Voluntary economic transactions between consenting parties are very resistant to criticizm. If I am rational and well-informed then I will only agree to a transaction if it makes me better off. The same goes for the other party. The exchange is mutually beneficial, so what can be wrong with that? Well, a lot of things:

  1. The assumption that I am rational is not true much, perhaps even most, of the time. Buying something unhealthy because I am too impatient/tired/hungry to cook something for myself is an example. The trade of cigaretts or opioids is often another.

  2. Same for assuming that I am well-informed. Maybe I don’t want to buy a product that was created by harming animals, but I simply don’t know about every product I need to avoid. Maybe I don’t know about the manufacturing defect in the bike I’m about to buy. Maybe I’m too credulous in looking at ads that promise me that some skin-care routine will really make me age slower. I think that a lot of the consumer economy runs on information asymetries.

  3. Entering the transaction might be mutually beneficial locally, while beingbad for me and the other party over all (I’m thinking of prisoner’s dilema like situations). I feel like this is a thing that’s relevant enough to mention, but I don’t have a good handle on it in the “What’s bad about a single transaction?” context.

  4. Even if we grant that the exchange is mutually beneficial to both parties, there might still be negative effects on someone else. If I hired a lawyer to harass someone I don’t like, this would be bad, even if both my lawyer and myself would be better-off (for some suitable sense of the term).

  5. There may be a power imbalance between the parties. This would be the case if someone is selling their kidney or working in a sweatshop to survive. Or if someone is working multiple jobs or in harsh conditions to pay rent (Amazon Logistics comes to mind1).

Mike Munger went on EconTalk and argued that there is a moral issue if a transaction is voluntary but not euvoluntary. A transaction is not euvoluntary if the disparity between BATNAs is to high. And BATNA means “best alternative to negotiated agreement”. Thank you bearing with me; let me illustrate what this. Let’s consider an example that Munger gave on the show: Imagine you’re stranded in a desert with your wallet. In the distance, there you can see a van. You walk up – it turns out it’s a food truck. You haven’t had anything to drink in the last 12 hours. The truck owner is selling water, but charging 500 € per bottle. What Munger now asks us to compare are the alternative both you and the truk owner have to exchanging 500 € for a bottle of water. The truk owner has nothing to worry about. He can either wait for someone else to come along, or drive to a town and still earn a sizable profit2. You, on the other hand, rely on the transaction for your survival. Your BATNA is death. This extreme difference in BATNAs means that the transaction is voluntary, but not euvoluntary. It is therefore morally objectionable, in the sense that it taking place makes the world worse.

So should we try to eliminate all transactions that are not euvoluntary? Yes, but carefully. If we simply made it illegal to sell water at very high prices, then there would be no food trucks in the desert and people who get lost there would die of starvation. Instead we should aim to create a world in which people don’t need to buy water for 500 € or sell their kidneys to afford food3.

Okay, maybe the opposite argument is true then. If I agree to a transaction non-euvoluntarily, this must mean that I am in a world where my BATNA is very bad. So while we should seek to implement policies that improve my BATNA, we should never ban the transaction itself directly. I think that this argument is basically correct, with two caveats. First, there might be other reasons to ban the transaction, unrelated to it not being euvoluntary. Maybe having people sell their kidneys is fine, but allowing kidney sales would also create a black market for drugging people and stealing their kidneys wich we want to avoid. Second, baning the transaction could at the same time improve someone’s BATNA. This case could be made for having a minimum wage: By making it illegal to employ people for less than X € per hour, we don’t condemn people to unemployment, but improve their BATNA to “working at a place that pays X € per hour”4.

  1. This blog is hosted on AWS. Life is hard. ↩

  2. Food truck owners, at least the couple I’ve talked to, make a lot. ↩

  3. Or at least we should make sure that nobody wanders off into the desert without water by accident. Restricting people’s choices so taht they are always safe sounds bad. ↩

  4. Minimum wage policy sounds complicated. I don’t know much about it. This is merely a thought experiment, not a real argument. Maybe a minimum wage will make a company go broke, or incentivize them to automate their workforce away. ↩