I notice a lot of writers saying that when two individuals engage in a transaction, it is necessarily mutually beneficial. It is, of course, indisputable that the two individuals engaging in the transaction believe ex ante that such a transaction will be beneficial to each of them. But isn’t it slightly incorrect to say that every voluntary transaction is mutually beneficial, given the fact that many people realize immediately after a transaction has taken place that they did not actually benefit from it?
Am I just nitpicking here–i.e. does everyone already realize this but only say “a voluntary transaction is necessarily mutually beneficial” in a metaphorical manner for rhetorical simplicity only?
That’s very interesting. I’ve seen “beneficial” thrown around too, and the rational is weak it seems for the justification falls back on that one concept “beneficial” (mutually beneficial). It seems to be a concept used to avoid and plug up holes in a poor argumentation. I would like to hear more from you on what you mean here on how when “… a transaction has takenplace that they did not actually benefit from it…”
Well, let’s say, for instance that Fred and Barney come together to make a transaction.
Fred has a vinyl record. Barney has a car.
Based on what they know about vinyl records and cars, Fred feels that a car is more valuable than a vinyl record, and Barney feels that a vinyl record is more valuable than a car.
Thus, they exchange. And they exchange on the basis that Fred feels, ex ante, that such a transaction will be beneficial to him, and Barney feels, ex ante, that such a transaction will be beneficial to him. (The exchange is made on the basis that the transaction is considered, ex ante, to be mutually beneficial.)
Once the goods are transferred to their new owners, Barney comes to discover that the vinyl record is not as great as he thought it would be, and now values the vinyl record far, far lower than the car he just gave up. Barney thus suffers a loss of psychic revenue. He realizes he did not benefit from this exchange. He realizes he would have been better off keeping the car, rather than exchanging it.
Thus, the exchange was not actually mutually beneficial, in retrospect.
Yet, I notice a lot of writers saying that all voluntary transactions are, by definition, mutually beneficial. Only, they’re obviously not. People voluntarily engage in transactions that turn out to be not mutually beneficial all the time.
I recently bought what I thought was an awesome bumper sticker online. When I got it in the mail, it was half the size I expected it to be, all the colors drained off after the first rain, and the stickiness on the back of the sticker wore off after the second rain. I did not benefit from the exchange. I would have been better off keeping the $4 I paid for the bumper sticker.
I can only say that I believed, ex ante, that such a voluntary transaction would be beneficial. I cannot say that all voluntary transactions are actually mutually beneficial though.
Ah, I see. Yes. Makes total sense. To base a voluntary exchange on “mutual benefit” is very limited and doesn’t account for what actually happens in all exchanges. Thanks for clarifying this!