Do Not Call Legislation Should Stand

As you know, we have been engaged on the "do not call list" debate. You may find this bit of economic reasoning to be helpful as you think through your position of this important issue. This material is taken from the most recent issue of Economy.com's report.

Congress obviously does not care for a recent federal judge’s ruling against the FTC’s "do not call" list. Economy.com’s Mike Burt wrote an article way back in 2002 that outlines the economic justification for the “do not call” list. The case today is the same as it was back then.

"Fundamentally speaking, government regulation of an industry should only be necessary if a market failure exists. A market failure occurs when a market system fails to produce the optimal solution. One common form of market failure involves externalities, where the full costs of a transaction are not borne by the market's participants. This is the case with telemarketing, in that the search costs that a solicitor incurs in its efforts to acquire customers are partially shared with consumers who are not interested in undertaking a transaction with the telemarketer.

Due to the myriad number of market participants, the transaction costs of each individual consumer trying to negotiate the terms under which each telemarketing company may contact them would be prohibitive. Thus, consumers are not able to effectively charge marketers for the time they lose in responding to an unwanted call. This lost time is an externality of the phone soliciting market, in that the sellers of the products and services sold by telephone are not required to compensate people for the time cost incurred on the part of those being solicited. This is on par, for instance, with a factory generating pollution that affects far more people than those who make or consume its output.

Under the current circumstances, there is a role for the government to step in to try to transfer at least some of the costs of these externalities to the telemarketers."

What does Don Iannone think? I am inclined to agree with Burt's assessment that the "do not call" list should stand. As I said in an earlier article, economic developers need to be more proactive about this issue because of the potential impact on call center jobs across the country, and yes even internationally.

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