Culture Economy and Business

The Economic Benefits of Cordial Debate

In our present day, it’s become increasingly difficult to cordially discuss politics with those of an opposing view. A 2016 Pew research study shows that people have ‘cold feelings’ of those of an opposing political party. A 2018 poll found that members of one major party found the other major party to be racist or bigoted.

These types of attitudes elicit ad hominem and often violent rhetoric. Neither these attitudes nor this type of rhetoric elicit any discussion of ideas, nor do they help us recognize that we are not enemies, but we are all humans living on the same planet. Instead, these attitudes and rhetoric have produced an extremely polarized political environment, a clash between political parties with each aiming to win. Sports are for these kinds of ‘wins,’ where there are winners and losers, but humanity is not. Rather, in humanity, “all men [and women] are created equal”, thus all humans are winners.

Unfortunately, this type of ad hominem rhetoric has become commonplace in our political discourse. Several articles have been written explaining why ad hominem, or any diversion from the actual argument, is counterproductive. They emphasize the use of rhetoric, but the tools of economic analysis can be used to defend cordial discussion as paramount to a free and prosperous society.

Exchange of Ideas

‘Mainline’ economics focuses on humans’ propensity to truck, barter, and exchange with one another. Many people might see exchange relationships as a source of two persons’ needs or wants to be fulfilled simultaneously, but they are more profound than that. Exchanges cause and catalyze division of labor and specialization— phenomena to which we owe our past and modern societal prosperity.

Exchanges are not just important for goods and services. Exchanges of ideas are just — I’d argue even more — as important. Without the exchange of ideas, the United States wouldn’t have been formed; slavery wouldn’t have been abolished; women wouldn’t have the right to vote, and; we wouldn’t have the mobile devices on which many of you are currently reading this article (Before the devices were made it had to be an idea!).

Ideas and their exchange are important, and we must ensure these exchanges take place. In fact, Adam Smith’s impetus in The Wealth of Nations was to elucidate what institutions are conducive to exchange. Would one think that ad hominem or a personal attack would be conducive to preserving the exchange of ideas? Maybe some will brush it off or give a comeback. However, this misses the point: ad hominem stops an exchange of ideas from occurring. The person who is initiating the personal attack will not learn anything by evading an argument and issuing an insult. Likewise, the person who receives the insult doesn’t learn anything because the person who insulted him or her doesn’t provide any new perspective or point out the strengths or weaknesses in an argument. The result is lose-lose for knowledge— even if it’s win-lose for an exchange of insults. Multiply this situation across thousands of others exchanging political ideas, and the result is a less informed population.

The exchanges of ideas and the institutions that elicit those exchanges are very important. However, there are two additional economic concepts that must be discussed that have implications from exchanges — the knowledge problem and the transactions costs.

Knowledge Problem

The exchange of knowledge, as described above, is actually quite an important point often taken for granted. Despite how smart people think they are, they can never know everything. There is just too much information for people to know. Each individual person has his her or own unique knowledge. How can all of this knowledge be spread amongst others, so that we can all make use of it?

In his paper The Use of Knowledge in Society, Nobel Laureate Friedrich Hayek calls this ‘the knowledge problem’ and one that the economy seeks to solve. Hayek argued that the ‘division of knowledge’ is equally as important as the ‘division of labor’ postulated by Adam Smith. To make use of this knowledge, Hayek argues for a decentralized society in which others can freely exchange with each other.

The Coase Theorem and Transactions Costs

The Coase Theorem, named after Nobel Laureate Ronald H. Coase, is commonly used in public economics when talking about negative externalities. Specifically, many microeconomic or public economic courses cite the Coase Theorem by saying that negative externalities can be mitigated “when property rights are well-defined, and bargaining can occur.” But that’s not all Coase stated in his paper, The Problem of Social Cost. In fact, he actually said that when transaction costs are zero (or low), well-defined property rights can engender exchanges that reduce negative externalities.

In theoretical welfare economics, negative externalities are phenomena that cause an economy to operate below the social optimum. Applying this insight to communication, we could say that engaging with ad hominem or personal attacks causes an exchange to have high transaction costs, since they stifle cordial conversation. In turn, these high transaction costs prohibit an exchange of ideas from occurring, causing a negative externality and, therefore, the economy of ideas to operate below the social optimum. This causes fewer ideas to be spread, experimented with, and questioned, than would be the case if the economy operates at the social optimum. In all, Coasean insight can thus demonstrate how economic analysis provides an the paramount need for cordial discuss.


Before concluding, it is worth mentioning that nothing presented in the previous sections constitutes an argument against free speech. Quite the contrary. Rather, the analysis above establishes that if we want to talk about how important free speech is, we must do so cordially. Otherwise, the exchange of ideas, including free speech, is stifled.

This argument is by no means an ironclad thesis. There are many methods — such as philosophy or sociology—by which to argue for a cordial exchange of ideas (The same can be said for the opposite case: there are arguments against being cordial using philosophy and sociology.). This argument simply provides an additional tool for making the case for cordial exchanges, using non-traditional methods. But we libertarians strive to be different—don’t we?


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