Saturday, November 23, 2013

Euvoluntary Entrepreneurship, Political and Otherwise

Imagine yourself a small craftsman in romantic little Tolkien-esque Renaissance England. Suppose you’re trucking your wares through the countryside along the only viable route. You happen upon a small hamlet midday, when you’re stopped by a guard. “Are these goods bound for market?” asks the guard.

“In the next village,” you reply.

“Well, then, there’s a tariff,” he says in a tired monotone. You fork over two silver pieces and are happily on your way.

What did you just buy? Was it a moral transaction? Was it euvoluntary? Most of the time, we render unto Caesar without question. Though we may grumble, we do not question. It is one of the only certainties in life, after all.

Fast forward a few hundred years. Now, suppose you have spent a few weekends building an excellent platform to pivot online customers for you niche product. Or something. I’m an economist, not an MBA.

Point is, you’ve got a working website that can make money, but you don’t know where the customers are. I offer to buy the website from you, and we agree on what we both think is a fair price, say a few thousand dollars. The website isn’t worth much to you without marketing, and my time is better spent marketing than building websites. A good trade.

Then you find out I’ve sold the website to another investor for over $10 grand. You’re livid.

At what point was the original transaction non-euvoluntary?

TGM can lecture you on the importance of middle men. They connect those with surplus to those with want. They move goods, and provide a service. In both of the previous examples, a bottleneck in the movement of goods has caused someone to profit. In the first case, there is no sentimental ire, but in the second there is no dearth of it.

In fact, one might argue that in the first case, the case we accept without indignation, there was no to little service rendered. Some enterprising bandit settled on a nice opportunity to extract wealth from travelers. A few farms and taverns grow up around him, and he’s legitimized as a mayor. Mayors can tax, and merchants pay. While you’re in his walls, you’re protected. He may even maintain his portion of the road. He could have picked somewhere else to settle down, but chose a choke point on a well-traveled road. It was strategic.

No less strategic was my purchase of your product for resale. The product found it’s way to the person who could best use it, and I made money along the way. When did I harm you?

I don’t have answers, friends, merely observations and conversation-starters. I’ll leave you with one more observation: the first example typically rankles libertarians, while the latter rankles Marxists. Curious.

1 comment:

  1. In the first case information is destroyed. In the second case information is created. The information creation that comes from speculation and middleman behavior benefits neither the buyer nor the seller, but other potential buyers and sellers, and producers, etc. It is a positive externality. The taxation does not create new information. Instead it destroys or at least impedes information. It confounds the price mechanism. It makes it harder for *other* buyers and sellers to know what the true relative price ratios are.


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