Friday, October 7, 2011

Cap Khoury and Closer to Fine

Euvoluntary exchange and the "closer to perfection" fallacy.

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.)

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Do you have suggestions on where we could find more examples of this phenomenon?