Telemarketers and economic freedom

Published 11:35 pm Wednesday, July 20, 2016

Do you remember those annoying telemarketing calls that used to interrupt our lives?  The interruptions were particularly inconvenient before we could pause live television.  Government action largely put consumer telemarketers out of business.  Normally I defend economic freedom here, but I readily admit that the Do Not Call list has improved my life.

By one estimate, Americans received 30 telemarketer calls a month before the Do Not Call list.  Telemarketing calls helped drive caller ID and other technologies to keep us from having to answer the phone.  Phone company telemarketers even engaged in slamming, or changing a person’s phone service provider without approval.  Although in principle distinct from solicitations, slamming added to telemarketers’ unpopularity.

The national Do Not Call list debuted in June 2003, based on legal authorization in the Telephone Consumer Protection Act of 1991.  Telemarketers faced hefty fines for each violation, and to date federal regulators have collected over $70 million in penalties.  States created their own lists with their own penalties.  The list exempts political candidates, fund raising non-profits, and businesses with a prior relationship with a customer, so some calls can still legally be made.

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And yet Do Not Call restricted the freedom of telemarketing companies and businesses using this advertising, causing the loss of many jobs.  According to the Bureau of Labor Statistics, the number of telemarketers in the U.S. fell by more than half between 2000 and 2015.  (Telemarketers continue to make exempt calls and business-to-business marketing.)  The American Teleservices Association projected that Do Not Call would cost 2 million jobs.  Many telemarketing jobs, however, would have disappeared due to automated calling and the offshoring of call centers even without Do Not Call.  Regardless of the exact number, the destruction of jobs and the value generated for businesses represent the cost of restricting economic freedom.  And yet I still don’t feel guilty.

Were telemarketers really exercising economic freedom, or rather violating Americans’ privacy rights with calls we didn’t want?  If so, then the Do Not Call list might have restored freedom.  Of course advertising “intrudes” on our lives in other ways, like TV commercials and direct (a.k.a. junk) mail, which we do not see as infringing on freedom.  We must be clear why unsolicited advertising calls differ from other types of advertising.

Telemarketing illustrates how the details of economic freedom can sometimes be unclear.  People who agree in principle may disagree about whether specific acts violate freedom.  New technology often generates such confusion.  The development of computer programs to dial phones made telemarketing economically feasible.

The law provides a forum to work out the details of freedom.  Often we can view a new situation from several perspectives.  For instance, telemarketing calls could be seen like TV ads, or like door-to-door solicitations.  What would be the consequences of applying rules from these different cases to the new one?

A seemingly reasonable rule might work poorly in a new circumstance.  As an example, law students learn from an old English court case how the ownership of property extended from the heavens to the center of the Earth.  Ownership to the heavens became an issue with the invention of airplanes.  Would planes need to secure rights of access to fly over land?  Such a reasonable extension of trespass laws, however, might have prevented commercial air travel, so the law decided that overflight was not trespass.

The English common law provided the foundation for our modern market economy.  Common law rules evolved with the economy, as judges made rulings as new circumstances arose, and continued litigation indicated when a rule was too costly.  Congress had to act on telemarketing because it involved the use of the phone network, a public utility.  Ultimately law and politics decided that telemarketing calls violated our freedom not to be disturbed at home.

Nations which protect economic freedom enjoy higher standards of living.  Sometimes we must think carefully about what freedom entails, and so our economy needs a proper legal foundation.  I’m glad to be rid of those annoying telemarketing calls, and don’t view the Do Not Call list as violating economic freedom.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision.  The opinions expressed in this column are the author’s alone and do not necessarily reflect the views of Troy University.  

About Dan Sutter

I am the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

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