"Why the hostility to commerce? What could be more benign than the freedom to trade with whomever you wish?
"I suspect ignorance about economics leads many to believe that when two people exchange goods and money, one wins and the other loses. If rich capitalists profit, the poor and the weak suffer.
"That's a myth.
"How many times have you paid $1 for a cup of coffee and after the clerk said, 'thank you,' you responded, 'thank you'? There's a wealth of economics wisdom in the weird double thank-you moment. Why does it happen? Because you want the coffee more than the buck, and the store wants the buck more than the coffee. Both of you win.
"Economists have long understood that two people trade because each wants what the other has more than what he already has. In their respective eyes, the things traded are unequal in value. But this means each comes out ahead, having given up something he wants less for something he wants more. It's just not true that one gains and the other loses. If that were the case, the loser wouldn't have traded. It's win-win, or as economists would say, positive-sum.
"We experience this every time we have that double thank-you moment in a store or restaurant."
~ John Stossell, on the Double-Thank-You Moment that ignites all trade
[Cartoon by Bob Thaves]
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12 comments:
This observation is both profound and obvious at the same time. It's obvious when you look at the world in an objective and non-entitled way - but that's relatively rare these days. When you keep this reality mind it's impossible to regard a "trade war" as anything but a contradiction in terms.
This Qotd is both simple commonsense and also simplistic and inane...
Why did the Indians sell Manhattan for trinkets and blankets...??
I would call the information in that deal asymmetric.
With asymmetric information , not many transactions are win/win.
The cigarette industry is an example of that... ( took many yrs for consumers to realize how bad smoking is for ones' health )
Why do you think small pacific Island Nations ban foreign ownership of land..??
Why do you think children, and those of unsound mind, are not subject to contract law obligations.??
One can also bring into the discussion the idea of time, ie.. short term benefits vs long term consequences..
If you want a myth.... maybe it is that all trade is win/win..
It's not the asymmetric information of trading partners that's all-powerful, it's their asymmetric *values.*
"Why did the Indians sell Manhattan for trinkets and blankets...??"
They didn't. They thought they were selling shares of the land, which was common practice (both in America and in Europe). And the Europeans were more than happy to let them believe it--maybe not open fraud, but certainly deliberate deception was involved. I'm not saying that all Europeans were evil; rather, they were people, and some, like in any group, were not moral.
The rest is you confusing fraud and flagrant government trampling of rights for capitalism.
Even if information is asymmetric it may not matter. If I look at a rock I'm looking at its history, the information it can provide, and potential fossils. If I give it to a friend of mine, she sees structure and how it can be carved. She doesn't CARE about the evidence for thermal metamorphism, just as I don't care that it can be easily carved.
Dinwar... If you buy the rock off your friend on the basis that you think it is gold and your friend sells it to you knowing that it is NOT gold, ... at the instant of the transaction both of you perceive the value as win/win. ( At a latter date, you might well say that you were ripped off )
You think you have a bargain, and your friend knows that he/she has got alot of money for something that is worthless.
I think I would always argue that asymmetric information matters.... unless you have a good reason to have an implicit trust in the counterparty. eg... your best friend..
I want to take this in a different direction. You have intentionally avoided my point: that asymmetric information doesn't matter if INTENDED USE is also asymmetric. In other words: We are looking at the same object, but using very different frameworks to evaluate it. Information I have would be superfluous to my friend; it is of no value, except as a curiosity. Her information is likewise of no value to me.
Your example in this post isn't capitalism, it's outright FRAUD. The fact that you cannot differentiate between fraud and trade tells me everything I need to know about how rationally you are approaching this topic.
Dinwar... this is the context for my comments (from QOTD)..""Economists have long understood that two people trade because each wants what the other has more than what he already has. In their respective eyes, the things traded are unequal in value. But this means each comes out ahead, having given up something he wants less for something he wants more. It's just not true that one gains and the other loses. If that were the case, the loser wouldn't have traded. It's win-win, or as economists would say, positive-sum."
I'm saying that in the real world of everyday life this is not necessarily true.
I gave the example of asymmetric information ...
eg... I know a motorway is going to be built right next to my house... I sell my house to a buyer who does not knows this.. When he finds this out he will probably regret the transaction..
Noone has broken the law.. ( unless there is a law that forces disclosure ).
My comments are in regard to the context of the QOFD . What I say does not negate the fact that there can be win/win transactions with asymmetric information ..
I'm saying that asymmetric information can result in transactions that are NOT win/win.
In my lifetime I have witnessed many transactions that have not been win/win...... there are plenty enuf people who do not play by the rules.. or play to win...and/or have a different sense of morality/honesty..
Yeah, I get that. What you're ignoring is that YOUR OPINION ON THE TRADE DOES NOT MATTER. I put that in capital letters so you don't miss it. THEY think they got a good deal, or they wouldn't have agreed to it. How YOU feel about it is 100% irrelevant, and that you feel that we should submit our economic activity to your approval (or someone else's, anyway) shows that you don't understand free trade.
No one has ever said that free trade is nice. No one has ever said that mistakes cannot be made. Pointing out that people make errors is not an argument against liberty.
Finally, you have not posted a valid example of an error. You have posted examples of socialism and fraud. As these would both be illegal under a capitalistic system, they do not constitute errors in capitalism. That you refuse to understand that and continue to blame capitalism for the crimes of those who oppose it demonstrates that you do not understand what is being discussed.
I think we could all point to personal examples where we thought a purchase was in our interest, but subsequently found out it was not. The point is we thought it was in our interests at the time, and that's all we've got to base our decisions on. Omniscience is not required for the general principle to apply.
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