False Advertising and the Free Market

In a free-market economy, what would prevent businesses from false advertisement? Businesses could easily say one thing and do another if no one is regulating. How can this be a good thing?

There is an implied straw man argument underlying these questions that should be addressed before moving on to the real issue. Advocating a free market is not the same as advocating anarchy. In a free society, laws exist to protect people from things like murder, theft, and fraud. No free-market economist argues that "anything goes" with respect to these crimes.

That being said, let’s consider your questions from another angle.

There are those who think that because some businessmen in a free market might be deceptive we should have no free markets at all. But quite often those same people don't care at all about the fact that the very politicians and bureaucrats they want to put in charge of regulating business say one thing and do another all the time. For example, Lyndon Johnson said in 1964 that if he was elected president, we would not have a major war in Vietnam. So he was elected president and we had a major war in Vietnam, costing tens of thousands of lives.

Using the same logic, we must ask if finding one politician—or even many of them—who says one thing and does another is an argument for abolishing our representative system of government and implementing a dictatorship. If it is, what is the guarantee that our new dictator would always tell the truth?

Concerning false advertising, I will skip the endless examples of government saying one thing and doing another every day and in virtually every election campaign and instead focus on your example—businesses. As mentioned above, there is not a single free-market economist who would argue that rules against lying apply to everyone else but businessmen.

In a free-market society, government exists for the protection of people's lives and property, the sanctity of their contracts, and the maintenance of peace. If someone sells you a box of corn flakes that instead turns out to be a box of sand, for example, there is a role for government, through its courts and perhaps other mechanisms.

But do not sell the free market short. Free markets have a host of important built-in consumer protections all over the place: Consumer's Reports, Underwriters Laboratories, word of mouth, and the media are just a few examples.

When CBS's "60 Minutes" does an investigation of some business malpractice, that is not government protecting the consumer. That is a private, for-profit company (CBS) going after another business in a free market of information, doing more to put that business out of business, and doing it more quickly, than even most government bureaucracies could.

So how can free enterprise be a good thing? Ask yourself this: Who produced the food you ate today? Who made the car or bus you went to school in? Who made the CD player you listen to? Who built the house that gives you shelter? Who invented the telephone, the personal computer, the silicon chip, the airplane, etc. etc.? Government didn't; free market entrepreneurs did.

All over the world, ideas are moving decisively in the direction of free markets. Those who argued that central planning and government control of the means of production were the way to go have been proven to be horrendously mistaken. They are in an ever shrinking minority of opinion. Why? Because the weight of economic science and experience tells us conclusively that people produce more and better goods, live longer, and are happier when they have strong incentives to start businesses, pursue their own personal goals, and own and accumulate property. If you doubt whether free enterprise is better than socialist planning, then you are missing out on one of the most wonderful revolutions in ideas and policy ever to grip the world.

Have you ever paused to wonder why so many of the world's poor and freedom-starved people have consistently chosen to emigrate toward nations with market economies, and away from nations whose every facet of life was regulated by impersonal, omnipotent, and often brutal governments? America remains the destination of choice among emigrants largely due to its unregulated beginnings.

Human freedom is an unequivocally good thing, and it comes in many degrees. The freedom to engage in voluntary, peaceful transactions with the consumers (primarily adult consumers) of one's choice is a centerpiece of civil society and one I hope you choose to study in greater detail. There are many free-market organizations, the Mackinac Center included, who would be happy to assist you in your study.