Morosoph's Journal: Free Markets do not require Self-Interest

The fallacy is this: that economic efficiency requires self-interested action.

This diary entry grows out of this post of mine.

It is motivated by repeated critiques of (for example) the GNU GPL or proponents of strong copyright law where it is perceived that a side-effect of reducing the ability to horde is synonymous with reducing output. Such a perspective only makes sense to the extent that creativity is conditioned by a restricted definition of reward.

What if reward can involve benefit to others? This concept seems natural to us when we consider such things as benefit to our families, or when we seek political advantage for a chosen cause, but not always so natural when we're considering trade, worker relations, or supply and demand. What if I demand not just the lowest price, but an adequate wage for specified workers in the form of "fair trade"?

"Fair trade" produce doesn't typically have massive market share, this is true, but then we do not have very much information to base our purchasing decisions upon. Also, some people don't think of it as a consumer choice as much as a political statement, the implicit politics being left wing, a collection of folks that they might or might not wish to be associated with.

In what sense, then, can a "fair trade" purchase be efficient? The answer to that becomes clearer when we realise that efficiency itself is a relativistic concept. Efficiency only make sense when we decide for ourselves what constitutes "progress" and "cost", so that the ratio can be known. "Fair trade" then involves a concept of progress that includes the end workers' well-being. Clearly that can be sustained whilst reducing the end price through mechanisation, better mechanisms of delivery, and such like. Thus buying "fair trade" produce still drives the market to find superior allocations of resources.

What then about the new development of "copyleft" licenses, such as Creative Commons "share-alike" licenses or indeed the GNU GPL? Here we see creation by people who value that others make use of their works, and others yet in turn. This act in itself must undermine the perspective of those who believe that an incentive to create is synonymous with keeping things to oneself. Thus the fact that the GPL is in use undermines the central justification used by those who oppose it on intellectual property grounds!

For those who haven't read it yet, you really should read Coase's Penguin!

You missed the magic word...

[TopShelf]

In economic terms, the key factor you're talking about here is utility - the value which one derives from a particular good or service. A piece of fruit has obvious utility in the form of it's taste or nutritional value, but if the purchase of that good also comes with the knowledge that the people involved in its production earn what you (the consumer) consider to be a fair wage, then that knowledge provides extra utility to the extent that you care about such things.

That could mean that someone is willi

Utility

[Morosoph]

You're quite right that I've missed out "utility"; I should retitle the entry. I was avoiding economic terminology, for my intent is to get people to realise that they're miscalculating, and to give ammo against those who would put forward the kinds of argument that I am criticising, who themselves may not have heard of utility as a concept.

Personally my preferred path forward is to lower our import barriers to agricultural products from Third World nations, so as to give them the opportunity to leverage

Re:Utility

[Morosoph]

To clarify:

I retitled "Addressing a Popular Economic Fallacy" to something more likely to draw in those who hold such a fallacy.

Also: although my liberalism has a libertarian edge, I was referring to your (excellent) suggestion in my earlier post.

Re:Utility

[Stargoat]

I write in Wiki because I do not want conservatives posting lies. I gain benefit from the GPL work I contribute. I also gain enjoyment from that work. Altruism does not exist. There is always self interest in everything everyone does.

Re:Utility

[Morosoph]

You seem to be confusing altruism with pure altruism, and being motivated with sefishness.

I was not arguing for pure altruism, and besides, I think that you're wrong. People often act against their own interests, usually stupidly, sometimes not. Motivation is not the same as selfishness in normal English usage. I make efforts to eat only free-range chicken, for example, but there's not that much in it for me (yes, it tastes nicer, but I'm not very rich at the moment). I simply make a habit of it becau

Re:Utility

[Stargoat]

You eat free-range chicken because it makes you feel better about yourself. That it tastes better is a bonus.

Re:Utility

[Morosoph]

You eat free-range chicken because it makes you feel better about yourself. That it tastes better is a bonus.

I agree, but there are easier means to the same end. In terms of maximising personal satisfaction, I am doing poorly. I can leverage existing motivation, but the result need not be as great as if I'd set out to maximise the quantity of what made me feel good.

You always need to factor in the opportunity cost.

Besides. Why do I feel better? I've put work into my moral development in the pas

Re:Utility

[Stargoat]

Apparently then, I'm a very cynical vegetarian.

You are right about easier means to the same end, but given past experience, I would argue that by eating free-range chicken, as opposed to, say, volunteering to dig wells in rural India, is based on the different choices you've made, which at the time you felt was in your best interest.

You could give up eating meat, which you probably believe to be a minor sin (particular once you learn how the animals are slaughtered.) But, you choose not to. You're ser

Re:Utility

[Morosoph]

I agree that I'm not as perfect as I could be, and I have seriously considered giving up meat. I am indeed far more self-indulgent than I could be, but I do not believe that we need to follow the most self-indulgent course, even allowing for "enlightened self-interest". I have been coming out of a breakdown, and find it hard enough to cook regularly at the moment, but I admit that if I saw myself as in some sense the equal of the chicken, rather than merely willing to ensure that it lived a relatively nat