Wednesday, March 19, 2014

Is Euvoluntary Exchange Just?

I'm not quite finished abusing Aristotle just yet. (NE, Bk. V)
Of particular justice and that which is just in the corresponding sense, (A) one kind is that which is manifested in distributions of honour or money or the other things that fall to be divided among those who have a share in the constitution (for in these it is possible for one man to have a share either unequal or equal to that of another), and (B) one is that which plays a rectifying part in transactions between man and man. Of this there are two divisions; of transactions (1) some are voluntary and (2) others involuntary- voluntary such transactions as sale, purchase, loan for consumption, pledging, loan for use, depositing, letting (they are called voluntary because the origin of these transactions is voluntary), while of the involuntary (a) some are clandestine, such as theft, adultery, poisoning, procuring, enticement of slaves, assassination, false witness, and (b) others are violent, such as assault, imprisonment, murder, robbery with violence, mutilation, abuse, insult.
I reiterate, justice is near. When its pale, far-mode phantom ascends, we witness corruption like the Star Chamber, or the kangaroo courts of the French Revolution, or the hideous social engineering shoggoths of Mao's Great Leap Forward, Stalin's purges, and Hitler's bloody eugenics rampage. Trials by jury, the due process of law, constitutional protections against unwarranted search and seizure... these are all defensible using consequential reasoning, but all of the judicial review imposed by the US Constitution serves as a reminder that Aristotle was right: justice requires context.

So how can euvoluntary exchange be just? Modern market exchange lacks context. When I go to the store and buy footie pajamas and hot cocoa mix, I know nothing of the vendor beyond the goods she offers and the price she offers them at. I don't know if she's kind to children and animals. I don't know if she's pious or profane, humble or hubristic, sunny or sour. In short, I make a judgement-free decision whether or not our exchange benefits me, and rely on her logic of exchange to decide if the exchange benefits her. Is this not vulgar?

It is not. The rules governing exchange that constitute a market order meet the conditions of virtue-preserving federalism.

Consider that a playground version of the Lex Mercatoria is just such an institution. There are rigid rules governing all trade (no takesies-backsies, rules of adverse possession, etc.), and there are local governing institutions. Don't believe me? As an itinerant child, I can assure you that if you brought the specific terms of trade from one schoolyard to the next, you'd find yourself excluded from the Lunchables secondary market. But also, the constant of "snitches get stitches" varies (or it did when I was a kid) by the barest whisper o'er the land. There is indeed a hierarchy of rules. And that's just as true for the real Lex Mercatoria as it is for the ersatz childhood version.

And when it comes to the local customs having primary authority, there's a reason that "when in Rome, do as the Romans" remains a useful cliche: folks who refuse to hew to local customs find it impossible to strike contracts. Just try running an im/ex business in Korea without dealing with the chaebol system. Contracts require offer and acceptance. The meeting-of-the-minds aspect of agreements means that you play ball or you go home.

A common moral identity? Ask Avner Greif about "impersonal exchange" and how it is in a modern market order, it just doesn't matter if my vendor is pious or profane, humble or hubristic, sunny or sour. High-trust societies with thick, functioning markets insist on at least a modicum of dignity for all. In a market society, it's completely normal to expect someone to discharge the obligations of a contract with no quibbling. The common moral identity of modern market participants is to honor contracts at a minimum to the letter, and if you're lucky, then the spirit as well. This approach is quite novel in human history. Clannishness rules human behavior. Overcoming that, or at least re-channeling it, is a remarkable feat.

As for the last one, the inability of local markets to rewrite the moral order, this is the one ordinary people have to be truly vigilant against. Inhabitants of the first and second estates have an incentive to improve the relative status of their houses against the third. This is particularly worrying when the third estate is growing rapidly (to the clear benefit of everyone qua consumer). Beware especially Helen Lovejoy political kayfabe.

Markets act as an organization preserving justice, just as good political organizations act to preserve the integrity of markets. That is, unless mischief is afoot. Euvoluntary exchange is both just and available when markets are available and have integrity. When that's not the case, the upper bound on the ability for people to serve each other voluntarily shrinks. Fair warning.

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