, one of those people will be president. But let me continue: one of those people will be president, and your vote won’t change that. Well, it might; after all, you do have a 1-in-60 million chance of placing a decisive vote. So if one of those people will win regardless of whom you vote for, then at least spare yourself some dignity and abstain.

Remember, saying no is still saying something. This November, say no – the market depends on it.

Will Logan


Will Logan

Will Logan is a graduating senior at Hillsdale College, where he studied economics. He is a current participant in the Koch Internship Program (KIP) in Washington, DC.

This article was originally published on FEE.org. Read the original article.

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