On Independence Day, Prime Minister Narendra Modi warned that while armed naxalism had largely been defeated, a different danger remained. He cautioned agains “dimagi naxals” – those who, he suggested, carry naxalite thinking in their minds. He said that they needed to be identified and isolated.

The political debate that followed has understandably focused on what exactly Modi meant and whom the phrase was intended to describe. But there is a more fundamental question worth asking: what happens when the state begins to distinguish between legitimate and illegitimate ideas?

This is not simply a question about freedom of speech. It is also a question about competition, information and the possibility of institutional error.

Richard Posner, in Economic Analysis of Law, offers an unexpectedly useful way of thinking about this. In his discussion of the protection of free markets in ideas and religion, he approaches freedom of expression through an economic intuition: ideas, like goods, benefit from competition. The state should therefore be cautious about intervening in the marketplace in which ideas compete. The analogy deserves to be taken seriously.

Economists generally distrust monopolies because a monopolist has little incentive to respond to consumers, improve its product or correct its mistakes. Competition forces producers to respond to information dispersed throughout society. No single producer knows everything. Markets aggregate information through the choices and judgments of millions of individuals.

There is something similar about a marketplace of ideas.

No government, however capable, possesses a monopoly on truth. If citizens are permitted to put competing ideas into circulation, those ideas can be challenged, tested, criticised, refined and sometimes discarded. The process will inevitably be messy. Some ideas will be foolish, others offensive and some potentially dangerous.

But the alternative is to give an institution – usually the state – the authority to determine in advance which ideas are sufficiently legitimate to enter the marketplace.

From an economic perspective, that should make us uncomfortable. The problem is not merely that a government might suppress a good idea. The deeper problem is that it might simply get the classification wrong.

Economics begins with the recognition that information is imperfect. Policymakers do not know everything about consumer preferences, technological developments or future economic conditions. The same informational problem exists in the world of ideas. A government may identify an idea as dangerous because of the people currently associated with it, only to discover later that the idea contained an important criticism of an existing policy.

History is full of such reversals. India’s own economic history provides a striking example. For decades after Independence, extensive state control, industrial licensing and restrictions on private enterprise were regarded as necessary instruments of development. Economic liberalisation in 1991 represented a profound change in that thinking.

What had once been regarded as necessary to protect economic sovereignty increasingly came to be seen as an impediment to growth, competition and innovation.

The law provides another striking example. For decades, Section 377 of the Indian Penal Code criminalised consensual same-sex conduct. In Suresh Koushal v. Naz Foundation (2013), the Supreme Court upheld the provision insofar as it criminalised such conduct. Just five years later, in Navtej Singh Johar v. Union of India (2018), the court decisively changed course. What the state had once regarded as sufficiently harmful to justify criminal sanction came to be understood as an unjustified intrusion into individual liberty.

Environmental policy offers a third example. For much of the twentieth century, environmental protection was frequently presented as a choice between economic growth and regulation. The development of environmental economics subsequently challenged that binary. Market-based mechanisms such as pollution taxes and emissions trading demonstrated that markets themselves could be used to address environmental externalities.

The lesson is not that every unpopular idea will eventually prove correct. Most bad ideas remain bad ideas. The lesson is more modest, but more important: we do not always know in advance which ideas are bad, which are valuable, and which may become valuable when circumstances change. That is precisely why competition in ideas matters.

The value of being wrong

This is where Amartya Sen’s The Argumentative Indian becomes particularly relevant. Sen’s argument is not merely that Indians have historically enjoyed arguing. His larger point is that public reasoning and intellectual heterodoxy are deeply connected to democracy. India’s democratic tradition, he argues, cannot be understood simply as an institutional inheritance from the West: it also draws upon a much older tradition of public argument and tolerance of heterodox views. There is an important economic dimension to this.

Argument produces information. When citizens challenge governments, they provide information that governments may not otherwise possess. When journalists investigate, academics question policy, courts scrutinise executive action and citizens protest, they generate information about the consequences of public decisions. Some of that criticism will be wrong. But that does not make it useless.

Indeed, one of the great virtues of competition is that it creates mechanisms for discovering error. Joseph Stiglitz’s The Road to Freedom provides another useful perspective. Stiglitz asks us to be more careful about what we mean when we speak of freedom. Freedom cannot simply mean the absence of government intervention or the freedom of the strongest actor to do as it pleases. One person’s freedom can affect another’s, and institutions must therefore determine how competing freedoms coexist.

The same is true of expression. The question is not whether speech or expression can ever cause harm. Of course it can. Incitement to violence, threats and deliberate acts intended to facilitate violence are different from ordinary political disagreement. A constitutional democracy can legitimately distinguish between them. The difficult question begins before that point: what happens when the state moves from regulating harmful conduct to classifying harmful thought?

There is an important economic distinction here. Regulating an act because it produces a demonstrable harm is one thing. Regulating an idea because the government believes that the idea might eventually produce harm is considerably more difficult. The first responds to an observable externality. The second requires the government to predict the future.

And governments, like markets, can fail. This is perhaps where Francis Fukuyama’s Liberalism and Its Discontents adds another layer to the argument. Fukuyama reminds us that democracy and liberalism are not identical. Democracy gives people the power to choose their government; liberalism places constraints on what that government can do. Elections determine who governs. They do not give the government unlimited authority over the citizen. That distinction matters enormously when the government itself is one of the most powerful participants in the marketplace of ideas.

It possesses institutional authority, access to public resources, visibility and the ability to shape public narratives. If, in addition to these advantages, it acquires the power to determine which competing ideas are legitimate, the marketplace becomes increasingly asymmetric. In economic language, the regulator becomes a participant with the power to exclude its competitors.

We instinctively understand the problem when this happens in an economic market. We worry about barriers to entry, exclusionary conduct and excessive concentration because concentrated power can distort competition. Why should ideas be different?

Keeping markets open

This is the central insight of Richard Posner’s marketplace metaphor. A marketplace of ideas does not require us to believe that all ideas are equally valuable. It requires something more modest: the state should not be the sole judge of their value.

Bad ideas can be defeated by better ideas. Dangerous arguments can be exposed. Historical falsehoods can be challenged with evidence. Economically disastrous proposals can be subjected to empirical scrutiny. Political rhetoric can be answered by political rhetoric. This is not an argument for anarchy in speech. It is an argument for competition.

Markets do not eliminate mistakes. They create mechanisms through which mistakes can be discovered and corrected. Firms that consistently produce what consumers do not want lose market share. Investors who repeatedly misread markets bear the consequences. Competition does not guarantee that the best product wins every time. It creates a process through which better products have an opportunity to displace worse ones. The marketplace of ideas works imperfectly in much the same way.

A society will inevitably produce bad ideas. The objective should not be to construct a society in which bad ideas never appear. That is impossible. The objective should be to construct institutions capable of defeating bad ideas without suppressing the process through which good ideas emerge. This is why the expression “dimagi naxal” deserves attention beyond the immediate political controversy surrounding it.

If the term is being used to describe individuals who genuinely advocate violence, the continuation of an armed insurgency or the overthrow of the constitutional order, then the relevant questions are evidence, law and due process.

But if the category begins to encompass people because they hold radical political views, criticise the government, challenge prevailing economic policies, defend unpopular causes or simply refuse to conform to the dominant political narrative, then something more consequential has happened – the marketplace of ideas has acquired an entry barrier. And once entry barriers become normal, competition begins to suffer.

Perhaps the most important lesson from Sen, Stiglitz, Fukuyama and Posner is not that governments should never regulate expression. It is that institutions must recognise the limits of their own knowledge and power.

Sen reminds us that argument is not a defect in Indian democracy: it is part of its intellectual inheritance. Stiglitz reminds us that freedom exists within a web of competing interests and unequal power. Fukuyama reminds us that democracy does not eliminate the need for constraints on government power. And Posner gives us the most useful metaphor of all: the marketplace of ideas.

The metaphor works because competition is valuable not because every competitor is good, but because no competitor – or regulator – can know with certainty which idea will ultimately prove valuable. India does not need a marketplace in which every idea is approved. It needs a marketplace in which ideas are allowed to compete, subject to the ordinary rules of law.

A country confident in its institutions does not need to fear every dissenting idea. It can allow the argument to take place and trust its citizens to judge. The strongest case against a bad idea is not that it should be silenced. It is that, when placed in a genuinely competitive marketplace, it can be defeated by a better one.

Freddy Thomas teaches economic analysis of law at the School of Law, Christ University, Bengaluru, and writes on the intersection of law, economics and public policy.

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