Gravediggers Gouging?

So, there was a heat wave in Pakistan, and 750 people died.  That's terrible.  Many were desperately poor, and for a heat wave to be a problem in Pakistan, it has to be hot.

And it was hot:  45 degrees Celsius.  That's 113 degrees Fahrenheit.  Or a "Real Feel," if you can trust that, of about 140 F.  More than uncomfortably hot, in other words.  Dangerous.

Well....the folks were trying to get their family members buried.  Again, terrible.  I can't imagine how awful that would be.

But here's the thing, from EE perspective.  Consider this quote:

Some said those in Karachi couldn’t find cars to carry the coffins of their dead to the cemetery and even if they made it, gravediggers overcharged them. “I literally wept when I heard a poor man didn’t have money to pay to a grave digger,” opposition lawmaker Abdul Rashid Godil said.

 Hard to say just what happened.  Was it fraud, where the charge was higher after than agreed on before?  If so, why pay?

Was it "gouging"?  That is, did the price go up in the face of scarcity?  That's kind of a different thing.
"Opposition lawmakers" are not really very reliable, even if they "literally weep."  People who use "literally" like that make me weep, frankly.

But let's take it all at face value.  There is a huge number of bodies, more than usual.  It's really hot, with a Real Feel over 135.  Is it "overcharging" if the price goes up, for extremely hard physical labor?  Would you dig a grave for the usual price if the temperature was 113, and the person had died because it was so hot?  Or would you charge more?

GDP vs. EE, Macro Policy Edition

Macro is hard. Remaining circumspect while you're doing it is harder yet. The peer-reviewed theoretical literature (or at least the papers I'm familiar with) seems eerily divorced from the agents under scrutiny, and the empirical work is a glass crowbar: nice to look at, but when you try to use it to move stuff around, it has a tendency to break. Perhaps more frustrating for regular folks, the public debate is esoteric, weirdly partisan, and boring as all get-out (with the occasional exception for rap videos).

Macro policy itself is not an exchange in the same sense as buying a taco or swapping credit default risk. Instead, it influences the environment in which these exchanges are made. Stimulus programs are passed under the justification that the government spending will ignite consumer spending, taking some slack out of idle resources. FOMC transactions put more current assets into circulation, lowering interest rates, which reduces borrowing costs, which I suppose is meant to make investment decisions more attractive? I'm not entirely clear on this point. Firms that make decisions underpinned by cheap paper strike me as imprudent, much the same way that families buying more housing than they can reasonably afford are imprudent. Also, TANSTAAFL: cheap credit is an intertemporal transfer.

So that's some of the baggage I bring with me. I'm a phantomweight in the macro arena though, scarcely in the audience let alone in the debate itself. I have no dog in the fight, so to speak. I am interested in marginal euvoluntary exchange though. And I'm interested in pedestrian intuitions. I assume that my regular reader(s) are too, else you wouldn't waste your time by reading me.

So how about it then? Let's assume that there is a chunk of commerce that does occur because and only because of government spending. The DoT plops down $26B on road construction that wouldn't have otherwise happened. Or the DoE pushes $15B into "Efficiency and Renewable Energy, Recovery," funding that otherwise would have sat idle, rusting in a field somewhere while discouraged workers' human capital depreciates on the couch watching daytime TV. Let's just assume for the sake of argument that proponents are right and the Broken Window Fallacy does not apply with fallow resources. Are these exchanges euvoluntary?

Maybe this question is misguided. Maybe the right answer is "it depends." How would you approach the question? What's the role of time, of discovery, of risk, of opportunity? When do cyclical effects become structural? When does the short term become the long term? Most importantly, how are ordinary citizens supposed to keep track of these questions when they're alienated from the discussion by dint of education, inept reporting, and strident disagreement between even the top echelon experts in the subject?

When the rule of law is working well, it gives regular folks a bit of certainty in a chaotic world. Rules closely observed serve ordinary people in their ordinary lives. The abrogation thereof serves whom exactly?

Procrustean GDP pursuit may well be oversold. Caveat subfragator. These are important questions, don't hesitate to ask them.

Hume Had Many Leather-Bound Books and His Apartment Smelled of Rich Mahogony

From Essays, Part II, Essay I: Of Commerce:

May not the sovereign lay claim to [superfluous (unemployed) labor], and employ them in fleets and armies, to encrease the dominions of the state abroad, and spread its fame over distant nations? It is certain that the fewer desires and wants are found in the proprietors and labourers of land, the fewer hands do they employ; and consequently the superfluities of the land, instead of maintaining tradesmen and manufacturers, may support fleets and armies to a much greater extent, than were a great many arts are required to minister to the luxury of particular persons. Here therefore seems to be a kind of opposition between the greatness of the state and the happiness of the subject [emphasis SLW]. A state is never greater than when all its superfluous hands are employed in the service of the public. The ease and convenience of private persons require, that these hands should be employed in their service. The one can never be satisfied, but at the expense of the other. As the ambition of the sovereign must entrench on the luxury of individuals; so the luxury of individuals must diminish the force, and check the ambition of the sovereign.

Knowing this, if you were a sovereign, and you wanted to "encrease the dominions of the state abroad", you might be tempted to underwrite those policies that best produced superfluous labor among the classes most suited to service in the fleets and armies. To sell these policies to the median voter, found doubtless among the tradesmen and manufacturers, you might pivot your claim in the soil of non-euvoluntary exchange. Labor isn't euvoluntary; employers exploit workers by BATNA disparity ergo minimum wage legislation ergo low-skilled labor is unemployable in the private sector ergo we can boast an end strength of 1.3 million heads ergo political elites can wage endless wars around the world.

Before you punch me through your computer screen, I'm not saying that this is actually necessarily the story of political economy, but I am asking my readers to consider that there might be more to a story than just the simple cry of "exploitation" and a hastily scribbled statute aimed as a remedy. Mungo is part of an upcoming series on Bastiat that I heartily recommend for these very reasons. Earlier in the Essay I quote above, Hume makes a distinction between shallow and abstruse thinkers. When it comes to matters of commerce, it pays well to dive straight into the deep end.

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?