Economics, Consequentialism

Morality and Market Process

I’m not sure others will find this argument persuasive. But one argument for the morality of markets goes like this:

A. It is wrong to use something someone else values more.

B.  But theft is also wrong, even if the thief values the object more than the current owner.

Prices give a signal that someone else values the item more, solving (partially) problem A.

And then the possibility of exchange means that markets can solve problem B, since  there are bargains where both parties are better off, but the person who values the item more ends up with it.

A happy consequence of this system is that we can never run out of anything where property rights are specified clearly and prices are allowed to adjust to reflect scarcity and signal the fact that other people value an item more than the current owner.

Or…so I claim, here.

Published on:
Author: Mike Munger
  • Koen Swinkels

    “Prices give a signal that someone else values the item more”

    This would only work if the degree to which you value something is equal to or limited by the price you are willing and *able* to pay.

    • Christopher Ritchie

      This gets to one quality which makes this argument wrong. Price mechanisms in what are generally called ‘Free Markets’ are not keyed to how people value things. They are keyed more or less strongly to the needs of those already in dominant positions in the system. The relative value any person or group of people place on something impacts the price mechanic by how well they are able to pay.

      It’s also not clear to me that B is true. If a proviso regarding survival was added it might be clearer, but even than it has a host of underlying presumptions behind it regarding the ‘rightness’ of property relationships I don’t think hold up.

      • Lacunaria

        You seem to only be looking at demand.

        “Dominant positions” in a free market are determined by who produces the most value, and with competition, the cost of production plays a larger role than how much consumers are able to pay for a product.

        Without (B) and property we don’t even have an effective pricing system for determining value. So, (A) depends upon (B).

        I think that survival tempers punishment for violating (B), but I’m not sure that makes it an exception to (B), at least not in practice since true crises of survival are rare and are actually exacerbated by making exceptions to (B).

        • Christopher Ritchie

          The Most value for whom though? Which is to say your preposition doesn’t really hold up under examination. ‘Free’ Markets are always subject to the social forces that surround them. That is, after all, part of their function, to further legitimize the property and power of those in positions deemed important by those with power within the market. The interests of the majority, or a minority with high levels of capital, always outstrip the values and interests of minorities without capital. Why one person possesses capital and another doesn’t is a question you cannot escape.
          Value can be determined without property or a pricing system. Observe the word ‘priceless’. You may disagree with such social arrangements, but their existance also can’t really be ignored, especially given that the OP is suppose to be an argument about the morality of markets.

          I question B as stated because I don’t think ‘Theft is wrong’ is really a moral principal anyone holds. We all recognize instances where-in one person acquiring property from another that the other thinks is legitimately theirs is not immoral. Where that line is drawn is highly subjective, and what constitutes ‘legitimate’ ownership of property is also highly subjective.

          Which really comes down to my ultimate objection, I think, though perhaps others will suss out; What the OP is trying to say is that Markets are moral because they are the best way of arriving at a fair allocation of resources. I would hope all but the most naive idealist would recognize that is observably not the case.

          • Lacunaria

            The Most value for whom though?

            The most value for other producers. Subjective value is objectively measured by the trade-offs people make in how they use their property. This is the price system.

            In other words, everyone produces something and then we see who wants what and what they are willing to trade for it. That objectively determines value and productivity. Then people reevaluate what they want to produce and the cycle repeats itself.

            Why one person possesses capital and another doesn’t is a question you cannot escape.

            I agree, but I am not escaping that question, you are. My answer is that, in a free market, all things being equal, the most productive people will accumulate more capital.

            By contrast, you have avoided addressing how changes in capital tend to occur and have instead focused upon how it resists change.

            I’d agree with you that there is an inertial productive effect from having capital, but that is not the driving force of change. e.g. how does a rich person lose wealth or a poor person gain it? Why is such mobility and net growth more common in freer markets than other systems?

            Value can be determined without property or a pricing system. Observe the word ‘priceless’.

            How does the word “priceless” explain how value can be determined without property or a pricing system? All it does is assert an infinity point in free trade.

            In other words, “priceless” is still subjective. What is priceless to one person might have a price to another.

            You may disagree with such social arrangements, but their existence also can’t really be ignored, especially given that the OP is suppose to be an argument about the morality of markets.

            Of course, there are other social arrangements, it’s just not clear which one you are advocating so I can compare it to a free market.

            I question B as stated because I don’t think ‘Theft is wrong’ is really a moral principal anyone holds.

            At best, that statement lacks proportion — you are looking at rare exceptions like survival and saying that people therefore do not hold to a moral principle that is actually extremely widespread.

            We all recognize instances where-in one person acquiring property from another that the other thinks is legitimately theirs is not immoral.

            What “the other thinks”? What kind of a moral standard is that?

            In any case, without examples, I don’t really know what you mean.

            Where that line is drawn is highly subjective, and what constitutes ‘legitimate’ ownership of property is also highly subjective.

            There are fringe cases, but that does not make ownership in general “highly subjective”.

            Which really comes down to my ultimate objection, I think, though perhaps others will suss out; What the OP is trying to say is that Markets are moral because they are the best way of arriving at a fair allocation of resources.

            You are welcome to make that argument. At this generic level, I’d just argue that fairness is determined by the process of “allocation”, not a snapshot of the allocation at any given time.

            In other words, free markets are moral because they are the fair way of arriving at the best allocation of resources.

            I would hope all but the most naive idealist would recognize that is observably not the case.

            Well, then, conveniently, you could write me and most libertarians off as “naive idealists”, all without your having to make a pragmatic argument.

            But to be fair, your ideas that “Theft is wrong” is not a moral principle anyone really holds, and that property ownership is highly subjective, strike me as “naive” and “idealist”, too, given that the opposite is so widespread in practice.

          • Christopher Ritchie

            To not diverge too far from the OP, I’ll shortly say that I think you’ll be lacking in evidence that social mobility has a direct corollary to ‘free markets’. Markets are part of broader social and historical systems and must deal as much with those inputs as any other.

            Which to answer my own question; People achieve capital through history. A combination of those things they were passed by those before and what they work to have themselves. That history is invariably a complex one revolving principally around violence. The free market, rather than being ‘free’ of violence, has always depended on it.

            It’s not that I don’t think most people would agree that ‘Theft is wrong’, it’s that I dont’ think most people would agree on what constitutes theft. Some examples are pretty clear; Your eating a sandwich, I take it from your hand, that’s theft. Yet most people would also view a homeless person taking a finance brokers sandwich as some-how morally not the same as the reverse. Moral institutions being what they are. I suspect the majority of people operate on something that would be closer to Role or Virtue ethics than any ‘rule’ ethics.

            [quote]In other words, free markets are moral because they are the fair way of arriving at the best allocation of resources.[/quote]

            There is no ‘arriving’ though. There is no magical end at which resources are divided out as best they can be. There is a churn and at any given point something may be fair, something else might not be. Markets fail. Markets are impacted by history, by the realities of the circumstances they exist in. Markets are just people, and people make plenty of choices that are irrational, or immoral, or both. Institutions exist outside of markets precisely for these reasons. And we can have ready examples of how certain ‘markets’ may lead to immoral situations(by passing on externalities as a classic example.)

            If the market always determines that you are to be at the bottom, how ‘fair’ do you think your going to think that market is? How fair is it really? What constitutes fair in the first place?

            I realize the initial argument isn’t formal, but I don’t think it’s very convincing to anyone not already partial to it.

          • Lacunaria

            I think you’ll be lacking in evidence that social mobility has a direct corollary to ‘free markets’.

            I assume you mean “economic mobility”. There are many cases which can be argued, but if we look at the extremes, with laissez faire at one end and central planning on the other, then there is a clear correlation.

            That history is invariably a complex one revolving principally around violence. The free market, rather than being ‘free’ of violence, has always depended on it.

            The only sense in which the free market depends upon violence is in the protection of property against murder, theft, etc., which is moral.

            It’s not that I don’t think most people would agree that ‘Theft is wrong’, it’s that I don’t think most people would agree on what constitutes theft.

            There are some fringe cases of ownership or survival, but that’s not nearly enough to invalidate the moral principle as applied in 99+% of criminal cases.

            Yet most people would also view a homeless person taking a finance brokers sandwich as some-how morally not the same as the reverse.

            You just switched to relative morality. The question was whether most people would still think taking the finance broker’s sandwich is theft. I think they overwhelmingly would consider it to be theft, even if they also think that the finance broker should voluntarily give it to the homeless man, but I’m open to learning if you have polls that say otherwise.

            In other words, free markets are moral because they are the fair way of arriving at the best allocation of resources.

            There is no ‘arriving’ though. There is no magical end at which resources are divided out as best they can be.

            Naturally, it’s a moving target, so there may be no complete “arrival”, but there is a continual “arriving” toward pareto efficiency.

            Markets fail. Markets are impacted by history, by the realities of the circumstances they exist in. Markets are just people, and people make plenty of choices that are irrational, or immoral, or both.

            So are the people who would make decisions in any more ideal system you might try to devise. The humble and moral solution is to simply ensure that the consequences are born by the decision-makers.

            Institutions exist outside of markets precisely for these reasons.

            The market subsumes those institutions if they are voluntary.

            And we can have ready examples of how certain ‘markets’ may lead to immoral situations (by passing on externalities as a classic example.)

            Externalities are either solved through voluntary agreement or they are naturally categorized as harm along with manslaughter and other property damages. Both could be considered to be within the structure of the free market.

            If the market always determines that you are to be at the bottom,

            That is an odd clause because:

            (1) “The market” is not single entity that “determines” something. The market is everyone individually. So you are saying “If everyone always determines…”. Note that there is no practical political system which can defend against “everyone always determining” something.

            (2) “the bottom” is not simply those who are least productive, as you might guess, but rather murderers and thieves who take value away from other people. Free markets don’t get rid of “the bottom” but they do tend to make the bottom higher.

            (3) “always” is also odd because people change their behavior when they are motivated.

            how ‘fair’ do you think your going to think that market is? How fair is it really?

            Very fair. What is your alternative? To reward harmful behavior? To subsidize work that no one wants? Are those more fair?

            No. Property and free exchange are more fair.

            What constitutes fair in the first place?

            Well, how about we start with “voluntary is more fair than involuntary” and owning yourself and the product of your labor?

            By the way, Disqus will interpret some HTML but not bbcode, so instead of [quote]…[/quote] you can use <blockquote>…</blockquote>

          • Swami Cat

            Christopher,

            I find your arguments fascinating, but I question many of your assumptions. I assume you would return the sentiment.

            “Price mechanisms in what are generally called ‘Free Markets’ are not keyed to how people value things. They are keyed more or less strongly to the needs of those already in dominant positions in the system. The relative value any person or group of people place on something impacts the price mechanic by how well they are able to pay.”

            I do not get the importance of “dominant positions” in the system. How is the value of a particular sandwich or an hour of specific labor determined by power other than the power of supply and demand which is already factored into markets? The wage I pay is the least I can pay to optimize profitability in a world where competing employers are bidding for the same labor. The wage the laborer is attracted to is the one which is highest according to the same process. If the profit margins are above the risk adjusted required rate of return, new potential employers enter the market, thus driving up wages and down profit.

            At best dominance seems a fringe issue, or something related to non market interferences, but perhaps I need examples of how the price paid is more a factor of power than the dynamic of supply and demand. Could you expound?

            “That is, after all, part of their function, to further legitimize the property and power of those in positions deemed important by those with power within the market. The interests of the majority, or a minority with high levels of capital, always outstrip the values and interests of minorities without capital. Why one person possesses capital and another doesn’t is a question you cannot escape.”

            Your argument takes a process (property conventions) of general value (easily empirically validated) and attempts to undermine it by pointing out it specifically benefits a disliked group (by you) thus attempting to undermine or malign the general value of the process. I could use the same rhetorical tactic to undermine the rule of law, rules of sports (designed to empower physically superior specimens at the expense of weaker individuals) and so on. It is simply a rhetorical cloud, which distorts the issue, and apparently intentionally so.

            In reality, virtually all of us enter markets with no property other than the claim on our own efforts. We then exchange that effort/ingenuity for fungible claims on property and service.

            In my case, which is quite typical, I got a part time job, used it to by a used car and food, then saved up for rent. I got a full time job and steadily improved the value I offered to fellow humans in exchange for more and more fungible tokens. I used these to acquire a house and various goods and services, including retirement savings which I then invested back into the market, leading to the hiring of new adults entering the system with almost nothing but their labor and a positive attitude. It is a positive sum, self amplifying problem solving system and it serves the needs of those without capital better than any system ever adopted by any society since the advent of the human race (an easily verified empirical claim).

            “…I don’t think ‘Theft is wrong’ is really a moral principal anyone holds. We all recognize instances where-in one person acquiring property from another that the other thinks is legitimately theirs is not immoral. Where that line is drawn is highly subjective, and what constitutes ‘legitimate’ ownership of property is also highly subjective.”

            Nonsense. “Theft is wrong” is a useful heuristic and is probably one of Brown’s universal cultural characteristics of every studied society. Every heuristic has exceptions and caveats. These don’t disprove the heuristic. Legitimate ownership is of course not always a simple matter to decide as the world gets complex. That is what the rule of law and courts do — they establish a reasonably but imperfectly fair system to resolve disputes around agreed property conventions.

            “Which really comes down to my ultimate objection, I think, though perhaps others will suss out; What the OP is trying to say is that Markets are moral because they are the best way of arriving at a fair allocation of resources. I would hope all but the most naive idealist would recognize that is observably not the case.”

            Absolutely not. The goal of markets is not fairness of allocation. Markets are superior to other comparable processes in the creation of value in non-public goods and services. It is a problem solving system, and though imperfect, is substantially better within its domain than competing systems.

            I am not downplaying fairness or allocation, I am emphasizing creation. Goods and services are not just distributed, they must first be conceived, tested, built, offered, improved and so on. You simply cannot assume goods and services exist. Two hundred years ago, virtually nothing we buy today existed in its modern form. Markets, intertwined with open access government and science, created them, raising median living standards in developed nations a hundred fold. Our poor are better off in many ways than the royalty of Adam Smith’s era.

            Fairness is important though. But you must understand that there are multiple definitions of fairness, not one, and these definitions clearly and logically contradict. There is fair defined as:

            1). Equality of outcome
            2). Outcome equivalent to need
            3). Outcome equivalent to effort or risk
            4). Outcome proportionate to actual value added
            5). Outcome proportionate to hierarchy (quartermaster pirate gets double shares)
            6). Outcome proportionate to initial agreement

            We judge the fairness of a process not by the first two, but by all that apply. The horrific failures of Marxism are in great part due to failure to recognize the importance of 3 and 4. If we are rewarded as per 1 or 2, the natural response is to reduce effort and value contribution. Thus the system produces less and less of value or requires more and more coercion.

            My recommendation for fair is that it is the emergent process which we would choose among competing alternative systems. This is similar to a behind the veil process. We would choose the system leading to highest weighted median long term outcomes. This allows us to weigh the various types of fairness and even more importantly to weigh fairness against all the other myriad values and goals that we have.

            If people want to choose Marxism, I wish them well, but I suspect they or their grandkids will come to regret it. Kind of matches up with 20th C history, huh?

            “The free market, rather than being ‘free’ of violence, has always depended on it.”

            Again, I see rhetoric, not clarity. Society and cooperation has always required a backstop of threats of violence. This adds no explanatory value to the issue of markets as opposed to competing alternatives. None. It just kicks up dust which you hope lands on your target.

            “If the market always determines that you are to be at the bottom, how ‘fair’ do you think your going to think that market is? How fair is it really? What constitutes fair in the first place?”

            The above explanation on types of fairness reveals the problems with this argument. If I choose to minimize effort or risk, I can get minimal reward and consider it quite fair. If I want more rewards, I can start by putting more effort in, and specifically more effort into directions others consider valuable. It is of course possible for a person to fail to be able to add any value in which cases non market mechanisms may be called for. Charity, safety nets, insurancE, etc.

          • Ron H.

            Great comment. However I had to ponder one sentence.

            “” Society and cooperation has always required a backstop of threats of violence.

            May I presume you mean violence in the form of defense, enforcement of agreements, etc.?

          • Swami Cat

            Ron,

            Broadly considered, yes. My understanding of widespread cooperation in evolution is that it is extremely limited between non kin due to free rider, defector and exploiter problems (such as alpha chimps). Humans solve the problem in part due to the threat of violence for defectors and bullies. I believe credible threats of violence are necessary to stamp out violence and defection. They are not, however, sufficient.

            Boehm is the premier expert on the issue, IMO. He refers to it as egalitarian or reverse hierarchies.

            I think it is also true from a threats of outside violence too. In other words, internal group cooperation is greatly driven as a response to external group competition, potentially violent.

            But I am rambling….

  • IEIUNUS

    Perhaps the underlying intuitions are correct, but I do not think this is a very good argument for the moral goodness of markets.

    I do not think A gets us anywhere: If I use my door handle to open the door in front of someone who has a peculiar fetish for door handles, it is not thereby wrong for me to use the door handle to open the door despite my lack of a similar, or greater, propensity for door handles.

    Also, I do not know if you meant “own” instead of “use” something that someone else values more than you. Though, changing A from “using” to “owning” something someone else values does not help either.

    You’ve heard of the case of someone that owns the only watering hole in town but refuses to supply the water without charging exorbitant fees, or unreasonably pricing the use of her watering hole. When the sole owner of the watering hole does not allow for a reasonable exchange for the use of her watering hole, this is a case wherein the pricing mechanism does not solve the problem of A. Though, clearly the owner of the watering hole has a prior claim to it, she cannot reasonably exclude others from its use while charging whatever she wants simply for the fact that she happened upon the only watering hole.

    • Ron H.

      Yes, the story of the only watering hole in town is familiar, and like most stories of this nature, it begins in the middle without any explanation of how we got to this moment when only one person owns all the water. Lots of questions need to be answered.

      First, how did a town develop around a single source of water owned by one person without anyone thinking to guarantee themselves access to reasonably priced water? An enforceable contract with the water owner, perhaps? Ensuring an alternate source in the event of problems with the one and only? It’s unlikely people who won’t even make those simple, basic provisions for the future are still part of the gene pool.

      Then one must wonder how the water owner is paid for water they sell to others in town. Is seems likely that the water owner relies on others in town for some of their needs such as groceries, electricity, and internet service? If so, the price of water – no matter how high the price charged by the one and only water owner, will be paid for in other good and service at a rate that leaves all parties better off after the exchange.

      You want to charge me $1000/month for water? Fine – that shopping cart of groceries will be $1500. Thank you ma’am.

  • Swami Cat

    My biggest concern is that I get all twisted up when someone throws out the term “wrong.”

    What do you mean by wrong? If you mean socially sub-optimal based upon a utilitarian or Rawlsian-type outlook (the type of society we would choose behind a veil) then I agree it would be suboptimal to use something when someone else values it more and it would be sub-optimal to establish institutions which allowed theft.

    But that possibly irrelevant (or possibly not) quibble aside, I think your basic logic holds. Another happy side effect is that it encourages productivity into socially valuable goods and services to optimize bidding power (ability to pay). In other words it aligns incentives to enhance human problem solving in order to optimize individual problem solving.

    I will add that some are unable to pay (children, senile seniors) and that market problem solving mechanisms are inadequate to optimize social welfare. But they are great within their domain.

    • Ron H.

      If by “optimize” you mean “perfect”, then there’s no question that markets fail to perfect social welfare, as does every other system of human social or economic interaction, but if you mean “do the best job possible under the circumstances” then I think you’ll agree that free markets far outshine any other system.

      I’m not aware of any requirement that every individual must pay their own way in a market system. Parents routinely support their children, and senile seniors are regularly cared for through the efforts of others. Those are not failures of a market system.

      • Swami Cat

        Hi Ron, thanks for the comment.

        Yes, I agree with your substitution phrase. I did not mean to imply perfection just improvement.

        I also agree that caring for others is not a failure in market systems. Is it a problem which is often (not always, insurance is an obvious counter example) being resolved via other than market mechanisms. Just to be clear, there are many problem solving systems. Math, science, competitive sports, politics and markets are just a few of the more obvious cultural problem solving systems (evolution is a biological problem solving system). Each applies to different domains of problems and is valuable when used appropriately within its domain and is less so — or potentially destructive — when used inappropriately or outside its target domain.

        I am a fan of effective social safety nets, even ones that may not be market based. However, the word “effective” is carrying a lot of weight, as many current safety nets are less than effective in my opinion.

        • Lacunaria

          Relative to most of your examples, the free market is not a method for solving problems, rather it is a meta-method for problem solving methods.

          In other words, the free market doesn’t tell you how to actually solve any particular problem, it just requires that the method you use must be voluntary, without unjust coercion.

          Math, science, sports, and even evolution in a sense, can occur voluntarily (in the free market) or compelled through the use of force.

          In this way, the charity of social welfare is not outside the free market, but rather is an essential part of it.

          Of course, implementing the free market meta-method may require the just use of force to prohibit murder, theft, etc.

          • Swami Cat

            These are really perceptive and thought-inspiring observations, Lacunaria. Thanks for adding them.

            Let’s simplify it down to two systems… Science and markets.

            I agree with you that markets are a meta-method. It doesn’t tell you how to solve any specific problem, it is in effect an open problem identification and solution system specifically aimed at the identification and solution fulfillment of a class of scarce goods and services. By agreeing to a system of property and voluntary contract conventions, we can create an emergent system which creates, spreads and improves the quality of desirable goods and services. It is an emergent system which is decentralized and requires the voluntary interplay within a set of rules. But it solves billions of problems on a daily basis. Absent markets most of us would never have been born, and the living standards for those that were would be one or two or orders of magnitude lower.

            I would also suggest that science is a meta-method. The domain of problems is different — in this case it involves understanding and explaining natural phenomena. But like markets it is a decentralized emergent practice dealing with scientists operating (usually voluntarily) under a set of informal rules. Scientists compete to discover or explain (publish) first and best, to replace each other’s ideas with their own. The details of the system are different, different rules, different types of competition, different incentives (fame rather than dollars), but both are meta-methods for problem solving within particular domains.

            I agree with the emphasis on voluntary, but I am not sure it really is the key defining difference. Science with coercion is a pale perversion of the larger emergent process. An essential aspect of science is that it requires persuasion (which is voluntary) not authority. Authoritarian science isn’t really science at all.

            I can see that charity flows naturally out of markets. Markets produce the wealth and the property rights which allow the property to be given away. But I am not sure that means it is “an essential part of it”.

            Food for thought….

          • Lacunaria

            These are really perceptive and thought-inspiring observations, Lacunaria. Thanks for adding them.

            Haha, you are too kind, thank you. 🙂

            The details of the system are different, different rules, different types of competition, different incentives (fame rather than dollars), but both are meta-methods for problem solving within particular domains.

            I agree that science can be seen as a meta-method. I’d consider fame part of the free market, too, though.

            I agree with the emphasis on voluntary, but I am not sure it really is the key defining difference. Science with coercion is a pale perversion of the larger emergent process. An essential aspect of science is that it requires persuasion (which is voluntary) not authority. Authoritarian science isn’t really science at all.

            It’s fine with me if you want to define science as requiring liberty, thereby making it a proper subset of voluntary solutions. At the very least, the more voluntary it is, the more effective it usually is, which is actually a pattern of liberty in general.

            I can see that charity flows naturally out of markets. Markets produce the wealth and the property rights which allow the property to be given away. But I am not sure that means it is “an essential part of it”.

            Right, without property, there’s no such thing as charity, just entitlement.

            More broadly, I just meant that there is value in helping our fellow man, so charity should be considered a functional part of the free market rather than as an outlier or exception.

            But it occurs to me that you didn’t really contest that, so it was unnecessary for me to make that point.

          • Swami Cat

            Thanks again, the discussion is enlightening.

  • Ben Kennedy

    Premises A and B seem to imply private property is more-or-less impermissible. If it is wrong for me to use a thing that someone else values more, and it is wrong of them for steal it, then it is therefore wrong for me to keep it. Theoretically I could exchange it, but if the person had nothing to offer me I’d be obligated to give it.

    • Lacunaria

      Exactly. Munger’s argument is incoherent since you can’t even get to a pricing system without ownership.

      • Ben Kennedy

        Maybe that works, it seems reasonable that stealing is somehow “more wrong” as it is an active harm, rather then simply passively using some resource someone else values. Regardless, “A” is still not very intuitive – when there are competing claims for a resource, looking solely at subjective “value” does not seem like a fair way to resolve them. I think it could be rehabilitated a little bit with some kind of statement on the moral wrongness of hoarding, e.g.

        A) It is wrong to have a surplus of something someone else needs

        But then there will be a lot of wrangling about about what constitutes a “surplus”, etc

        • Lacunaria

          when there are competing claims for a resource, looking solely at subjective “value” does not seem like a fair way to resolve them.

          Yeah, the subjective value must be made objective somehow for (A) to even be meaningful.

          In a free market this is done by the individual making actual trade-offs (revealed preferences) in how they use their property (including their labor, etc.).

          A) It is wrong to have a surplus of something someone else needs

          But then there will be a lot of wrangling about about what constitutes a “surplus”, etc

          Exactly, I think you’ve mostly just shifted the subjectivity from “relative value” to “surplus”.

          But in the free market, naturally decreasing marginal utility already pushes in that moral direction, so we don’t even have to agree on a single definition of “surplus” for that moral to be followed.

          Moreover, if (A) is compelled using a single definition of “surplus”, then that will discourage production/supply, such as with laws against price gouging.

  • It’s a persuasive argument for people who already prefer free markets. I think most anti-market types would bandy about A. They would replace “value” with “need,” and you would try to explain how it still ends up working your way, and they would give up early and go eat alfalfa sprouts.

    • Lacunaria

      Haha. 🙂 Well, from this thread, it looks like market types bandy about A, while anti-market types balk at B.

  • Lacunaria

    Your article is excellent, Prof. Munger, and places your synopsis here in important context. My apologies for not reading it first. 🙂

    The idea that we can never run out of anything (modulo substitutable goods), still strikes me as a bold claim, but I can’t think of a good exception to it historically. The potentially increasing broadness of “substitutable” is the key, so it is odd that the word is absent from the basic assertion.

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