Wednesday, April 3, 2013

Mark it Zero!

I hustle wares in ideas because I have neither acumen nor facility for truck, barter, or exchange in goods. But let's imagine for a moment that on one of my annual Indonesian monsoon-season golfing trips I line up a fairway shot and get struck by lightning at the exact same moment as I get hit on the noggin by a falling, perhaps intentionally hurled coconut. When I wake from my coma, I'm addled enough to imagine I should be in the business of selling silver-plated bathtub fartbubble catchers.

So that's just what I do. I light out from the hospital, gown flapping in the breeze, bandages trailing from my head, off to the bank with my ad hoc business plan, a spring in my limp, and a gleam in my one working eye. Lo and behold, the loan manager has also recently suffered severe cranial trauma and is willing to advance me a loan sufficiently large enough to open shop. So that's exactly what I do. Trouble is, my neurological damage hasn't granted me any clairvoyance into the art of selling nor has it helped conjure the savvy I need to avoid the scorn of the community. Indeed, in my wisdom, I find that we have an eminently exploitable market opportunity. I don't know if you've noticed this or not, but there aren't a lot of stores open between the hours of 6 and 11 AM on Sundays. Just think of all the business I could get if I were the only shop open at that time. Furthermore, my market research has shown that Camper Van Beethoven was on to something and I prominently display a sign that reads "bowling skinheads welcome."

Now, my sole proprietorship might be (literally) brain-damaged in its stupidity, but is it not euvoluntary? My customers aren't coerced by agency or situation, the product I'm offering isn't all that addictive, and unless something very untoward is going on, my wares shouldn't be used as a component in home weapons manufacture.

How about if I invoked the vendor's right to refuse service to anyone who wasn't a skinhead bowler? Not even the very close Walter Sobchak would qualify for an exchange of cash for tub bauble. Would that still be euvoluntary? If not, why not? I think we all share an intuition that commercial transactions should be anonymous and impersonal, which is to say that it rubs us the wrong way when sellers elect to indulge certain kinds of discrimination. It's okay to offer a discount to kids and retirees (which is isomorphic to charging a premium for working-age adults), it's okay for insurance companies to vary prices by residence location (which, de facto often travels closely with race, income and the like), but "no dogs or sailors" (which I actually saw with my own two peepers while I was still in the Navy), "no blacks or Irish", "Chinese not welcome" signage offend so deeply that grainy black and white images of these relics of distant racism still arouse sentiments of sad contempt.

But how do we disentangle market ethics from atavistic revulsion? My business plan is stupid, but it's not unethical in any meaningful sense. I'm internalizing the costs of my own stupidity: by refusing to sell items that people actually want to people who actually want them at a convenient time, I'm hurting myself. There's no uncompensated externality, no coercion, and the only regret is regret no one can reasonably lay proxy claim to. Are the arguments substantively different from the Elaine Huguenin case? Are the reasons that underpin a seller's decision to refrain from making an exchange relevant? If it's true that (eu)voluntary exchange is mutually beneficial, then irrational, taste-based discrimination on the part of sellers is already expensive. Opportunity cost is the value of the foregone transaction, people. Cost and Choice: read it (again and again) until you understand it.

And then there's high-information discrimination. A "No Ed Hardy" rule at a nightclub could be expected mitigate losses due to property damage just as surely as a smokers' premium for life insurance is recommended by actuarial tables. What if the "no dogs or sailors" sign above was an instance of this? How do we tell the difference? Is it not at least a little arrogant to presume that distant legislators can, from their offices in the capital, with their multiply conflicting constituencies and curiously-arrayed personal incentives hope to correctly second-guess the motives of business owners, to impose stentorian, false discipline on men and women of business? Bastiat's unseen is oceanic: not only do careless anti-discrimination statues rob people the opportunity of euvoluntary exchange by strangling infant firms in the cradle, but it enshadows bigotry, leaving crass, racist, sexist merchants to stew in their resentment rather than forcing them to accept the full cost of their intolerance as they watch their more welcoming competition flourish across the street.

Not everyone is cut out to sell silver-plated bathtub fartbubble catchers. Weeding out who is and isn't up to the challenge cannot be the responsibility of people who have no incentive-compatible accountability. To do so is to promote moral dry rot. A liberal order is one disciplined and nourished by the sunlight of competition. Not all exchanges in a free market will be euvoluntary, but untoward meddling needlessly enshackles longitudinal meta-euvoluntarity. This is a high price to pay to soothe the brow of short-sighted social planners.

So it's obvious I'm no good at running a shop in a strip mall. Maybe I'm better off sticking to what I know: economic recipes. Here's a perennial favorite.

The "Barbarism to Opulence" aka "The Craggy Scotsman"

(1) Peace
(2) Easy taxes
(3) Tolerable administration of justice

In a Collins glass,
Pour one part each peace and easy taxes over capital mobility, fill with a tolerable administration of justice. Garnish with the free movement of labor.

Serves one sovereignty*

*availability limited, check local listings.

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