Tuesday, April 27, 2010

Does It Matter if Exchange is "Euvoluntary"?

Is exchange just? Does it matter if exchange is "euvoluntary"? I try to answer these and other questions, here.

Excerpt, with definition of euvoluntary:

Euvoluntary exchange requires (1) conventional ownership of items, services, or currency by both parties, (2) conventional capacity to transfer and assign this ownership to the other party, (3) the absence of regret, for both parties, after the exchange, in the sense that both receive value at least as great as was anticipated at the time of the agreement to exchange, (4) neither party is coerced, in the sense of being forced to exchange by threat, and (5) neither party is coerced in the alternative sense of being harmed by failing to exchange.

In the political world, “power” is measured by the capacity of one person or a group to impose his, or its, will on others through the threat of violence. That is the sense of “coercion” in number 4 above. 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. Let’s call this the “BATNA” for short.

Suppose I am considering buying a bottle of water. If I am in a grocery store, and notice that the price is $1,000 per bottle, I laugh and push my cart along. I’ll buy the water somewhere else, or get some from the tap, or choose any of many alternatives. I am almost indifferent, in fact, between buying water at Kroger or buying it at Food Lion, for the market price of $0.90. I have choices.

And, I have money, and we all agree that I own that money and can transfer, 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 won’t regret purchasing it, if I choose to do so. So the exchange is euvoluntary.

Now, let’s suppose instead that I am far out in the desert, and am dying of thirst. I happen to have quite a bit of cash on me, but I can’t 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”. 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?

It was not. The exchange violates part 5 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 paper is tentatively forthcoming in Social Philosophy and Policy, September 2011)

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