In a piece last week, I quoted observations from Matt Yglesias and Ezra Klein to the effect that, when you scrape away all the rhetorical appeals to “property rights” and “free markets,” you find that the real agenda is not so much the promotion of markets and property as such, as promoting the interests of business and defending business against stuff it doesn’t like.
And lo and behold, John Stossel and Michael Medved come out and prove me right. Stossel hosted Medved, author of The 5 Big Lies About American Business, on his Fox Business Network show. Medved, in the process of fulminating about Hollywood’s theme of “the businessman as villain,” drops this little gem: “You can only make a profit in this country by giving people a product or a service that they want,” he says. “It’s the golden rule in action.”
(It was amusing, by the way, to see Medved contrast today’s “businessman as villain theme” with the good old days, when Jimmy Stewart played kindly George Bailey the banker. Oddly enough I seem to recall a character named Potter who was also a businessman—but that can’t be!)
Medved responds to allegations that big business is corrupt and exploitative, in the corporatist economy we live in, by arguing that “it can’t happen, because in a free market, blah blah woof woof.” It’s the moral equivalent of traveling back in time to feudal France and saying to the serfs: “No, those great landlords can’t be exploiting you because in a free market…” Or to the old Soviet Union and saying, “No, those state industrial managers can’t be pushing you around because in a free market…”
Stossel, at least, has previously tipped his hat to the ideas of corporatism and crony capitalism. But he didn’t let out a peep about it this time. He smiled and nodded in response to Medved’s fairy tale with the demeanor of a four-year-old child on Santa’s knee.
So in a free market, exploitation is impossible. I agree. But what has that got to do with a corporatist system founded on 150 years’ worth of massive collusion between big government and big business, in which the great fortunes are founded on crimes and the great profits are equivalent to the feudal landlord’s rents?
The struggle of work vs. ownership is central to the Leftist paradigm. I agree. But the main form of “ownership” by which labor is exploited is not property in one’s own accumulated past effort and abstention. The real form of exploitative ownership against which labor has to contend is artificial property and artificial scarcity: a property in the conditions under which other people are permitted to work, buy and sell.
If you look at the biggest firms, and the dominant sectors in the global economy, their profits are all rents on a property in controlling other people’s access to opportunities.
Medved also comes out and counters the “myth” that the rich get richer by making the poor poorer, because “when two people engage in free exchange, both gain.” So “there are no obscene profits,” according to Medved.
I can just imagine him telling a mugging victim that he wasn’t really robbed, because “when two people engage in free exchange…” The question is, whether a given transaction in our corporate economy IS a free exchange.
So is he saying that all economic transactions under the present system are “free exchange”? Is he saying that the profits of (say) military contractors and state-protected monopolists aren’t obscene? Is he denying that they even exist?
Frankly, I doubt if he even cares, he’s been phoning it in for so long. Medved is just being willfully stupid in order to write a by-the-numbers puff piece, in service to a bunch of crooks who want a legitimizing myth made to order. And Stossel is cheering him on.
Give me a break.
This was a fun read. Had me laughing at parts..
I still have a certain fondness for libertarians like Stossel, Milton Friedman, [insert weak libertarian here]. Even when they "get it" they just don't "get it." But I think they are sincere. If they aren't, then fuck em, but I think they are. (I used to sort of think the same thing until the veneer of freedom was increasingly torn away). I think it's a human condition to want to look up to something, and the Randian (among others) influence over libertarianism pushes a phantom idealization of management and capitalists so it sort of fits. Last I checked economic theory, capitalists in a free market were supposed to get an ROI, adjusted for risk, in line with the prevailing rate of interest. When that's obviously not happening (or maybe it is still, but the monopolies are capitalized into the framework to maintain "profits"), it's time to ask questions. If the risk is so great that that's how they're making money, it seems like praise should be heaped on any lotto winner. But we know what's really going on.
quasibill, good comment.
I suppose part of how one thinks about this a function of what one means by exploitation, yes? So, in a genuinely freed market, (a) individual transactions aren't distorted directly by force or fraud and (b) background economic conditions aren't distorted by force or fraud. I can imagine someone saying that no transaction that takes place in the absence of these sorts of distortions can reasonably be called "exploitative." Might that be what Kevin meant?
But I take quasibill to be saying, in effect, that, however one uses the word "exploitative," it should be clear that there can be morally objectionable transactional terms in the absence of the kinds of distortions I've mentioned. And that's surely right.
Chris, excellent analysis.
This exchange between Matt MacKenzie and Charles Johnson on the nature of exploitation, and in what sense it can or can't happen in the absence of aggression, is worth a read.
Interested readers will find a less entertaining and detailed critique of the Stossel/Medved conversation here:
http://liberalaw.blogspot.com/2010/04/stossels-my…
Oops, I accidentally reversed which name links to which article. So click on Charles' name first to get Matt's article, and then click on Matt's name to get Charles' response.
"You can only make a profit in this country by giving people a product or a service that they want."
It's interesting how people will acknowledge exception after exception to this claim but still assert it. Maybe they're treating it as a kind of natural-historical judgment in Michael Thompson's sense, just as the description of the horse as a kind of quadruped would remain true no matter how many horses lost a leg. Or maybe they think of it as a "friction phenomenon" in the Böhm-Bawerkian sense that drove Mises crazy. In either case, the United States is being interpreted as an essentially free-market society and so the exceptions don't matter. But given how systematic the exceptions are,the claim that the United States is an essentially free-market society needs a tad more defense than they've given it.
“So in a free market, exploitation is impossible. I agree.”
I’m guessing this was hyperbole on your part, but just to be sure…
In a free market, exploitation will still be possible, just far less prevalent, and easier to remedy. And probably only on a far smaller scale.
Just because someone’s in an awful situation, doesn’t mean that transactions that they enter into voluntarily aren’t in some way exploitative. But (1) the number of folks in bad situations will be fewer in a free market; (2) the options available to those in bad situations will be greater in a free market; and likely (3) the awareness of the unfortunate and the personal ethic of accepting personal responsibility for rectifying exploitation and the circumstances that lead to it will be more widespread.
I know not many are as enthusiastic about decentralization and localization as I am, but I would posit that under a localized economy, such exploitation would be tremendously curtailed by not only the psychic impact of exploiting someone you personally know, but also by the social sanctions that would come with being less than charitable towards someone who finds themselves in a desperate situation.
Quasibill: You're right. For space considerations, I took the statement at face value on the assumption that exploitation=injustice–ignoring the possibility that a given act might be exploitative or "unfair," but not unjust in the sense of being actionable. In the same spirit as the pieces Roderick links, I addressed the issue in a bit more nuanced form in the Appendix to ch. 11 of OT.
Gary: Your critique of Stossel was one of the things that put me on his trail.
Roderick: Your reference to "friction phenomenon" is ironic, because some of the Austrian critics of the value theory section of MPE argued that all the frictional deviations from the law of cost were sufficient to make it meaningless. JNS (he whose full name may not be uttered) made a similar critique in that godawful flame war last December.
But the cases are not exactly parallel. I would argue that when the friction is natural or spontaneous, it's just a disruption of the natural tendency of prices to move *toward* cost, regardless of how much they're deviating from it at any given moment. OTOH, the frictional deviations from non-exploitative, positive-sum exchanges in today's corporatist economy are not only predominant in a quantitative sense, but are also qualitatively mostly artificial and permanent. So if the frictional exceptions to the classical law of cost are sufficient to make it irrelevant, then a fortiori the state capitalism we live under should be regarded as having its character determined by all those "exceptions."
Frankly, I don't even think that the idea that everyone involved inherently benefits from a free exchange is strictly true even in genuinely free market conditions when one looks at it in more general normative/moral terms or interprets the claim as perpetuating the myth of the homo economicus. The fact that I make an economic exchange does not necessarily accurately represent my values, it could very well just be a submission to my circumstances or options. And it certainly doesn't necessarily mean that I benefit in any objective sense or in terms of long-term rational self-interest (contrasted with a purely psychological egoist sense of self-interest). Relative to certain norms, a given exchange could be evaluated as foolish or a swindle.
This discussion brings to mind Michael Munger's recent post on 'euvoluntary exchange'.
This made my day.
That link touches on part of what I was talking about, but not completely. The sense in which it relates is that it talks about situations in which not buying would cause death or great harm, and hence it could be said that one is being exploited by someone that takes advantage of your vulnerable position in the name of making an exorbitant amount of money off of it.
But there are other senses in which I'm making the claim that a free market scenario doesn't necessarily mean that all exchanges are benificial. For example, I think that I can be justified in evaluating someone's consumer habits as being wasteful or silly. Someone that stockpiles on tickle-me-elmos, for example. But there's another issue. Even if what someone is buying doesn't seem silly, and even if not making the exchange wouldn't result in death or gross harm, I'd still want to say that some exchanges are just plain swindles.
Im basically thinking that the bargaining power can be tipped in favor of the seller in a way that lets them get away with fleecing people up to a certain point. I don't think it's quite true that free markets function as a consumer democracy, accurately representing the consumer's demand. Other than the fact that there's Say's law that supply creates its own demand, in the given circumstances or social context the supply that just so happens to be available kind of determines what choices you have regardless of your specific demand.
None of this is meant to be an arguement that we shouldn't have a free markets, but it's against the sort of extreme psychological egoism that refuses to apply any normative standards to economic life and mythologizes market interactions as inherently utility-maximizing. What I would take issue with is a purely amoralist economic perspective that doesn't square with reality. I certainly am not accusing anyone here, including Carson, of taking such a perspective, but I just think that such economic statements really have to be qualified in a broader analysis.
When I say that an exchange is beneficial to both parties, I simply mean that they see themselves–given the alternatives–better off making it than not. In the case of exploitation, the seller acts like a monopolist differentiating prices on the basis of ability to pay, so that he can provide the bare minimum of benefit necessary to bring the other party to the table. But the very fact of being able to target price just below utility to the buyer, rather than competing on the basis of production cost, is a characteristic of monopoly.
I understand that you're speaking in an economic context. I'm speaking from a moralizing perspective. I don't see the two as mutually exclusive, just different aspects. It could be that someone sees themselves as better off making the exchange than not while still being exploited.
Ah, I see. I was going by "benefit" on the basis of revealed preference. But I'm quite prone myself to moralistic judgment of what I regard as utterly dumbass consumer decisions (like paying an enormous brand-name markup for otherwise virtually identical goods just because of the logo, taking on forty-year mortgages whose monthly payments you can just barely make, etc. And don't even get me started on the bubblegum pop the kids listen to nowadays.). Someone may serve his subjective preference by doing something, and still be a damned idjit for doing it.
Idiocy isn’t the only factor here, right? To take an example from Germain Grisez: suppose that, while driving, I break down in a very scary neighborhood; a burly, well-armed tow-truck driver from out of the area, who has very little fear, comes by, notices my plight, and offers to tow me away for, say, three times what he’d ordinarily charge. I don’t think I should have any legal claim against him for doing so; but it seems to me that it’s possible that, if our roles were reversed, he would resent being charged what he's charging me, and, if it’s true that he would, then it seems as if he’s being unreasonable in charging me as he is, and, in this case, I’d find “exploitation” a not unreasonable term for what he’s done.
Gary, I realize that you were using an example, and I understand what you were getting at with it; but I have something to add to the concept.
If your fear of harm was legitimate — i.e., it was actually a rough neighborhood, and your chances of coming to harm were substantially greater than usual, and not simply perceived — then I would say that the burly tow-truck driver was not only providing a tow, but (at least implied) protection.
He has burliness, mobility, weaponry, and a local reputation; and it seems to me that he's offering those things as part of the "tow package." If you don't want to pay the fee, and will risk the neighborhood alone, then that's a choice.
If the example is meant to imply that the tow-truck driver is somehow threatening, that is, he's "making an offer you can't refuse," then that's a different story. But, if he is kindly, and simply offering to be a guardian as well as a tower, and pricing accordingly, I don't see how that would be inherently exploitative.
If the tow-truck driver is part of the reason that the neighborhood is scary, then of course it's exploitative. If he is simply a good person living in a bad place, then I don't see that it is so.
As an example, of course it's not perfect, but I think the situationally increased pricing doesn't lose all of its economic aspect in the presence of emotional distress — especially since the tow-truck driver is assuming some additional risk himself.
Gary's example is something I'd consider exploitation, even if not in a legal context. I'm basically defining exploitation as "taking advantage of someone else's negative circumstances in order to make an exhorbitant gain or exersize power over them". The person doesn't want to help you, they're basically exploiting a power disparity to benefit themself.
make that: “very little to fear”
I agree with your definition in essence, Brainpolice. I was getting more at the "what is exorbitant?" In other words, while three times normal fee might count as such; what about a 10% surcharge, for example. What might be the best way for a third-party — or us, in this case — to decide that? Is it possible for a third-party to decidedly determine that, or is it more along the lines of, "Hey, come on, that's a bit extreme"?
Well, I don't think that it really requires a quantitative standard where we establish some sort of official number (I feel similarly about the issue of occ/use and abandonment, I.E. framing the question as "what quantity do we codify and who does it?" kind of misses the meat of the matter). It really is more contingent on the qualitative context of the situation. I just think that in general ethical terms it is reasonable for us go "hey, that seems messed up".
I completely agree about this, Oroboros. Indeed, I think that's one reason not to involve the legal system here. Obviously, more flexible non-violent responses may be appropriate in some cases, but I don't think any general standards will be available for this purpose.
Gary, I was thinking about the "that's kinda messed up" angle — especially sans legal system — and it seems, even today, that that type of social feedback and consequence is alive and well.
Ratings about pricing, service; emotional intangibles such as "atmosphere," and "friendliness" abound online. Almost every product and service imaginable has ratings and reviews associated with it—instantly—for anyone who cares to look.
In the tow-truck example (assuming the tow-truck was branded or the driver was named) the person who was provided services would have access to a potential audience of billions, that he or she could communicate with instantaneously via Internet-capable phone; or shortly thereafter via normal computer.
As the price and availability of such devices continues to drop, even people otherwise disadvantaged will have the ability to make their experiences known—to proclaim to the world, "hey, this is messed up!"
It may not allow the person to recoup fees or make claim against the unethical provider; but it most certainly reduces the likelihood of such actions occurring again to themselves or others.
Hell, we're in an age (or extremely near it) where a phone could take an image of the tow-truck's branding, and instantly bring up all manner of information regarding its reliability, pricing, ethics, and so on. Certainly this can already be done manually via search. It may not be a comfort between a rock and a hard place, but it can at least provide an extra layer of awareness—be it useful for negotiation, decision, or otherwise.
Oroboros, I agree completely.
I don’t know that I’m overly interested in a standard a third party could operationalize. My question here is: does the driver believe he would resent the charge were roles reversed? If he would, then it seems unreasonable for him to subject me to the charge. I’m not worried about finding an objective measure here, because I don’t think there is one; I just want to know if the driver is behaving reasonably.
Thanks for the clarification, Gary and BP. I’m not interested in an “Official Number,” either.
I like your role-reversal concept, Gary, I think that gives at least the actor a handy ethical guideline — of course, as it’s basically a form of “Do unto others…”
I just wanted to be sure that we weren’t discussing a third-party standard of some kind, beyond “hey, that seems messed up,” which has very nicely flexible social consequences integral to it. “Watch out if you work with X, they’re kinda messed up.”
Gary Chartier's comment reminds me of a 19th century cartoon in the British magazine Punch, from a period when there was a spate – or perceived spate – of robberies by razor wielding thugs. It shows a gloomy street, with a large ruffianly type leaning over a much smaller clerk, showing him an open cut-throat razor and saying "Would you like to buy a razor?"
"When I say that an exchange is beneficial to both parties, I simply mean that they see themselves–given the alternatives–better off making it than not."
Perhaps we need another way of expressing this? It's situationally beneficial, perhaps systemically beneficial (as in good in the system given), but need not be contextually beneficial? I'm thinking about myself buying clothes for work – the purchase of shoes from a retailer may be "beneficial" to me in that I'm better off making the purchase than not, but in the broader context it is yet another outlay of cash I need to make to keep my job. The common argument, "just get another job" is bullshit because those jobs that allow you to maintain earnings given one's work history while being satisfied generally are pretty damn hard to come by.
As for mutual benefit in free markets, if anyone has seen the movie Jean de Florette you have a situation in which essentially free exchange is going on – two neighboring farmers in the middle of nowhere essentially unencumbered by outside interactions. One farmer comes from the city and doesn't know what he is doing and tries to apply "science" and what he learned from books. The other farmer knows the region, and that the city farmer's plot has a hidden spring – and the country farmer wants the city farmer's spring.
Knowing that the city farmer will eventually kill his farm, the country farmer helps him along his path. These exchanges are all free – in fact, most are truly free; the country farmer lets the city farmer borrow his plow and even helps him plow his field. Every transaction along the way for the city farmer is willingly entered into, and in short order benefits him, but in the long haul it is his downfall.
It seems that these sorts of transactions would still take place in a truly free market, and even if eventually other people discover (through customer reviews, word of mouth, etc,) that the one farmer is a crook, the damage has already been done to the people who provide the negative reviews.
Non-mutually beneficial interactions will occur in all systems, it is just that in a truly free market they would be less.
Gary, your question of whether the dominant party would resent a transaction were the positions reversed is as good a standard as any I've seen for identifying a situation that's unfair but not formally unjust.
SPBS: It seems to me that systematically beneficial transactions, in the sense of goods we buy that are not desired in themselves but as a precondition for an overall good, are a major part of the total. But achieving less arbitrary and one-sided systematic conditions is an end in itself.
SPBS, I haven't seen the movie, so I'm basing this on your outline; but isn't the Country farmer taking a risk that the City farmer might actually succeed? In the movie, does the Country farmer give the City farmer bad advice, etc., in order to intentionally foment his eventual failure?
In other words, why is the Country farmer helping the City farmer? Is it so the City farmer will sell the desirable plot to him cheaply, or simply give it to him due to his help and friendship?
If the Country farmer is not lying to and deceiving the City farmer, but simply trying to get on his good side, isn't that net beneficial to both? If the City farmer fails legitimately, then the Country farmer gets a good deal on the plot, and the City farmer moves on, maybe having failed more slowly (and thus was able to eat and live where he wanted to, for a longer time) than he otherwise would have.
But, if he finds a better agri-science book or is a fast learner, he may end up being successful, and the Country farmer could even partner with him, etc.
Not having seen the movie, I'm not really sure what the dynamic is. But, it seems to me that at a certain level savvy will remain imperative. While a freed market may have much less coercion, manipulation, etc. — I don't think caveat emptor is ever going to become unnecessary.
I tend to place importance on both sides of that equation, as more buyer awareness almost always leads to better seller behavior, on the whole. But better seller behavior should not, in turn, lead to lower buyer awareness; even though it often does. But in a freed market I think it would be self-correcting, because anyone taking advantage of buyer's lowered guards would create a resurgence in buyer awareness; rinse, repeat.