In an interview Milton Friedman said:

The most important single central fact about a free market is that no exchange takes place unless both parties benefit.

This is close to the truth. And the simplification might be appropriate when comparing free trade against coercion as an organising principle. But it's missing an important qualifier, and the more thoughtful critics of markets will notice. Here's how Walter Block qualifies it, emphasis added.

Each and every trade is mutually beneficial in the ex ante, or anticipatory, sense. That is, if I trade you fifty cents for a newspaper, we each value the other’s possession higher than our own.

Each party in a voluntary trade expects to be better off for having made it. That mutual expectation is why the exchange happens without the needed for coercion. But expected benefit isn't the same as realised benefit.

Discrepancy between expected benefit and actual benefit can have three kinds of cause:

  1. The seller commits fraud, misrepresenting the thing he sells: it turns out that the goose doesn't lay golden eggs.

  2. The product was fairly represented, but the buyer makes an error of judgment. A year later it's clear that the product he bought didn't benefit him enough to offset the opportunity cost of having bought it.

  3. The buyer knew about all the undisputed features of product (price, physical characteristics, performance data etc), and wouldn't have made the purchase, had it not been for skillful promotional messaging on the part of the seller.

The three kinds of outcome aren't sharply delineated. Two and three can fully overlap. I'm most interested in the third, because I think it represents the most interesting challenge to proponents of free markets, like me.


Libertarians generally believe the use of coercion in response to fraud is legitimate. So we grant that the first item is a valid concern, and advocate institutional enforcement of rules (laws) against fraud and/or the use of soft social disincentives to fraud such as reputation systems.


In a world of imperfect knowledge we accept that people will make mistakes, including making trades that they later regret. In this context we realise that expected benefit is the best motivation available to plan-making humans, there can be no certainty of benefit. So regretted trades aren't a special defect of markets. They're just the kind of mistakes that humans make routinely anyway. In a market economy they'll often be made in the context of trade.

To the extent that property rights are enforced, the costs of trade mistakes are borne by those who make them. This arrangement minimises perverse incentives and systemic risk, which are commensurate with the degree of top-down political control in society.


Most interesting to me is the case where real benefit doesn't match expected benefit because of a particular kind of promotional messaging on the part of the seller. Think of famous contemporary organisations with marketing departments.

In terms of what marketing departments do, we can imagine two non-exclusive dimensions: fact conveyance and PSYOP.

Fact conveyance means broadcasting the existence of a good/service and describing what that thing is in relatively objective terms. This dimension roughly corresponds to transparently appealing to reason - "Our product helps solve problem X thanks to features Y and Z".

PSYOP stands for psychological operations. Here I'm using the term to mean designing messages that interact with the unconscious minds of your audience with the intent of increasing sales. PSYOP roughly corresponds to covert manipulation of emotion and what has been called affective advertising.

Here's one example of successful PSYOP from Robert George Heath.

In 2001 the struggling communications network, Cellnet, was relaunched as O2 using a campaign with the vacuous message ‘O2: see what you can do.’ The advert featured blue water with bubbles bubbling through it, people flirting and floating around, fluttering doves, a dog catching a ball, and some lilting music in the background.

There was absolutely no mention of the network quality or coverage or tariffs or handsets, because O2 was no better than anyone else on these. Yet despite being a failing brand, and having absolutely no performance advantage, O2 went from last to first in the market in just four years.

More importantly, an industry analysis of this launch concluded their success was entirely due to the ads, which had encouraged people to feel that O2 was “calm and serene, the antithesis to clutter and chaos, a contrast to the often frenetic world around mobile phones”.

Fact conveyance can help buyers find solutions to their problems, a clear benefit with no obvious downside. On the other hand brand PSYOP could be harmful to consumer benefit on net (even while we may enjoy a well-crafted affective advert).

Defending the advertiser?

In Defending the Undefendable (1976) Walter Block wrote:

Subliminal advertising, if it exists, would be considered coercive. But it cannot be claimed that ordinary advertising is coercive without completely obliterating the distinction between coercion and persuasion.

Perhaps things were different in 1976. Whether or not subliminal advertising is properly considered coercive, In 2019 (in the internet age) ordinary advertising routinely has a subliminal element - in the sense of content that exerts influence without reaching the subjects conscious awareness. I don't think a hard distinction between subliminal advertising and other kinds is tenable anymore.

the main fallacy of the critics — the assumption that deep down, there is a distinction to be made between motivational advertising and informational advertising, that motivational advertising is "bad" in various ways while informational advertising is "good." The truth is, however, that exposing people to information and motivating them are so inextricably bound up together that it makes little sense to even distinguish between them.

Block's claim that information cannot be separated from the way it's conveyed, packaged, is true and may help the case in defense of the advertiser, but it doesn't it doesn't speak to the possibility that PSYOP can invalidate the generalisation that voluntary trade is mutually beneficial.


PSYOP techniques might not even have a bearing on expected benefit. That concept belongs to the domain of conscious deliberation and belief. Skilled emotional manipulation can work instead at the subconscious level. A marginal buyer, one who only just decided to buy the product, may have been tipped over the edge by a cannily constructed sentence or image (or the collective influence of thousands of them) that made them feel more favourably towards the product for reasons they can't articulate.

Stronger still, expected benefit is a much less important component of our buying decisions than we believe. Here's Fiery Cushman's article about confabulation.

We are shockingly ignorant of the causes of our own behavior. The explanations that we provide are sometimes wholly fabricated, and certainly never complete. Yet, that is not how it feels. Instead it feels like we know exactly what we're doing and why. This is confabulation: Guessing at plausible explanations for our behavior, and then regarding those guesses as introspective certainties.

When we are outside the laboratory — and when our brains have all the usual connections — most behaviors that we perform are the product of some combination of deliberate thinking and automatic action. [...] The problem is that we get all of our explanations partly right, correctly identifying the conscious and deliberate causes of our behavior. Unfortunately, we mistake "partly right" for "completely right", and thereby fail to recognize the equal influence of the unconscious, or to guard against it.

Red queen

Under competition in a free market firms will be under strong pressure to use PSYOP. To the extent that these marketing practices become widespread in a society, a systemic gap can open between voluntary trade and mutual benefit.

From this perspective, free market advocates might appear naive. We've noticed the capacity for voluntary exchange to deliver mutual benefit (at least in the anticipatory sense, and under conscious deliberation) but overlook that that's not the only dynamic at play.

Left-leaning commentators have make a similar complaint. Their concern is often the perceived incentives of businesses to maltreat workers and the shared environment under a laissez-faire regime. I think this underestimates the capacity of strict property rights, private law, and market forces to remedy both concerns.

Certain kinds of voluntary exchange will tend to deliver mutual benefit. But free market rhetoric tends to overlook a countervailing tendency: the Darwinian pressure of the market in favor of firms that are skilled at exploiting the ideosyncracies of human brains, not necessarily at aligning with our highest values. Individual firms who want to buck the trend put themselves at a disadvantage and are less likely to survive. Collectively enormous energy is spent without progress, but any individual refusing to participate will be left behind.

How bad could the situation get?

Observing myself, it seems like some of the market exchanges I participate in are much more susceptible to PSYOP influence than others.

Social media platforms are a well-documented example PSYOP-rich environments: with millions of users, it makes sense for tech giants to endlessly iterate on subliminal conversion-enhancing tweaks to their software. Through the use of A/B tests, developers and designers needn't even understand why their adjustments work to encourage the behaviour they want. I understand that my strong impulse to check my phone for notifications isn't a fluke.

In other domains my prefrontal cortex is much more heavily involved, and the room for successful PSYOP is minimal. This includes any costly purchases that I've felt motivated to research before buying. So at least for now the scope for successful PSYOP is limited.

Counter PSYOP as a market opportunity

The same market that incentivises PSYOP also creates factors that limit it's power and scope. There is a growing awareness of the potential harm of this kind of manipulation, and a demand for ways to circumvent it.

Books and commentary

Self help books such as Digital Minimalism Thinking, Fast and Slow and Essentialism help readers to understand their minds and live intentionally, both of which will tend to undermine marketing PSYOP.

Many critical articles have been written about social media's behaviour influence too. A general demand for novelty means there'll always be an audience curious to hear about the potential undesirable effects of systems that are widely used.

Intentionality aids

Beeminder is a website that charges you money when you fail to stick to your stated goals. One of its taglines taglines is 'Be a slave to your second-order desires'. One of Beeminder's example use cases is the goal spend less time on facebook.

Another class of products and services promise to foster internal awareness. A mindful brain, aware too of internal changes, is less easy to manipulate. There's been an explosion of apps for developing mindfulness skills. And there are devices for the deliberate manipulation of your brain state.

Information sentries

Humans brains are jury-rigged. Our neo-cortexes work in concert with neural structures we inherited from our ancient ancestors. This arrangement makes us vulnerable to skillful marketing manipulation. But future AI's needn't suffer from this deficiency - they may not be faithfully neuromorphic. Perhaps there'll be an era in which AI assistants granularly curate information generated by other minds for us. A kind of memetic firewall. The information they present to us will be tailored to be maximally beneficial to us, however we end up defining beneficial. I don't know if general intelligence would be required for this role, if so we still have the alignment problem to contend with.


I hold these beliefs with regard to the claim that voluntary exchange (always) benefits both parties in the ex ante sense. I hope the preceding discussion explains these items to your satisfaction. I'm very happy to hear arguments against any of them that I haven't mentioned above.

  1. It is false that voluntary exchange (always) benefits both parties in the ex ante sense. At least some voluntary exchanges are precipitated by factors not under conscious control, and thus not sensitive to expectation of benefit in the usually understood sense. Medium confidence

  2. It can't be apodictically shown that voluntary exchange is more often mutually beneficial than it is one-sided (in part because of PSYOP and subconscious influence). High confidence

  3. On net, voluntary exchange (with PSYOP) currently results in more good than harm. High confidence

  4. At least in our pre-super-AI era, a pervasive PSYOP-driven dystopia is unlikely. (After this era, all bets are off). High confidence

  5. In this era, incentives inherent to the market create human behavior that limits the power and scope of PSYOP. High confidence

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