Wednesday, November 30, 2011

The Fairness of Free Markets

Walter Williams tells us that:
in a society of voluntary relationships income is not “distributed”; it is earned—earned by individual efforts to please one’s fellow man. One person is not poor because another is rich. The fact that people earn income reflects the morality of free markets. It is their ability and willingness to please their fellow man that enables them to have a claim on the productive assets of the society.
Is this true? Let's consider a hypothetical voluntary relationship.

Suppose you are driving off the beaten path in Death Valley with your wife and child and your car breaks down. I pass by. I'm your only hope of survival. You need water and a ride. I've got both. But I want $10M of your future earnings in exchange. I've got a contract and you can choose to sign it or not. If you do, should it be enforced? If you sign it you do so in a state where you are perfectly lucid. You are rational. Should a court enforce this contract in a free market world and respect my property rights?

According to the law today this contract would be ruled unconscionable and declared unenforceable. One party took advantage of its position of superior bargaining power in order to craft a contract that is excessively unfair.

Reading Williams you'd think that the court's action is unfair. You can't have a court come in violate a freely agreed upon contract. I've earned the $10M in your future compensation. I helped my fellow man.

That's a pretty bizarre stance in my world and I doubt very much Williams really believes this. He uses this definition of fairness in his economic arguments, but does he use it in his home? Let's suppose he had two children and let's suppose they happened to be stranded in town and wouldn't get a ride for 8 hours. Child A is hungry and Child B has $20. Child B says that she'll give Child A $10 provided Child A licks her boots. Child A after a few hours is desperate enough and does so. What would Williams say to his children when he finally arrived to pick them up and Child A complained? Would he say "Good job. You both helped your fellow man. One was able to be fed and the other was able to be entertained. A mutually beneficially transaction. This is a just and right a system as could possibly be devised."

When right wingers start arguing about economics they'll defend boot licking and bum fights. The bum knows what's in his own best interest so he and another bum should be allowed to fight each other in hopes of gaining meager compensation. I doubt very much these right wingers would say the same to their children that received boot licking for modest compensation. I bet they'd be outraged. I bet they'd say that their children should feed these hungry people rather than demand that they humiliate themselves.

But that all changes when they enter a blog comment section and start arguing.


Sheldon said...

YOu may be interested in a series of posts on another blog I follow. See the 3 part series on Is the wealth of the the rich legitimate?

Jon said...

Those were great Sheldon. Thanks for the link. I'll have to follow that blog.

HispanicPundit said...

I'm curious Jon: Do you support legalizing drugs? Prostitution?

If so, then would it follow that you would be pleased to see your kids doing heroin or pursuing a job as a prostitute?

If not, then you can start to see the right wing response to your post.

Jon said...

I don't support total legalization of drugs or prostitution.

Suppose a man finds a woman broken down in the desert and says he'll give her the ride if she'll be his sex slave for life. I don't think that should be legal. Do you?

HispanicPundit said...

I don't think you can make "for life" agreements. So no. For example, I know somebody who used to work for a company that upon being hired, you had to sign a contract that stated that upon termination, voluntary or forced, you would never work for a competitor in the future. That's BS.

The ideal capitalist scenario is completely free movement of mobility. No immigration restrictions. No forced labor. No nothing but what you decide today, now.

I bet most capitalists would agree with this. Even Walter Williams, Sowell, etc. So I see this as another example where you dont truly understand the right.

Jon said...

No "for life" agreements. No nothing but what people decide today, now.

So suppose I were to offer $1 million to someone to cut my grass for life. Whenever it's long, this person must cut it. I make an exception if he has a physical condition that prevents him. That's an unenforceable contract in your view. You think Sowell and Williams would agree with you.

People even today write up contracts and pay up front for services to be provided over some length of time. Like I could pay $200K for someone to build a house. That's a 2 month job. That's enforceable, as is lifetime grass cutting.