Reexamining Exploitation

I’m coming to the realization that many of the political debates in the U.S., and much of the resonance of characters like John Edwards, springs from different experiences of the economy at a day-to-day level. Free marketers, like myself, tend to view the whole enterprise on a Smithian theoretical level: the exchange of one thing for another, with benefit to all. This, unfortunately, is not a universal experience. Any good attorney will tell you that any bargain should be based on informed consent; any good economist will tell you that if the terms of a deal are not ideal homo econimus will renegotiate the deal to harmonize with their interests. There are, I remain convinced, sectors of society where this is actually true. Unfortunately they are by no means universal.

I seem to see a gradient running through the world – as socioeconomic status increases the world looks more and more like the economists’ ideal. Interlineation, negotiation, comparison of terms, total inspection of the “fine print,”: these are things that can occur if one has the time, freedom, education, and access to alternatives (what the Harvard project calls BATNA,) but not otherwise. The more one slides down the scale, the fewer and fewer choices one has. Oddly, this seems to be not due to the lack of actual money to negotiate with, but more terminology and expectation. Buying a, say, 2 Million dollar house (or apartment, for you Manhattanites,) you’re fully expected to have a series of expert inspections, contracts reviewed and revised by attorneys on both sides, and a slow, careful transaction. Renting an apartment for $350 a month none of this is accepted as normal. However, from an economic and political standpoint the two are identical. In fact, the portion-of-income number for the buyer in the latter is often greater than the buyer in the former.

As a general rule, the less you are spending the less time you are given and the less information you’re provided. This might be justifiable if everyone had the same resources to dispose of, but as for some it represents an enormous portion of their worldly goods, the whole thing is totally suspect. As a personal anecdote, a few years ago I had the displeasure to buy a car at an establishment in an, how to put this, less-than-fashionable suburb of our glorious metroplex: the idea that a customer could both a) calculate exponential functions and b) was not intimidated by a page of legal terminology was a whole new world to the sales staff. Considering that both of these skills are assumed in the defense of every predatory lender and corporate policy-maker, (“they signed the contract,”) my eyes were further opened to the assumptions these people actually make.

The bottom line is that the market can not actually function efficiently unless its participants actually have the information needed to make a measured decision. This can only happen if the institutionalized fraud is removed from the parts of the economy that prey on the weak and desperate. If man is to be free to choose, he must have real recourse against the swindler.

But how to root it out?