Are all transactions always mutual or are they not? Is there a grey, subjective area to transactions?
Coercive transactions are not, eg taxes. All voluntary transactions are, ie market transactions.
All voluntary transactions are inherently mutual, but in a sense that may end up being superficial in some contexts. If the systematic context in which it takes places greatly limits people’s options or if disparities of power are used as leverage to milk people, a voluntary transaction can manifest as simple submission. In this way I think that the concept of “voluntary-ness” can be ambiguous. I can “voluntarily” submit to power because I have no other choice besides death or extreme misery, not necessarily because my values are being genuinely represented. The power dynamics of the particular situation is what determines whether the “mutual benefit” is meaningful.
All voluntary exchanges are ex ante mutually beneficial, by definition. In other words, both parties, at the point in time when the exchange takes place, value the good they are receiving more than the good that they are sacrificing. An exchange that is not mutually beneficial can only occur under duress. Now, some pontificators, in an attempt to show that this mutually beneficial exchange is somehow exploitative, will dismiss the subjective valuations of those parties involved and supplant them with their own entirely arbitrary judgments. But for the economist there is no difference between a man that exchanges his car, which he needs to get to work every day, for a pound of cocaine, or if that very same man exchanges an apple for an orange. The pontificator believes that some individuals are not in a position to make the “correct choice” and therefore require the aid of his expertise.
Actually my argument is based on sympathy for the situation and values of a particular party (the party taken advantage of), not putting my preferences in their place. When the party sincerely thinks “I’ve been taken advantage of” and indeed they literally had no other option but to submit, the canard of 3rd person imposition of preference doesn’t make sense. The facade of neutrality can only by maintained via the illusion of avoiding normatives. Of course, thinking in the terms I am requires us to not throw basic ethics out the window in the name of perpetually staying within the boundary lines of economic methodology, which is an unfortunate practise that economic reductionists have a knack for. But using economic subjective value theory as a political bludgeon to handwave away all normative judgements of economic activity is simply a categorical error to say the least.
Brainpolice,
Have you a simple example or few of such transactions? I’m pretty sure I disagree with you 
but I’d like to understand your point(s) before I dismiss.
What can I say, “vulgar economics” finds your arbitrary and entirely subjective normative judgements to be completely incoherent. A voluntary and therefore mutually beneficial exchange cannot be exploitative, and you implicitly conflate persuasion and coercion (which are two different phenomena). It would be ridiculous to claim that Michelle’s good looks coerced me into have sex with her, or that Mises’ reasoning abilities coerced me into supporting Austrian economics.
weird no one is considering transactions that impact individuals not directly involved in the transaction (the buyer and the seller).
weird no one is considering transactions that impact individuals not directly involved in the transaction (the buyer and the seller).
I know I’m repeating myself, but…
Student, have you a simple example or few of such transactions? I’m pretty sure I disagree with you but I’d like to understand your point(s) before I dismiss your argument.
say i own a paper company. i make and sell paper to companies that need it like say tropicana who uses it to make juice boxes. in this transaction i, the seller, and tropicana, the buyer, both benefit from the transaction. however, in the process of making the paper, my company releases various gases into the air that are not only unpleasent to locals living near the plant (they smell bad), but they may actually lead to more serious consequences (paper production releases ghgs into the atmosphere contributing to global warming). similarly, transporting the paper itself to complete the transaction has similar consequences (trucks emitting noise and harmgul ghgs).
this is the essense of the problem of negative externalities. there are people that are being harmed by the transaction that have no say in the matter.
It seems to me like a simple pullution problem..
say i own a paper company. i make and sell paper to companies that need it like say tropicana who uses it to make juice boxes. in this transaction i, the seller, and tropicana, the buyer, both benefit from the transaction. however, in the process of making the paper, my company releases various gases into the air that are not only unpleasent to locals living near the plant (they smell bad), but they may actually lead to more serious consequences (paper production releases ghgs into the atmosphere contributing to global warming). similarly, transporting the paper itself to complete the transaction has similar consequences (trucks emitting noise and harmgul ghgs).
this is the essense of the problem of negative externalities. there are people that are being harmed by the transaction that have no say in the matter.
They gave you title to money; you gave them title to paper. No harm came to anyone as a result of this transaction. Your production process, as you describe it, and the method used to take possession of the paper, have an effect on your neighbors. That is completely separate from the transaction. The noise and smell are not results of the transaction.
You, but certainly not Tropicana, may be held liable to your neighbors for your method of production. Either you or Topicana or both may be help liable for the delivery method. Negative externalities only exist as far as property rights are not recognized.
how exactly are you defining “the transaction”? the creation of the product isn’t part of it and neither is the physical exchange of that product???
does your definition of “the transaction” extend only to the verbal agreement that a set of goods will exchanged? if so, I can only say that seems like an odd way to define the term. if i tell you i will give you my car for $20 bucks, but then never do, i would say a transaction never took place because the goods were never exchanged. but you would??? curiouser and curiouser, indeed.
anyways, i don’t want to get into a semantic debate of how to define the term “transaction”. it sounds like you get the gist of what i’m saying.
i would only note that illdefined property rights are not the only problem that give rise to negative externalities. transaction costs are also important. specifically, transaction costs must be low enough so that those impacted parties can coordinate. but that is not always the case.
In this light, my point would be that (Austrian) economics alone can not give a full picture of such things by the very nature of what its methodology excludes: normatives + the (empirical) social context in which economic activity takes place. Suffice it to say that even if one fully agrees with (Austrian) economics, there is no good reason to limit the substance of one’s socio-political positions to the confines of such an economic analysis (and thus make no normative judgements). Even from an ethical subjectivist perspective (which it is a categorical error to conflate economic subjective value theory with, hence my above comment), it can be warranted to make normative judgements of this sort.
The issue at play is that there is vagueness surrounding the concept of “voluntary-ness” or that the systematic context in which these activities take place makes such “voluntary-ness” impossible. In particular, the range of choices that one has and the social/economic/political systems that function as a framework is a factor. It is thus either trivially true or false-in-some-contexts that a “voluntary” exchange is inherently “mutually beneficial” - or that it’s “voluntary-ness” is all that substantive. Giving an extremely dehydrated person a bottle of water in exchange for a million dollars or lifetime enslavement is “voluntary” in a superficial sense and calling it “mutually beneficial” is trivially true to the point of it being a joke.
All that you have succeeded in doing is defining “exploitation” out of existence a priori in a way that begs all the questions. On the other hand, I’m more or less using the concept as it is fairly commonly understood, I.E. to use one’s position of power as leverage to control others or to get people to make significant sacrifices that they wouldn’t normally do because they have no other meaningful choice. Perhaps at some level the “exploited” party can be said to benefit, but the context of what is going on can not in good faith be considered a healthy recriprical relationship in which one is treated with respect. No, sometimes people are just being milked, and there’s nothing inherent about (Austrian) economics that makes it so that this can not be aknowledged.
The problem that I have with the “always mutually beneficial” line is when it is used as a trump card to negate the application of just about any ethical standard and to grant any currently existing power arrangemenst a defacto status of innocence. In “the real world”, economic activity is much more complicated than this line can account for, and there is a huge difference between “mutual benefit” in the more trivial sense of “psychic profit” and what actually benefits people in terms of survival and physical/mental health. At its worst, the “mutual benefit” line is just a particularly simplistic and crass form of psychological egoism (and theory that is untenable for a variety of reasons). At it’s best, it’s a truism which only applies if we already have a genuinely libertarian society, which isn’t the case. Ideologues ignore this at their own peril.
Great post, BP.
The following statements do not contradict.
- Voluntary exchange is inherently mutually beneficial.
- All exchanges are not voluntary.
is mutually beneficial in a very real, non-trival way. The recipient of the million dollars most likely benefits. The recipient of the water obviously benefits, in a much more clearly identifiable manner.
how exactly are you defining “the transaction”? the creation of the product isn’t part of it and neither is the physical exchange of that product???
The creation process certainly is not. I painted a picture and hung it on my wall. Is that a transaction? Of course not. Selling it, or giving it away, would be a transaction. As for delivery, you certainly could hand-delive the paper. You know, carry the bundles over. Or hire a fleet of bicyclists. The fact is, you use the dirty, smelly trucks because its the most cost-effective method for you. One of the many reasons it’s so cost effective, as you pointed out, is that the government shields you from the liability for the damage your actions do to others. Higher transaction costs due to increased liability may indeed have a profound impact on certain property exchanges. This, in itself, is not a problem. Prices will adjust. Certain products will be too costly to produce. Again, this, in itself, is not really a problem. There are millions of potential products that are too costly to produce.
does your definition of “the transaction” extend only to the verbal agreement that a set of goods will exchanged? if so, I can only say that seems like an odd way to define the term. if i tell you i will give you my car for $20 bucks, but then never do, i would say a transaction never took place because the goods were never exchanged. but you would??? curiouser and curiouser, indeed.
If I were to write you a check, or send you money through PayPal, would you need to actually hold the dollar bills for the exchange to take place, or would the banks simply need to make a few clerical changes? In your example, after you give me the $20, is the car then yours, or does it only become yours after you pick it up?
You are creating vagueness where there is none in order to make your argument, which is, again, incoherent. Your position requires you to conflate persuasion with coercion. Mine doesn’t.
Superficial according to you. If the individual, that is about to die of dehydration, is willing to pay 1 million dollars for the bottle of water, that is, if he values the existence of his life more than the million dollars that he must surrender for that bottle of water, then a mutually beneficial exchange will take place in the absence of any form of coercion. And this is anything but superficial to the man who now lives thanks to that bottle of water (though he may find the price objectionable after the fact). The man who owns the bottle is free to do whatever he wants with the bottle; it belongs to him. The man dying of dehydration is not dying because of the man with the bottle of water. Similarly, when given the choice, I would rather pay 25,000$ for a Ferrari than the 100,000$ asking price. The fact that the car salesman does not want to sell me that Ferrari for 25,000$ does not mean that I am somehow being exploited. Additionally, the fact that I have no car, and can’t to get to work, is not the fault of the car salesman.
No I haven’t. If I grab Michelle, tie her up in my basement, and threaten to kill her if she refuses to have sex with me, then I’m clearly exploiting her. But saying that Michelle’s good looks coerced me into having sex with her is, again, nonsensical.
The ethical standard that you are referring to is entirely your own, and it ignores the actual subjective valuations of the parties involved.
The “real world” doesn’t care about how things should be. It’s why things are the way that they are (scarcity, insatiable human desires, etc).
Esuric and Brainpolice, I have a question for both of you.
Let’s say that A is walking by a lake and sees that B is in the lake and drowning. If A does not help B, and B subsequently drowns, did A kill B?
No.