Michael Munger PPE Program Duke University Fleeming Jenkin
Slide 2
Slide 3
The first objection [to the claim that exchange is voluntary]
is an argument from coercion. It points to the injustice that can
arise when people buy and sell things under conditions of severe
inequality or dire economic necessity. According to this objection,
market exchanges are not necessarily as voluntary as market
enthusiasts suggest. A peasant may agree to sell his kidney or
cornea in order to feed his starving family, but his agreement is
not truly voluntary. He is coerced, in effect, by the necessities
of his situation. (What Money Shouldnt Buy, http://www.iasc-
culture.org/HHR_Archives/Commodification/5.2HSandel.pdf
)http://www.iasc-
culture.org/HHR_Archives/Commodification/5.2HSandel.pdf
Slide 4
Why are some transactions okay (water), some are not (meth),
and in some cases the problem is payment, not the exchange itself
is the problem (prostitution, organ sales)? What transactions
should the state allow, regulate, or prohibit? What is legal? What
should a moral person do? When is the market price a guide for
moral action?
Slide 5
EUVOLUNTARY OR NOT, EXCHANGE IS JUST. Social Philosophy and
Policy, 28 (2011): 192-211 Today, what is moral? What are the
obligations of the individual?
Slide 6
1. Can selfish actions be moral? What are the conditions under
which self-interested exchange is allowed? Relatedly, what
individual mutually beneficial exchanges should be outlawed? 2.
GIVEN the answer to #1, under what circumstances are the aggregate
consequences of such exchanges a problem?
Slide 7
The laws and conditions of the production of wealth, partake of
the character of physical truths. There is nothing optional, or
arbitrary in them... this is not so with the distribution of
wealth. That is a matter of human institution solely. The things
once there, mankind, individually or collectively, can do with them
as they like. (Mill, Collected Works, 1965, emphasis mine).
Slide 8
The roots of the English word monger, a common merchant or
seller of items are quite old. In Saxon writings of the 11th
century, described in Sharon Turners magisterial three-volume
History of the Anglo-Saxons (1836), we find a very striking passage
where a merchant (mancgere) defends the market price on moral
grounds.
Slide 9
I say that I am useful to the king, and to ealdormen, and to
the rich, and to all people. I ascend my ship with my merchandise,
and sail over the sea-like places, and sell my things, and buy dear
things which are not produced in this land, and I bring them to you
here with great danger over the sea; and sometimes I suffer
shipwreck, with the loss of all my things, scarcely escaping
myself. What things do you bring to us? Skins, silks, costly gems,
and gold; various garments, pigment, wine, oil, ivory, and
orichalcus, copper, and tin, silver, glass, & suchlike. Will
you sell your things here as you brought them here? I will not,
because what would my labour benenfit me? I will sell them dearer
here than I bought them there, that I may get some profit, to feed
me, my wife, and children.
Slide 10
Itinerant Padre: Radford (Economica, 1945), "Economics of a POW
Camp" Very soon after capture people realized that it was both
undesirable and unnecessary, in view of the limited size and the
equality of supplies, to give away or to accept gifts.... Goodwill
developed into trading as a more equitable means of maximizing
individual satisfaction.
Slide 11
Itinerant Padre: Radford (Economica, 1945), "Economics of a POW
Camp" Stories circulated of a padre who started off round the camp
with a tin of cheese and five cigarettes and returned to his bed
with a complete [Red Cross] parcel in addition to his original
cheese and cigarettes.
Slide 12
1. Euvoluntary exchange is always just 2. Exchange that is not
euvoluntary is nonetheless often welfare-enhancing. Objections to
exchange are generally misplaced objections to disparities in the
pre-existing underlying distribution of wealth and power, which
exchange actually mitigates.
Slide 13
(1) conventional ownership by both parties (2) conventional
capacity to transfer and assign this ownership to the other party
(3) the absence of post-exchange regret, for both parties, in the
sense that both receive value at least as great as was anticipated
at the time of the agreement to exchange
Slide 14
4. Absence of uncompensated externalities 5. neither party is
coerced, in the sense of being forced to exchange by threat 6.
neither party is coerced in the alternative sense of being harmed
by failing to exchange.
Slide 15
Slide 16
In the economic world, power in an exchange relationship is
measured by the disparity in outcomes if no exchange is agreed
upon. More simply, economic power is the disparity in welfare at
the reversion points, or the best alternative to a negotiated
agreement. Lets call this the BATNA for short. This concept of the
Best Alternative to a Negotiated Agreement, or BATNA, comes from
Roger Fisher and William L. Ury. Getting to Yes: Negotiating
Agreement Without Giving In (Boston, MA: Penguin Books, 1981).
Slide 17
One might think of the value of the BATNA as the level of
welfare of the person without access to exchange. Imagine Jane and
Bill are considering an exchange of a product for a sum of money.
Jane has power over Bill if Bill suffers more from a failure to
exchange than Jane does. In some sense, each has a voluntary choice
to make: Jane can sell or not sell, and Bill can buy or not buy.
But if the BATNAs (the consequences of failing to consummate the
transaction) are wildly different, then the exchange is not
euvoluntary.
Slide 18
So, formally, Jane has power over Bill, and Bills exchange
decision is not euvoluntary, if either of two conditions are met:
1. Value (BATNA JANE ) Value (BATNA BILL ) (Threshold 1 ) 2. Value
(BATNA BILL ) < (Threshold 2 ) BATNA: Best Alternative to a
Negotiated Agreement Bantha
Slide 19
It points to the injustice that can arise when people buy and
sell things under conditions of severe inequality or dire economic
necessity.
Slide 20
It points to the injustice that can arise when people buy and
sell things under conditions of severe inequality or dire economic
necessity.
Slide 21
1. Severe Inequality: Value (BATNA JANE ) Value (BATNA BILL )
(Threshold 1 ) 2. Dire Necessity: Value (BATNA BILL ) <
(Threshold 2 )
Slide 22
Suppose I go to a grocery store to buy water, and the price is
$1,000 per bottle I laugh and push my cart along. Ill buy water
elsewhere, drink tap water, or many other alternatives. Im almost
indifferent between water at Kroger or Food Lion for market price
of $0.90, or even Whole Foods for $3.00.
Slide 23
So, even though water is a necessity (Ill die without it!) I
have choices. And, I have money, and we all agree that I own that
money and can transfer it, and we all agree that each store owns
the water, and can transfer it. Finally, the water is not
poisonous, and tastes good, so I wont regret purchasing it, if I
choose to do so. So the exchange is euvoluntary.
Slide 24
Now, lets suppose instead that I am far out in the desert, and
am dying of thirst. Im rich, and I happen to have quite a bit of
cash on me, but I cant drink that. A four wheel drive taco truck
rolls over the hill, and pulls up to me. I see that the sign
advertises a special: 3 tacos for $5! Drinks: $1,000. 3 drinks for
only $2,500 qu te gustara, gringo?
Slide 25
I argue with the driver. Have a heart, buddy! I am dying of
thirst! He asks if I have enough money to pay his price, and I
admit that I do. The driver shrugs, and says, Up to you! Have a
nice day! and starts to drive off. I stop him, and buy 3 bottles of
water for the special price of $2,500. Was the exchange
euvoluntary?
Slide 26
It was not. The exchange violates part 6 of the definition,
relative equality of BATNAs. My BATNA was death, from thirst. The
driver was little affected by whether a deal was consummated
(though he got a bit richer), while I was enormously affected. Even
though in most important senses the exchange was voluntary (I could
have said no), it was not euvoluntary. The precise definitional
line between almost equal BATNAs (and therefore euvoluntary
exchange) and unequal BATNAs (and therefore not euvoluntary
exchange) may be hard to draw, but I hope the distinction is clear
enough for analytic purposes.
Slide 27
Many examples that seem like power are not coercive in the
usual sense of political power. I have a gun, and you have a
wallet. Now, I have a wallet AND a gun. Euvoluntary? No, by
criterion 5, No coercion. But a sweatshop is different. The reserve
army of the unemployed is different. The source of power there is
not coercion, but a disparity in BATNAs. Still, not euvoluntary, by
criterion 6, Coerced by circumstance.
Slide 28
Suppose we say that, to protect the weaker party from being
exploited, we will outlaw the exchange. How does this help the
weaker party? Does NOTHING to address the BATNA that we found
unacceptable. In fact, all it does is maroon the weaker party at
the BATNA that, by assumption, we found unacceptably inferior. No
escape!
Slide 29
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Slide 35
North Carolina's Anti-Gouging Law in 1996 (General Statutes
75-36) (a) It shall be a violation of G.S. 75-1.1 for any person to
sell or rent or offer to sell or rent at retail during a state of
disaster, in the area for which the state of disaster has been
declared, any merchandise or services which are consumed or used as
a direct result of an emergency or which are consumed or used to
preserve, protect, or sustain life, health, safety, or comfort of
persons or their property with the knowledge and intent to charge a
price that is unreasonably excessive under the circumstances.
(Later amended to be even more restrictive, outlawing price changes
reflecting cost increases up the supply chain, August 2006,
SL2006-245, GS 75-38).
Slide 36
They clapped. Appeared to be happy. What is the objection? Why
do so many states have these laws? If I wanted to offer ice for
sale for $12 per bag today, could I do it?
Slide 37
Locke, John. 1661 / 2004. Venditio. Locke: Political Writings
(ed. By David Wooton). Hackett Publishing. Venditio: "A sale."
Questions: 1. What is the just price? 2. When is the market price
just?
Slide 38
A ship at sea that has an anchor to spare meets another which
has lost all her anchors. What here shall be the just price that
she shall sell her anchor to the distressed ship? To this I answer
the same price that she would sell the same anchor to a ship that
was not in that distress. For that still is the market rate for
which one would part with anything to anybody who was not in
distress and absolute want of it. And in this case the master of
the vessel must make his estimate by the length of his voyage, the
season and seas he sails in, and so what risk he shall run himself
by parting with his [extra] anchor, which all put together he would
not part with it at any rate, but if he would, he must then take no
more for it from a ship in distress than he would from any other.
(Locke, 1661/2005, Venditio, pp. 4456; emphasis added).
Slide 39
How to square Lockes intuition about market price with our
claim about euvoluntary exchange? How to weigh the imperatives of
EE against the constraint of non-worseness?
Slide 40
Any plausible theory of just market exchange must balance two
conflicting moral considerations: euvoluntariness (true
voluntariness) and Pareto efficiency. Voluntariness requires that
neither party is coerced into exchange by threat of violence or
other form of direct harm. Euvoluntariness imposes the additional
requirement that neither party is coerced by the lack of a decent
alternative to a negotiated agreement. Pareto efficiency, on the
other hand, requires that voluntary, mutually beneficial exchanges
should always be allowed, even if they are not euvoluntary. P.O.
takes the status quo BATNAs as given, and exogenous.
Slide 41
Suppose that, in order for the stronger party to act morally,
the weaker party must actually be harmed in some material sense.
This possibility is accounted for by the non- worseness principle,
described by Zwolinski (2008) interpreting Wertheimer (1996).
Zwolinski describes non- worseness this way: In cases where A has a
right not to transact with B, and where transacting with B is not
worse for B than not transacting with B at all, then it cannot be
seriously wrong for A to engage in this transaction, even if its
terms are judged to be unfair by some external standard. (p.
357).
Slide 42
Euvoluntary exchange is both fair and just, and should not be
interfered with by either the state or moral considerations.
Bargaining is unrestricted. Non-euvoluntary (violations of either
condition 5 [force] or condition 6 [disparity and / or direness])
exchange is always unfair, and violates a central moral intuition
about exploitation
Slide 43
If the person making a moral choice, and the person paying the
material consequences are identical, then punishing non-euvoluntary
exchange might be justified (ice-buyers were denied ice, but saw
evil-doers punished. They clapped!)
Slide 44
But if the person who is concerned about his morality is
different from the person bearing the material consequences, there
is a problem.
Slide 45
The theory is operationalized through a fictitious negotiation,
using a formal model of bargaining. The model assumes that two
parties have values for the exchange, and outside options
(BATNAs)
Slide 46
The fictitious negotiation model is parametric. The free
parameter is the observers revulsion toward the imbalance in
bargaining power, which is captured by the disparity threshold.
Rather than being a constant, the disparity threshold is a
decreasing function of the direness of the weaker partys outside
option, but the particular shape of the function varies from
observer to observer.
Slide 47
Briefly, the fictitious negotiation model is as follows: 1.
Neither party is morally obliged to suffer harm by an act of market
exchange. (Voluntary, non- supererogatory exchange) (Charity is
allowed, but is outside the logic of the exchange model, a la
Radford)
Slide 48
2. The negotiation will be fair and exchange will be
euvoluntary if and only if the disparity between the parties
outside options does not exceed a certain threshold (eqn #12, p.
11). The magnitude of the disparity threshold depends on the
relative abjectness of the weaker party (argument 1). Further, the
direr the weaker partys outside option, in absolute terms (argument
2), the lower the disparity threshold.
Slide 49
3. If the negotiation is fair, all non-supererogatory outcomes
are just. A non-supererogatory outcome is either a mutually
beneficial agreement or the disagreement outcome, in which the
parties get their respective outside options (BATNA).
Slide 50
4. If the negotiation is unfair, the stronger party must devise
a fictitious negotiation, in which the weaker party has an improved
BATNA. The BATNA must be improved until 1 of 2 things happens: (a)
The disparity in BATNAs is reduced until it is no longer unfair.
This does not require a zero disparity; only that it equals the
disparity threshold. (b) The surplus of the fictitious negotiation
is reduced to O. This can happen because the surplus of any
negotiation decreases as the parties outside options improve.
(Non-worseness)
Slide 51
5. The just agreements of the actual negotiation correspond to
the non-supererogatory outcomes of the fictitious negotiation that
are implementable in practice. This seems complicated. Consider
Lockes most interesting example.
Slide 52
What if the maximum price you (weaker ship) would pay for a
SECOND anchor is less than I (stronger ship) would reasonably
accept? Then no bargain, because surplus is negative. But then your
material misery is purchased at the cost of my moral smugness.
There is a surplus, because you would pay more for a FIRST anchor
than I would require to sell a SECOND anchor.
Slide 53
So, trapped in a paradox. I am not required to give away the
anchor, but can charge the value of a second anchor far out at sea
(still quite valuable). Could sell, because value of buying first
anchor to you exceeds cost of selling second anchor from me. But MY
moral qualms require that I create a fictitious bargain where you
have a better position: suppose you have an anchor, and are
considering buying a second anchor.
Slide 54
Locke did not recognize non-worseness. In his analysis, my
moral obligations rule out a transaction that would have benefitted
you. Yet I am also not obliged to give you the anchor.
Consequently, the concern that bargaining be fair rules out a very
valuable exchange. This is a greater injustice than the unfair
exchange would have been.
Slide 55
Locke needed to add NW clause. Stronger ship is obliged to sell
at indifference price, assigning ALL the surplus to the weaker
ship.
Slide 56
Clusters of similar disparity threshold functions constitute a
culture. A threshold function that captures the essential features
of a culture constitutes an ideology.
Slide 57
1. A man sells wheat. Last year the market price was 5
shillings. This year there is a shortage, and the market price is
more than 10 shillings. Is this extortion? After all, there is
increased need, because of the shortage. But shouldnt he sell at
different prices to (a) a poor man, (b) a rich man, and (c) a
jobber or wholesaler? Problem: if he sells to a poor man at 5
shillings, the buyer becomes a seller, reselling at 10 s and
pocketing the difference. Unless obliged to give money to the poor,
just because I have wheat, this is an absurdity. (Locke, 1661/2005,
Venditio, pp. 4456; emphasis added).
Slide 58
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Slide 61
[L]et us suppose a merchant of Danzig sends two ships laden
with corn, where one puts into Dunkirk, where there is almost a
famine for want of corn, and there he sells his wheat for 20s a
bushel, whilst the other sells his at Ostend just by for 5s. Here
it will be demanded whether it be not injustice to make such an
advantage of their necessity at Dunkirk as to sell them the same
commodity at 20s per bushel which he sells for a quarter the price
but twenty miles off? (Locke, 1661/2005, Venditio, p. 444)