Market for loyalties theory
Encyclopedia
Market for Loyalties Theory is a media theory based upon neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

. It describes why governments and power-holders monopolize radio, satellite, internet and other media through censorship
Censorship
thumb|[[Book burning]] following the [[1973 Chilean coup d'état|1973 coup]] that installed the [[Military government of Chile |Pinochet regime]] in Chile...

 using regulations, technology and other controls. It has also been used to theorize about what happens when there is a loss of monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 or oligopoly
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

.

History and Elements of the Theory


The theory was originally developed in the 1990s by Monroe Price
Monroe Price
Monroe E. Price is Director of the University of Pennsylvania’s Center for Global Communication Studies at the Annenberg School for Communication and Director of the Stanhope Centre for Communications Policy Research in London. Professor Price is the Joseph and Sadie Danciger Professor of Law and...

, the Joseph and Sadie Danciger Professor Law, Media and Society at Cardozo Law
Benjamin N. Cardozo School of Law
The Benjamin N. Cardozo School of Law is the law school of Yeshiva University, located in the New York City borough of Manhattan. The school is named for Supreme Court Justice Benjamin N. Cardozo. Cardozo's success as a young school has been remarkable, leading some to characterize Cardozo as a...

 School.bio His theory explains media regulation in terms of a market with an exchange, not of cash for goods or services, but identity for loyalty.

Economic Term Market for Loyalties
Sellers Governments & Powerholders
Buyers Citizens, Community Members
Price/Currency Loyalty
Goods Identity



Price describes sellers as: "Sellers in the market are all those for whom myths and dreams and history [i.e,. identity] can somehow be converted into power and wealth—classically states, governments, interest groups, business and others." Price illustrates buyers, medium of exchange
Medium of exchange
A medium of exchange is an intermediary used in trade to avoid the inconveniences of a pure barter system.By contrast, as William Stanley Jevons argued, in a barter system there must be a coincidence of wants before two people can trade – one must want exactly what the other has to offer, when and...

, and their relationship:

The "buyers" are citizens, subjects, nationals, consumers—recipients of packages of information, propaganda, advertisements, drama, and news propounded by the media. The consumer "pays" for one set of identities or another in several ways that, together, we call "loyalty" or "citizenship."

Payment, however, is not expressed in the ordinary coin of the realm: It includes not only compliance with tax obligations, but also obedience to laws, readiness to fight in armed services
Armed forces
The armed forces of a country are its government-sponsored defense, fighting forces, and organizations. They exist to further the foreign and domestic policies of their governing body, and to defend that body and the nation it represents from external aggressors. In some countries paramilitary...

, or even continued residence within a country.


Finally, the concept of identity consists of a party platform
Party platform
A party platform, or platform sometimes also referred to as a manifesto, is a list of the actions which a political party, individual candidate, or other organization supports in order to appeal to the general public for the purpose of having said peoples' candidates voted into political office or...

, ideology, or national ideals and aspirations. It may be as ephemeral as the hope for a better future or as concrete as the desire for a national homeland. Identity is valuable to buyers as it contains both the legacy of their past history and the promise of their dreams for the future (whether it is for wealth, a better life, or an education).

The central idea is that governments and power-holders act in such a way as to preserve their control over the market. The theory was applied with respect to markets offering identity through various media—radio and satellite broadcasting
Satellite television
Satellite television is television programming delivered by the means of communications satellite and received by an outdoor antenna, usually a parabolic mirror generally referred to as a satellite dish, and as far as household usage is concerned, a satellite receiver either in the form of an...

 and the internet.

Market for Loyalties and Monopolies


When a monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 or oligopoly
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

 over the flow of information is lost, the unavoidable consequence is destabilization. Market for Loyalties Theory predicts the consequences of loss of control through the application of the concept of elasticity
Elasticity
Elasticity may refer to:*Elasticity , continuum mechanics of bodies that deform reversibly under stressNumerous uses are derived from this physical sense of the term, which is inherently mathematical, such as used in Engineering, Chemistry, Construction and variously in Economics:*Elasticity , the...

.

All other factors being equal, the less elasticity
Elasticity
Elasticity may refer to:*Elasticity , continuum mechanics of bodies that deform reversibly under stressNumerous uses are derived from this physical sense of the term, which is inherently mathematical, such as used in Engineering, Chemistry, Construction and variously in Economics:*Elasticity , the...

 in the market prior to the loss of monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 or oligopoly
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

, the greater the destabilizing effect of the loss of such control.
Four factors affect elasticity: the number of substitute products (or identities) in the market and their closeness to the good in question; effects from marginal consumers; complications from wholesale and retail marketing; and the temporal, informational, and transaction costs necessary for consumers to learn about and take advantage of competing products.
Link to graphical illustration of inelasticity.

Substitute good
Substitute good
In economics, one way we classify goods is by examining the relationship of the demand schedules when the price of one good changes. This relationship between demand schedules leads economists to classify goods as either substitutes or complements. Substitute goods are goods which, as a result...

s consist of two items where "a rise in the price of one causes an increase in demand for the other." In 1926, Marco Fanno, an Italian economist, demonstrated that elasticity (and more importantly, stability) increase with additional substitutes. In the case of the Market for Loyalties, the more substitutes for "identity", and be implication the more competition of "identity" in the instance of oligopoly, the more elastic the demand curve and the less destabilizing a loss of monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 or oligopoly
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

 over an information environment will have. Furthermore, as the number of competing messages of identity in the Market for Loyalties approaches infinity, the presence of any new message of identity should have infinitesimal effect. Thus, when the concept of elasticity is applied to Market for Loyalties Theory, it creates an argument supporting the broadest possible freedom of speech.

A complete understanding of the economics underlying the loss of monopoly control over the market requires consideration of other factors of elasticity besides substitute goods. Additional consumers of identity, who were sidelined during prior periods of oligopoly. For instance Shi'a were marginalized in Iraq from fully participating in society during Saddam Husein's regime, and the Shi'a presence after the fall of the regime would increase demand in the Market for Loyalties.

Another important factor affecting elasticity in the Market for Loyalties and stability after loss of monopolized control is the presence of retail and wholesale markets. In Iraq the significance of tribalism, where by loyalty could be sold "wholesale" had the effect of locking in the choices of individuals to their particular tribe. They simply were not free to choose their allegiances. The ultimate effect was to increase the inelasticity of the demand curve, thereby increasing the instability after the Market for Loyalties became more open following the removal of Saddam Husein's regime (the principal censor
Censor
Censor may refer to:*Censorship, the control of speech and other forms of human expression*Roman censor, a magistrate for maintaining the census, supervising public morality, etc*Cato Censor , Roman statesman...

 of information in the market).

High transaction costs (the cost of switching loyalty) also can work to create a steep demand curve and instability following monopoly control. The cost of shifting identity with and loyalty to various tribes, political organizations, and religions can be quite high--resulting in a loss of family, friends and social standing and even trigger persecution. In an intolerant society, the high transaction costs of shifting one's identity and loyalty also operate to produce an inelastic demand curve and instability upon opening of a Market for Loyalties that had been previously constricted by monopoly or oligopoly.

Conclusion


Market for Loyalties Theory demonstrates the wisdom and benefit of freedom of speech
Freedom of speech
Freedom of speech is the freedom to speak freely without censorship. The term freedom of expression is sometimes used synonymously, but includes any act of seeking, receiving and imparting information or ideas, regardless of the medium used...

 and information flow. However, it also uncovers complicating factors the contribute to instability when there is a loss of monopoly or oligopoly over an information environment (the Market for Loyalties). Factors pertaining to economic elasticity - the presence of substitute identities, marginal consumers, whole sale and retail markets, and transaction costs all affect - can lead to significant destabilization after the sudden loss of monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

 or oligopoly
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

of an information environment.
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