Wednesday, February 4, 2015

When Is It Ok To Limit People's Trading Partners?

In my previous blog entry... Noah Smith On Builderism... I criticized his support of a policy (minimum wage) that shrinks people's pool of potential trading partners.  From my perspective, we really don't maximize value by limiting who people can trade with.  The question is... are there any exceptions to this rule?

For example...

Bill Belichick kissing his daughter (Photo by Matt Slocum/AP Photo)

What It’s Like to Date Your Dad - Alexa Tsoulis-Reay

Tyler Cowen gets all the credit for bringing that article to my attention... Assorted links.  And, let me protest too much by saying that I had absolutely no idea what the article was about when I clicked on the link.  Here's the text that Cowen used for the link...

How far are you willing to push the Pareto principle?

I love Pareto efficiency!  So yeah, of course I'm going to click on it!  And I probably wouldn't have clicked on it if he'd used the article's title for the link.  Once I was there though I couldn't help but read the article.  Of course I had to share it with my gf... who then shared it with one of her friends.  It's not the kind of article that most people would share with all of their friends.  

The song and the article were almost enough material for me to make some excuse to blog about them.  But it wasn't a preponderance of material.  That changed when my gf showed me the photo of Belichick kissing his daughter.  The photo was the tipping point.  It followed too perfectly from my previous blog entry.  The universe was pretty much begging me to utilize this teachable moment.

As far as I know, Belichick isn't dating his daughter.  But should he have this option?  Should we take it off the table for him?  Or should we support New Jersey for allowing adult incest?

I wonder what Noah Smith would say.

When liberals support minimum wages, they limit people's potential trading partners.  But when they support laws that make it illegal for business owners to discriminate, they do so because they don't want people to limit their potential trading partners.

Personally, I oppose minimum wages because they limit people's potential trading partners.  But I also oppose anti-discrimination laws.  Why?  Because they force people to trade with people that they don't want to trade with.  This invariably destroys value.

The basic rule is that expanding the pool of potential trading partners increases the amount of value that people will derive from trades.  In terms of dating, let's take a look at some numbers that I shared a few years back in a comment on this blog entry... Meet The World’s Cutest Economists…


Re “Proof That We Are Soulmates”

Here’s how I considered the numbers back in college. Let’s say you had the opportunity to talk on the phone with 10 random guys. It stands to reason that there would be 1 guy in that group that you would derive greater utility talking to than the other 9. We’ll call him Bob.

So you eliminated those 9 guys and include Bob in a a sample grouping of 100 completely new random guys. You talk to all those 100 guys on the phone and select the one guy that you derive greater utility talking to than the other 99. Chances are this guy wouldn’t be Bob. We’ll call this new guy Frank.

So you eliminated 99 guys and include Frank in a sample grouping of 1000 completely new random guys…yadda yadda yadda…you end up with a new guy…Henry.

If you graphed the utility of Bob, Frank and Henry…what would the curve look like? How much utility would you derive from a one in a 1,000,000 guy? How much utility would you derive from a one in a 100,000,000 guy?

If you could stop time…then by a process of elimination you could find your “one”. We’ll call him John. Can you imagine how well you’d hit it off with John? The minor detail is that you’ve only talked to him on the phone so you have no idea what he looks like. This is another graph you could create… superficiality vs personality.

Back in college I remember hitting it off with a girl from Taiwan. One day I discovered that she didn’t shave her armpits. It was a deal breaker. To this day that ranks as my most regrettable deal breaker.

In any case, people are more likely to win the lottery than find their “one”…so it makes me laugh when so many people say they’ve found their soulmates.


While I might laugh when somebody says that they've found their soulmate... I can't possibly know for a fact that it isn't true.  Maybe they did win the love lottery.  Given the numbers though it just seems far more likely that their "one" is still out there.

Just like I can't know for a fact whether somebody won the love lottery... there's absolutely no way that I can know the amount of utility that partners derive from a trade.  With this in mind, I support New Jersey for making adult incest legal and I protest states/countries where it's not legal.

However, just because relatives should be allowed to date doesn't necessarily mean that they should be allowed to procreate.  If you're interested in a detailed explanation... Is A Procreation License Consistent With Libertarianism?

Preventing close relatives from procreating isn't an exception to the rule (enlarging the pool of potential trading partners increases value)... it abides by it.  When parents handicap their children in any way, they shrink their children's pool of potential trading partners.  This destroys value for their children and for whoever their children would have traded with if they hadn't been handicapped.

People should be allowed to handicap themselves.  They should be allowed to shoot themselves in the feet.  Why?  Because it stands to reason that value will be destroyed if they are forced to trade with people that they don't want to trade with.

Along these same lines... it's never ok for the government to limit people's trading partners.

But what about pragmatarianism?  Wouldn't it limit who people can trade with?  I suppose that's true.  But these limitations wouldn't be determined by people's opinions or their delicate sensibilities... nor would they be determined by impersonal shoppers....
Yet difficult as he [the modern politician] finds it to deal with humanity in detail, he is confident in his ability to deal with embodied humanity.  Citizens, not one-thousandth of whom he knows, not one-hundreth of whom he ever saw, and the great mass of whom belong to classes having habits and modes of thought of which he has but dim notions, he feels sure will act in ways he foresees, and fulfill ends he wishes.  Is there not a marvelous incongruity between premises and conclusion? - Herbert Spencer, The Man Versus the State
Any trade limitations imposed by pragmatarianism would be determined by people putting their own money where their mouths are.  If I had reason to believe that people weren't choosing the most valuable options, then it would be my responsibility to share my information with them.

Donald J. Boudreaux gets full credit for bringing Spencer's excellent passage to my attention.

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