Why engineered demand breaks the link between markets and human well-being

Most people are told that capitalism works because it gives people what they want. We vote with our dollars, markets respond, and resources flow to where they are most valued. This idea is repeated so often that it no longer sounds like a theory. It sounds like common sense.

But there is a problem hiding in plain sight.

What if much of what we “want” is not discovered by markets at all, but manufactured by them?

Modern capitalism assumes consumers whose choices reflect real needs and genuine preferences. In reality, human beings are irrational, emotional, and deeply susceptible to influence. We are driven by status, habit, fear of missing out, insecurity, and imitation. This is not controversial. Entire industries are built around measuring and exploiting these tendencies.

What is more uncomfortable is this. Human irrationality is no longer a limitation of the system. It is the feature the system increasingly depends on.

Advertising, branding, and behavioral targeting do not simply inform consumers about available options. They shape desire itself. They teach people what to want, when to want it, and what it says about them if they do not have it. Status anxiety becomes a growth strategy. Insecurity becomes a revenue stream. Attention becomes the most valuable resource in the economy.

We see this everywhere once we stop pretending otherwise.

Phones that feel obsolete after a year even though they work perfectly well. Fashion cycles that change not because clothing wears out, but because relevance does. Wellness products that sell identity, control, or virtue more than health. Social media features engineered not to improve connection, but to maximize compulsion and time spent.

None of this is accidental. None of it is irrational from the system’s point of view.

When demand is engineered in this way, markets may still be efficient. Prices still clear. Goods still move. Profits still rise. But efficiency no longer tells us anything about human well-being. It tells us only how effectively a system can convert psychological leverage into consumption.

At that point, efficiency stops being a virtue. It becomes a technical achievement detached from any meaningful definition of social good.

Efficiency stops being a virtue. It becomes a technical achievement detached from any meaningful definition of social good.

These outcomes are often framed as failures of consumer discipline or personal responsibility. People should simply choose better, resist temptation, or be more rational. But this misses the point entirely. These patterns are not moral failures of individuals. They are rational outcomes of a system that profits more from manipulating attention and emotion than from solving real human problems.

This is not a new insight, even if it is an uncomfortable one.

Nearly a century ago, Edward Bernays argued openly that mass manipulation of desire was necessary to sustain industrial capitalism. He believed that shaping public wants was not only possible, but essential. His work helped transform advertising from simple product description into psychological persuasion. What was once controversial became normal. What was once manual is now automated, scaled, and optimized by data.

Once we acknowledge this, a foundational assumption of modern economics begins to crack.

Markets are said to allocate resources efficiently based on consumer demand. But this claim quietly assumes that preferences are organic, stable, and meaningfully connected to human welfare. When preferences themselves are shaped by actors who profit from shaping them, that assumption no longer holds.

Efficiency is always relative to demand. The critical question is not whether markets are efficient, but whether the demand they respond to reflects anything we should treat as socially meaningful.

The diamond industry offers a clean illustration. Diamonds are not especially rare. They have limited functional value. Yet through artificial scarcity and sustained cultural conditioning, companies like De Beers turned them into symbols of love, commitment, and status. A vast global system of extraction, marketing, and consumption emerged to sustain this demand. From a market perspective, this was a success. From a human welfare perspective, it is difficult to argue that society is meaningfully better off because of it.

This example is not unique. It is simply older and easier to see. Today, similar dynamics operate across consumer technology, fashion, finance, and digital media. What changes is not the logic, but the scale and speed.

At this point, the common defense is that markets are neutral. They simply reflect what people choose. If people buy something, that choice must reveal value. But neutrality disappears once we recognize how much effort and capital are devoted to shaping those choices in the first place.

Consumer choice cannot serve as moral justification when the environment in which choices are made is deliberately engineered to exploit predictable psychological weaknesses.

Choice still exists, but it is constrained, nudged, framed, and influenced in ways that systematically benefit those doing the influencing.

Capitalism, in its modern form, does not aim to improve human well-being. It aims to maximize profit under existing constraints. If manipulating attention, insecurity, and habit is more profitable than solving real problems, resources will flow toward manipulation. This is not a moral indictment of individual firms or consumers. It is the structural outcome of competitive incentives.

The broader institutional consequences of incentive distortion are examined in The Dependency Trap: How Incentives That Replace Responsibility Undermine Economic Prosperity.

Defenders of the system often respond by pointing to growth, innovation, and expanding choice. And it is true that capitalism has been extraordinarily effective at producing goods, scaling production, and coordinating activity. The mistake is assuming that these achievements automatically translate into social good.

We have built an economy that is highly efficient at producing novelty, consumption, and distraction, while struggling to produce stability, meaning, and genuine improvement in people’s lives. We measure success by output and profit, then retroactively assume that what is profitable must also be beneficial.

But progress is not the same thing as motion. Expansion is not the same thing as improvement.

The uncomfortable truth is this.

Capitalism is not failing because it is inefficient. It is succeeding at efficiently optimizing the wrong thing.

Capitalism is not failing because it is inefficient. It is succeeding at efficiently exploiting human irrationality.

Until we stop treating engineered demand as evidence of human welfare, we will continue to confuse technical success with moral legitimacy. We will keep allocating vast resources toward outcomes that look productive on paper while leaving people anxious, distracted, and dissatisfied in practice.

Markets are working.

That is exactly why we should be worried.

Continue Exploring

If this critique of engineered demand resonated, these essays expand the structural analysis:

• The Dependency Trap: How Incentives That Replace Responsibility Undermine Economic Prosperity
• Human Nature and Economic Systems: Why Good Intentions Are Not Enough
• You Are Not Free