 Welcome to free thoughts from libertarianism.org and the Cato Institute. I'm Aaron Ross Powell, and I'm Trevor Burrus Our guest today is Michael C. Munger the director of the politics philosophy and economics program at Duke University Welcome to free thoughts Mike. It's great to be on the show Today we're talking about Voluntaryness which is an incredibly core concept to free market and libertarian thought I mean probably to all types of political thought Why is the concept of Voluntaryness so core to economic thinking as we talk about it today? Well, a lot of economists will start with the assumption that exchange is voluntary Whereas people who are not economists tend to wonder whether an exchange is voluntary So right at the beginning we have economists say since Exchange is voluntary whereas everyone else says if and that makes a big difference That I think a lot of the reason is that economists are looking at kind of an abstract setting and they we call it perfect competition There's many buyers. There's many sellers The reason that it matters is that if something isn't voluntary, it's coerced now. That's too Trite distinction, but if something isn't voluntary it means we were in some way forced to do it So what the reason why a voluntary? Exchange is important is that we have some reason to believe that both are all parties to the exchange are better off and If we can find a way without increasing the amount of stuff to make at least two and maybe all people who are party to the exchange Better off it sounds like the world to be a better place And so it's a it's a way of justifying exchange cooperation all the sort of things that that we value in a social setting But Voluntaryness is also as you said It is a cornerstone of Economic thought in the sense of we presume that you wanted to exchange if you do it generally speaking Otherwise you wouldn't have exchanged it's hard to think about doing economics without the concept of Voluntaryness if you're talking about subject To value and maximizing but then other disciplines spend a lot of time thinking about Whether things are truly voluntary and there's a lot of ways that they maybe aren't truly voluntary some situations or things like this that affect how people think about exchange and are maybe against markets right and there's What Aaron just said is right? Suppose we allow people personal autonomy That means that we credit their subjective desires as being something that if they act on them No one's going to quarrel with it well There's plenty of circumstances whereas in fact that's not true and we think that objectively you're not better off And so we won't allow you to do it. We don't credit your subjective preferences And we think that you're not really doing it voluntary that it's under duress because there's some big difference in Bargaining strength or your career somehow by circumstances. That is you don't really have alternatives So for something to be voluntary you had to have a choice and if this is your only alternative and it's not very good It's just better than the terrible alternative that doesn't really seem like it's voluntary and that distinction goes back to Aristotle so in the Nicomachean ethics Aristotle talk gives the example of a ship and The the ship has a heavy cargo on it But there's a storm coming the captain is trying to decide whether to jettison all the cargo to save the ship The question is was it voluntary well in a sense? Yes, because he could have done otherwise but in another sense It wasn't because he didn't have any other legitimate choice And so Aristotle says it may depend what you call voluntary may depend on kind of the the locus of moral Agency that you have and in this case that we can treat it as being voluntary the guy Did it and made himself better off so he wasn't brainwashed or a robot or put a gun to a head So it was a choice in some sense But but it wasn't voluntary in the sense that I had a couple of pretty good choices And I just chose the one that was better so to clarify this it depends that you just mentioned of trying to figure out What's a voluntary and what isn't you introduce this term you voluntary? What does that mean? Well, some people say that it's Monster word because the Greek prefix prefix EU meaning well or truly is tacked on to the the Latin route Volunteers and so you've got a Greek Latin monster word Have you not taking your classics classes? I mean this is important stuff If you're really worried about that you need to go to Walmart and get a life they're on sale and If that's the worst problem with the word then I wouldn't worry much about it. So the my question was What is truly voluntary? What would everyone agree is truly voluntary and I've written a couple of papers about this and in fact I'm going to Chile Santiago de Chile to talk about Circumstances under which people have the sense that something's voluntary and I think for that to be true Not only do we have to be able to own something and have a sense that exchanging it is legitimate But also have not have it not have too many externalities where it affects other people without their permission and it can't you can't have coercion so the I think most Economists would say coercion in the sense of having a gun held to my head means not voluntary I'm So as I was reading that the papers you've written about this I was a little bit confused about the terminology or the need for a new term because we've now we've now it sounds like three levels there's There's coerced and then there's voluntary and then there's truly voluntary but the things that get described as just potentially voluntary but not truly voluntary like the whether to toss the cargo off the ship or in one of the papers you give an example of you're Stuck in the desert don't have anything to drink. You're on the verge of dehydration and some guy offers you water for a thousand bucks Does that I mean it seems weird to even call that voluntary at all that looks like how would we distinguish that situation like you either pay The thousand bucks or you die or you either throw the cargo overboard or the ship goes under from say the gun against your head Example where you pay the guy, you know, give me the thousand dollars I'll give you this water or I'll shoot you if you don't it's a distinction that philosophers make and I think what's interesting about it is that it the role of human agency between Coersion having the gun to my head means there's a human finger on the trigger in the other case I'm in the desert and Presumably the person who is trying to sell me the water also didn't maroon me in the desert if he had that would be something else But for whatever reason I'm in the desert and maybe that morning The example is a is a taco truck that shows up and is willing to provide me the water, but for a thousand dollars a liter He could have gone to the construction sites and sold tacos and water to everybody else to the workers of the construction site But he said I'm going to go drive around the desert and see if I can find someone who really needs water And then sell them water at a thousand dollars a liter So the question is is that person acting badly? So it really is the what what I want to know is there's no question if I'm a robber I hold a gun to your head and I steal your wallet and you make a voluntary choice, you know The old Jack Benny line was your money or your life and he's I'm thanking I'm thanking So he's trying to decide which one is worth more You're probably gonna decide your life is worth more and you voluntarily hand over your wallet in the context of the sort of We're ignoring the fact that you have rights to that wallet and I don't I'm gonna shoot you I don't have the right to do that. So the duress there is human agency The question is and I'm acting badly the guy with the guns acting badly is the guy with the taco truck acting badly Or is he actually acting? Well, and even if he's acting immorally We might many people would argue Michael Sandell for example at Harvard would say he's acting immorally But do you really want to make to say he's acting illegally? Because if we outlaw that transaction you're condemning me to die of thirst in the desert It's hard to say how that makes me better off if it's your concern for my welfare You're violating a philosophical principle called non-worseness the you the way you describe it in One of the papers as you say that there are six characteristics of voluntary exchange And most of you voluntary well, there's yeah five of five of more are voluntary you mentioned on property and externalities and No coercion from the agent who you're dealing with but the sixth one You describe as the best alternative to a negotiate exchange or that situation of the Situation giving you coercion but not the actual agent to giving you coercion. Maybe it's wrong to even call coercion duress And so yeah, the best of the batteny or the batten That's can you explain the equality of that that in the concept of you volunteering as well I was actually trying to grant something that Michael Sandell had written In in it again Michael Sandell as a philosopher at Harvard in it He said it's possible to be coerced but by circumstance So the objection to exchanges being voluntary because economists just say exchanges are voluntary Well, it might not be if you're working in a sweatshop and you don't really have any alternative So if you're coerced by circumstance the question is is that exchange something? That's morally acceptable and should it be legal so that that really is the background I was granting his claim what I was trying to do was make it less sort of Emotionally appealing and give it some technical content. So what Sandell said was there's two circumstances under which you might be coerced by Circumstance one is that you're in dire circumstances and the other is there's too big a difference in bargaining strength So the batna is here's what happens if I don't participate in this exchange The best alternative to a negotiated agreement is what happens if I don't Participate in the exchange which is die of thirst or something. Well in this case my my circumstance is dire It's not so much the difference in bargaining strengths is so great So the the two kinds of examples are I'll die if I don't if I'm not allowed to have this exchange That's coerced by circumstance or if the difference in bargaining strengths between Nike and the people that they hire at their sweatshop is so large now the people at the sweatshop are not going to die So their circumstances and dire in that case. It's a disparity or a difference between the two batnas So if Nike fails to hire this guy, there's a thousand more But if the worker fails to get that job he may end up selling drugs if it's a woman, you know She goes to prostitution the won't die, but has a much worse employment setting So the the I tried to give technical content to either the difference in bargaining strengths Which is one baton up minus the other or the direness of the circumstance And that is the the party that's less well off how bad off in an absolute sense Will they be and this is this is where the critique of market exchanges comes in from More friends on the left, right is that they they think that the What free markets do if you don't have government protecting our interests is Allow for these huge disparities in bargaining power and build them up and make them even worse So the bosses can dictate terms to the employees. And so what we need is to set price floors on wages and Get health care rules on that provision of health care and so possibly price gouging laws and all these things So given that you Agree that there's there's a there there that I mean that there is something wrong with these wildly disparate degrees of power in bargaining Which is something that a lot of libertarians Tend to take just the well, it's voluntary to act and just not really acknowledge that there's something problematic about this but so given that What's then wrong with using the state to address these serious disparities? I Think the answer is complicated. So I myself have kind of changed my mind after working on this I think there's my I started out as an economist and I was one of those people who would say since exchange is voluntary Both parties are better off Therefore the more of these exchanges that are allowed the better and any interference is prima facie a problem And so the state ought to stop well What the the the argument from the left goes and so the logic of it Let me summarize if I can find a way that these exchanges are not voluntary It's not true that both parties are better off and therefore there's at least some room for state intervention that might either Improve the quality of the transaction or at least protect the person who is weaker And so the that protection of the person who is weaker in a way It's kind of Rawlsian we want to make sure that we take care of those who are least well off And so though it's an it might be an invocation of the difference principle. I think I Was trying to do two things first. Let's come up with a place of agreement where You know if I if I go to the store and I buy a bottle of water and it the leader costs me $1.50 That's probably okay. So let's all agree that if an exchange is you voluntary the state has no business interfering with it Now what if the exchange is not you voluntary well the justification for state interference is to improve the welfare of the person Who's left less well off if it harms that person then that seems like we've done something odd And so I've made a lot of students at Duke very angry by making this claim And I admit that it's tendentious, but let me say it So the some of the the students from students against sweatshops at Duke had a very kind of naive idea of what they could accomplish Duke buys a lot of Duke clothing one of the things that you can tell about Duke students is they're very proud to be a Duke They have Duke hats to shirts to pants. They probably have Duke undergarments That we don't see thank goodness These are purchased from companies that buy them in Asian countries and you know, maybe they're sweatshops, maybe they're not It's certainly true that they pay much lower wages and they have different safety and environmental and health care Environments than you would have in the United States So the question is what should we do and if we say we're not going to buy from those countries Then it's hard to say that we're helping those people because all we're doing is firing them And so what we're doing is taking the moral smugness of rich white people and then using it as a Justification for imposing material harms on the people that we say we were trying to benefit But aren't I said it was tentative But but aren't the I mean so the people the people who are selling the sweatshop goods Are themselves party to the exchange say between Duke and them when Duke stocks this stuff or then between the students who are buying it and so Is it harming third parties one question? Well first is it harming third parties, but it also seems like they Since these people are party to this exchange they have something they want for it So we really are really cutting off the workers. Are we really saying no, they're not gonna get a job Because if say Nike Doesn't hire them or can't hire them. It's not like Nike's just gonna say well We're not gonna make sweatshirts right they're gonna have to find some alternative and that alternative may be to pay workers more or You know set up better systems that are going to make their customers in the end happy so that they'll buy the sweatshirt The collective action is big enough if I mean, let's say you actually do get a ton of people just stand up 80% of Nike's Product sales go down because everyone stands up and says I'm not gonna stand for this anymore So then that that could fix the right so the solution is a you know This there's a disparity in bargaining power at this level So we address it with a disparity in bargaining power at a much larger level, which is look Nike We're not gonna buy your sweatshirts unless you and then that's the problem unless you Unless you buy it from a factory that has certain characteristics that we approve of and so maybe it has wages and safety and healthcare benefits that Are only in the United States and so it's basically a buy American program It's hard to say how that helps anybody in Vietnam if that's your concern It's hard to say that I mean buy American is something else. That's protectionist policy And that's fair enough, but then you shouldn't disguise it as concerned for those who are less well off I think the most sophisticated version and you basically said it was Negotiate to make sure that Nike at that existing factory Increases its wages and has better health benefits now the question is and this is my economist side acting Why is it that the people who were working in the factory before we're working under those? Circumstances and at that wage it's because they're fairly economically marginal All of us know the term gentrification Gentrification is what happens when very poor people get priced out of a neighborhood because prices go up well jobs can be gentrified too So if you go from two dollars an hour to eleven dollars an hour and you start to get health care benefits You don't have a 26 year old woman working there anymore. You have a 35 year old man who graduated from high school And so all of the people that you say you care about are fired and it's gentrified so job gentrification defeats This perfectly laudable impulse to say I want to make sure that these people can have a better job It won't be the same people. You cannot do that When I was asking the last question and for a moment lost my train of thought Trevor jumped in with a I think also important issue Which is third parties because we can be parties to an exchange Without having Voluntary-ness enter into the question at all because through negative externalities or if I run a shop and Trevor runs a shop and you decide to buy from him then I'm being Harmed in the sense that I'm not getting your business a competition harms me Does that factor into questions of voluntariness or how we ought to think about whether these exchanges are really voluntary? Yes, and as I said I changed my own mind about this. So suppose that the reason I'm operating in these countries is that the Rules that they have for environmental protection or for the health of the workers are just a lot worse Well under those circumstances Maybe we're creating pollution that wouldn't be allowed in the United States or we're we're using a Part of the environment that's very damaging that wouldn't be allowed in most countries That's actually a violation you shouldn't be doing that and so in the company can say no we refuse to do that now It's true that there maybe they'll lose some profits as a result But you're not going to get the same gentrification result because the workers themselves are still being paid the same amounts The difference is the rest of the nation is not being damaged in ways They didn't consent to do so I think the externalities claim the third parties that are damaged in some of the Machiladoras and places where the environmental damage is significant. That's a legitimate objection and the company is responsible for it And if you want to object, that's fair enough but then what about the Competition harm because one of the arguments that we hear against say the global economy against you know No matter what the impact of buying this stuff overseas has on the environment or Whether the sweatshops are good or bad for those workers The fact is that you're buying it overseas you're not buying an American say and so we're losing these good union jobs because of your free exchanges and is I mean that the The guy who used to work in the garment factory in the US who has now lost his job That's a harm to him, right? But that doesn't we typically don't say that's the kind of harm that matters in the same way that environmental degradation might Why? one of the things that Is a benefit and a harm of capitalism is that we're constantly trying to find new ways to make better stuff more cheaply So it's really about consumer sovereignty capitalism isn't very good at producing jobs It's pretty good at producing benefits to consumers and so When I ask someone that I have a large class introduction to political economy How many of you made your own shoes? No one ever raises their hand. Why why didn't you make your not once? I thought that guy would be the most interesting guy in the entire class. I keep hoping. Yeah Some sort of clogs or the University of Oregon No one makes their own shoes because they can buy much more cheaply than they can make them and Adam Smith makes this argument that in some ways this scales up from the individual to the family to the nation Why would you make something when you can buy it more cheaply now? The question is what happens to the people who would be making it in your country if you only bought from the United States and that means that some of them would have jobs that now don't and That means though that when you look at how much it would cost consumers to keep that person in the job It's usually some pretty big integer multiple three or four times So to keep this person in this thirty thousand dollar job would cost consumers a hundred and twenty thousand dollars now We don't compensate them very well though. It's true We you could say if consumers are benefited surely we can have trade adjustment assistance The problem is that the history of those things don't work very well And to the extent that you try to do it you're enslaving generations of people in jobs that aren't going anywhere like keeping whale oil people Farming whales there are three counties in northern Alabama were nearly half of all the hosiery all the socks and the world used to be made They and those had come from New England Where all the jobs had been lost and those had come from old England where all those jobs had originally been that that's where the hosiery Market had started After about 1985 The factories in northern Alabama started to close and now two-thirds of all the world's Socks are made in a near in and around a city in China called detang And they call it sock city or whatever the Chinese word for sock city is in Mandarin All those counties in northern Alabama are just devastated. Nobody now has jobs. The employment is in the industry It's 30 or 40 percent unemployment But the result is that socks the cost of socks has fallen even in nominal terms certainly in real terms Dramatically everyone can buy much cheaper socks as a result now How do we weigh the costs and benefits of that in a market economy? There's a strong presumption in favor of benefits to consumers rather than benefits to workers question is how can we make that? politically palatable is Is that you hear this kind of dispute a lot you kind of from the Bernie Sanders camp or we're sacrificing Workers quality jobs at the altar of consumer cheapness and having more and more and more better I mean, do you view that as a as a? a At least a cogent objection to the market economy that needs to be Addressed in some fashion and maybe the voluntariness element as works where we can use some other concept to say this is this is wrong But it's at least interestingly wrong You and Aaron both made the objection in I think it's strongest form economists say that in a voluntary exchange Everyone is made better off Well, here's an exchange where people are buying socks from China and the result is some people in northern Alabama are in fact made worse off Now it's not an externality in the usual sense that it's a consequence of the purchase like pollution But it's a consequence of me buying from you and not someone else They're I mean buying not from you and instead from someone else But do the consequence of liberty in some basic sense. It's a cost of liberty. So the the but the advantage of it is that James Taylor has this song about mill work So there used to be a bunch of cotton mills and textile mills in North Carolina They were called the people who work their lint heads and the James Taylor song is mill work in a DZ mill work It ain't hard mill work it ain't nothing but an awful boring job. So is that really what we aspire to have our children do? Well, there were a lot of towns where that was the backbone of the culture of the society However now there are all sorts of other jobs people go to college They aspire to do something else if we artificially raised the wages and preserved those jobs We would basically be shackling people to something that is from the previous century and another To sort of change gears, but it's still the same topic of a similar type of the effects of trying to stop this or or keep it out keep keep it out or Mandate it some way is the price gouging laws which Still enjoy a fairly high level of popularity. Oh, it's bigger than I would say three-quarters in it And I think that some of the original reasons you were thinking about you voluntariness is you were trying to explain Something you know for economists are just like well, yeah, I mean the price goes up price goes down. There's no real price There's a problem as resources. Well, you know, this is obvious. We should not price catch a lot Well, no one else see over very few people who aren't economists think that and one of the stories that you tell is about bringing ice into Hurricane situation and what happened in that situation So This is the place where I probably changed my mind the most We tend to think that people have subjective preferences and they can have those in politics so economists Well, when they look in the mirror, they see the smartest person in the room So, you know, I'm an economist all is known by me and when he disagrees must be irrational So I looked at this example where in Raleigh, North Carolina, some people from Goldsboro had brought ice in to sell it They were selling it for $11 a bag which violated North Carolina's price gouging law The police came to arrest the guys who were selling the ice and some of the people who were standing in line waiting to buy it Actually clapped as the police arrested them. So they clearly wanted Then the them I mean is the ice sellers So the people standing in line to buy the ice from those ice sellers were Clapping when the police arrested the ice sellers and this was just to this was in the aftermath of a Hurricane of a terrible and so there was there was simply no ice available in the local area and people food was rotting It's not just insulin insulin and baby formula and they really wanted. Yeah, they really wanted ice But they also felt that they were being taken advantage of and in a sense They were they had the notion that ice was worth and this is kind of like Aquinas's notion of just price Ice is worth a dollar fifty a bag and you're selling it for eleven dollars a bag In fact, you came here to sell it knowing that I was desperate Now what's interesting is that the person who stayed home in Goldsboro and watched TV and said oh, it must be terrible to be in Raleigh. I wonder what's on Sports Center. We think that person is more moral Than the greedy guy who says let's go get some ice and he rents and he rents a refrigerator truck fills it with ice and takes It to Raleigh. Yeah, that's the bad guy. That's the bad guy because and what's interesting is that if If if you were an omniscient benevolent social planner You would tell me Take ice to Raleigh That's what you would whisper in my ear. You just wake up in the middle of the night and just suddenly have a command Well, but the thing is they did it for the wrong reason they were doing it for a self-interest and they were going to sell the ice I think it's interesting to ask how the people were stint standing in line were made worse off By having an alternative. They wouldn't otherwise have had but Those people standing in line were the ones who voted for the price gouging law because unlike my earlier example where I said Moral smugness was being purchased for rich people at the price of material harm to poor people these people had both parts of the consideration in mind and Economists tend to think that people who are autonomous are able to make trade-offs So they were trading off the material harm from being denied access to the ice for the spiritual vindication The moral fact that these people are taking advantage of me and here are the authorities to say this is wrong. I As the people standing in line are saying I like the second of those better than the first and they should be able to Make that trade-off so it's not irrational to support price gouging laws But it it seemed I mean the fact that they were standing in line is what's so weird about this because if they were sitting at home They're like I hear there's ice for $11. I really like ice But I'm not gonna pay $11 because that's highway robbery and then you're watching it on the local news And you see the guys get hauled away by the cops and you cheer like okay You know might disagree that it would be better if they could keep selling the ice But you can on that makes sense But to say I really need this ice and I'm willing to pay $11 for I want it more than I want the $11 So I'm going to stand in line and presumably stand in a long line reasonably long line and Then you've made it some way through the line So you've already got these sunk costs and then they arrest them and you start cheering you still cheer then that seems just Completely bizarre. Oh, I it took me five years to understand it But but is it open? I see your point But are we okay with that with saying that if you want to Vindicate your moral Your moral beliefs about price gouging by voting to use the apparatus of the state to use coercion against people who are making voluntary exchanges Or I guess that's the big maybe raise the question itself Then then you can't you're not allowed to do that Yeah, there are many things you might want to make your morality and and play it out and then use the state to keep people from smoking marijuana But if we're generally libertarian like you we don't usually make that calculus. Well, and that's a fair point But it's a different point. So one of the things that a sort of a property rights Purist would say that ice belonged to the seller. He can charge whatever price he wants as long as he's not using coercion and You know, that's fair enough But suppose you don't believe that that's true and that we can put some restrictions on what people sell and what they do I Once thought even then price gouging laws are just irrational But what's interesting about Aaron's example? He put a fine point on it. They didn't stay home. They actually left home and went to stand in line I think the explanation is that the eleven dollars exhausted almost all of the expected consumer surplus from purchasing it So probably they're really not willing to pay much more than eleven dollars the benefit of the transaction is not very much But you're only making the claim that it's not irrational. I still think it's worth them, but it's wrong It's still it's why is it wrong? It's wrong two ways One it's morally wrong in the sense that it violates the property rights of the seller They're not doing anybody harm by bringing in this needed stuff in selling it So it's a violation of property rights and I think that should be that that's a good argument against it Just that not everybody buys that but second it's wrong because it doesn't recognize that there's a supply response The only way to have a low price is to allow a high price. You you there's this inducement So people tend to think of this as if it's a lifeboat example and in a lifeboat There's a fixed amount of stuff. I've really got to be kind of a jerk You really need water and I have some to say well You know how much are your children worth because you're never gonna see them again without this water So you have to promise that when we get back to port if I share this water with you that you'll pay me a million dollars And you say okay, I have no choice we get back to port you say it was an unconscionable contract It would it was an under duress and the judge would agree it is an unconscionable contract So the the the question here what's interesting I think is even if you if you let's put aside the question of it belongs to the seller there's a Consequentialist argument for getting rid of price gouging laws because it dramatically increases the amount of ice that's available to desperate people and The only reason why the price is $11 is that we basically made it illegal to sell this stuff You get rid of the price gouging law and there would have been a parade of trucks bringing ice and other needed materials to the beleaguered city So what we saw this after Hurricane Katrina the US Army basically laid siege To an American city which is pretty remarkable They had trouble keeping control inside, but they surrounded it and prevented needed supplies from being brought in That's what a siege is so a lot of trucks bringing supplies were headed towards New Orleans Some people just got up and decided to drive down there Yeah, the argument the reason they were turned away was they were told we can't be sure you won't sell this So that the main thing we don't need to protect people against hunger thirst forget that we can protect them against price gouging That's the main thing that we should do. That's just wrong Many more things would have been brought to the city if it had not been surrounded by armed troops with their guns facing outward Economists though, I mean continue to be often baffled by this kind of behavior So whether it's people being opposed to price gouging even when we can make a pretty clear case that they're hurting themselves with these laws Or rent or minimum wage but even even so anti-discrimination like there's the the story that you know the market would get rid of Racial discrimination because you're by refusing say blacks you're giving up customers or you're giving up potentially good employees and yet this stuff Sticks around. Is it is it because? Marks to move well or is it is that it is there are other things that economists are failing to take into account in their utility functions like that we You know, yes, we're not getting the ice, but we are getting a level of satisfaction from our moral indignation or the racist gets something valuable to them out of excluding blacks and so if we You know if we pretend that sort of thing doesn't exist then it looks Strange or wrong, but if we take those values seriously, then those count at the same way as like Getting the ice or whatever else I Think economists tend to undervalue People's moral intuitions and how much they will pay to have Policies that satisfy in accord with those moral intuitions and that's what I think we need to do a better job of engaging It's not that we can't it's just that we don't and we tend to say well markets will solve this Well markets won't solve some of those problems Perfectly competitive markets over the long period just make it more expensive for me to exercise a taste for racism They don't make it impossible unless the market's perfectly competitive and so You can you can say that it that it helps When people look at what look like disparate results and attribute it to racism and then they can pass a law saying We're not going to have that it makes them feel better And so the I think it would be better if we say this really is a problem What is it that we can do to address it? How could we make markets better at at solving problems of racism discrimination? Making sure that poor people have access to housing The rent control I think is the the one almost all people who are trained in economics are going to say rent controls a bad idea There's just no defense for rent control. The main thing it does is hurt poor people In in your essay one of your essays on you volunteers You discuss a John Locke peace Which you had once told me was It was it's almost lost and it was before you had written about it It was almost lost where John Locke is ruminating on the questions that we're talking about today and and particularly what would be It's almost just price theory in the desert water example or some other examples He comes up with and how what maybe what the moral thing there should be but then there's also the legal thing of whether That they should prohibit so it's everything you've been kind of talking about here. What is this essay? Where did it come from? What is the general gist of it? Well, I'm awfully excited about it. So let me give you the brief version John Locke when he was pretty young in the 1650s wrote a little squib and at the top he entitled it Venditti Oh, and it was handwritten it was found in its handwritten form in a folio in the 1690s And it was this was owned then by a family that had bought some of Locke's papers It was printed a couple of times, but it was unknown to economists And it's really unknown to most philosophers and even Locke scholars because it's obscure so Someone had suggested it to me and on reading it I did I was shocked at how modern a conception it has of a particular question And that is we all have a notion of when prices are just or unjust When is the market price just which is an amazingly terrific question for the 1650s So this is more than a hundred years before Adam Smith published the wealth of nations It's long before we had any notion of market price And in fact Locke's notion of market price is pretty close to ours in the sense that it's that that is Generated by a market with many buyers and many sellers and that we can agree on what the commodity is So it's a it's an amazingly Modern forward-looking conception of this he gives four examples And if I may one of the places you can now find it because it is in print We got permission to print it is the new philosophy politics and economics anthology of which I'm a co-editor that was just published by Oxford I'm also happy to send anybody a PDF if they want to send me an email and the the it is interesting because as you said So much of this depends upon the competitiveness of the market your ability to take to extract or Coerce or Whatever word you want to use the guy in the desert when you're the only person there and then there's someone else who also has Is what defines that market is the lack of other people who are also selling water to the guy in the desert So so what is so I think Locke uses the example of a ship that loses its anchor And and it's happened upon but what is that example? How does that come forward? He gives four examples and each of them is work is worth looking at the ship example is the hardest I think There's a sailing ships and The if you don't have an anchor in a sailing ship at night And you're anywhere near a coast or rocks that you don't know about You're likely to drift on it the ship will be wrecked and all the cargo and crew will be lost So what's the value of an anchor life? If you don't have any it's the the sum of the value of the lives of all your crew the value of the ship And the value of the cargo it's a lot Well, suppose that one ship that has multiple anchors let's say three encounters on the high seas another ship that has lost all its anchors and The ship that has no anchors hails them and says will you sell us an anchor? The guy who has three anchors what price would he be justified in charging? You can almost charge anything you want. We can why didn't say what price will he charge? I said what price would he be justified and by justified? I mean literally just so what would be the morally just price to charge and The theme that block has developed throughout this is that you're not obliged to do anything super Erogatory so an erogatory act is one that you're obliged within Market setting super erogatory means to sacrifice. I'm going to do something more So I am not obliged to give him an anchor if I had 30 maybe I would have some obligation It's like somebody's drowning. I have a life ring and I can throw it It doesn't cost me anything then I might be obliged But I have three anchors and the reason I have three anchors is that sometimes you lose them and losing them is bad So if I were to ask myself what chart what price would I charge for an anchor? It might be a lot But then when I find this guy, I can't use my particular knowledge of his desperation to jack the price up even more That's what Locke says. That's Locke's claim So Locke's claim is you have to conduct a kind of hypothetical bargain Where this person maybe has one anchor or doesn't need it quite so desperately and then would an exchange take place So if there is no market price you have to come up with a way of saying what would the market price be if there were a market here and He's careful to say the price of an anchor back in port is almost irrelevant Because we're the particular and this is very Hayekian the particular circumstances of time and place actually matter for the setting of the market price But it is wrong for me to use my knowledge of your desperation Now, you know, that's controversial But the what it has going for it the brilliant part of it is if one of us is really desperate It's not a market price in the usual sense. It's it's an emergency. It's something else So a market price is when there's relatively many buyers many sellers and the consequences of failing to exchange are not catastrophic So I'm always justified in charging the market price the question is what would it be and he has this very tantalizing interesting claim that Mentally you construct what a bargain would look like and maybe you still wouldn't sell it. Maybe you think I you know Look, I'm sorry, but I've only got three and I can't risk the lives of my crew the value of the cargo all my investors So I still can't sell you one. So I'm not obliged even to sell at all but what I can't do is say Absolutely, your ship is worth a hundred thousand pounds. I'd like ninety nine thousand pounds, please You mentioned that this is somewhat there's this hacky in question in here of trying to imagine what The price would be in this market that doesn't quite I mean, we can't just say like what's the price on the other markets as emerging prices But how does that play into the other hacky a notion of? prices and knowledge because it seems like you're almost asking this person to play the role of the Impossible central planner like we don't have a market to see what the prices emerge from so just use your intellect to Figure out maybe some econometrics ought to be I mean doesn't kind of hacking thought preclude the very possibility of what Locke is asking us to do well There's no question that these two people are going to come up with a bargain And the bargain might be I refuse to sell because you can't possibly pay me enough That seems unlikely Because I would be willing to pay quite a bit what what Locke is saying is I can't use the difference between What I would take what I'm willing subjectively not not not my reservation price And most of us can come up with here's something that I would be happy to accept Now the question is I then compare that to the market price. I have no idea what that would be That's right, but that's in this case. It's the best that I can do and the the alternative is that I say Well, it's too hard a problem. I'm not going to sell it to you In these situations of we're just sort of discussing all these and of course I find it interesting that more and more You called them a few a few minutes ago lifeboat situations a lot of public policy is like this is discussed in sort of lifeboat situations type of things which it seems like they're trying to invoke This you voluntary type of the lack of being you voluntary health care minimum wage is now discussed as as a lifeboat type of situation Many other price gouging obviously things like this What is the best way for libertarians to? Respond I mean we've been talking about all the same What is the best way to respond to this? I mean because the tendency is just like oh, well, you know They really don't need how much do you know how much healthier to someone actually need and Everyone could say they need this and everyone says dire straits and all this stuff like that But but then the other side is saying well look we need a heart transplant It's not you volunteer your base of being coerced into any price you possibly pay What is the best way to talk about these very difficult issues? I? Think the thing that we have to do and it's really hard, so I'm not saying it's not but it's really hard Is to get people to understand the distinction that Bastiat made so well between the scene and the unseen So John Stuart mill famously has this formulation where he says that when it comes to production We have to use the physics of markets. There's not really an alternative But the things once there we can then use the rules of morality to decide how to distribute their benefits Well, it's a mistake to say that those two things can be separated and you hear this all the time And one of the most egregious examples is from pharmaceuticals So we have this drug that somebody went through Clinical trials and there's nine drugs. They tried that didn't work They now have one and it costs $300,000 per year to do this need that can't possibly be right. They shouldn't be able to charge $300,000 per year. Well that confuses the thing the things once their problem The reason that they were created the reason that the guy in the taco truck went looking for people who needed water Was the recognition that there might that this might not work? So they undertook a risk we don't look at the failures We don't say well all the drugs that didn't work We're gonna compensate you for that all of their efforts to create a new drug that that admittedly I mean the reason that's important is that by premise this drug is extremely useful more useful than any other drug We have for treating this very dangerous disease whatever it is Well, but you don't get to charge as much as we thought you were going to get to That doesn't make any sense and you have to ask not well the things once there what is seen You have to say what would have happened if we if we had known in advance You you couldn't charge more than what we now think is a reasonable price a hundred dollars a year Well, they wouldn't have come with the drugs in the first place But that's hard to recognize that there's a and it's the same supply response The reaction of markets is to create things that don't now exist It's a very hard argument to make because we tend to be materialist and look around and say how can we allocate the fixed Amount of stuff around us. How can we do better? Not let's take advantage of the dynamism and creativity and entrepreneurship of people who are admittedly motivated by profits Thank you for listening if you have any questions you can find us on Twitter at free thoughts pod That's free thoughts POD free thoughts is produced by Evan banks and Mark McDaniel to learn more find us on the web at www.libertarianism.org