28 May Democracy Online: The Invisible Hand of Yelp!
For years economic libertarians have argued that the government has no role in regulating economic matters. They insist that it is the power of the economy – not government policy – that punishes bad behavior and rewards good behavior in the free market.
Following this logic, if a business owner decides to discriminate against certain individuals, then it is the business itself which suffers in the longterm from the loss of revenue.
Discrimination, according to libertarians, is, above all, bad for business. The government should get out of the way, they argue, and allow the inherently good nature of the consumer to regulate the market.
Ignoring for now that many Libertarians are upholding a flawed reading of the 18th Century economist Adam Smith, we have to wonder whether consumers alone should be entrusted with the serious business of creating a fair and just society. Recent events in the US state of Indiana have stirred up the debate over government regulation versus free-market capitalism.
In March 2015, the Indiana state government passed legislation which arguably gave business owners permission to discriminate against sexual minorities in the name of religious freedom. Under the new law, business owners would apparently be allowed to deny service to anyone whom they considered somehow out-of-sync with their own religious ideals.
The public outcry over this legislation has been encouraging to those who believe that it is the government’s role to promote justice and protect minority groups from bigotry and abuse. The state government eventually revised the law in response to severe criticism in the media, as well as fears of lost revenue for state businesses.
Nowhere has the outcry been so loud as online. When an Indiana pizzeria owner told local media she would refuse catering service to gay wedding parties, thousands responded to this blatant homophobia by taking to the business-rating site Yelp! and leaving negative comments about the restaurant. Soon the pizzeria faced national media attention and was forced to close its doors. The owners allegedly even went into hiding in response to the online uproar.
The market of the future
It should be clear to anyone watching that the so-called Invisible Hand of the market just got a lot bigger thanks to online platforms that allow users from all over the world to have their say in the market place.
We won’t solve the free-market versus regulation debate in the wake of Memories Pizza, but let’s all agree that a positive social media presence is key to keeping your business alive and well in the connected era.
Marketing researchers have found that 50% of consumers are unlikely to buy from a brand that has a negative online reputation, whereas 71% say they are likely to buy from a brand they follow on social media. In short, no business can afford to have their brand diminished by negative social media presence. Memories Pizza, if nothing else, is proof of that.
Now, in a perfect world, this massive Invisible Hand of Yelp! would have been the end of Memories Pizza. Alas there is also a market for homophobia, and its invisible hand has conspired to crowdfund a staggering amount of cash to resurrect Memories and keep discrimination alive and well in Indiana! Clearly these Invisible Hands don’t always do the right thing.
The Invisible Hand of the market got a lot bigger thanks to online platforms.
By Will Gibbens – Table Talk Communications for stay amazed every day