April 5, 2013 columns

Just Market Exchanges

Neera K. Badhwar explores how the distinction between fully voluntary actions and actions done under duress applies to market exchanges.

Aristotle defines a voluntary act as one that has its cause in the agent rather than an external force, and that is done in knowledge of the relevant particulars. This is entirely commonsensical. Everyone would agree that in being blown away by the twister, Dorothy leaves Kansas involuntarily, and that the hunter who kills his son mistaking him for a rabbit kills him involuntarily (even though he pulls the trigger voluntarily). Aristotle notes, however, that some voluntary acts are done only because the other available options are far worse. He gives the example of someone who does something shameful in order to protect his family from the tyrant’s wrath, or the captain of a ship who throws the cargo overboard to save the ship from sinking in a storm. In each case, the individual acts under duress. His action is, therefore, not fully voluntary. It is mixed (or, in Michael C. Munger’s words, voluntary but not “euvoluntary”).

This distinction between fully voluntary actions and actions done under duress provides a much-needed framework for understanding and evaluating market exchanges. Some economists maintain that all that is needed for a just exchange is that it be voluntary and give both parties what they expect, ex ante, to get from it (e.g., Murray Rothbard, “Free Market,” The Concise Encyclopedia of Economics, 2008). And all that is needed for a voluntary exchange is that it be free of force and fraud. Hence all exchanges free of force and fraud are just, and the law has no business banning just exchanges. This last is certainly true; indeed, for reasons I explain below, the law has no business banning all unjust exchanges either. However, the claim that all voluntary exchanges are just rests on a far too narrow conception of justice, a conception that reflects neither everyday thinking about justice nor philosophical analysis of it.

The core meaning of justice is giving people their due, and what is due to them is multifaceted, including, among other things, proportionality and a recognition of them, as Kant would say, as ends in themselves rather than mere means to our purposes. Yet many exchanges made under duress violate these requirements of justice, because the circumstances of one party to the exchange lead her to accept a minimal and short-lived benefit in exchange for a weighty and long-term benefit. Kidney sales in poor countries, such as the Philippines, are perhaps the most blatant examples of such exchanges. The snapshot view of transactions typically taken by economists hides from them what is only too evident to common sense: that even a transaction that is free of force and fraud can take unfair advantage of a person’s desperate condition and treat her as a mere means to the ends of the buyer. The moral justice or injustice of an exchange often depends on details that become visible only if we take a wider and longer view of exchanges. A desperately poor but healthy woman whose family is on the brink of starvation because of a drought might be willing to sell her kidney to a well-off man (or his broker) for a large sack of rice – a payment actually proposed as being sufficient by a nephrologist in Manila (see Nancy Scheper-Hughes, “Parts Unknown: Undercover Ethnography of the Organs-trafficking Underworld,” Ethnography 2004; 58). If this is the poor woman’s only means of warding off starvation, there is no doubt that she is better off with the exchange than without it. That sack of rice will enable her and her family to survive for a month instead of, say, only five days. Yet a month’s bare survival in exchange for a kidney that enables the well-off buyer to live well for many years pretty obviously violates the proportionality requirement of justice. Indeed, the disproportionality goes even further: a nephrectomy on a woman on the brink of starvation is all but guaranteed to harm her physically and, eventually, kill her, even should she manage to get another sack of rice from someone else. The kidney recipient saves the desperate woman’s life at time t1 at the cost of depriving her of her health and perhaps even her life at time t2.

Compared to the baseline of no-exchange, the desperate woman is better off. That is reason enough not to ban the exchange, as is the fact that a ban would violate the liberty of consenting adults. But why believe that the no-exchange baseline is the only possible baseline we can use for evaluating the transaction morally? By the baseline of simple humanity, the exchange is both disproportionate, and disrespectful of the desperate individual’s humanity (the idea for such a distinction between baselines is due to Alan Wertheimer, Exploitation, 1996). Indeed, it is no more just than an exchange between a man dying of thirst in a desert and a well-off, well-stocked tourist who, passing by him, agrees to give him some water in return for all his property after they reach home. Every philosophical ethical theory joins commonsense morality in condemning such a deal as unconscionable, and the common law agrees by refusing to uphold it if the thirsty man reneges on it. Likewise, a well-off buyer of a kidney makes an unconscionable deal if all he offers to the desperate woman is a large sack of rice or, for that matter, a few hundred dollars. He ought to give her what he would have given had she not been desperate, just because the kidney seller is a human being like himself rendered helpless by circumstance. What makes both the desert and the kidney exchanges unjust is that the better-off parties save the desperate individuals from impending death in exchange for long-term advantage to themselves and long-term grievous harm, perhaps even death, for the desperate individuals. In doing so, they not only make a highly unequal exchange, they treat the desperate individuals as mere means to their ends, resources to be sucked dry and left to their fate. Their actions and attitudes say, in effect, that the life and well-being of these individuals are of no moment after they have served the interests of the better-off parties.

What, then, is the just price for a kidney, and how is it to be determined? Locke proposes a general answer to the question of a just price when one party is in dire straits in his Venditio. He argues that a ship that is in danger of sinking in a storm because it has lost all its anchors should not be taken advantage of by a ship that has an anchor to spare. The second ship ought to sell the anchor to the first at the price it would charge if the first ship was not in desperate circumstances. This is the price it would charge in a competitive market. Munger and Ricardo A. Guzmán agree with, and offer a formal theory to justify, this analysis in *An Analytical Theory of Just Market Exchange” (2012). But what is a competitive market? Whatever else it might be, it is a market in which people are free to buy and sell. The kidney market, then, is decidedly not a competitive market, since kidney sales are banned in every country but one (Iran). If kidney sales were legal everywhere, or at least in most countries, and there was free legal trade in kidneys, many rich people would go to poor countries for kidney transplants (as they do for other medical procedures) and the price of kidneys would rise in those countries. Ironically, it is the attempt to save people from exploitation by banning kidney markets that has led to the unimaginably high levels of exploitation and injustice that we see in underground kidney deals.

Some libertarians might be inclined to reject my argument in the belief that it implies that all cases of profiting in a disaster, such as selling salt at a higher price when most of the salt mines supplying a community have been destroyed, are unjust. But my argument does not imply this. It condemns injustice, but there is nothing unjust about raising the price of a commodity when it is in short supply, and lowering it when it is abundant. Doing so neither takes advantage of people by making grossly disproportionate exchanges, nor treats them as mere means to the seller’s own ends. Nor is it unjust in any other way that I can see. Rather, it is the only economically and morally rational way to act.