July 24, 2003
From the desk of Jane Galt:Is the Do Not Call list really best for society?
Over on the Volokh Conspiracy, Tyler Cowen is leading a lively discussion on whether the benefits of the Do Not Call list really outweigh the costs. After all, people do buy things from telemarketers; in fact, the "yield" that direct marketers get from people who have asked not to be contacted doesn't seem to be any lower than the yield from those who haven't opted-out. The economists presumption is that the people who buy things must place at least some utility on what they bought; hence, it is not obvious that the economic damage from the telemarketers exceeds the benefit.
Speaking as
a) a libertarian who
b) put herself on the Do Not Call list and
c) has purchased things from telemarketers, and moreover
d) would conceivably do so again
I'd still argue it does.
First, the story of how I bought something from a telemarketer. As so many things in this weary world are apt to, it all comes back to my teeth.
And my fear of needles. Let me explain.
I hate needles with a passion seldom found in one so young. Thus when I needed my wisdom teeth out, I did so with only a local anaesthetic, because I couldn't bear to have them stick a needle in my arm to sedate me.
This was when I was seventeen. The noise and racking of having the first one out was so traumatic that I inadvertently neglected to make an appointment to have the other three removed for the next ten years.
Until I got a monstrous case of strep throat, which somehow caused my remaining wisdom teeth to become infected. I have never been so sick and miserable in my life. I saw the periodontist. Out they must come! he proclaimed, gave me a prescription for delightful painkillers, and made an appointment to remove them the next day.
(The next day was when I discovered that I am allergic to Vicodan and related narcotics. I discovered this by becoming spectacularly sick all over the periodontist's reception area. But that is another story.)
The painkillers killed the pain, induced a marvelous, floaty sort of feeling, and lifted my spirits to the point where I was filled with a sort of miasmatic love for every other man, woman, and small furry animal on the planet. I got into a long, languid discussion of my past school days with a stranger who phoned with some vague connection to Penn's alumni office. I was just wrapping up with them when my mother walked in, bearing supplies for my convalescence.
"Hello, mother darling," I said, hurling myself into her rather surprised arms.
"Who was that on the phone?" she asked.
"Someone from the Penn alumni office," I said, pillowing my head on her shoulder. "I love you."
"Why were you giving them your social security number and mother's maiden name?" she asked. I had no answer.
Needless to say, after I'd gone off the painkillers, I found this very worrying. I was checking my credit report like one of those psychotic rats in lab experiments, waiting for someone to open up a credit card or car loan in my name. Then, about a week after the teeth came out, my new University of Pennsylvania insignia credit card arrived in the mail.
Did I need a credit card? No. Would I have ordered it in my right mind? No. Would a telemarketer have sold it to me if they saw me in person? Not unless they wanted a lawsuit; I was fairly obviously heavily medicated.
On the other hand, it hasn't been an undue burden to me, either. Not, by itself, worth passing a law.
But it's not the things I buy that I'm worried about, even though I am probably one of those people with low sales resistance who should avoid telemarketers like the plague. If I'm too idiotic to keep from saying "no" to a salesman, I don't think it's the government's job to keep me from being an idiot. No, it's the 2,000 people who telephone me with things I won't buy that put me in the regulatory mood.
I suspect most people feel the same way: it isn't that they fear sharpers using advanced mind control techniques to force them to put aluminum siding on their house; it's legions whose services they will never use that make them angry enough to demand legislation. They understand that there are potential benefits to the consumer: for everyone who bought something they wouldn't have that they don't need, we might well be able to stack up a case of someone who bought something they needed but weren't planning to purchase, such as fire insurance or a burglary alarm that prevented financial losses. But that still leaves the rest of us who had to pay for those services with all the precious, irreplaceable time we spent hopping up to answer a phone call we didn't want; with money spent on telezappers and unlisted numbers and caller ID that still didn't keep them out of our livingrooms at dinner; with all the call-screening and other defensive maneuvers that annoy us and eat up our time just so we won't have to talk to another jerk trying to pressure us into buying something we don't want and can't use.
Consider that most of us value our leisure time at more than our average hourly wage, since otherwise we would forfeit some of that leisure to work more. The average hourly wage in this country is considerably more than what a telemarketer makes per hour, especially among the demographic that telemarketers target.
Now, according to this piece in The Economist on telemarketing, telemarketers contrive to spend fifty minutes of every hour on the phone with a live human being. They do this by mass-dialing and then hanging up on lines without a live human -- and sometimes lines with a live human, if there's no telemarketer available to ply them with lawn furniture.
So unless their yield is very high indeed, the telemarketers are externalizing a cost onto their non-customers that is as great, or greater than, the benefit they and their customers gain from the indiscriminate dialing. That's a major strike against it in my libertarian book.
Telemarketing is also the sales tactic most likely to sell to people who are for some reason befuddled and in no condition to make any sort of decision about major purchases. While as I said above, that is not by itself enough for me to condone regulation unless it predominantly sells to that group, it still counts against it.
And what groups does it benefit? I can't think of one. The homebound are perfectly well served in their shopping needs by the internet and the television shopping networks, which don't bother anyone else. No one wants to be contacted by a telemarketer; the sales are almost exclusively of things people weren't planning to purchase. While that could have good as well as bad effects, I should think that in the best case the society-wide effects would balance each other out.
It benefits the telemarketer, of course. But it would also benefit him if he were allowed to enter my home and take the silver; I see no reason why I should suffer undesired annoyance for his sole benefit.
Comparisons to television advertising won't wash. Watching the television is still a voluntary activity; having a telephone, and answering it, is not. At least for the 99% of Americans in mainstream society, it isn't. Moreover, while I might not like the advertising, I do like the programming it pays for. Telemarketers are not the natural price of having a telephone. The telemarketer isn't paying for my phone. If he were, as Cowen suggests he might, I'd be more inclined to take his calls.
It's a hard argument for a libertarian to formulate, however, because libertarianism tends to be a philosophy of absolutes, and this, to me, is a problem of scale. (Is it possible I'm a closet utilitarian?) If the problem were one or two calls a month, I'd probably argue against such a law, because the harm of imposing another regulation, and the cost to the telemarketer and his potential consumers, would seem to outweigh the trivial cost imposed by answering the phone once every couple of weeks.
But modern technology has allowed telemarketers to externalize ever more of their costs onto the people they call, by increasing ten, twenty, a hundredfold the number of calls, and hanging up on the folks who were unlucky enough to haul themselves out of the shower when there wasn't anyone available to tell them about the wonders of Terminix. I think there is a tipping point, beyond which all those external costs outweigh the benefits accrued by telemarketers and the people who buy from them. And when people with a couple of precious hours of leisure every night have to listen to a sales pitch every twenty minutes, I think we've passed that point.
Posted by Jane Galt at July 24, 2003 6:55 AM | TrackBack | Technorati inbound linksSo (he said, focusing on a little matter that's almost entirely beside the subject), how did you do a local without a needle? I'd take one in my arm over one in my gums any day, and twice on Tuesday.
Several of the most freeing words I ever learned to utter were "Please put me on your do-not-call list." It was simple, and said in a nice tone, polite to the person working the phone (people have to make a living somehow). It was even nicer knowing there was a regulation that made the telemarketer listen and do as I requested, lest they be fined. The numbers of phone calls plummeted to maybe one or two per evening. Now I've put my name on the national do-not-call list. My home may once again become my refuge where the ringing of a phone is a welcome sound, maybe a friend or a family member. Not Bell South with a great new DSL service that I MUST have. It's nice when a policy has a good economic argument for it and it just feels right too.
"...and the television shopping networks, which don't bother anyone else."
Excuse me? I am perpetually bothered buy what they sell on those networks. Diamonelle and feax Tanzanite in a 10K gold plated piece of tin for only 17 low payments of 13.99 each? I find it very bothersome even though I never choose to watch it (-- I have on occation been forced to).
To change the subject drastically, one of the benefits of NOT being a libertarian is that I don't have to morally justify being on the do-not-call-list. I'm just on it and happier for it.
Sorry to harp on about a side topic, but you are *not* allergic to Vicodin or any other painkiller. What you describe (vomiting while taking Vicodin, and probably on an empty stomach) is a *normal* response to narcotic (better called opioid) painkillers. They slow (or stop) the gut, including the stomach. But that is not an allergy in any way, it's just what happens. You needn't fear opioid painkillers, at least if you are careful to take them on a full stomach when possible, and to get anti-nausea drugs when not.
Yeah, fwiw, I do know this stuff (an MD and about a year's worth of anesthesiology training).
I don't see the libertarian problem with a do not call list. The phone system is a regulated monopoly. If it were a truly free market, there might be a phone company that refused to carry telemarketing calls on its lines and that company would be the provider of choice very soon.
This supposed libertarian problem is like the supposed libertarian problem with speed limits or mandatory motorcar insurance. Of course the state requires insurance and mandates speed limits. Do you think a private highway company would stay in business long if it didn't require insurance and enforce speed limits? And they'd probably use those photo-cop machines to do the enforcement, too. The state will and should do the same until the freeways can be privatized, according to libertarian theory.
Needles, eh? They don't bother me at all. I figure I either impress or disturb nurses when I hold out the arm and smile pleasantly.
What I don't understand is how telemarketing survives - that is, unless the necessary success rate is as ridiculously low as spamming. But over-assertive advertising seems to come in fads, as if a new generation of get-rich-quick smart-alecs arrive on the scene completely unaware of their predecessors' demise.
Case in point: two summers ago, my office withstood several visits a week from groups of two or three Abercrombie & Fitch refugees. Picture God's gift to suave, thick-necked frat players or a barbershop quartet of Thurmanesque Uberbabes. They'd walk in, offer to contact us about totally unappealing "office supplies", and usually walk out without so much as a business card - and to poorly suppressed laughter on our side of the slamming door. Over and over.
How could they have stayed in business? Good question. The next summer, nary a visit. I haven't seen any of them since.
You got a credit card on painkillers?
I ordered a 10-CD set of "Country Classics, 1950-1975" on the day after Christmas, whilst sitting on my parents' couch while the rest of the world was at work or out shopping.
It involved too many Darvocet, a wisdom tooth that came in on Christmas Eve, a lack of dental insurance and ...
Well, I had no recollection of doing this until I came home from work a few weeks later and found a big box from Time-Life music. I opened it and the memories came flooding back.
Amazing what painkillers will make one do, isn't it?
I understand and appreciate all your arguments against telemarketing; externalized costs and all. However what matters to me is a.) they annoy the f-- out of me, b.) they annoy the f-- out of me, and c.) they waste my time just to get up, see something like 'out of area' on the caller ID and then sit back down and ignore the ringing until it stops. Assuming that in a deregulated market there would be both ad-free and ad-supported providers, I'd certainly choose the former. But since we still can't quite get to that sort of market, I'll take the national do-not-call list as good enough for now.
On a related note, how would a truly free market deal with those annoying little airplanes that sound like they're about to fall out of the sky as they struggle with those big banners. I've had many a Sunday afternoon's peace and quiet shattered by the sound of an airplane engine open at full throttle dragging a banner through the air. Many of those banners merely advertise the banner service.
Maybe if we were allowed to buy surface to air missiles in a free market, I could get the neighborhood to pitch in and buy one...
Unfortunately, telemarketing does have an absurdly low response requirement and apparently is somewhat successful. The national do-not call list saves me from having to track down all the various companies and ask them not to call me.
Caller ID would be more useful if all cell phone companies would make sure names were programmed properly and the system talked with other states better.
Bolie IV
I thought Cowen's one really telling point was that if all the people signing up for this list really wouldn't buy anything from a telemarketer, ever, the telemarketers ought naturally to be all for the idea: it amounts to the government doing a big chunk of their market research for them.
But they're not. So they're assuming that some biggish fraction of the people who sign on to the list really are potential customers. I wonder how big that fraction is.
I was enthused about the do-not-call list at first, but now my Caller ID is cluttered with numbers from Nova Scotia, Ontario, New Brunswick, and who knows what other Canadian provinces. Telemarketers are preparing for the list by simply moving operations out of the U.S., so it'll make nary a difference.
*Sigh*
it is for precisely the reason we're having this conversation that telemarketers have nothing to fear: there are some idiots out there who will buy anything and there are still others who will worry they're somehow missing out on something if there's a list and still others who choose not to opt in because they think the system will be ineffective.
I am not one of those idiots. I have been on the Colorado no call since day one and have never once received a telemarketing call. It works. So shutup about it before Congress changes their minds.
Now if only we could have a no snail mail list and a no spam list.
We installed a tele-zapper. When the do not call became available I was on the list within 4 hours.
Now what is needed is a tele-zapper for Baloney. on the computer. I grew up during WWII and I like Spam! ;>)
Michelle Dulak wrote:
I thought Cowen's one really telling point was that if all the people signing up for this list really wouldn't buy anything from a telemarketer, ever, the telemarketers ought naturally to be all for the idea: it amounts to the government doing a big chunk of their market research for them.
Not necessarily. The purchaser of the phone service might not be the only person using the line, but with the no-call option, all parties who might potentially answer a call on that phone line are automatically cut off.
Sounds fair to me, since the line purchaser should have that option, but from the telemarketer's side, it is that many fewer opportunities to catch a flu sufferer fresh off a double-shot of Nyquil.
anony-mouse: Very good point, & one I hadn't thought of. Thanks.
I am an expert in direct marketing. Statistics show that cold calling a list of people from a phone book is the most inefficient and least cost effective method of marketing. The companies who do cold calling do not understand marketing and are idiots. Nobody sells anything to an angry consumer, although stupid companies try.
So now that cold calling is basically outlawed, you will be happier and companies will waste less money using an ineffective marketing method
The only profitable way to use telemarketing is this: Through direct mail, Internet sites, and advertising, offer the consumer the opportunity to get more information on the product. Call the consumer to give her more information and attempt to sell the product. These calls have not been outlawed and you probably will be happy to receive these type of calls.
I am an expert in direct marketing. Statistics show that cold calling a list of people from a phone book is the most inefficient and least cost effective method of marketing. The companies who do cold calling do not understand marketing and are idiots. Nobody sells anything to an angry consumer, although stupid companies try.
So now that cold calling is basically outlawed, you will be happier and companies will waste less money using an ineffective marketing method
The only profitable way to use telemarketing is this: Through direct mail, Internet sites, and advertising, offer the consumer the opportunity to get more information on the product. Call the consumer to give her more information and attempt to sell the product. These calls have not been outlawed and you probably will be happy to receive these type of calls.
"Watching the television is still a voluntary activity; having a telephone, and answering it, is not. At least for the 99% of Americans in mainstream society, it isn't."
Um, when did answering machines that let you screen the call to decide whether to pick it up, or that allow you to simply listen to the calls at your convience, cease to be available to 99% of Americans in mainstream society?
Another reason that people might put themselves on the do not call list even though they do choose to buy occasionally, is that the benefit from the one thing a year they do buy doesn't justify the intrusion of the 999 times they're offered something they don't want to buy.
If their choice is between "be called 1000 times and buy one thing" and "be called 1000 times and buy nothing", they prefer the former. But if you add the choice "be called zero times and buy nothing", they pick the new choice. There's nothing irrational or surprising about that.
The bottom line for me is that I paid for the phone service, I pay for it for my convenience not the convenience of strangers with something to sell. If the telemarketers want to pay the fright for my phone service then they can annoy me all day long.
The line the telemarketers are pulling out of their hat is lost jobs, well first of all these jobs are moving off shore anyway, second the money spent on telemarketing will not just sit there doing nothing, they will do something else with it and that something else is more then likely going to be spent here in the US rather then India.
- Telephone service really isn't a regulated monopoly anymore. It migh not be a full fledged open market but there is competition.
- Telemarketers do pay for the use of your line just like anyone else.
- The people who bug me the most are my own credit card companies.
- I agree with Megan, the intrusion has just risen to suich a level that people feel like they need a simple answer.
Telemarketers do not pay for my line, they pay for their line, they can call themselves, don't even start that foolishness with me, that is nothin but horse hockey.
I pay for phone service for my convenience, not the convenience of some one who wants to sell me crap. I pay for a "private" line, not a party line. If you want to make the argument that the telecommunication system is some sort of communists set up where we all chip in and since we all make it possible I'm allowed to bother anyone I want that you had better think of something else because that sort of smoothed brained thinking ain't gonna fly.
Justifying intervention in this case is, I think, best made on the basis of a hypothesized market failure. Specifically, high information costs for consumers produce a market failure. Considering the monopolistic structure of telemarketing firms is only important in terms of how it relates to the economies of scale available.
Both consumers, telemarketing firms and society stand to gain from voluntary transactions resulting from telemarketing calls. The problem lies in the huge economies of scale that exist in exchanging information via the telephone. Technology allows telemarketing firms to gather information from a great number of consumers in a short period of time at relatively low marginal costs. The same economies of scale prevents consumers, on the other hand, from dispersing information in the reverse direction with equal efficiency.
Normally we assume all voluntary transactions to be efficient (including implicitly voluntary transactions). In this case, we would normally expect consumers to expend resources to pay telemarketing firms to quit calling if the cost of answering the phone were truly greater than the cost of calling. However, the information costs in this instance are prohibitive.
Consumers: it's not that you didn't ask for the call and you have a right to privacy. Efficient wealth-maximizing things happen every day in which you are involved and to which you did not explicitly consent. Were your explicit consent necessary in each interaction, virtually nothing would get done. Walking down the street is an invasion of someone else's privacy. Costs are externalized regularly as well, and much of the time this is efficient in its context.
Most of the time this is OK—if it's inefficient you can expend resources to prevent it. In this case, they can gather information at marginal costs far below your marginal cost for providing information—something inefficient and justifying government intervention.
As someone whose group developed one of the first statistical predictive dialers in the mid 80's for a major East Coast Telecommunications company let me say that those dead air calls irk me as well. They are symptoms of an improperly tuned system. There are ways to keep your agents busy with live calls without using such agressive dialing.
Second, Megan, even with the do-not-call list you are going to get that call from your Alumni Association, their subsidiaries, agents, and assigns because you already have an on-going relationship with them. Also for your credit card companies. You cannot stop those calls without dropping the relationship.
I hadn't thought so much about the off-shore aspect of this, but international tariffs are high. The worse thing you can do about these calls is to lift the receiver and drop it on the hook, thus completing the call. They don't get charged for uncompleted calls. In this case I would expect VOIP to somewhere like Canada where the cross-border tariffs are relatively low and then on the PSTN to the US. I do expect more tie-in telemarketing where the relationship to one of your current accounts could be tenuous.
BTW, if you don't like HSN on your TV just use your remote to erase it from the up/down scan.
Rick you can rant all you want but telephone calls aren't free. People don't pay for "their line" so much as they pay to get hooked into the system. Who do you think put all those wires down? The phone company and they charge people for calls to pay for that investment. The phone industry may be moving to monthly fees for unlimited calls but you still are charged to make a phone call. You can't seperate "their" line from "your" line.
I am not arguing for telemarketing I am just mentioning some facts.
Actually international call rates are not high. I pay 5c per minute or something like it to call Britain, which is less than half of what it costs me to call San Francisco about 50 miles away. Of course the first rate is open competition; the second rate is set by the california public utilities commision.
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