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More precisely, Guzman and Munger (2014) argued that voluntariness requires five conditions to be met: the parties own the objects being exchanged; the parties have the practical and legal capacity to transfer the ownership of those objects; there is no deception or fraud, and no compulsion, addiction, or insanity; there are no large-scale uncompensated non-pecuniary externalities, and there is no coercion by threat of direct harm.
The idea that unconscionable bargaining power can be an instrument of coercion can be traced back at least to Locke (2003) and Hume (1888). Hume proposed the following example: "A man, dangerously wounded, who promises a competent sum to a surgeon to cure him, wou'd certainly be bound to performance; tho' the case be not so much different from that of one, who promises a sum to a robber." Hume (1888; p. 125). In recent decades, this idea has attracted renewed interest among moral philosophers, most notably Frankfurt (1973; p. 71); Lyons (1975; 425–436); O'Neill (1985, 252–277); McGregor (1988, 23–50); Olsaretti (1998; 2004, 119–154), Snyder (2008, 389–405), Zwolinski (2009), and Munger (2011). More recently, Vrousalis (2013) connects exploitation with domination, seeking to define exploitation as the self-enriching instrumentalization of another's vulnerability. Finally, the rejection of substantial inequality in bargaining strength is a condition of the exchange situation, not a condition of the wealth positions of the participants in a broader sense. The issues discussed in regard to the diminishing marginal utility of wealth and the arguments for redistribution are summarized in Schmidtz (2000). We are considering only the narrow situation of the exchange itself.
In the jargon of game theory, a negotiator's outside option is the best of his alternatives to a negotiated agreement. In a negotiation, the weaker party is the negotiator with the worse outside option, whereas the stronger party is the negotiator with the better outside option. There is some reason to believe that the evolved moral intuitions of humans are compatible with a "social contract" theory in which exchange is an integral, almost unconsciously accepted, part. See Mizzoni (2010).
The validity of this example depends on whether a kidney qualifies as a marketable good or not (a marketable good is one whose commerce is both moral and legal). Since the marketability of kidneys is a controversial matter, we refrain from taking a position here. We just assume that kidneys are marketable for the sake of argument. One view of “morally marketable” by Brennan and Jaworski (2015) would hold that “if it can be done, it can be done for money.” We are not necessarily endorsing that view here, but simply using an example in which kidneys are marketable for the sake of argument.
This approach is consistent with a number of philosophical treatments of this problem, notably Smith's (1776/1976) "impartial spectator" or Nagel's (1991; p. 65) elaboration of the "impersonal standpoint". Interestingly, as Levy (2019) points out, the problem of “impartiality” relates to the requiring some outside and objective reasons. If participants are allowed to construct their own reasons, indeterminacy is likely to be the result. Yet it is not clear how to get around this problem, as Levy rightly notes, other than to have (we claim) analytically-based normative theories such as ours.
It is important to note that the “no beneficence” condition is highly circumscribed to the domain of commercial exchange. One is always allowed to act on charity, and in fact there may be a duty of charity in extreme circumstances. Thus, we are making a distinction that is useful analytically, but is unlikely to be very appealing in actual choice situations: we are restricting our consideration to market exchange, as the title to this piece suggests. Thus, there may be a duty of beneficence or charity, but that duty arises from considerations outside the logic of market exchange. A deeper consideration of the operation of Kantian imperatives would be required for a general theory of beneficence, and that is outside our scope. For some outlines of what such a consideration would look like, see Timmermann (2005). We thank an anonymous referee for pointing out that the previous discussion of this point was inadequate and misleading.
Consider the following example: A well-to-do woman has an apartment to rent and her impoverished brother has nowhere to live. He asks her to lend him the apartment while she recovers financially. The principle of non-beneficence implies that the woman can reject that request, as she would incur an opportunity cost: the forgone rent. At the same time, she could have a parallel obligation to help her brother, by given him a sum of money possibly different than the rent of the apartment. He could use that money to rent his sister's apartment or spend it on something else.
The intuition behind the fictitious negotiation model can be found in a short text (under 2,000 words) scribbled by John Locke inside the cover of a notebook. The text is captioned "Venditio”--Latin for “sale”—and dated 1695 by a later auditor. It seems to be a quick set of notes for a full essay that Locke never elaborated. In Venditio, Locke analyzes four examples of hard bargains and draws conclusions about the just price. His analysis is based on a sophisticated conception of voluntariness that anticipates the notion of euvoluntariness. In one of his examples, he asks rhetorically: "A ship at sea that has an anchor to spare meets another which has lost all her anchors. What here shall be the just price that she shall sell her anchor to the distressed ship? To this I answer the same price that she would sell the same anchor to a ship that was not in that distress." In other words, Locke responds that the rescuer ship must negotiate with the distressed ship as if the distressed ship had a better outside option. For an in-depth analysis of Venditio, see Ricardo Guzman and Michael Munger, op. cit. Wertheimer proposes a similar device to determine the fair price in bilateral negotiations. He claims that the fair price corresponds to the price that would prevail in a hypothetical competitive market. According to Wertheimer, the hypothetical market price is a good benchmark for fairness because in competitive markets buyers and sellers are price takers. Therefore, neither party to a negotiation has the power to impose the terms of the exchange. See Alan Wertheimer, op. cit, p. 232.
It is a general property of formal negotiation models that the gains from exchange diminish and eventually turn negative as the parties' outside options improve.
Wertheimer (1999; pp. 232–233), discusses a similar case from real life. Two ships, the Port Caledonia and the Anna, were sheltering from a storm in Holyhead Harbour. The master of the Port Caledonia asked the Anna for a tug. After some tussle the masters agreed on a £1,000 fee, which was an unusually high price. Later, a court modified the contract, on grounds of it being extortionate. The court awarded the Port Caledonia £200 for its services.
The question of whether one is obliged to insulate others from risk, or if imposing risks on others may be permissible, is itself a complex subject. See Kumar (2015) for a review.
One intuits that Wrington is the weaker party to the negotiation, as she is in grave danger, but this intuition can be wrong. If the cargo of Wrington was much more valuable than the cargo of Samaritan, or if Wrington carried a great number of lives while Samaritan carried a few, then Wrington would be the stronger party. Our assumption that the two galleons are equally valuable guarantees that Wrington is the weaker party.
If the wealthy fail to fulfil those general duties, society has the option to force them by means of progressive taxation and redistribution. Fried (1981; p. 106). An interesting extension of this problem has to do with proximity: Are consumers (for example) obligated to be concerned with the condition of workers in faraway countries? That is, the fact that conditions might be a "sweatshop" if placed in one's own country may or may not imply the same obligation to be concerned if the country is distant. Weymark (2014) shows that this intuition is at best arbitrary, and may be entirely impossible to justify, at least using only distance.
If a negotiation is fair, its degree of unfairness is zero. If a negotiation is unfair, its degree of unfairness is the difference between the weaker party's outside option and the minimum fair outside option. The minimum fair outside option is the increment that can be given to the weaker party such that the stronger party loses his unconscionable bargaining power.
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Guzmán, R.A., Munger, M.C. A Theory of Just Market Exchange. J Value Inquiry 54, 91–118 (2020). https://doi.org/10.1007/s10790-019-09686-5