Thursday, May 8, 2008

Voting in the marketplace


Yesterday I spoke about how prices emerge and how local purchases relay information back to the global marketplace. From there, it shouldn't be too great a leap to think about how specific purchases - or the lack thereof - send signals to producers. This gets back to my original post about M&Ms.

If our spending decisions impact how the market functions, then it might be helpful to think of monetary choice as a form of voting. Now, it’s important to recognize the limitations of voting. Just as your single vote will not determine the outcome of the Presidential election this November, your purchase of a particular brand of celery will not determine the future course of the agricultural sector. But we still greatly value the ability to vote, and see the act as participating in something larger than ourselves in important ways.

Plus, just as there are ways to maximize the impact of one’s vote, there are ways to maximize the impact of your spending decisions. First, boycotts and similar tools have taught us that collective choice has a greater impact than acting alone – even in a global marketplace.

Second, and perhaps more importantly, we vote in the market far more often than in the political realm. Think about how many times you’ve voted for candidates or ballot measures in the last year versus how many times you’ve bought gasoline, for example. Every transaction sends a message. And in the case of investing, voting is almost constant rather than a single transaction.

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