Lowering the Cost of Love : Capitalism and Valentine's Day

          People lament the fact that Valentine’s Day is yet another example of a very ‘commercialized holiday.’ In fact, Valentine’s Day is so commercialized that one’s participation in the holiday is often defined by how much money is spent on things like cards, candy, dinners, flowers and other extravagant surprises. The commercial aspect of Valentine’s Day seems to be responsible for all of the bad parts about the holiday. After all, it’s easy to blame big corporations for leaving us with empty wallets, a sense of guilt for not buying a gift, and for emphasizing materialism during a day in which we specifically celebrate something immaterial. While it is true that creative entrepreneurs are doing their best to leverage Valentine’s Day into a bigger profit opportunity, big corporations and commercialized holidays make our lives and our Valentines days better.

               

        This past Valentine’s Day I needed to send some roses to my girlfriend in Peru. Delivering the flowers by hand would be extremely expensive in both monetary and time costs. Luckily, all I had to do was punch in a sixteen digit VISA number on 1800flowers.com to send flowers to Peru. Nearly millions of people, who I don’t know or speak the same language as, and who might not even know each other, were able to deliver roses to a town on the Amazon River that does not even have a postal code. The best part is this all worked for only a $27.00 international shipping charge. 

               

         My circumstance highlights the power of market coordination to make the impossible a possibility. Markets don’t only make sending flowers around the world easy; nearly every Valentine’s Day gift required extensive coordination of millions of people.  In fact, Entrepreneurs were planning and organizing capital to make Valentine’s Day celebrations possible long before the average consumer decided to think about it. Someone was planting the flowers, ordering ribbon and making chocolates long before Valentine’s Day even crossed our minds. Even though when we rush to buy Chocolates right before Valentine’s Day, we might feel frustrated for paying the full price when we all know that the same item will be heavily discounted on February 15. However, even the simplest box of chocolates requires thousands of ingredients and millions of people to produce. Dairy products for the chocolate itself, plastic for the box, and maybe even some paper for the wrapping are just a few parts of a basic candy box.

               

          Making the chocolate requires milk, which came from some kind of farm. On that farm a farmer managed the production of that milk. Someone else oversaw using that milk in chocolate production, and yet someone else had to grow the Cocoa necessary to make the chocolate. A chemist designed the plastic for the box, and then a packaging engineer had to figure out how shape it like a heart. While all this was happening, someone was cutting down trees to use for wrapping paper. An engineer had to design the chainsaw that the workers used to cut down the trees, and still another person had to grow the coffee beans for the coffee these workers drink during their breaks. Throughout this whole process a host of legal experts was most certainly employed to create and negotiate contracts between all the people contributing to the chocolates, and finally this legal team had to convince the FDA that the chocolates were fit to eat.

                 

          Even though we might not like having to pay for commercialized products during Valentine’s Day, the alternative seems to be much worse. I don’t have the knowledge, skill or time to make Chocolates or prepare Roses. In fact, corporations work so hard to make products that would ordinarily be out of our productive capacity so easily attainable that without them getting even a mediocre gift might be impossible. What is even better, these companies compete with each other to constantly provide us with cheaper and cheaper prices for things we could never do ourselves. 

         Though they might profit in the process, profit seeking entrepreneurs are already working to make Valentine’s Day possible for next year. The market process is coordinating millions of people who are peacefully and voluntarily exchanging services, generating wealth and creating a better Valentine’s Day for everyone.

‘Service’ ≠ ‘Altruism’

Alexander C. Cartwright ‘13

During yet another evening spent in the library, I found myself in a debate with a friend of mine. After hearing about a documentary he had seen about the destructive power of markets, I quickly took up the task of defending economic freedom. After more than an hour, he seemed convinced that I could overcome all his objections, but he ended the conversation by explaining- the problem with market-based systems is that people are constantly rewarded for good behavior, instead of just being the best they can be they are tied to incentives and rewards, not service to others. Surely I cannot refute this point. While we know that things like performance based pay and merit based rewards drive productive behavior, we still need to ask ourselves if encouraging people to react to such incentives is a good idea. However, monetary rewards, and other market-based incentives are not only effective, but also can be justified by the very criteria critics use to reject markets: service to others.

The claim that rewards can alter one’s behavior in a negative way is certainly not without merit. Of course, we want to teach people how to make good moral choices and how to live for something beyond the next reward. Thus, a capitalistic, pay-for-performance based work ethic seems to come with some non-ideal, if not immoral, element. A system run completely by rewarding people might breed unprincipled citizens, driven to get bigger and bigger rewards on an endless, unfulfilling ego chase. Rewards with personal benefits might not encourage people to help their communities beyond themselves. People could be so focused on rewards that they inherently distrust each other, or even break laws and justify their actions on the incentives that encouraged them to do so.

However, discounting capitalism because participants are rewarded for good behavior instead of an intrinsic desire to serve is an unwarranted criticism. Merely receiving a reward, like a payment, for doing good, does not exclude such an action from being service. In fact, Adam Smith points out “It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest” (An Inquiry into the Nature and Causes of the Wealth of Nations, Chapter 2). Just because the butcher is reacting to incentives (profits) and acting out of self interest, does not exclude him from simultaneously doing service. The butcher, brewer and baker must all serve their customers in order to make themselves better off. 

We can certainly conclude that the butcher, baker, and brewer in this case are not being altruistic. Responding to incentives, like profits, certainly lowers (if not eliminates) an action’s altruistic character, yet the same is not true with service. In other words, one can still do service without being an altruist.

The fact that service does not require altruism goes largely unnoticed, yet this misconception is at the heart of this faulty criticism of capitalism. In a market-based system, the butcher, brewer, and baker systematically cannot become better off without serving others. The market system requires that we serve others in order to receive rewards. Thus, incentivizing people actually encourages good behavior and service to others. Plus, the incentives, or rewards, act as signals we can use to tell producers were they can serve others best.

Critics of this self interest-service model quickly, and correctly, point to how people often receive unjust rewards by influencing laws and government.  The service requirement in a market-based order is all but erased once those writing the laws are rewarded by special interests. While this critique is accurate, and extremely discussion worthy, critics should be careful not to blame an economic order for a political shortcoming.

When people face incentives, in a market context they are rewarded for how well they serve others. Companies are rewarded for better and better service, while entrepreneurs spend entire days figuring out how to serve the consumer better. Most importantly, everyone is encouraged to do service because it is the only way to make oneself better off. That is, voluntary trade is mutually beneficial; it requires both parties to be better in the end. Markets don’t make us inherently good, perfectly moral, or inherently altruistic, but they require us to serve others and provide us with signals that show how we can serve best.