Why do people hate the market?

Stardom sent me this clip about Seva Cafe, a restaurant operating the Radiohead business model: eat first, then pay whatever you feel like.

Instead of a warm glow, I feel depressed. Why are projects such as Seva Cafe so loved? Why is someone volunteering to do social service more respected than, say, an industrialist that creates tons and tons of consumer surplus? What is wrong with commercialism? Why do people hate prices, money, and the market mechanism itself?

One potential reason behind the markets' bad reputation is their worrying tendency to generate inequality when left unchecked. Most people, however, are not simply against free-market libertarian societies; they are suspicious of markets at the micro level, even when these operate within reach of the redistributionist arm of the state.

My feeling is that people suspect markets because the incentives of the seller are diametrically opposed to those of the buyer: the former wants the price to be high, the latter low (with the opposite going for quality); furthermore, and perhaps more crucially, the parties in the transaction are usually better off concealing information from each other, or communicating outright misleading information (seen any ads recently?). This is not a problem in the textbook model of perfect competition, but real-world markets can generate a lot of ill feeling amongst participants. Information is gold, and it's often hard work. In contrast, in a perfectly altruistic 'giving' economy, the incentives of the giver ('supplier') are fully aligned to the incentives of the receiver ('the buyer'): the former is better off the happier he makes the latter. I'm way more confident in the quality of the food my mom serves me than that of my local chinese. I feel way more comfortable with a friend that 'cares for me' than with an explicitly selfish business associate. I prefer a partner who loves me to paid-for company.

One problem with this is that altruism exists in very small amounts, and it tends to constitute a very unstable equilibrium (a few people deviating is usually enough to bring to whole edifice crumbling down). And even if that wasn't a problem and the objective was to organise an economy of angels, there is no technology that is nearly as good as markets in determining the relative value of goods. An 'altruistic' model can work - often very well - only at the most micro of levels (e.g. in the case of Seva Cafe) where the lack of information can be brushed aside and gross inefficiency can be 'subsidised' from outside the system. But it is no way to run a full-blown economy. Alas, this is not immediately obvious.

The implications of the public's mistrust of markets are profound. Simply put, it's the resource allocation equivalent of having invented the chainsaw and insisting on using your nails to cut down trees. What can be done to change public perceptions of markets?


  1. Anonymous Says:

    Thanks for the honest post. Seva Cafe is not about people hating the market.

    You said it yourself: "I'm way more confident in the quality of the food my mom serves me than that of my local chinese. I feel way more comfortable with a friend that 'cares for me' than with an explicitly selfish business associate. I prefer a partner who loves me to paid-for company."

    Seva Cafe is an experiment in taking that 'family-based economy' that you described (i.e. sharing, giving) and extending it beyond one's limited family.

    It's intention is to provide that feeling of being home and feeling loved - an oasis outside of the market of trade. Where else but with your friends and family can you really experience this? This is not to say that trade is bad or unnecessary. It just gives merit to that which you said yourself you prefer. It's a small bubble of family in the world - one that is open to everyone.

    Ultimately, it's up to the market to determine whether the experiment can go on or not. But instead of withholding the care for those who cough up the money for it, like in a family, the care just flows unconditionally. If not enough people value it and support it, it will collapse and go away.

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  3. datacharmer Says:

    Anonymous, thank you for your comment. I'm sorry if I came across as saying that there's something wrong with Seva cafe (and similar endeavours)- in fact, I like the idea very much and I would love to visit or volunteer if I get the chance. My comment was that such projects can only have a limited impact, yet they enjoy widespread support; at the same time, profit-motivated endeavours and markets (a powerful tool in our quest to improve the condition of the human race, especially that of the most needy and vulnerable amongst us) are often loathed and frowned upon.

  4. Anonymous Says:

    I'd say that people cannot see how markets work. All they see is a bunch of people being selfish, and that is obviously bad.

    And most people want to be seen to support things that are obviously good.

  5. salary bloke Says:

    I think there's probably something in this theory, but I don't think it accounts for *all* of the resistance to the market.

    Another factor is that the operation of the market is just so implausible,and so counter-intuitive: common sense seems to tell us that it just wouldn't work.

    Although, of course it does. The insight of economics is explaining why something so implausible actually comes about.

    It's this second factor that (I think) accounts for the absence of market-thinking in a corporate environment: managers don't trust it. They prefer to centrally plan, the Stalinist model if you like. (and that's the subject of my blog!)

  6. Anonymous Says:


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