Sunday, December 9, 2012

Euvoluntarism and Opportunity Cost

The key to whether an exchange is euvoluntary, as I argued in the Toby Davis lecture, is the answer to this question:  do both (all) parties have outside options that are (a) not too disparate, in a relative sense, and (b) not too desperate, in an absolute sense.

Then, one must consider that, even if an exchange is not euvoluntary, the implied unfairness of exchange is so large allowing the exchange would actually be unjust.  It often occurs that outlawing non-euvoluntary (unfair) exchange is even more unjust than allowing it.  So, for example, if I decide that sweatshops are unfair, and I order the sweatshops closed, I harm the people I am claiming to care about.  The act of closing the sweatshop imposes the very outside option (abject poverty, perhaps starvation) that made me decide the transaction was unfair in the first place.

The very smart Isaac Morehouse nails this idea on his own in a recent article in the Freeman.  He explicitly talks about things in terms of "opportunity cost," or the outside option.  Very cool example:  He needs a quarterback for his fantasy football team.  Knowing this, another "coach" with two quarterbacks is asked to trade one of those quarterbacks.

This is very much like Locke's "Captain with two anchors" example, by the way.  Very, very much like it!  Check it out...

Anyway, they negotiate a deal.  The deal is not good for Morehouse, in some objective sense, but it is MUCH better than no deal.  Both parties are satisfied with the deal.

But the league commissioner nixes the deal, saying it is unfair.  In effect, the league commissioner is making exactly the argument that the exchange is not euvoluntary.

Is that cool, or what?

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

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