The Digital Marketplace's Invisible Hand

Illustration via Canva AI

Preface 

In my previous reflection, I contend that social media has led businesses to prioritize social issues. This shift benefits societies, as companies are now accountable to their customers and must consider the social consequences of their actions. In my reflection, I emphasized the importance of independence and command by obedience, highlighting the significance of virtue and autonomy in decision-making. I suggested businesses balance employee independence with adherence to natural principles such as value creation, supply and demand, and customer satisfaction. My reflection underscored the interconnectedness of social issues, business practices, and individual autonomy in the contemporary digital landscape. 

The following reflection will have the same main topic: the impact of social media on freedom of speech and its influence on businesses. Companies prioritize social issues mainly due to the power of vocal customers on social media platforms. I will discuss the issue of social media and freedom of speech by using the content of three readings to contribute to the discussion. The three readings are "The Tulipomania," "The Social Responsibility of Business is to Increase Its Profits," and "The Division of Labor" by Charles Mackay, Milton Friedman, and Adam Smith, respectively. I will begin by summarizing each reading (a), then follow by applying the reading to the topic (b).

I (a) 

"Tulipomania" refers to a historical event in the Netherlands during the 17th century. Extraordinary Popular Delusions and the Madness of Crowds is a book written by Charles Mackay, and one section of the book is dedicated to the phenomenon of Tulipomania. In the section on Tulipomania, Mackay recounts the events that occurred during the Dutch Golden Age in the 17th century when the prices of tulip bulbs soared to unprecedented levels, eventually leading to a speculative bubble and a subsequent crash. People went to great lengths to participate in the tulip trade when the market finally collapsed, causing significant financial losses for those involved.

I (b) 

The speculative nature of Tulipomania is similar to how social media can amplify trends and opinions. In Tulipomania, the speculative fervor around tulip bulbs spread rapidly through word of mouth and increased demand. Similarly, information, trends, and opinions can spread unprecedentedly on social media. Viral content can reach millions quickly, influencing public perception and behavior. Tulipomania is an example of herd mentality, where considering the underlying value or rationale. Social media amplifies herd mentality, with trends and opinions gaining traction as more individuals participate or endorse them. The desire to conform or be part of a popular movement can lead to the rapid adoption of specific ideas.

II (a) 

In his essay titled "The Social Responsibility of Business is to Increase Its Profits," Milton Friedman argues for a narrow interpretation of the role of businesses in society. He contends that the sole social responsibility of a company is to increase its profits within the boundaries of the law and ethical custom. Friedman's perspective is rooted in the belief that a focus on profit maximization, within legal and ethical limits, is the most effective way for businesses to contribute to societal well-being in the long run. Friedman's perspective aligns with the traditional profit-driven approach to business.

II (b) 

In the world of social media, where businesses are highly visible and accountable to vocal customers, the pursuit of profit is still a primary objective. Social media can magnify the consequences of business decisions, as negative public sentiment can quickly spread. Friedman's idea can be connected to the notion that public perception, influenced significantly by social media, can impact a company's profitability. If a business is seen as neglecting social responsibilities, it may face backlash on social media platforms, potentially affecting its reputation and bottom line.

III (a) 

Smith's "Division of Labor" begins by illustrating the concept of division of labor with a famous example of a pin factory. He describes how breaking down the process of pin manufacturing into specialized tasks allows workers to become highly skilled at their particular job, leading to increased productivity. Smith introduces the concept of the "invisible hand," suggesting that individuals, by pursuing their self-interest in a competitive market, unintentionally contribute to the overall economic well-being of society. The pursuit of profit, in this view, indirectly benefits the greater good. Smith argues that markets if left to operate freely without excessive government intervention, will naturally adjust to the demands of consumers. Prices, wages, and production levels are determined by market forces, creating an automated system. While Smith extols the virtues of the division of labor, he also acknowledges its limitations, such as the potential for monotony and the dehumanization of workers. He recognizes that a balance must be struck to ensure that the benefits of specialization are widespread. Businesses often specialize in specific products or services, and through social media, individuals can find their niche in expressing opinions or advocating for social issues.

III (b) 

Social media platforms, acting as digital marketplaces, enable the efficient distribution of information and ideas. Smith argues that the division of labor leads to increased productivity. Similarly, in the age of social media, individuals and businesses can enhance their productivity and reach a larger audience by specializing in their content or offerings. The freedom of visibility provided by social media platforms allows for more efficient dissemination of messages or products. In Smith’s essay, the "invisible hand" can be likened to the influence of individual voices shaping the digital landscape. The actions of individuals on social media collectively impact public discourse and the direction of businesses. Smith's belief in the self-regulating nature of markets parallels the dynamics of social media as a marketplace of ideas. The market mechanism, according to Smith, adjusts to the demands of consumers. Similarly, social media platforms adapt to user preferences and trends, influencing the type of content that gains traction.

Conclusion 

Suppose social media platforms continue to allow individuals to express their opinions either for or against corporations in the digital marketplace. In that case, one can expect that the people's invisible hand will continue to operate. The invisible hand will be responsible for causing major reform for some companies and for creating substantial wealth for others. Essentially, the people decide. Companies that satisfy customer demands are rewarded, while failures face consequences.