Euvoluntary Exchange and the “Closer to Perfection” Fallacy

The most recent episode of EconTalk features fan-favorite guest Mike Munger of Duke University.  His goal here is ambitious: to “build a bridge between philosophers and economists”.  The question: why is it that some types of voluntary transactions are seen as repugnant and made illegal, even though all parties to the transaction are made better off and enter into the transaction voluntarily?  The question (a special case, at least) is also asked another way: Why does it happen that it is legal to provide certain goods or services, but not to charge what they are worth?  Examples include organ sales, blackmail, “price-gouging”, and various aspects of low-cost labor.  (I should point out that Prof. Munger does not claim here to establish what the laws “should be”, just to better understand the reasons for some laws and social norms that seem counterproductive from an economist’s standpoint, and why they persist despite undesirable unintended consequences.)

Also, some insight into German beer festivals.

(If you’ve never listened to EconTalk before, you might want to check out some of Mike Munger’s previous appearances on EconTalk first.  If you’re already listening to the current episode and liking it, you’ll surely want to hear more from him.)

Now, the key ingredient in his analysis here is something called BATNA (best alternative to a negotiated agreement), which is used here as a way of economically quantifying imbalances of power.  (Overly simplified and blatant example: If you are lost in a vast desert and I drive up in my desertmobile, offering to sell you water.  My best alternative to selling you water is to drive away and sell it somewhere else.  Your best alternative may very well be to drop dead.  Consequently I can charge you very high amounts of money, and we’re both better off than if we had made no deal, but there is something repugnant about my behavior.)  He’s probably on to something, but the conversation left me thinking about something rather different.

There is a very common fallacy in human thinking about rules and making rules, about how our views of morality and our preferences inform our lawmaking decisions.  At least, I think it’s common, if not pervasive.  It’s not one that I have seen on the “standard” lists of fallacies (such as this one), so let’s call it “Closer to Perfection” fallacy.  (Those of you who like your fallacies and rhetorical terminology in Latin, knock yourselves out.)

Closer to Perfection Fallacy.  If a certain phenomenon would not occur in an “ideal” world, making that phenomenon illegal or impossible can only make the world more like the ideal.

Example. In an ideal world, people with water would seek out people lost in the desert to give them water free of charge, out of mercy, and there would be no need for you to buy my water for $1000.  Consequently, it should be illegal for me to sell it to you.

I believe that many of us are prone to make this mistake, and that it says a lot about why genuine and well-meaning people can do so much damage when attempting to legislate morality.  What do you think?  Does this, or something like it, already have a name?



9 Responses to Euvoluntary Exchange and the “Closer to Perfection” Fallacy

  1. Un says:

    Socialism- Where well meaning people want to spend other people’s money or restrict how other people use THEIR property.
    Free market- Where all parties to a transaction aware of all the fact can make an informed decision.
    Of course only a jerk would not provide water to someone desperate for it. However, when you legislate behavior, you interrupt the free market. Example- Price fixing will only create black markets and shortages.

  2. n8chz says:

    In an ideal world people wouldn’t get lost in the first place. You seem to want to dismiss anyone who disagrees with your laissez-faire dogma as cloud cuckoos or idealists or utopians. People accuse me all the time of being a utopian, but I’d gladly settle for a world in which nice guys finish second last.

    FWIW, I have no ambition to legislate anything, period. All I would like to see from people fortunate enough to be blessed with relatively painless BATNA dilemmas is to check their privilege. Even that I consider voluntary.

    • Cap Khoury says:

      First of all, I don’t subscribe to a laissez-faire dogma by any means. I’m for legislation of various kinds, I’m against legislation of various other kinds, and which is which is not really what this post is about. Certainly both the host of the program I linked to and the guest take a much more laissez-faire stance on most things than I would. (It’s much less clear, though, that they hold this stance dogmatically, but again, that’s not really what this post is about.)

      And I don’t want to dismiss any positions about legislation or anything else here. I want to dismiss certain types of argument. If someone says, explicitly or implicitly, “I’m for legislation to ban X because in a perfect world, there would be no X.”, well then that’s a bad argument. That’s not a good reason. Maybe we should ban X and maybe we shouldn’t, and figuring that out is probably hard, but that’s not the kind of argument that helps us make a good decision.

      I may be wrong (I hope I am), but it seems to me that we as a society are not very good at asking ourself what kinds of rules, laws, social norms, etc. we should have and why. We don’t seem to be very good at have intelligent conversations about this. Often, people with different ideological positions are each unable and/or unwilling to understand why the other might believe and feel the things he believes and feels. Any idea or insight that illuminates any part of why some groups of people hold certain preferences or positions, I feel, is in service of a good cause.

      Here’s my utopian vision: a world where we try to figure out what kind of society we actually want and what kinds of problems we want to solve, and where we actually think about what form of legislation or lack thereof, what kind of social norms, what kinds of institutions would lead to those ends. Not just what has a good sound byte.

      Thank you for the comment, and for the opportunity to clarify what my main points and purpose actually are. Apparently the post was easier to misinterpret than I’d have liked.

      And FWIW, I agree with every word of your second paragraph.

  3. UU says:

    My utopian vision – Where everyone who CAN carries their own weight.
    If those who CAN carry their own weight, their are plenty of resources to help those who CAN’T. Unfortunately, we have too many people who WON’T mooching off those who CAN (and DO), in effect robbing those who CAN’T.

    Laissez-faire is more equitable and effective than the corruption of interventionists (legislators) who think they can make better decisions with your money than you can.

    • n8chz says:

      I guess my utopian vision is where everyone CAN carry their own weight; in other words, carrying one’s own weight is a right rather than a privilege. In theory, people earn their keep by working, while in practice people get to earn their keep by selling themselves. Production, not promotion, creates the food in our bellies. I see the latter as a kind of overhead. The actually useful work necessary to supplying our needs and wants is smaller than the amount of existing work, which itself is smaller than the workforce (as evidenced by the existence of involuntary unemployment). Why not spread it around via shorter work week, earlier retirement, more vacation time, etc.? Fewer people excluded from carrying their own weight, and less salesiness and other overhead that actually is parasitic.

      Concerning the “carrying one’s weight” metaphor, and linking it to the original topic of euvoluntary exchange: One might say that one form of dysvoluntary (non-euvoluntary) exchange is when one “outweighs” the work opportunities on offer. Perhaps the laissez-faire take on that is that anyone in that situation is fat and/or lazy. In any case, your idea of utopia sounds like my idea of dystopia.

  4. UU says:

    Are your the grasshopper, or the ant?
    Carrying your own weight is a responsibility, a right and a choice. Not carrying your own weight to the best of your ability (yes, we are unequal in this regard) is also a right and a choice.
    On balance, people are usually promoted (any paid more) because they are more productive.
    If someone chooses to work the longer hours or aspire for more, they should be rewarded for it. Those who work less and aspire for less should be compensated accordingly.
    Those grasshoppers who aspire to do less should not hold back (limit the number of work house) those who aspire to do more.
    They should not expect the ants to then surrender what they, the ants, have earned.
    I would not use “overhead” as a thoughtless slur, it is a necessary ingredient in every business, i.e., its no good to produce a product or service if you don’t sell it and get it to the customers.

    • n8chz says:

      Being promoted for being more productive is not the same thing as self-promotion. The latter is all about impressions, while the former has some objective basis.

  5. UU says:

    Self promotion, like a job reference, may get a prospect’s attention for awhile, but you need to produce. In the long run we know who is all talk and who produces. A good job resume is self promotion. Nothing wrong with that. It sells your skills.

    • n8chz says:

      One who self promotes but does not produce will, as you point out, be detected for what they are (after the waste of some amount of money, of course), while the reverse, one who fails at self promotion but actually is productive, goes undetected. Maybe this fits with your notion of fairness (for example, if you think failure to self promote is deserving of contempt) but the inefficiencies are inescapable.

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