A photo taken by my cousin “Hugh McElroy”:http://en.wikipedia.org/wiki/Black_Eyes at a trendy leftwing-branded DC coffee shop.
The error has been there for at least the last couple of years. It reminds me of something that has always puzzled me – why are so many libertarians opposed to fair trade coffee?
It would seem to me that fair trade coffee is fairly hard to argue with on the principles of consumer sovereignty (i.e. the claim that consumers know their own interests best, and are able to realize them through the market mechanism). If consumers want to pay a premium for coffee that has been produced ‘fairly,’ then this should be no more troubling for libertarians than consumers wanting to pay a premium for e.g. luxury chocolate (which often is made from the same basic material as very-good-but-not-horrendously-expensive chocolate), and arguably less troubling. Perhaps libertarians can argue that fair trade coffee is a special case – and that consumers aren’t able to monitor the production of the coffee to ensure that standards are kept; that fair trade coffee has perverse consequences and so on. All this is certainly plausible – but the same problems of monitoring and possible perverse consequences apply to all sorts of government functions that libertarians are keen to have put out to private actors. If market mechanisms are poorly suited to promoting public welfare in situations where the profit motive is mixed up with the desire to do good, then many libertarian schemes for reform are in very big trouble. All in all, the left wing market skeptical case against fair trade a la (for example) Dani Rodrik seems a lot more plausible than the libertarian one (perhaps one can also argue that lefties who buy fair trade coffee ought to be plausibly more open to market mechanisms across a variety of other areas, by the same logic – but I’ll leave that for you all to discuss and dispute in comments).
{ 156 comments }
Ebenezer Scrooge 04.06.10 at 2:16 am
Why are libertarians opposed to fair trade? Chesstnuts, my precioussss. Chesssstnuts.
Libertarians, by and large, are virginal boys. Little boy virgins like to think they are big rough Marlboro men, who wear their guns outside their pants, for all the honest world to feel. Fair trade implies intersubjectivity and acknowledgement of interdependence. Fair trade, then, is gushy girl stuff. Eeeeuuuw!
(h/t, Townes Van Zandt.)
bartese 04.06.10 at 2:23 am
I reveal my ignorance…. what is the error on the menu…?
Heartless Libertarian 04.06.10 at 2:37 am
I think that this episode of Econtalk with Russ Roberts and Mike Munger does a fine job of explaining why libertarians and others who support free trade think that fair trade coffee arguably hurts those it purports to help (all while costing consumers more money).
http://www.econtalk.org/archives/2007/12/munger_on_fair.html
Either that, or else we just love the sweet, sweet taste of the tears of child laborers in our beverages.
Greg 04.06.10 at 2:42 am
bartese,
They write “free trade” when they mean “fair trade.”
aa 04.06.10 at 2:44 am
Possibly the misprint in Orinoco. Henry seems to have inaugurated silly season on April 1, with no end in sight.
aa 04.06.10 at 2:50 am
@ Greg
I’m blind too – thanks for that.
Boo 04.06.10 at 2:51 am
Oh, goodness, is that Marx Cafe?
Chris Ashley 04.06.10 at 3:09 am
A libertarian friend objected to my college dining hall’s fair trade bananas. Her argument was that fair trade efforts propped up inefficient economies that needed to abandon an outmoded agricultural base. I proposed that bananas had to be picked by someone, who might as well receive a livable wage with a portion of my board fees. My friend doubted that such livable wages were actually possible, for reasons that look congruent to those in HL’s linked podcast (gestures toward corruption down the supply chain).
It seemed to me there were two axioms underlying her argument: that the lives of agricultural laborers cannot be improved by anyone else’s good intentions, and that any price premium on a commodity good was based on a scam. Neither is precisely a libertarian belief, but ISTM they both fit with a libertarian aesthetic.
I continue to buy fair trade bananas, personally, and plan to keep doing so unless somebody rakes up some muck to substantiate the corruption concerns.
Patrick 04.06.10 at 3:54 am
Its called ressentiment. They know that people who aren’t libertarians, and who in fact think libertarians are silly children, like fair trade goods. Therefore they think fair trade goods are bad. Its the same reason so many libertarians think vegetarianism is morally bad, and SUVs are morally good.
On a slightly deeper note, when your entire ideology is based on the idea that people are inherently selfish and self centered, and that we’d all magically be better off if we embraced this fact, the fact that someone chooses to do something generous for a stranger just HAS to have pernicious repercussions, it just HAS to. Or else your ideology is wrong.
kevincure 04.06.10 at 4:21 am
I don’t think you’ll find libertarians who want to, say, *ban* fair trade coffee or anything like that. I think the general argument is that a) it’s a waste of your money because b) it’s a terribly inefficient way of doing charity if that’s what your after and c) in general equilibrium, it’s not even clear that unskilled workers in countries with fair trade coffee or bananas or whatever are better off. It seems much more likely that some workers are better off, but that the workers on fair trade farms will be disproportionately those with family connections to the farm or those with particularly high productivity. I think libertarians would argue that if you want to help third world farmers improve their incomes, you would be spending your income much better by lobbying for freer trade in those goods in Western countries, or alternatively working with charities that support productivity-enhancing techniques such as rural schools, clinics to deworm/provide antimalarials, etc. And you can be sure with those techniques that the vast majority of your money actually goes to its intended target and not to, say, the corporate vault of Starbucks.
It’s not so much the consumer act of buying the fair trade that would bother a libertarian – consumer sovereignty, after all – but the overblown claims of who is being helped by the fair trade label.
derrida derider 04.06.10 at 4:32 am
kevincure’s objections to fair trade are reasonable but they are pretty much the “left wing market skeptical” ones noted in the original post. The point is that libertarians (well, at least libertarian bloggers) seem much less coherent in their objections than this, so it is reasonable to infer that their objections are indeed rooted in ressentiment rather than from having thought it through.
tomslee 04.06.10 at 4:37 am
I stopped listening to Econtalk some time ago – Russ Roberts has never, that I have heard, heard anything on his show that has made him wonder in the slightest about his own beliefs, and he generally interviews his ideological friends under the guise of objectivity. In this episode, he and Mike Munger make the usual cases about displacement of the poorest, make the usual observations that WalMart’s average wage is higher than minimum wage (being an average, it could not be anything else of course). These arguments are circular – if things could be better they already would be, and any improvement in conditions will simply be dissipated and will even make people poorer. Yet there were no empirical cases at all in the discussion, simply perfect competition market models. The cynicism of Robers and Munger about fair trade marketing efforts contrasts remarkably with their belief that other marketing efforts, as part of regular market operation, are to be admired (companies would not engage in them if they weren’t worthwhile). They impute all kinds of other motives to their ideological foes without any evidence. And yet, shockingly enough, production standards regulations of all kinds have actually made worthwhile impacts on many different markets, and efforts to improve labour standards have, while patchy, had good impacts too.
tomslee 04.06.10 at 4:39 am
And I’d highly recommend “Can Labour Standards Improve Under Globalization” by Kimberly Ann Elliott and Richard B. Freeman, despite its incredibly boring title.
ScentOfViolets 04.06.10 at 5:10 am
I’ve never heard a convincing rationale for what seems to be their near-universal objection to unions. Somehow, one person bargaining with an employer is perfectly okay, but two people coordinating their bargaining is not. I don’t see why collective bargaining would necessarily be a bad thing by their lights, so long as no “coercion” is involved (another word with layered and manifold meanings not immediately apparent to the uninitiated), but, well, it just is.
trotsky 04.06.10 at 5:50 am
Um …
Who’s objecting to people buying whatever coffee they want?
piglet 04.06.10 at 6:33 am
kevincure: Fair trade does pay for schools and clinics. Doesn’t welfare (charity) create dependence and so on? Why should libertarians prefer charity to market mechanisms, which is what fair trade is? That is kind of the mystery here. But in fact, “libertarians” are never consistent and have never been. Collective bargaining is one case in point and Pigouvian taxes – which are a market mechanism for correcting market failures – is another one. If libertarians were consistent, they’d spend all their waking time lobbying for carbon taxes. This is such an old and banal story, why do we waste out time discussing it. Yawn.
Kadin 04.06.10 at 7:00 am
I’ve heard it argued that fair trade goods “distort” markets and prices, which I always thought was bizarre.
dsquared 04.06.10 at 7:27 am
Same reason that global warming sceptics often believe in the DDT myth – it’s got nothing to do with their core issue, but it’s a bit of hippy-punching that lets them tell one of the favourite “Rhetoric of Reaction” stories about counterproductiveness. Having said that, the Fairtrade Labelling Organisation IMO has some pretty serious questions to answer about why the hell its support price for coffee has hardly risen in the last few years and is so low relative to the premium charged for Fairtrade-labelled coffee. (Also, the fairtrade organisation has had massive mission creep over the last decade and is now involved in all sorts of things with debatable relevance to the original idea of price stabilisation for small farms).
kevincure 04.06.10 at 7:38 am
Unions, again, are not something I think libertarians on the whole object to – Will Wilkinson has a series of posts recently on why “left-libertarianism” is really the most common brand, and many of the straw men about libertarians you see bandied about seem to apply to conservatives, not libertarians. That said, those interested in efficiency – I think most libertarians are – do have two pretty convincing arguments against unions. The first is that unionized sectors, similar to the fair trade argument, tend to lead to nepotism when worker wage rises above what the workers would be paid in a similar non-union job. If the market demands 5 union workers at a wage for which 10 are willing to do the job, then something other than price will clear that particular market. The general way this works in the empirical work I’m familiar with is that “in-groups” will limit worker supply from outgroups. Among other things, this is why unions are often linked to one race or another. The other reason you might not like unions is that there is a question of how wages are divided up *within* the class of union members. Seniority tends to be much more important in unionized sectors. That is, the powerful members of the union are essentially expropriating wages from younger workers, not just from management and owners of capital.
Obviously unions have beneficial effects as well – worker safety and fair treatment, in particular. But if you’re of the persuasion that the individual is the primary element in society – aka, a libertarian – it’s not surprising you might be skeptical of unions.
Zamfir 04.06.10 at 7:59 am
kevincure, those points only work if you assume companies are owned and controlled by single individuals. In practice, management or owners are also in-groups, with the same aim of standing united to increase their share, and with similar internal dynamics as unions.
The question is not really why actually-existing libertarians rally against against unions or fair-trade chocolate. The question is why they rally so much more againt them then against other similar phenomena like management in-groups or luxury brand chocolate. Being against hippies, as a principle, seems to explain that pretty well.
JoB 04.06.10 at 8:13 am
20- Also, it is by far easier to become a part of union in-groups than of management or owner in-groups. Which is why one’s distaste for unions and fair trade should be indeed moderate when it is compared to the others because an in-group is more of an in-group if it is less accessible.
Paul 04.06.10 at 8:42 am
This Marginal Revolution post struck me at the time as a pretty good summary of the argument that buying Fair Trade goods is likely to be counter-productive. I’m not sure if Tyler Cowen counts as a libertarian for the purposes of this discussion…
” We might think of sub-Saharan subsistence economies when we think of Fairtrade, but the biggest recipient of Fairtrade subsidy is actually Mexico. Mexico is the biggest producer of Fairtrade coffee with about 23% market share. Indeed, as of 2002, 181 of the 300 Fairtrade coffee producers were located in South America and the Caribbean. As Marc Sidwell points out, while Mexico has 51 Fairtrade producers, Burundi has none, Ethiopia four and Rwanda just 10 – meaning that “Fairtrade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nations”.
The article offers many other points of interest. For instance:
By guaranteeing a minimum price, Fairtrade also encourages market oversupply, which depresses global commodity prices. This locks Fairtrade farmers into greater Fairtrade dependency and further impoverishes farmers outside the Fairtrade umbrella. Economist Tyler Cowen describes this as the “parallel exploitation coffee sector”.
Coffee farms must not be more than 12 acres in size and they are not allowed to employ any full-time workers. This means that during harvest season migrant workers must be employed on short-term contracts. These rural poor are therefore expressly excluded from the stability of long-term employment by Fairtrade rules.
In other words, it’s mostly a marketing gimmick.”
EWI 04.06.10 at 8:44 am
Why do libertarians (if such a mythical creature really exists), hate Free Trade Coffee with such a passion? Because it hoists them on their own petard, preciousss.
Consumer Choice! Consumer Choice!
dsquared 04.06.10 at 8:57 am
#21: I remember reading that at the time and thinking that it was entirely in character for Tyler Cowen and libertarians in general to be using data from 2002 in order to write about Fairtrade coffee in 2009. The linked article is quite good, and replicates a number of Peter Griffiths comments (plus a load of rather dodgy ASI market-boosterism). But it’s clear that for MR, it isn’t really about fairtrade – the hippypunching is the objective.
Alex 04.06.10 at 9:19 am
By guaranteeing a minimum price, Fairtrade also encourages market oversupply, which depresses global commodity prices.
Undeclared assumption: it’s a sufficiently large segment of the world coffee market to move the whole thing. I don’t know if this is true, but it’s critical to the argument.
Coffee farms must not be more than 12 acres in size and they are not allowed to employ any full-time workers. This means that during harvest season migrant workers must be employed on short-term contracts.
The first question that comes to mind: is this actually true?
Here is the Fairtrade Labelling Organisations International generic standardisation document for the use of hired labour. Quote of note:
O RLY? What about requirement 1.5.1.13?
Perhaps there’s a special exception in the Product Standard for coffee? Let’s look in the list of product-specific labour standards! Here they are.
There is no product-specific labour standard for coffee!
Is there any reason to read Tyler Cowan ever again?
Hidari 04.06.10 at 9:30 am
‘By guaranteeing a minimum price, Fairtrade also encourages market oversupply’.
I would also like to see some hard empirical data for this claim. I know it is an item of faith amongst market fundamentalists, but is it in actual fact true? The basis for this would seem to be belief in the ‘laws of supply and demand’. But these ‘laws’ are semi-mythical.*
*Just to explain what I mean by this: I don’t actually mean to deny that there is supply, there is demand, and that there is some kind of relationship between the two. What I object to is the word ‘law’ in that phrase, with the pun (no weaker word will do) which means that one is irresistably reminded of the laws of physics and chemistry. But the word ‘law’ in the economic phrase simply means ‘heuristic’: in other words, the ‘law’ of supply and demand is more like a proverb than a law of physics, something like ‘A calm sea does not make a skilled sailor’ or whatever.
Laws of physics are deterministic, the ceteris paribus restriction, while it applies, generally does not matter in real world situations, and they can be proven by empirical, quantitative data. The theory that there is a ‘law’ of supply and demand is not like this. Arguably, no ‘law’ of economics is like this.
JoB 04.06.10 at 9:58 am
24- It is sophisticated hippy-punching because first they denounce anything they don’t like as a hippy and then they call in the troops to punch the damned hippies. Meanwhile they can remain in their easygoing Western libertarian lifestyles thanks to governments that (have no option but to) favor them.
Map Maker 04.06.10 at 10:42 am
Alex,
“Regular work excludes all seasonal work.”
There actually isn’t a lot of regular work in coffee growing … seasonal work is planting and harvesting … the two main steps in coffee production …
Tyler looks right on this one.
Tim Worstall 04.06.10 at 10:45 am
“If consumers want to pay a premium for coffee that has been produced ‘fairly,’ ”
Which is why this libertarian (or classical liberal) supports Fair Trade.
“that fair trade coffee has perverse consequences and so on.”
Which is why this libertarian opposes Fair Trade. Not the concept, voluntary collective action is just fine. But the detailed rules do have some perverse effects. There are limits on mechanisation for example. And yet mechanisation is the only way, in the long term, that the incomes of farmers can rise (yes, obviously, at the cost of displacement of some or the majority of farmers into other occupations).
So not hippie punching in general, just punching this particular group of hippies.
Robert Wiblin 04.06.10 at 10:59 am
While fair trade doesn’t violate the non-agression principle, libertarians are usually compassionate people on some level too, so the ineffectiveness of fair trade at improving human welfare (as documented in comments above) is likely to make them critical.
Cranky Observer 04.06.10 at 11:07 am
> While fair trade doesn’t violate the non-agression principle, libertarians
> are usually compassionate people on some level too,
Compasssionate people, right up to the moment in the voting booth when they punch the Republican choice. Every single time.
Cranky
Alex 04.06.10 at 11:23 am
There actually isn’t a lot of regular work in coffee growing … seasonal work is planting and harvesting … the two main steps in coffee production …Tyler looks right on this one.
Tyler Cowan asserts that the Fairtrade certification forbids coffee farms to employ permanent staff. I have read the document, and have provided links to it. It says no such thing. Further, you appear to have missed this paragraph, directly above the sentence you quoted, on page 19, in the guidance notes to 1.5.1.13:
As you rightly say, most work on a coffee farm is seasonal by nature. Tyler Cowan, therefore, cannot possibly have been right even on his own terms; were his assertion accurate, it would be impossible for any coffee to pass Fairtrade certification. I refute it thus! (lifts cup)
Further, this demonstrates that he knows nothing about coffee, agriculture, or really anything else relevant to the issue.
Jason Kuznicki 04.06.10 at 11:25 am
Many of us don’t really care one way or another about Fair Trade coffee, as long as you choose it freely.
I’m not convinced of what effects this stuff has on the lives of the poor, for good or ill, but even if I were, it would be a pretty low priority compared to ending our foreign wars, legalizing drugs, and abolishing subsidies to American farmers. Each of those would do vastly more to help the lives of poor people in other countries than anything having to do with Fair Trade coffee.
Indeed, the whole idea that this is remotely an important issue for libertarians just surprises me. It’s not.
JoB 04.06.10 at 11:36 am
Abolishing subsidies to American farmers, indeed. Abolishing American subsidies to American industries as well; specifically those that are disguised as military purchases.
J. Otto Pohl 04.06.10 at 11:42 am
I have not noticed that fair trade coffee is any more expensive than unfair trade coffee. When I lived in Arivaca (2005-2007), a cup of fair trade coffee at the Gadsden Coffee Company/Aribac Cafe was only a dollar. This was considerably cheaper than any unfair trade coffee I have seen in recent years. But, maybe all the other places I saw were untypical.
However, I do think that the retail cost of coffee largely relies upon factors other than its fair or unfair trade status. Does anybody believe that the cafe pictured in this post would charge less than two dollars for its coffee if it were not fair trade? My guess is that any savings they could get from buying unfair trade coffee would be pocketed by the cafe rather than passed on to the consumer.
Ebenezer Scrooge 04.06.10 at 11:44 am
@14:
Libertarians–or at least some libertarians–have genuine conceptual problems with associations of any kind, including both voluntary associations such as unions and involuntary associations such as the state. (Don’t get them started with the family!) Dicey did a very nice job with this: high Victorian libertarian thought.
However, since most libertarians are merely money-cons looking for a smidgen of intellectual respectability (when they aren’t virgin teenaged boys), they personify corporations as individuals, and only view unions as associational.
tomslee 04.06.10 at 12:07 pm
I am quite prepared to believe Jason K and Tim W that there are many libertarians who don’t care either way. And I’m far from libertarian but I have my fair trade doubts too: is fairwashing ready to join greenwashing in our vocabulary yet? Still, problems are to be solved.
But I do agree with the premise of the post that there are many libertarian-minded economists who seem ready to spend time explaining why fair trade won’t help, and I suspect it is because they don’t want to admit that there are problems with an existing market that need to be solved, with the singular exception of the market not being competitive enough.
Fortunately, libertarian attempts to sway the market for hippypunching by pushing demand over and above the existing market-clearing rate will have little effect. In fact, it will probably decrease the total number of hippies punched.
Joshua Holmes 04.06.10 at 12:23 pm
However, since most libertarians are merely money-cons looking for a smidgen of intellectual respectability
This. Lots of libertarians are anti-union and anti-Fair Trade because they’re either not really libertarians, or they came to libertarianism through conservatism and haven’t really thought through the implications of the philosophy. Personally, I don’t care about Fair Trade coffee one way or the other, and I’m pro-union.
dsquared 04.06.10 at 1:14 pm
There are limits on mechanisation for example. And yet mechanisation is the only way, in the long term, that the incomes of farmers can rise
1. Tune in next week, when Tim discovers that the regulations relating to unemployment benefit preclude you from claiming it if you are also in paid employment. And yet paid employment is the only way, in the long term, to leave the ranks of the unemployed!
2. Perhaps more pertinently, no there aren’t! The generic FTLO standard does not have any limit on mechanisation (the only references to “mechanisms” refer to voting methods for producer co-operatives and the only references to “machines” refer to health and safety standards in their operation). Is there a specific rule forbidding mechanisation in coffee production? No! There is even a special Fairtrade price for “washed coffee”.
I actually knew that Worstall was wrong about (2) because I’d explained it to him before. I only added (1) to highlight another invalid argument – that because Fairtrade support is targeted on small producers, it in some way prevents small producers from growing. This woudl only work if the removal rate of Fairtrade subsidies amounted to a high marginal tax – in fact, as I have previously noted, the Fairtrade support price has not remotely kept pace with market prices, so it can’t be right.
The frustrating thing is that there are valid criticisms of Fairtrade, as noted above. But there are so many bad-faith ones that a version of the Galloway/Israel effect kicks in (both George Galloway and the State of Israel are basically rather unloveable entities that become worthy of qualified and critical support simply because of the kind of creep who one all too often finds attacking them).
dsquared 04.06.10 at 1:16 pm
(btw, I heartily second the last paragraph of Alex’s #32. The fact that someone claims that it is because of Fairtrade that family-owned small coffee plantations employ labour on seasonal contracts, or that anything remotely close to the current Fairtrade market could be supplied by unmechanised farms, while not completely discrediting them, certainly casts doubt on whether they have thought this sort of thing through).
Barry 04.06.10 at 1:28 pm
Test post
Barry 04.06.10 at 1:30 pm
Henry, longer comments don’t go through.
Henri Vieuxtemps 04.06.10 at 1:31 pm
Well, I suppose it’s a two-way street: libertarians do hippie-punching, and hippies libertarian-punching.
But I’d suggest that offering fair-trade brands is a weak punch; much more effective libertarian-punching would involve an actual boycott of the non-fair-trade brands. Bring it on, dammit!
chris 04.06.10 at 1:48 pm
the only references to “machines†refer to health and safety standards in their operation
Clearly, Third World laborers are being oppressed by intrusive, patronizing liberals who refuse to let them trade the risk of being maimed for pennies that they could use to feed their families.
Insisting on safe machinery interferes with the economic growth that could lift them out of poverty altogether. A rising tide lifts all boats, which is great if you still have arms to row with.
ScentOfViolets 04.06.10 at 1:53 pm
This doesn’t make sense from a libertarian perspective, I would think. According to another notion that apparently comes bundled with being a libertarian is that the value someone’s labor brings to an enterprise is just what someone is willing to pay them. So if they negotiate with employer X for wages Y, by definition, that is the value of that work performed by those people. So you can’t really even make that formulation in the libertarian world.
But as long as unions are voluntary associations, members aren’t coerced into these pay arrangements. I’ll also get on one of my hobby horses (well, hobby ponies) and note as a sidebar that seniority seems as good a proxy as any for evaluating work performance. Certainly it’s no worse for most people than those “employee evaluations” that a good many workers get and seem to bear only a tenuous relation to actual productivity.
stbnow 04.06.10 at 2:49 pm
Emerging from lurker status to point out another error on the menu: If “John Daley” is supposed to refer to the golfer, the name’s “Daly”. That is all.
piglet 04.06.10 at 3:13 pm
I find the “in-group” argument (19) rather mystifying. If libertarians oppose in-group tendencies in unions on the grounds of racial homogeneity and such, do they also oppose churches, country clubs, property owners associations, business associations, college fraternities, etc. etc.? I would expect this kind of argument from a social democratic, not from a libertarian perspective. The best way to get rid of in-group homogeneity and nepotism would in fact be to mandate universalism, along the lines practiced in Germany where *all* workers are represented by a duly elected workers’ representation and wages are set for all workers in a sector by negotiations between employers’ and workers’ representatives without government interference. If libertarians are really concerned about in-groups and nepotism, are they willing to embrace that solution (which is also very efficient btw)? Or are they simply against unions in any shape or form? (Rhetorical question I guess).
““left-libertarianism†is really the most common brand, and many of the straw men about libertarians you see bandied about seem to apply to conservatives, not libertarians” In my understanding, “libertarianism” as used in the US is really a misnomer (as are “conservatism” and “liberalism”). Libertarianism is originally a leftist concept defending individual autonomy against both government and corporate power and is understood in that way in Europe but for some reason, in the US, a certain brand of market extremism has customarily been labeled libertarianism and this is the way most self-described libertarians use the term in my experience. In my experience, Self-described US libertarians are far more vocal opposing environmental regulation and social safety nets than to oppose torture and wars of aggression. In that respect it does make sense that they would find fault with fair trade and unions, and it has nothing to do with the “liberty” in libertarianism.
mds 04.06.10 at 3:24 pm
This depends a great deal on what the actual goals of the schemes for reform are. “Public welfare” and “desire to do good,” if they appear at all, are used merely as window dressing when, e.g., Cato supports eliminating Social Security. Such a scheme for reform would greatly enrich their donors, and further afflict the afflicted while comforting the comfortable. You say “very big trouble”; I say “mission accomplished.”
piglet 04.06.10 at 3:38 pm
@35: the share of the cost of a cup of coffee that goes to the actual producer is so minuscule that even a large fair trade premium – say 50% – would be almost inconsequential – perhaps 5 cents per cup. This is one of the reasons why coffee became the quintessential fair trade good. Commodity markets such as coffee are dominated by few concentrated buyers who have the power to impose outrageously low prices on producers. Given that five cents per cup of coffee can be the difference between extreme misery and a decent living for producers, the protestations by corporate apologists such as Cowen are about as morally defensible as are economic arguments for child labor. If they were concerned about market distortion, they would talk about the monopsony power of the multinationals. Specifically the claim that fair trade “encourages market oversupply, which depresses global commodity prices”, is complete bogus. Fair trade is not subsidized production that is then dumped in the market (as is the case with many US and EU farm subsidies). It is a contractual guarantee that gives producers a minimum of economic security. Fair Trade was developed by people who understood Third World economics intimately, as opposed to ignorant amateurs of the Tyler Cowen ilk who even get the most basic Econ 101 concepts wrong when it suits their ideology.
Sebastian 04.06.10 at 4:03 pm
What do you mean by “so many libertarians opposed to fair trade”?
By ‘so many’ do you mean a majority of libertarians? Or even a large percentage that isn’t quite a majority?
And what do you mean by ‘opposed to’? Do you mean, “thinks it is rather useless on a practical level and wouldn’t personally pay the premium (and perhaps think that those who do are kind of silly and/or deluded about its effects)” or do you mean “think it should be outlawed”?
So far as I know there is nothing about being a libertarian that means you can’t believe that people make stupid and/or counterproductive choices. Nor does it mean that you aren’t permitted to point out that certain choices may be stupid or counterproductive. I think it just means that except for very extreme choices, you don’t think the government should outlaw/meddle with it.
Right?
I think that smoking weed every day would be a stupid choice for most people. I don’t smoke weed myself and I suspect I wouldn’t if it were legal. I would be willing to tell one of my friends if I thought he was smoking weed too much. I don’t think the government outlaw or even very strongly regulate the smoking of weed.
Does that make me a libertarian ‘opposed’ to smoking weed?
Sebastian 04.06.10 at 4:05 pm
ugh “don’t think the government should outlaw or even very strongly regulate…
Apparently I get a contact high from even talking about weed.
WharfRat 04.06.10 at 4:11 pm
Does anyone seriously believe that Fair Trade will, all by itself, lift entire populations out of poverty? If so, then the punch everyone is drinking in this argument is most certainly spiked.
I reach for fair or direct trade coffee because I presume workers there are treated marginally better. I also like the shop from which I purchase it. I don’t think I’m saving the world, lifting anyone out of poverty, or really doing much more than buying coffee, and hoping that there is a bit more dignity in everyone’s work, from the plantation to the point of purchase. I know there certainly isn’t any less.
Also, I’d like to ask, for the sake of provocation: has anyone commenting here ever lived in a coffee producing country and actually have some experiential knowledge of the plantation agricultural that brings the bean to every corner in the US? If so, please chime in, because with all this bluster, I’d forgotten that these pawns in various ideologies of economic development were actual human beings.
piglet 04.06.10 at 4:30 pm
WharfRat, you put up a whole army of strawmen. Anything else?
Blackadder 04.06.10 at 5:00 pm
One of my libertarian friends claims he would have no problems with unions, so long as employers had the right to fire anyone who joined one.
WharfRat 04.06.10 at 5:39 pm
@piglet 53:
To be honest, I’m not sure it’s really fair to hold my feet to the flames for putting up an army of straw men, given the conversation thus far. It’s true: I don’t really engage explicitly and individually with any other comment, commenter, or argument, but offered general observations about what I see as strange premises for an argument; to be clear, I’m saying that libertarian objections to fair trade are themselves simply grousing in the direction of a straw man do-gooder. Furthermore, I think we substantively agree that hostility to “fair trade” is absurd, though I don’t think I directly say so above.
I suppose I should point out that the straw libertarians would probably object to my belief or even hope that fair trade even marginally improves the dignity of the workers who labor under these contracts. Economic development practices that marginally enhance the dignity of those in host countries are defying the odds, and I applaud and support them.
Henry 04.06.10 at 5:49 pm
Sebastian – I’m referring here to the willingness of many libertarians in the public sphere to argue against fair trade coffee, despite the fact that they seem to be generally in favor of solving a whole host of problems touching on social justice through market mechanisms. Most of the same objections that they bring to bear on fair trade coffee can be brought to bear e.g. on industry self-certification schemes for forestry and environmental protection. Not about right to choose to be stupid – but about the fact that many libertarians think markets are teh awesome for solving social problems, but also object to e.g. fair trade for what seem to me to be mostly cultural reasons.
Mitchell Rowe 04.06.10 at 5:54 pm
Is it really news that libertarians are not a consistent bunch? I mean some very prominent ones are against a woman’s right to choose. In the United States most Libertarians are simply conservatives who like to smoke weed or who have a grudge against the poor.
bxg 04.07.10 at 12:30 am
I’m neither a libertarian nor a blogger, but “fair trade” sets teeth on edge in a way that honestly pre-disposes me to want to be critical ahead of hearing the arguments. It’s the phrase itself: it’s propaganda. I think it’s clever and effective (for its beneficiaries), but – as for a lot of effective propaganda – I think this is a bad thing. If they had chosen something more obviously a trademark or certificastion rather than a value judgment (e.g. “ShareTheWealth-Certified(TM)” coffee) I’d feel entirely differently. Another label I have the same instinctive reaction to is “cruelty-free”.
It’s like selling a new brand of oatmeal with a big “100% cholesterol free” banner emblazoned on the package. It’s true, literally, but you know they hope some consumers choose this brand fearing that competing brands of oatmeal _just might_ be cholesterol-laden. The effective market responses are for all brands of oatmeal to start carrying the same silly labelling clutter (and what comes next?), or for someone to undertake (and consumers to be responsive to) an otherwise-needless education campaign. Neither outcome is a good thing. Marketing that is fundamentally misleading, dishonest, or confusing undermines markets and public discourse in general, and I don’t think you need to be a libertarian to dislike it. Especially so when it is effective.
I think there’s a lot of room to argue against unfettered free trade, specially in particular cases. I don’t think the develping world are better off, though, if the received wisdom is that free trade is “unfair” by default. Or at least, if this is how people should enter the debate, I’d like it to arise from more than just an inspired marketing trick.
parse 04.07.10 at 1:48 am
The point is that libertarians (well, at least libertarian bloggers) seem much less coherent in their objections
So if both coherent and incoherent arguments in favor of the libertarian position exist, it’s safe to assume that most libertarians find the incoherent arguments more attractive? It’s interesting that on this thread, the arguments from self-identified libertarians or individuals presenting libertarianism sympathetically are the coherent ones, and the incoherent ones are those arguments libertarian-averse posters describe as being the true sources of libertarian thinking.
Sebastian 04.07.10 at 3:49 am
“I’m referring here to the willingness of many libertarians in the public sphere to argue against fair trade coffee,”
Again, ignoring ‘many’ what do you mean by “argue against”? Are they saying that it isn’t effective in the way that it is advertised and thus is a waste of money? That kind of objection isn’t anti-libertarian.
“but about the fact that many libertarians think markets are teh awesome for solving social problems”
This is super vague. Saying that ‘fair trade’ coffee doesn’t do much actual coffee farmers and thus is more a marketing scheme more than anything else isn’t some sort of damning indictment of the libertarian understanding of free trade so far as I can tell. Do you mean something else?
J. Otto Pohl 04.07.10 at 3:50 am
Piglet, so my observation that the fairtrade status of coffee is essentially a nonfactor in its price is correct? In that case it appears that there is no economic argument against fairtrade from an American point of view. Fairtrade does not hurt American consumers of coffee.
dsquared, neither Israel or George Galloway have a right to exist in their current forms. However, US taxpayers do not provide Galloway with billions of dollars each year and he has not dropped white phospherous on any children. So from an international point of view he is far less damaging.
dsquared 04.07.10 at 8:44 am
Again, ignoring ‘many’ what do you mean by “argue against� Are they saying that it isn’t effective in the way that it is advertised and thus is a waste of money?
Well, they’re saying that the Fairtrade standard prohibits mechanised farming and forbids hiring full-time workers, and they’re using seven-year-old statistics.
Paul 04.07.10 at 9:15 am
Daniel,
I’d be more comfortable with the “old statistics” critique if those same statistics were not also the most up-to-date numbers cited in this thread.
If the focus of Fair Trade really has shifted from, say, Mexico to Ethiopia that would be a pretty damning response, but I haven’t actually seen anyone arguing that it has, let alone providing any evidence.
Jason Kuznicki 04.07.10 at 11:29 am
Perhaps I wasn’t clear enough earlier.
Until this post, I was utterly indifferent to Fair Trade coffee. I hadn’t done any research on it, I hadn’t given it much thought, and what little thought I had given might have been stated like this: “I suspect (but I do not know) that Fair Trade coffee makes little or no difference to workers. But at least it’s harmless and I don’t even notice that it costs much more compared to the other premium offerings.”
I still suspect that it may make no difference for a variety of reasons:
1. Extreme difficulty in monitoring, which makes cheating very likely.
2. Signaling. People would pay more to signal that they cared about workers, even if the workers didn’t benefit at all. Fair Trade coffee would likely still exist even if it were just a pleasant-sounding lie.
3. Likelihood of perverse incentives and unforeseen consequences. I didn’t necessarily know what these would be, but there’s a strong habit of mind among libertarians to suspect them, and to look for a disconnect between an act’s intentions and its effects.
In each of these there is a strong parallel to organic foods, incidentally. But it’s your money (or mine), and we all get to do with it as we like. In the universe of priorities, I struggle to think of one that’s lower.
Barry 04.07.10 at 2:05 pm
” Likelihood of perverse incentives and unforeseen consequences. I didn’t necessarily know what these would be, but there’s a strong habit of mind among libertarians to suspect them, and to look for a disconnect between an act’s intentions and its effects.”
‘The Rhetoric of Reaction: Perversity, Futility, Jeopardy’ by Albert O. Hirschman
“is a book by Albert O. Hirschman, which styles the rhetoric of conservativism in opposition to social change as consisting of three narratives: perversity, futility, and jeopardy, and that, further, these narratives are simplistic, flawed, and cut off debate. Hirschman illustrates this thesis with examples from the French revolution and 19th and 20th centuries. He then discusses corresponding progressive narratives, and proposes”
http://en.wikipedia.org/wiki/The_Rhetoric_of_Reaction
Ceri B. 04.07.10 at 3:01 pm
The problem is of course that American-style libertarianism isn’t skeptical about collective results. It’s in denial about them. You can’t, for instance, be a libertarian in good standing and believe that state-directed health care systems work better so reliably that one would be an improvement in the US. You can choose your way out – denying the results obtained everywhere else, asserting some unique factor in American government and society that’s so much worse that we cannot be saved and are damned, asserting that misery is actively desirable. But asserting as a matter of fact that large-scale state effort can produce better results more cheaply and more accountably than private firms is as dis-allowed as dividing by zero.
Likewise when it comes to making a marketplace priority of anything like human rights. It’s not that it doesn’t work, it’s that it can’t be seen to work, or suspected of working, because if it did it would destroy the whole edifice.
The criticisms of someone like D^2 matter very much more to me because I know he does believe that priorities other than profit maximization can be important and successful.
moe 04.07.10 at 3:17 pm
The amazing thing here is that none of these people know anything about fair trade or have done much research on it. Fair trade is not an a priori issue. Before we decide whether we like ‘the idea of it’ maybe look into it a bit? Particularly when the worries are about the economics of it. I’m not an expert on fair trade and don’t know that much about it. So let me just put that up front! But I know enough to know that these people don’t know much about it either.
I know many people here are college professors and theorists but maybe look into fair trade. Or other things that you want to opine upon that require empirical knowledge. It’s interesting and you won’t know what the hell you’re talking about unless you do.
Fair trade often does not cost significantly more than the similar premium products they compete with, because the companies that disseminate fair trade products take less in profit as a result. So do not assume fair trade costs more.
There is an economic (not necessarily a libertarian) argument does touch on a weakness of fair trade, in that higher prices could drive a glut of production. But it is hardly more efficient to have people grow, as they must, speculating on the next year’s profit and then suffer enormous want once there is a crisis of overproduction. Fair trade can regulate markets in a rational way if the price variations are spread out over the course of several years.
The ‘left wing’ criticism of fair trade, as you put it, does not hold water.
First, fair trade growers are, relatively speaking, much better off than non-fair trade growers. In a sector with great poverty, fair trade growers can send their kids to school, have shelter, enough to eat, decent workloads, security. They live, for that sector, middle class lives where others who pick and grow copy sometimes suffer from malnutrition during price collapses or bad weather.
There’s an enormous difference in the context of rural poverty.
Second, I am agog at the absurdity of rejecting fair trade–which exists and already makes a huge difference in people’s lives–for some pie in the sky idea of multinationals sharing their profits.
Third, how is this ‘left wing.’ On the one hand, we have grower controlled co-ops and sometimes worker controlled companies. On the other, we have multinationals doling things out.
Fair trade is clearly not the answer to all of the world’s inequalities but it is an extremely innovative approach to the market, which screws the poor left right and sideways.
piglet 04.07.10 at 3:27 pm
Paul 63: I didn’t look up statistics about fair trade in Ethiopia because nobody has made a coherent argument as to why this is even relevant. If Cowen thinks that there should be more fair trade coffee from Ethiopia, he is welcome to start his own fair trade brand or to switch to an existing Ethiopian brand (which I believe there are). My FT coffee is not from Ethiopia and I never pretended it was and I have no idea why Cowen thinks FT is a failure if it doesn’t come from Ethiopia. It seems to be a version of the “doing good is pointless because there is so much more suffering than anybody can possibly alleviate” argument, or perhaps the “we shouldn’t try to solve Global Warming because there are also people dying of malaria, so better let’s do nothing about either of these problems” argument. As far as I can see, nobody here has offered any coherent argument against fair trade that is not based on speculation, resentment, or simply non sequiturs, and I am not willing to even respond to that. I did, in 49, respond to the only effort at making an economic argument, which I showed to be completely baseless. If you still believe that there is a “coherent” argument out there, please let me know.
dsquared 04.07.10 at 3:36 pm
If the focus of Fair Trade really has shifted from, say, Mexico to Ethiopia that would be a pretty damning response, but I haven’t actually seen anyone arguing that it has, let alone providing any evidence.
Well ….
First, fair trade growers are, relatively speaking, much better off than non-fair trade growers.
There is actually frighteningly, surprisingly little evidence for this, viz my links above. Fairtrade costs no more than other forms of coffee because the Fairtrade support price is much lower than the current market price and hardly any of the fairtrade premium makes it back to the farmers. This is a valid criticism of Fairtrade, which is only “left wing” in so far as it’s based on an actual fact rather than an economist’s a priori argument.
Sebastian 04.07.10 at 3:50 pm
“Well, they’re saying that the Fairtrade standard prohibits mechanised farming and forbids hiring full-time workers, and they’re using seven-year-old statistics.”
The lot size and mechanised farming mistakes (presuming that they are mistakes) were mistakes of the source (the guardian) not of the libertarian in question.
If you’re aware of more current statistics, you can argue that they are avoiding them, but you appear to be saying that the statistics are just a bit old with no suggestion or point to the ‘proper’ ones.
But none of these questions really go to Henry’s main thesis, which appears to be that criticism of fair trade is
a) incompatible with libertarian thinking [at least as applied]
b) offers some useful critique along the lines of: “If market mechanisms are poorly suited to promoting public welfare in situations where the profit motive is mixed up with the desire to do good”
So far as I can tell, a is pretty much completely wrong in theory and he hasn’t done much for it as applied.
I’m not even sure b makes sense enough to try to debate. Which market mechanisms is he talking about? What kind of promoting public welfare does he mean? Because if he thinks libertarians aren’t allowed to call out marketing ploys as potentially touting more than they actually provide, I suspect he just doesn’t understand libertarians at all.
And if instead he means things like in #56 (which honestly seems like a completely different issue than the one he raised initially, but at the initial level of abstraction I guess he could have meant almost anything), I’m not really sure what he is talking about. The usual libertarian examples are things like Underwriters Laboratory for electrical safety standards on consumer products–and even that isn’t really “self-certification”. But I’m not specifically aware of the environmental self-certification he talks about nor the libertarians who tout it. But if it is like UL I’d probably be for it. If it is just a meaningless marketing gimmick I would be for exposing it as such. As for fair trade coffee, I didn’t think of it much before, but it looks like it is an in between case–mostly marketing gimmick, with a couple of bones thrown toward coffee growers to make it look a little better.
As for Henry’s high level critique, my response would be (as someone who leans toward the libertarian side) that if you think innovation tends to be a large component of the general welfare, you tend to think that constant government meddling in the market on the one hand, or monopolistic control of it on the other is (usually) stultifying rather than leading toward innovation. (The major long-term exception being military innovation, which suggests that government can do innovation, but can’t do it cheaply. Although it farms a lot of the innovation out even there, so I’m not sure how that cuts–should Lockheed-Martin be seen as a private company for this analysis or basically an arm of the government? I don’t really know.)
How fairtrade coffee bears on either Henry’s side of that discussion or the libertarian side, is mysterious to me. It seems so divorced from the question he poses that I have to think that he has in mind some specific proposal which makes it all make more sense. But he is alluding to something which hasn’t come across my radar.
piglet 04.07.10 at 5:03 pm
Sebastian: I would say that Henry’s initial post was an allegation about libertarian attitudes which he made without providing evidence. The evidence however, at least in the form of highly suggestive anecdotal evidence, has been supplied by a host of self-described libertarian commenters, and they have made exactly Henry’s point: there is a reflexive resentment against FT among self-described libertarians, that is not based on any knowledge of the subject matter, and that is at least remarkable given that FT is a purely market-based, consumer choice driven approach that libertarians should find ideologically appealing if they had any coherent ideology at all. I think this is a fair summary of the discussion so far and let me point out that nobody has answered any of my arguments.
piglet 04.07.10 at 5:17 pm
And what Barry, Ceri and moe have said. To clarify further, I used to be rather knowledgeable about FT, I was involved in one of the early campaigns to get FT into Universities close to 20 years ago, I educated myself about trade issues, terms of trade, the power of the multinationals and the situation of small Third World growers etc. and I can only laugh when I see libertarians like bxg 58 with their cute romantic ideas about trade always being fair just, which only somebody can believe who is completely bereft of economic knowledge at all. As I said this was a long time ago, FT was a grassroots thing, corporations like Starbucks hadn’t entered the equation. I don’t claim to be knowledgeable about the current state of FT, I haven’t paid much attention to the issue recently, I couldn’t tell how much the FT premium per pound of coffee currently is and I don’t care enough to look it up. But none of the wannabe FT critics here seem to know what they are talking about and that speaks for itself.
parse 04.07.10 at 5:34 pm
I can only laugh when I see libertarians like bxg 58
“Libertarians like bxg 58” being those libertarians who say I’m neither a libertarian nor a blogger.
They have made exactly Henry’s point: there is a reflexive resentment against FT among self-described libertarians
And this reflexive resentment is exemplified by Jazon Kuznicki when he writes Many of us don’t really care one way or another about Fair Trade coffee, as long as you choose it freely.
Paul 04.07.10 at 5:36 pm
Piglet,
This struck me, when I quoted it above, as a fairly clear argument on the basis of the data:
“Fairtrade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nations”
And, subject to those data being accurate, I’d say it still is.
Daniel, if you’re going to make a series of posts complaining that someone’s argument is in bad faith because their data is old, you really have to be able to show that newer data is available and reveals a relevantly different situation.
My sense is that you are engaging in libertarian-punching first, and an interesting discussion of fair-trade second.
piglet 04.07.10 at 6:18 pm
“Fairtrade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nationsâ€
Why is this at the expense of poorer nations? Why is the fact that Ethiopia has a smaller FT market share an argument against FT? How does providing schools and hospitals to Mexican farmers hurt Ethiopian farmers? This claim is completely bogus and I have pointed this out in 68. Are you willing to engage in the argument or not?
parse 73: ““Libertarians like bxg 58†being those libertarians who say I’m neither a libertarian nor a blogger.” Point taken. Should have said something like “free marketeers”.
Paul 04.07.10 at 6:51 pm
Piglet, demand for coffee is a scarce resource, and when a system of selective subsidies diverts that demand from a relatively poorer nation to a relatively richer one we tend to expect that the people who make a living from supplying that demand, and the economy around them, will experience a loss disproportionate to the benefit received by the richer nation.
Now, you might reasonably respond:
a) That Fair Trade coffee generates additional demand where none would otherwise exist – so that people don’t buy Mexican coffee instead of Ethiopian, but instead of not having coffee at all. This is probably true in a very few cases, but I doubt it’s enough to make much of a difference to the original thesis
b) That the wealth of the nations in which coffee farmers farm is a poor proxy for the wealth of the farmers themselves and that the production of coffee adds little to the wider economy.
c) That, due to distortions in the market for coffee in Ethiopia, Ethiopian coffee farmers aren’t made any better off by their marginal sale – perhaps production is subsides so as to occur even when its price is below its true cost. Or visa versa for Mexico, I suppose.
d) That the data relied on is out-of-date in the sense that more recent data shows a different trend, but that’s addressed more to Daniel than to you.
We can have any one of those arguments, and, other than (a), I wouldn’t be stunned to find that one or more of them was accurate. But, to be honest, talking about trade subsidies without at least a prima facie understanding of trade diversion is a pretty monumental waste of time.
ajay 04.07.10 at 7:05 pm
Is this really a subsidy? Or is it just a case of Fairtrade coffee farmers earning more money for producing a better (and costlier to grow) product? Admittedly it’s not ‘better’ in the sense that it tastes better, or not necessarily so, but it’s valued more highly by the people who buy it. If Fairtrade were just approving coffee that had been produced more carefully and tasted really nice, that wouldn’t be a subsidy. The knowledge of fair working conditions is part of the coffee experience, surely.
dsquared 04.07.10 at 7:26 pm
Daniel, if you’re going to make a series of posts complaining that someone’s argument is in bad faith because their data is old, you really have to be able to show that newer data is available and reveals a relevantly different situation.
That was the purpose of “Let me google that for you”, a website that lets you Google terms like “Ethiopian Fairtrade Coffee” and thereby discover how much things have changed in the last seven years for Ethiopian Fairtrade Coffee.
mds 04.07.10 at 7:35 pm
To be fair, this could be interpreted as a come-on.
piglet 04.07.10 at 7:41 pm
“Piglet, demand for coffee is a scarce resource, and when a system of selective subsidies diverts that demand from a relatively poorer nation to a relatively richer one “
Please provide evidence that this is happening. I. e. that without FT, Ethiopia would sell more coffee. Once again, this is completely bogus.
Paul 04.07.10 at 7:46 pm
Daniel,
I don’t think you’re clear on my usage of the pronoun “you” in the post you (Daniel) quote.
Just to clarify: If Daniel wants to accuse someone of bad faith for using outdated statistics then Daniel needs to provide proof that said statistics are outdated. If Daniel has time to post, four times, that he wins because the statistics are outdated, then Daniel really also ought to have time to demonstrate the accuracy of his (Daniel’s) claim. I suppose I really ought to have a link to “let me google that for Daniel” here.
Paul 04.07.10 at 8:01 pm
Piglet,
On the demand side there are three possibilities in relation to any given unit of fair trade coffee:
(a) (as above) the costumer makes the decision to buy coffee only because fair trade coffee is available. In this case, mexico will gain sales and Ethiopia will not lose sales. This case is consistent with your hypothesis but, I submit, likely to be unusual.
(b) the customer would have chosen Mexican coffee whether or not it was fair trade certified. In this case, fair trade does not effect sales as between ethiopia and mexico.
(c) the customer would have chosen ethiopian coffee in the absence of a mexican fair trade option, but opts for mexican coffee out of a preference for the fair trade product.
Now, if I had to guess I would think that (b) and (c) would break down roughly in proportion to mexico and ethiopia’s share of the world market pre-fair trade, but slightly favouring (c), because ethiopia’s coffee is better-regarded (AFAIK) and therefore likely to appeal to some of the same customers as fair trade coffee generally.
You, on the other hand, seem certain that (b) accounts for roughly 100% of fair trade sales, and (c) for roughly 0%. I’m comfortable in rejecting that hypothesis.
Now, we can augment this discussion with an analysis of the supply side (briefly: increased prices for some producers in mexico will tend to increase output there, and some of the extra coffee they produce will result in reduced prices or sales in ethiopia) but I think we’re talking past each other. I’m genuinely unclear which bit of my argument you don’t like.
piglet 04.07.10 at 8:08 pm
Paul, you are making a factual allegation. I request that you provide factual evidence or drop it. Your theoretical hand-waving is irrelevant. You apparently don’t realize how ridiculous and ignorant your claims are. Do you know what Ethiopia’s coffee market share is? How did it change in relative and absolute terms over the past decades? Do you know what the FT share of the global coffee market is? You have no factual data about anything. You think you can just throw in some half-baked speculation about what might happen under certain idealized circumstances. To remind you, your side is making the claim about Ethiopia being hurt so the burden of proof is on your side, not mine. I won’t respond to this nonsense any more unless I see some factual data that actually support your specific claims.
piglet 04.07.10 at 8:31 pm
Since nobody is going to come up with data if I don’t do it myself, here’s the FAO statistic about the 2008 global green coffee harvest in tonnes (http://faostat.fao.org/site/567/default.aspx#ancor):
Africa 909,995
Central America 1,029,368
Caribbean 102,032
South America 3,836,624
Central, South, and Caribbean America produce more than 5 times what Africa produces. “181 of the 300 Fairtrade coffee producers were located in South America and the Caribbean”. So what?
Again I don’t think your argument would be valid even if South America were indeed overrepresented. I reject any reasoning of the form “if you help X but not Y, you hurt Y, so it is better not to try to help anybody in the first place”. And as I pointed out before, any FT critic concerned about Ethiopia is welcome to start their own FT operation.
Henri Vieuxtemps 04.07.10 at 8:42 pm
Isn’t the geographical location of the plantation completely beyond the point?
The customer wants to discriminate between socio-economic models, to reward one model and punish the other; what difference does it make if it’s in Mexico or Ethiopia or Antarctica? I don’t understand this angle at all.
bread & roses 04.07.10 at 8:42 pm
On the union distraction:
“If the market demands 5 union workers at a wage for which 10 are willing to do the job, then something other than price will clear that particular market. The general way this works in the empirical work I’m familiar with is that “in-groups†will limit worker supply from outgroups.”
In the world I’m familiar with (and part of), there are many qualities to which an employer can turn to choose 5 union workers from the 10 willing to do the job when price is prohibited. There’s productivity, skill, training, certifications, work ethic, looks, age, size of truck, identity of uncle, talkativeness or lack thereof, safety record, criminal convictions, mood of employer, seniority, in-group status, etc., etc.
In the construction trades, where I have been a union employee for 7 years and a foreman with hire-and-fire responsibilities for 1, all these factors are taken into account by someone at some point. But the productivity, skill, training, and work ethic are more enduring.
One could argue that an employer forbidden to choose on price will therefore choose a factor (like in-group status) that isn’t relevant to performance. And that will happen sometimes, I’m sure, because employers are frequently not rational actors. But I can’t see any reason to argue that that is what will happen, especially if you’re a libertarian and you think everyone acts in enlightened self-interest.
Paul 04.07.10 at 9:19 pm
Piglet,
While I am making a factual claim, it’s one that’s consistent with a very, very broad range of observed outcomes – namely, as I suggested above, that what I’ve called category (c) is significantly different from zero. I view your implicit claim that no purchaser of mexican fair trade coffee would otherwise have purchased Ethiopian coffee as so outlandish I literally cannot believe that you, yourself, believe it to be true.
I’ll follow up by saying that reasoning taking the general form “if a policy harms X and helps Y, and the harm to Y is in some sense larger than the benefit to X then that policy is not good” is a pretty important tool. Pointing out that anyone who is bothered can send Y an dollar is more than a little beside the point.
Paul 04.07.10 at 9:20 pm
Obviously I’ve got my “X’s” and “Y’s” backwards up there. D’oh.
tomslee 04.07.10 at 9:27 pm
“if a policy harms X and helps Y, and the harm to Y is in some sense larger than the benefit to X then that policy is not good”.
But (a) Fair Trade is not a policy, and (b) if an action that helps X would also help Y if it was extended to Y then the thing to do is to extend it to Y, not prevent it from helping X.
piglet 04.07.10 at 9:27 pm
Paul: I will henceforth treat you as a troll and stop feeding you. For those who still think there might be something to his reasoning, observe that he changed my “if you help X but not Y, you hurt Y” into ““if a policy harms Y and helps X”. Yet after a zillion requests to provide evidence for harm done to Y, none was provided. Case closed.
Henri Vieuxtemps 04.07.10 at 9:29 pm
Paul, I think you mixed up your Xs and Ys there, but anyway: what if I do want to harm the unfair-trade businesses, the more harm the better? Just like I want to harm the child-labor businesses and slave-labor businesses, regardless of what country they are in.
piglet 04.07.10 at 9:36 pm
tomslee: “But (a) Fair Trade is not a policy” To libertarians, everything that liberals do is some form of Big Government and every outcome must have been planned in advance by some Politbuero. Consumer choice and market mechanisms are only value-free when exercised by libertarians. As soon as liberals make a choice, they are inadvertently hurting somebody.
piglet 04.07.10 at 9:42 pm
I think this is important to understand about libertarian thinking. see, when a libertarian buys a cup of non-FT coffee, wherever it is from (probably not from Africa), it would be unfair to hold him responsible for the consequences of her action on poor coffee growers. He is just making a value-free choice. But when a liberal buys a cup of FT coffee, she is immediately responsible for the poverty of millions of coffee growers who’s coffee he happened NOT to buy. Can’t you see the moral superiority of libertarianism?
Folks, I’m not being sarcastic. This IS the essence of Paul’s and others’ argument. It is the ONLY way to make sense of it.
jrc 04.07.10 at 9:54 pm
A few FT facts:
Only Co-operatives can be FT certified, not individual farmers.
Coops tend to sell about half of their total production on FT markets, and half through regular channels. The two beans are identical.
There are no FT “subsidies”. There is a price floor, and a FT premium of 5-15cents depending on if the coffee is also organic. If the market price exceeds the general price floor, then there is a new floor set at a few cents over market price, plus the premium. The current NY “C” commodity price is a little above the general price floor.
There has been almost no evidence found of “cheating” the FT system. Transfair USA certifies all FT in the United States, and they oversee the use of the FT logo. I was somewhat surprised that there has been no documented cheating, but I know some Berkeley people who went out looking for it, and they were surprised not to find it too.
So, given the first two points:
The “problem” of over-supply in the face of FT “subsidies” is not really a problem at all g. The FT market is limited (it can only buy about half of what certified producers produce). Certified cooperatives then sell the rest of their coffee on the regular market. Total coffee supply remains unchanged, only the fraction sold as FT/Non-FT changes.
Entry into FT (certification) has increased rapidly. DeJanvry, McIntosh, Sadoulet have a working paper with an argument that this constitutes a kind of “tragedy of the commons”, where producers race to grab at the increasingly small FT premiums (because each coop can now sell a smaller percentage of their beans on the FT market, reducing average premium per pound). The greatest risk to increased FT certification is not increased aggregate supply, but decreased FT “benefits” to individual coops.
bxg 04.08.10 at 3:37 am
> I see libertarians like bxg 58 with their
Actual quote: “I’m neither a libertarian nor a blogger …”
> cute romantic ideas about trade _always_ being fair just, which only somebody can
believe who is completely bereft of economic knowledge at all.
Actual quote: “I think there’s a lot of room to argue against unfettered free trade, specially in particular cases…”
I invite readers to read my original post (@58) vs piglet@62. (Piglet: I challenge you:
encourage readers to likewise read the same two messages back to back. No? No embarrassment on your part?)
I request: “piglet”, please call me a liar up front if you want! (though based on what???). I posted under a mad- up name after all; here is no legal risk in you spelling things out.
IMO you are embarrasing yourself and undermining your case. Do you not see this? An honest person have either (a) not bothered to read my post, or if they did, not care about it (perfectly ok) or (b) have done so and have honest disageements reasonable to a person who has read what I have written. You look like an utter fool to do neither (a) nor (b).
I don’t even know what to argue against. Trade “_always_” being fair and just: this is IS silly, but it’s not me suggesting something so nuts (and how do you read this into my comment?) so who are you thinking about? Fair trade _on the whole_ being beneficial to all parties? I do NOT believe this but I do believe (a) this is a legitimate argument and (b) many people clearly not “bereft of economic knowledge” (and, e.g. with Nobel prizes etc) argue so with some reason. I do not feel contempt for them even where I disagree.
I viewed Henry’s original post as a legitmiate question. I wondered if there was an _interstesting _ answer (even granting the totally un-evidenced premises) more than “libertartians are stupid and evil” or “libertarians are stupid adolescent boys”. I tried to explain my own _prior_ psychology here, even as I am a socialist. I understand the difference between a prior bias and a belief after research, even though you do not; so basically thank you for nothing. Your inability to read (and willingless to simply lie about) plain and clear English sentences hurts everything you appear to believe in.
bxg 04.08.10 at 4:07 am
Follow up to previous long post, short version:
“piglet”: I challenge you to respond with a post including these word: “Readers, please read bxg @58 and my response @72. I stand by my response @72 as a sensible and justifiable personal opinion.”
“We” (>=1 reader :-) anxiously awaits your confirmation. (If you can’t say this, I would really like to know what the problem is.)
moe 04.08.10 at 6:28 am
dsquared: What links above? The ‘let me google that for you’ links?
I did not see evidence in the set of links (about Ethiopian Fair Trade) that fair trade growers are not better off or that they do not receive a higher price, averaged out over time.
The co-ops are paid directly. the individual farmer sells his coffee without being able to control the price. The co-ops are not required to sell their coffee to fair trade buyers. They can sell their coffee to anyone. I’m not sure what your claim was. Is it that they are irrationally selling their coffee at a lower price than they would receive elsewhere? Why would they do that?
Were there other links aside from the google link or something else you have in mind?
These are all genuine questions. I’m well aware that you know much more than I do about economics so what am I missing?
Alex 04.08.10 at 9:50 am
On cheating: one of the features of the FLO International standard is that it requires either union recognition, or failing that, employee representation of some other form, and joint control of what happens to the Fairtrade premium. So to some extent it should be self-enforcing with regard to Fairtrade producers, although there is still the risk that non-Fairtrade producers would pass off their products. That is of course the point of the certification process. (This has been a broadcast from Britons for Reading the Fucking Document, Already.)
dsquared 04.08.10 at 9:54 am
Moe: no, the Peter Griffiths link in #25.
dsquared 04.08.10 at 10:02 am
(actually just further to that, I’ve just noticed that Griffiths also makes a quite strong version of the “production of Fairtrade coffee affects the world price” claim, even saying that it actually kills farmers[1]. I don’t endorse this because I don’t think the empirical evidence remotely supports it. But a number of his other criticisms, relating to the opacity of the FLO and the fact that not much of the Fairtrade premium makes it to the farmers, are on point).
[1] Or rather, he says that this would happen if Fairtrade worked as it claimed to – actually he thinks the subsidy doesn’t really get through to farmers, and so there is no effect on the world price. At least he notices that these two criticisms are actually inconsistent – lots of people in this thread seem to be arguing that “the Mexican farmers never get the Fairtrade money! And because of this subsidy they don’t get, they overproduce!”.
piglet 04.08.10 at 1:20 pm
“lots of people in this thread seem to be arguing that “the Mexican farmers never get the Fairtrade money! And because of this subsidy they don’t get, they overproduce!—
I haven’t anybody seen anybody make that claim except for you and several of us have said that the claim about FT hurting non-FT farmers is bogus. FT does not promote overproduction period. Read again what has been said earlier.
bxg, don’t get worked up about this. I apologize for misidentifying you as libertarian. Apart from that, you are the one who said Fair Trade is “like selling a new brand of oatmeal with a big “100% cholesterol free†banner emblazoned on the package” . You seemed to be saying that trade is always fair just as oatmeal is always cholesterol free.
piglet 04.08.10 at 3:26 pm
I am spending too much time on this nonsense. Well I finally checked the Griffiths web site. I can’t figure out why anybody, even dsquared, would recommend it. It looks like any other nutcase web site and it is. The Prospect article rambles about Vietnam’s entry into the coffee market – an event completely unrelated to Fair Trade – which depressed world coffee prices, and then continues to say that Fair Trade is doing the same. What’s the connection? There is none. Well this was just a short article. What about the 38 page document “Ethical objections to Fair Trade”? Afaict it does not contain a single piece of empirically verifiable evidence about the alleged damage done by Fair Trade. The only “argument” is the one already discussed ad nauseam: “If aid/charity money is spent on high-cost, low-impact projects in the Third World, instead of on low-cost high impact projects, then there will be an increase in deaths and destitution.”
Fair Trade is not charity and it does not divert any money that would otherwise have been available for Third World aid projects. This claim is about as nonsensical as the claim that people are starving because I buy food for my cat.
piglet 04.08.10 at 3:42 pm
What is Fair Trade? It is consumers paying a small premium for a product that they care about. This premium is not a “subsidy” and does not incite overproduction, no more than farmers markets and CSA operations do.
What is interesting about the economic argument that has been made by people such as Cowen and some commenters on this thread is that the consumer decision to pay a premium for a product characteristic they care about is normally considered a sacrosanct aspect of economic freedom, beyond judgment or reproach. Cowen would never criticize consumers for overpaying for a brand name product or call this a “market distortion”. Only as soon as the product characteristic in question is the welfare of those who made the product, suddenly there is “market distortion” to be warned against. Cowen etc. assume that truly economic behavior is always selfish and whatever doesn’t fit this mold is suspect. This is the explanation that seems to make most sense after reading through this whole discussion. It kind of answers the question posed by Henry and so it may not all have been a waste of time.
Sebastian 04.08.10 at 3:43 pm
So, I haven’t seen much in the way of libertarians actually coming up with the objections attributed to them.
I’ve seen some libertarians object that it is just a marketing scheme with little or no actual pass through effect. And I’ve seen that the evidence on that question seems kind of sketchy from both sides, such that even after all this I can’t have a firm opinion on FT’s effects. (Dsquared’s position appears to be “You can’t prove that it doesn’t pass through” which may be true, but he definitely doesn’t seem to be saying “They pass through”) Anyway, that doesn’t seem hypocritical or cognitively dissonant for libertarians or whatever.
And I’ve seen one Tyler Cowen post suggesting that if FT worked as intended in the short run, it would tend to undercut itself in the medium run. Which doesn’t seem like an anti-libertarian objection either.
And then I’ve seen some links to people I’ve never heard of who just seem unbalanced in general. Which I’m pretty sure you can do for nearly any proposition at all.
So, I guess we’ve proved what?
Henry 04.08.10 at 3:57 pm
“Brink Lindsey”:http://www.cato.org/pub_display.php?pub_id=6807 and “Jeremy Weber in the Cato Journal“:http://www.cato.org/pubs/journal/cj27n1/cj27n1-9.pdf for starters. It used to be an occasional hobby-horse of Megan McArdle’s, but I can’t be arsed to go looking back through her “Jane Galt” stuff to find it.
LizardBreath 04.08.10 at 4:02 pm
So, I haven’t seen much in the way of libertarians actually coming up with the objections attributed to them.
I don’t remember clearly enough to attribute this to libertarians specifically, but wasn’t there an argument about some Economist article on Fair Trade coffee over at Obsidian Wings years ago? I remember mixing it up with Andy Olmsted, who I think was libertarianish, at least, if not a libertarian. And he’s dead at least two years, isn’t he? So longer than that ago.
I miss Andy — he was great to argue with.
parse 04.08.10 at 4:40 pm
Weber’s linked piece begins It is true that the Fair Trade coffee system–the producers, exporters, importers and retailers operating by the rules and standards of FLO–has improved living standards for many participating coffee growers. . .Yet the system faces vexing issues such as a disconnect between promotional materials and reality, excess supply and the marginalization of economically disadvantaged producers and groups. It ends with the conclusion that Only with a strong dose of practicality and self-critique can the Fair Trade movement create an effective mechanism for promoting development in coffee-producing communities. In between, Weber argues in favor of embracing market strategies to increase participation in Fair Trade networks.
If this is really one of the two best examples of libertarian opposition to Fair Trade, then opposition is being very broadly defined.
Henry 04.08.10 at 5:12 pm
Nope – they were the product of a 5 second google search for “Cato” and “fair trade.” But look at the discussion of the opponents of fair trade on the “Wikipedia page”:”http://en.wikipedia.org/wiki/Fair_trade_debate on the fair trade debate. Brink Lindsey, the Economist, Tim Harford, Henry Hazlitt, The Adam Smith Institute, the Institute for Economic Affairs. I wonder what ideological thread could possibly connect these people and institutions? (in fairness, there is also a short discussion of two French lefties at the end of the piece).
piglet 04.08.10 at 6:31 pm
As an aside, I don’t see that Rodrik (cited in the original post) formulates a critique of FT, coherent or otherwise. He is not sure how FT works and asks for information. Some of the repnses are worth reading though.
piglet 04.08.10 at 6:32 pm
As an aside, I don’t see that Rodrik (cited in the original post) formulates a critique of FT, coherent or otherwise. He is not sure how FT works and asks for information. Some of the responses are worth reading though.
Sebastian 04.08.10 at 8:49 pm
Well the Brink Lindsey piece you link seems more of the “doesn’t seem to be working as intended” criticism rather than anything else. And he certainly doesn’t seem to be trying to outlaw Fair Trade coffee or something. He just seems to be suggesting that it doesn’t work very well.
And the Jeremy Weber piece doesn’t even really strike me as particularly anti-Fair Trade anyway. It suggests that much of it is marketing ploy, that it has helped some producers, that it is subject to swiftly diminishing returns as currently operating, and that it has some interesting cross effects with ‘organic’ coffee which work against truly poor growers. He makes a couple of interesting suggestions at the end which you may or may not like, but it doesn’t seem particularly objectionable at all.
Again, some clarification on what you mean by opposed in “why are so many libertarians opposed to fair trade coffee” could really help. Characterizing the Weber piece as ‘opposed’ seems weird. He has some criticisms of it, but you seem to be implicating much more than that.
parse 04.08.10 at 11:43 pm
That’s very funny, Henry. You were so sure that there was libertarian opposition to fair trade coffee that you spent five seconds on a google search and rushed over here to post the results–only to find that the articles you linked to didn’t actually represent opposition to fair trade coffee. Maybe next time you should read the pieces before you present them as evidence in favor of your thesis.
Henry 04.09.10 at 12:25 am
parse – I’m happy to keep you amused (especially because it clearly isn’t very hard). This is a post that I’ve nearly written half a dozen times over the last few years – and two or three of those times it’s been in response to some libertarian or another making these claims. Hence my certainty that there were lots of libertarians making those claims. And I’m demonstrably right that it is a general (although not universal) trend – in addition to Tyler, the Econtalk guy and Mike Munger (libertarian candidate for governor of N. Carolina; I’d have been tempted to have voted for him over the Democrat if I’d been there, since his platform was measurably to the left of same), we have the _Economist_, Harford, Hazlitt, the Adam Smith folks etc. Usually, gotchas work better if they … well … get ya.
Sebastian – if I had been arguing that libertarians wanted to outlaw fair trade coffee, I would presumably have been arguing that libertarians wanted to outlaw fair trade coffee. There’s a certain degree of differentiation between the words “opposed to” which I used, and “want to outlaw,” which I didn’t (and which, if I’m not mistaken, you introduced entirely on your own initiative). I’m happy to agree that there aren’t any libertarians out there whom I am aware of who want to ban fair trade coffee – if you want to treat that as a concession on my part, do so by all means.
parse 04.09.10 at 12:48 am
parse – I’m happy to keep you amused (especially because it clearly isn’t very hard). This is a post that I’ve nearly written half a dozen times over the last few years – and two or three of those times it’s been in response to some libertarian or another making these claims.
Which claims?
And sincere thanks for keeping me amused. You’re right; it’s not that hard, but you deserve credit for provocative writing nonetheless.
There’s a certain degree of differentiation between the words “opposed to†which I used, and “want to outlaw,â€
There’s a similar difference between “critical of” and “opposed to.” I think Sebastian’s correct to say most of what you’ve pointed to so far is more accurately described by the former.
Henry 04.09.10 at 2:54 am
I’ll happily stipulate to Weber, but you and Sebastian are on a complete hiding to nothing with Brink, unless you can somehow explain how the quite unambiguous phrase, “well meaning dead end” is somehow incompatible with “opposed to.” And this is not even to get started on the Mike Munger/Roberts dialogue …
Sebastian 04.09.10 at 7:17 am
You’ll happily stipulate what to Weber? That he isn’t really opposed to fair trade even though you cited him and linked to him as a clear example of someone opposed to fair trade?
He pretty much makes the points that I’ve said are typical libertarian points throughout this thread. If he is what you mean by “opposed to” than you really seem to agree with my pot example from comment #50:
Do you really use a definition of ‘opposed’ which is so broad? I mean you can, but that is why I’ve been asking for you to explain what you mean by it all this time. Pointing out imperfections or unintended consequences in a system isn’t a contradiction in libertarian thinking. Using the persuasive power of pointing out that something isn’t working as intended isn’t anti-libertarian.
Your original post, and all of the comments you wrote after, suggest that libertarians want to thwart fair trade or something, but on actual inspection most of the cases look like libertarians suggesting that fair trade in practice tends to be mostly marketing scheme, or otherwise not very effective.
I’m not sure I’d even say Weber is ‘critical’. He kind of thinks that there are some good things about it, but that large parts of it are misleading/for show. He also seems to think that it broadly has good aims, and that it might be possible to get it to work in certain circumstances.
The funny thing is that if I had raised his piece, you probably would have dismissed it as non-representative. But what are we supposed to do when you raise it as representative and it turns out like that?
As for Brink, I think he uses it more as a prop than anything else. Kind of like how for Chomsky any discussion can be turned into a topic on American Imperialism. And even then, Brink is basically suggesting that it doesn’t work. You have some sort of mysterious linkage between this and a suggested contradiction about markets and social forces, which doesn’t appear to be illustrated in the Brink essay at all unless I’m totally misunderstanding your point. (Which is possible as you mostly allude to it, rather than actually sketch it out).
I guess that is my whole problem with this post. You allude to a bunch of things that are quite apart from my experience with actual libertarians, but don’t really point to good examples of what you want to talk about. Now I’m certain that if you look hard enough you can find a crazy person on the internet who could sort of illustrate your point. But so far, most of the examples seem like reasonable criticisms which aren’t even real opposition. And that is especially true of one of the two that you yourself offered as a representative. Which is just weird.
The funny thing is that I strongly suspect that Weber really is the most typical representative of how libertarians approach fair trade: they tend to think it is well meaning, but mostly a marketing ploy.
So you were right to include him as representative, but it undercuts your point about loony libertarians.
piglet 04.09.10 at 2:30 pm
It seems Sebastian is asking a fair question with respect to Henry’s original post and what he means by libertarians being “opposed” to FT and Henry might want to give a better response than he has so far. Reading through the thread and some of the references, what seems undisputed is that a number of libertarian-leaning sources are making claims about FT causing harm to poor African coffee farmers. Whether that constitutes “opposing” or “criticizing” the concept may be open to debate but more important is the veracity of those claims. The issue has been addressed quite extensively and so far nobody has come up with any credible evidence for the “FT harms poor growers” meme. Would you, Sebastian, then agree it is fair to say that some libertarian-leaning authors are spreading false and discrediting claims about Fair Trade?
Henry 04.09.10 at 3:35 pm
Sebastian – let me spell out the claim I am making again – this time in bullet points, which may make it clearer.
(1) Libertarians tend by and large, to be very enthusiastic about the benefits of policy-making via markets. They often make very broad and sweeping claims for same. Libertarians frequently propose that policies which are aimed at promoting various social goals (viz. protection of environment etc) be carried out through market means such as self-regulatory schemes combined with commercial reputation, and argue that markets are well suited for these purposes.
(2) Many prominent libertarians are also obviously opposed to initiatives such as fair trade coffee. They point to the many ways in which fair trade coffee schemes may have perverse consequences, and not achieve the kinds of the benefits that they purport to.
(3) But looked at properly, fair trade coffee shares much in common with the market and self-regulatory mechanisms that libertarians usually prefer. The same criticisms can be applied to both.
(4) Hence there is a disconnect here, which is interesting.
Note what I am _not_ arguing and have _never_ argued – that libertarians want to ban or outlaw fair trade coffee. What I _am_ arguing is that libertarians very frequently not only argue for market solutions from political theoretic first principles (which is what you seem to want to concentrate on), but for efficiency reasons too. It is the _efficiency_ rationale that I am going after here – even if fair trade coffee is inefficient and perverse, one would like to see libertarians apply the same kind of skepticism to the self-regulatory schemes that they tend to like.
On the broader point of the slippage back and forth between natural rights and efficiency arguments in libertarian thought, I’ve never seen anything better than “Cosma Shalizi’s summation”:http://www.cscs.umich.edu/~crshalizi/weblog/253.html. Although something different is going on in this discussion, where Sebastian seems to be interpreting an argument which I thought was quite clearly a criticizing libertarians-talking-about-efficiency one, as a criticizing libertarians-arguing-about-natural-law-and-whether-something-should-be-banned one.
Henry 04.09.10 at 3:40 pm
Also note, by the way, that some libertarians (most prominently Tyler Cowen) are not on the hook nearly as badly as others, because they explicitly acknowledge the limitations of markets for various social purposes, reprimand their fellow libertarians for making heroic assumptions about the virtues of markets-vis-a-vis governments and so on. I think Tyler is on safer ground making these arguments than e.g. Alex Tabarrok. I have no idea whether Sebastian is closer to the Cowen or Tabarrok end of this scale.
Sebastian 04.09.10 at 5:05 pm
Well at least you are clearer in your points. We could have used some of that in your original post. But you’re still maddeningly vague in certain areas.
On point 1, my problem is that if you inspect most of the examples of which I’m aware, they don’t map well onto the fair trade example . Take Underwriters Laboratories, which is the classic example. They verify certain safety standards in products. That is MUCH easier to verify and test than claims about how workers are treated in third party countries well back in the production chain. You can always look at the product as it IS, rather than make claims about what happened earlier. It is much harder to game, or make spurious claims about. Or take carbon trading. Libertarians tend to argue that if you want to limit carbon through government intervention, carbon trading is least distorting because it uses market functions to allocate the scarce resource such that it will tend to encourage those who can easily go to alternatives to do so, and will tend to encourage innovation more easily than alternative methods. This doesn’t map well onto Fair Trade either, which is more cartel like if effective, more advertising ploy if not.
As for point 2, I think you are still overplaying opposed to. What does ‘opposed to’ mean now that you have stipulated “don’t want the government to ban”? Willing to say that it doesn’t always work as intended? Hell, I say that about Tylenol, but that doesn’t make me opposed to it. But I’ll move on from there.
How about we just focus on “They point to the many ways in which fair trade coffee schemes may have perverse consequences, and not achieve the kinds of the benefits that they purport to.” which is certainly true.
“But looked at properly, fair trade coffee shares much in common with the market and self-regulatory mechanisms that libertarians usually prefer. The same criticisms can be applied to both.”
Looked at properly, this may be true. Unfortunately you haven’t helped us look at it properly. You just keep asserting the obvious parallels, which frankly aren’t obvious.
You are either misunderstanding the libertarian critique, or you have some example of libertarian proposals in mind that you aren’t willing to share for some reason. But the standard ones, the ones that leap to mind when I think of libertarian proposals, don’t actually share much in common with Fair Trade.
My main points on this:
1) FT makes claims about distant production, not actual product. These claims are harder to verify than claims about the actual product.
2) To the extent that FT accurately represents practices, it is unobjectionable for consumers to decide that they value it and are willing to pay a premium for it. How this intersects with UL-style verifications or market mechanisms like carbon trading, is unclear.
3) You seem to be conflating libertarian claims about market allocation of scarce resources and how that produces innovation (say carbon trading) with claims about market segmentation/specialization. Those aren’t particularly similar claims. Problems in one area are not the same as problems in the other. Fair Trade criticisms have very little to do with nearly all of the libertarian informed proposals I can think of in that realm. You either have something in mind that I’m not thinking of (which is very possible) or you are treating allocation and segmentation issues as the same (which is also possible). If the first, I wish you would just come out and identify the proposals you think are similar to FT and we could inspect them for similarity and/or typicality of libertarian claims. If the second, in my opinion they are different enough to require different analysis.
My analysis of market segmentation claims would be something along the lines of: they depend on verification problems. Verification of the end product (i.e. UL or long term safety of a pharma drug for example) is easier and more concrete than verification of a process. Even process oriented verification (say meat packing) is still subject to end product checking–if they fake it too much you verifiable bacteria in the end product. If you fake FT coffee, you get the exact same end product–coffee. So it is more subject to gaming or spurious claims.
piglet 04.09.10 at 5:53 pm
Would you, Sebastian, then agree it is fair to say that some libertarian-leaning authors are spreading false and discrediting claims about Fair Trade?
Sebastian 04.09.10 at 5:57 pm
Some? Sure. But more specifically, the major objection from d-squared was that the information was old. Not that it was wrong. And two of the items which are suggested to be wrong (I can’t independently verify) came from the guardian (Cowen is quoting the guardian) and as such can’t really be said to be from “libertarian-leaning authors”.
piglet 04.09.10 at 6:15 pm
I’m talking about the claim that “Fairtrade pays to support relatively wealthy Mexican coffee farmers at the expense of poorer nationsâ€. This is a specific claim, no evidence (old or otherwise) was offered to substantiate it.
Henry 04.09.10 at 6:42 pm
bq. You seem to be conflating libertarian claims about market allocation of scarce resources and how that produces innovation (say carbon trading) with claims about market segmentation/specialization
Sebastian – nope. What I am saying is that libertarians tend on the whole (with significant exceptions etc etc) to buy into a certain set of economic theoretical arguments. These arguments suggest that markets (and self regulatory mechanisms based on market reputation etc) are the best and most efficient way to connect individual desires to generally beneficial social outcomes. They tend to be suspicious of arguments that emphasize how resort to market mechanisms may have perverse or unexpected social consequences. However, when it comes to fair trade coffee, a variety of libertarian critics seem interested in finding a variety of reasons why market mechanisms _in this particular instance_ have pernicious and perverse consequences. Something doesn’t give here. Unless there is some _very strong reason_ why the market mechanisms underpinning the choice to buy fair trade coffee are uniquely awful, then we may expect that similar problems may plague other efforts to turn market mechanisms to the task of achieving broad social benefits. One plausible example that I can speak to from my own research is the insistence of libertarians at Cato and elsewhere on setting privacy rules through a combination of self-regulatory standards and reputational incentives. Trying to achieve privacy through these standards and incentives is plausibly subject to similar problems and perversities (it is next to impossible to measure how firms actually treat privacy using market means thanks to the incentive to obfuscate; self regulatory schemes like TrustE demonstrably have material motivations to underplay possible violations etc ) – yet libertarians writing in this area seem disinclined to investigate such problems further, let alone take them seriously. If you can point to any counter-examples, I would be interested to see them.
I’ll note that this has been my argument from the beginning – hence e.g. the discussion of consumer sovereignty in the initial post. The “opposed to” meaning something like “want to ban” is really something that you have introduced. What I have pointed to is a pattern across a substantial range of libertarian writers and sources, of persistent intellectual hostility to a particular phenomenon that takes advantage of the market mechanisms that libertarians usually like. Hence my conviction that there is something odd happening here.
piglet 04.09.10 at 6:47 pm
Maybe it would help to use the term “object to” rather than “oppose”, if semantics is really what Sebastian is up to?
Sebastian 04.09.10 at 7:25 pm
“They tend to be suspicious of arguments that emphasize how resort to market mechanisms may have perverse or unexpected social consequences. ”
No that isn’t a good characterization. Libertarians are perfectly willing to accept that markets may lead to unexpected social consequences (say how the introduction of the automobile changed US rural life). They tend to be suspicious of arguments that emphasize how wonderful it would be if governments try to further correct those–especially when advocates of the same are unwilling to investigate how those ‘corrections’ also lead to unexpected social consequences.
“However, when it comes to fair trade coffee, a variety of libertarian critics seem interested in finding a variety of reasons why market mechanisms in this particular instance have pernicious and perverse consequences. Something doesn’t give here. ”
Yes, but what doesn’t give is that you just gave a poor characterization of libertarian economic thought and then found a contradiction which exists because of the poor characterization.
“Unless there is some very strong reason why the market mechanisms underpinning the choice to buy fair trade coffee are uniquely awful, then we may expect that similar problems may plague other efforts to turn market mechanisms to the task of achieving broad social benefits. ”
“Broad social benefits” is another super-vague one. At that level of abstraction you are almost certainly right, or arguably wrong, or pretty much anything. Markets are great at providing certain kinds of social benefits, and mediocre at others, and badish and others still. But again, your sense that libertarians haven’t heard of unexpected market outcomes is just wrong, so you’re going well astray here.
“One plausible example that I can speak to from my own research is the insistence of libertarians at Cato and elsewhere on setting privacy rules through a combination of self-regulatory standards and reputational incentives.”
Finally we get to an example. Is this what you had in mind all along? Because it isn’t the most obvious example (I would have guessed you meant carbon trading). But comparing it to Fair Trade, it seems to me on first blush that it is easier to verify failures in the privacy case. Either than information becomes public (and thus the failure is revealed) or it is semi-public (but still subject to being noticed) or it is being used for marketing (in which case it will be noticed). Now it isn’t AS easy as the Underwriters Laboratories case which I have already raised numerous times (and you either ignored or don’t understand) but it is certainly easier than the Fair Trade case which A) takes place almost entirely in outside countries and B) has no consumer side effects whatsoever which combined seem to make it very difficult to verify.
Furthermore, we should note that the ‘libertarian’ arguments which most on this thread find so objectionable are those regarding second order effects regarding long term supply and demand issues (suggesting that it impoverishes one third world country’s farmers to help others). So far as I can tell those issues do not exist at all in the privacy case.
So what is left?
Henry 04.09.10 at 7:48 pm
Sebastian – clearly you are reading a very different set of libertarians than I am if you genuinely believe that libertarians are not, as a broad rule, enthusiastic about market mechanisms and suspicious of arguments against them. Given this basic difference, I suspect that further dialogue on this topic is not going to get us anywhere useful.
engels 04.09.10 at 8:06 pm
A few suggestions. Libertarians don’t like Fair Trade because liberals are into it and libertarians don’t like liberals (aka the identity politics argument cf. why libertarians don’t like health food, France and hippies). Other than that, for a libertarian any trade is fair, as long as there’s on force or fraud involved, even if it’s paying someone $1.50 for 12 hours work on a coffee plantation so the term is meaningless, or even a kind of false advertising. Other than that, ‘it’s not from the benevolence of the butcher etc’ that the market works its magic; once market actors start worrying about being nice rather than getting the best price they can all hell is likely to break loose and we’re halfway to communism.
Sebastian 04.09.10 at 8:08 pm
“clearly you are reading a very different set of libertarians than I am if you genuinely believe that libertarians are not, as a broad rule, enthusiastic about market mechanisms and suspicious of arguments against them.”
Umm, I responded to “They tend to be suspicious of arguments that emphasize how resort to market mechanisms may have perverse or unexpected social consequences. ”
Do you find that the same as your current characterization? Because I don’t at all, and I think most libertarians could easily distinguish between the two. Hell, I think most liberals could easily distinguish between the two.
If you are now retreating to “libertarians are generally enthusiastic about market mechanisms” I guess you win by the power of moving goalposts.
I took your allusions to specific cases and responded directly to them. I specifically addressed the different kinds of market mechanisms and why libertarians might look at them differently. On three different recent posts I tried to talk about how Fair Trade market objections were different from the objections you seemed to be alluding to. I’m beginning to think that you just read like a random sentence from my posts and then sarcastically respond to it.
You seem to be all about generalities and very little about specifics. (Say my specific responses in 126 or 120 or 116). Yes, at a sufficient level of generality you always win. Congratulations.
engels 04.09.10 at 8:39 pm
Seriously though Fair Trade isn’t really a ‘market mechanism’, at least in the purist’s sense of a system that generates beneficial collective outcomes from the _self-regarding_ behaviour of individuals (Smith’s invisible hand) so I can see why it might make libertarians a bit queasy. (Compare Milton Friedman’s disparagement of ‘corporate social responsibility’…)
engels 04.09.10 at 8:43 pm
But it seems like both sides of this debate have already taken their ball and gone home…
piglet 04.09.10 at 9:02 pm
“You seem to be all about generalities and very little about specifics.”
Sebastian, it is you who chooses to ramble on in the abstract rather than responding to specific arguments. E. g. your statement in 120: “You seem to be conflating libertarian claims about market allocation of scarce resources and how that produces innovation (say carbon trading) with claims about market segmentation/specialization” Observe how this hand-waving is totally disconnected from the preceding debate. It would probably be fair to characterize this as trolling. The point that everybody except Sebastian understands is that libertarians have a tendency to mischaracterize Fair Trade (FT as a “subsidy” etc.) in order to find fault with it.
bianca steele 04.09.10 at 11:18 pm
I was unaware that libertarians generally use the bad social consequences argument against rationalistic innovations in social or economic organization, but it’s interesting to know.
jrc 04.09.10 at 11:34 pm
Engels:
If individuals have preferences for the welfare of coffee farmers, then FT is a perfectly fine market mechanism. In fact, if Western consumers have those preferences, and FT does NOT exist, then there is no market for the altruism of the consumers, and thus we would not necessarily reach a Pareto optimal outcome.
People are still “self-interested” in the proper way, they just have preferences such that their self-interest is in part determined by the welfare of others. This is not some radical idea. Clearly, our preferences are determined by the welfare of others: friends, family, community, even without believing that generosity is ever likely to come back and help us (meaning: we don’t just care about them to insure ourselves against future misfortunes, we actually care about their well-being and are willing to pay for it).
engels 04.10.10 at 10:09 am
‘Clearly, our preferences are determined by the welfare of others…’
Maybe so but classical economics doesn’t assume this, and it’s not a part of its explanation of how markets work. See the famous Smith passage mentioned above.
engels 04.10.10 at 11:00 am
Otoh if you want to _define_ ‘self-interested so that all behaviour, including altruistic behaviour, is self-interested then yes, it’s self-interested ‘in the proper sense’. Likewise if I define cheeseburger to mean blog commenter then you’re a cheeseburger in the proper sense. I’m doubtful that either of these points really advances the discussion, though.
Arif 04.10.10 at 1:38 pm
One thing that seems missing from this discussion is the agency of producers.
Farmers and other company manager/owners in the third world and elsewhere can be motivated by various social goals for their own societies and workers.
I agree with Henry’s original post, that bringing producers together with consumers who share those socio-economic goals through intermediary certification organisations does not seem to me to be anti-libertarian.
Libertarians who believe in (at least that we should act as if there were) perfect competition may be upset that fair trade implicitly denies that either the price mechanism is sufficient to allocate resources efficiently, or that efficiency should not be the sole goal of economic organisation. But that seems quite a difficult view to sustain consistently.
The Econtalk argument linked to by Heartless Libertarian #3 seems to me to be suggesting that fair trade is an alternative to charity and replicates its potentially distorting effects through creating perverse incentives or increasing resources available to oppressive elements in those societies. The presumed alternative is to have faith in the market and campaign for western mercantilist policies to be dismantled. However here is nothing mutually exclusive in campaigning both for freer trade and supporting markets reflecting consumer and producer preferences for fairer trade (or local production, or organic production as mentioned by Jason Kuzinski #64).
Against this, the “libertarian” premise seems to me to be that all economic decisions should be free of social/ethical considerations, or to put it another way that the ethical/social goals they subscribe to would all be met through the price mechanism if free from distortion through redistribution, so all political efforts should be focused on achieving this alone.
From this supposed libertarian perspective then, the farming small-holder who wants to pay workers wages providing them with a degree of security, dignity or opportunity for self-advancement, or who wants to grow food using environmentally sustainable methods, is just as guilty as the hippy consumer who shares those goals. By caring for their more immediate impact on the environment or their employees, they are somehow (possibly by making it look like the pre-existing price mechanism is inefficient/unjust/destructive in allocation) making it harder to achieve a free trade revolution which “libertarians” believe will make everyone better off. (I use quotation marks, because I think that this only describes one very dogmatic strain of right wing libertarianism, and I imagine most self-professed libertarians would approve of fair trade in principle – as a non-coercive method of achieving our goals).
If libertarianism is incompatible with market activity reflecting non-economic preferences, then to be a libertarian either I should buy a narrative that my ideals for world peace, social and economic equality and security, ecological sustainability etc will all be met through the free market (as long as I don’t alter my consumer decisions to reflect those ideals too directly) – or I should abandon those ideals as less appropriate than wanting a world where production of stuff is maximised. It is a curiously totalising conception of libertarianism, requiring everyone to reduce their identities and behaviour to conform to a single model.
bianca steele 04.10.10 at 2:39 pm
engels, are you being facetious? I seem to remember Adam Smith wrote something about altruistic emotions being inherent to human beings. Maybe you should read every page of The Wealth of Nations and get back to us when you’ve verified that there’s no reference to any motive other than self-interest in that book. It would be interesting for a historian of science to investigate when the idea that narrowly defined rational self-interest was the only permitted motive in economics thinking became widely accepted.
engels 04.10.10 at 3:51 pm
‘Maybe you should re-read every page of _The Wealth of Nations_ and get back to us when you’ve verified that there’s no reference to any motive other than self-interest in that book’
Maybe, but I’m not really sure why, seeing as I never said there isn’t.
engels 04.10.10 at 4:17 pm
(Smith wasn’t a libertarian. I cited that passage, not because I think it sums up his views, but because it is a kind of mantra for some libertarians. I didn’t say anything about the whole book or his work as a whole, which is more nuanced.)
bianca steele 04.10.10 at 4:24 pm
Maybe, but I’m not really sure why, seeing as I never said there isn’t.
Oh, okay, I’ll do it then, and get back to you. I wouldn’t want to say you meant anything I couldn’t know you meant until I read all your sources in full.
I took your @128 and @135 to be arguing, against those making different claims about what modern economics says, that classical economics in the tradition of Adam Smith emphatically denies the action of any motive other than (narrowly defined) self-interest in, for example, in the whole process of getting meat from the barn to the kitchen. If this is not the case, I don’t understand how you intended your posts to be connected to the others that went before.
engels 04.10.10 at 5:40 pm
Well Bianca I guess I’ll just have to live with you believing I’ve said something obviously ignorant again.
piglet 04.10.10 at 5:59 pm
classical economics doesn’t assume this, and it’s not a part of its explanation of how markets work.
It’s not that hard. Classical economics assumes that as a rule, agents act in their own interest. It probably doesn’t “emphatically deny the action of any motive other than (narrowly defined) self-interest”, but it clearly describes self-interest as the main driver of economic decisions, and then goes on to say that through the “invisible hand” of the market, all these selfish actions miraculously add up to further the common good. I don’t see any merit to your complaint Bianca.
bianca steele 04.10.10 at 6:03 pm
I should have put in a smiley or a “Seriously” or some other verbal marker to liven up the academic sounding prose with something emotional.
engels 04.10.10 at 6:09 pm
Arif #137 is an interesting comment but, as I said above, iirc Milton Friedman did in fact defend this ‘totalising’ view, for corporate decision makers…
bianca steele 04.10.10 at 6:12 pm
piglet, I think we’re working from somewhat different traditions. Most strikingly, what you describe as “libertarianism” and characterize as “left,” is totally impossible in the United States, I think. That “all these selfish actions miraculously add up to further the common good” sounds a lot more emphatic than I think is warranted from anything I’m aware of in what I know of classical economics.
piglet 04.10.10 at 6:36 pm
Dunno. Why don’t you tell us what you think is warranted from anything you’re aware of in what you know of classical economics.
bianca steele 04.10.10 at 7:17 pm
piglet,
The question here is a human institution called “fair trade coffee”: people got together and came up with a plan to provide a product. They decided what the product would be, how it would be priced, and who would do the work, under what conditions. They hired or contracted with people who voluntarily offered their labor at the price offered, for the purposes offered. They offered the product to customers under prevailing market conditions.
There are several objections someone might make to this. Some people think the conditions under which labor is offered make the offer less than fully voluntary. Some people, on the contrary, think product planning, pricing, and so forth, should be done centrally. From the fact that someone objects, I can’t tell why. Here, though, people who object keep making the same argument (I mean here on this thread–I don’t know what Henry has been reading), so we know what the objection is. The objection is that the motives of the people who planned the organization were the wrong motives. The only motive that is acceptable is to be a market actor, someone who sells a commodity at market prices and pays market wages, making profits for investors.
They don’t argue for this, they don’t provide their sources, they don’t suggest books to read. They don’t welcome efforts by others to do that. They imply (falsely) that everybody who is qualified already agrees with them. They also imply that their sources (when they acknowledge them) made claims they never made: for example, if someone treats problem X, they may claim the person had principled reasons against being interested in problem Y. Only someone who believed lies could miraculously be turned to good purpose (ironically!) would feel any obligation to take what they say seriously.
engels 04.10.10 at 7:47 pm
I guess I’m going to give up on this thread in a minute but just to be clear, I haven’t said that libertarians are ‘opposed’ to Fair Trade in the sense of believing it is evil or wanting it to be stamped out. That would be loopy. I have given reasons for why I think some of them could consistently view it as unnecessary and as a kind of moral blackmail, which no sensible person would waste her money on. Of course I think that’s misguided too, but then I’m not a libertarian.
jrc 04.10.10 at 8:19 pm
On Preferences and Efficiency:
I think we are having a word problem. There is a conception that Classical economics relies on “self-interested” individuals. So let’s be precise:
A self-interested agent maximizes utility based on her own preferences. Many kinds of preferences can be represented with Utility functions. The components of this utility function (the variables and parameters) are not in any way specified by the theory of economics, only certain properties that these preferences must have in order to be representable by a utility function. These properties are not on the things people have preferences over (consumption, altrusim, etc) but on the ways people prefer them (preferences are smooth, transitive, defined across all goods).
A firm maximizes profit in a competitive market.
When firms maximize profits and individuals maximize utility, and there are no missing markets for anything people have preferences over, then (assuming production has decreasing returns to scale at some point and a few other things) markets achieve a general equilibrium that is Pareto optimal.
**Note: also no public goods, externalities, and symmetric information.
So: people have preferences for altruism. They maximize their utility, in part, by buying FT coffee. Because they prefer the bundle they choose with FT coffee over the bundle they choose with non-FT coffee and whatever other goods they could afford with the price difference.
So, in this example, classical economics is all perfectly happy with FT, and if the FT market did not exist, the market outcome would NOT be Pareto efficient, because individuals would have no mechanism through which they could consume altruism.
This is Micro Theory 1 in any graduate school.
The interesting point is the one that Bianca made: when did Utility Maximizing come to mean “All that should matter to you is your own consumption”.
I have a feeling that, in a general sense, even the Chicago people think that is a pretty gross twisting of what the theory actually says.
My guess is that this is a result of the modeling decisions Economists have made over the years. Modeling consumption of goods is easy, and empirically measurable too. Modeling altruism and measuring it are very difficult. So everyone who takes Econ sees only models where preferences are defined only over a couple of consumption goods, and they come to think that that is what makes people “self-interested” in the utility maximizing sense.
It is not.
j
jrc 04.10.10 at 8:19 pm
On Preferences and Efficiency:
I think we are having a word problem. There is a conception that Classical economics relies on “self-interested” individuals. So let’s be precise:
A self-interested agent maximizes utility based on her own preferences. Many kinds of preferences can be represented with Utility functions. The components of this utility function (the variables and parameters) are not in any way specified by the theory of economics, only certain properties that these preferences must have in order to be representable by a utility function. These properties are not on the things people have preferences over (consumption, altrusim, etc) but on the ways people prefer them (preferences are smooth, transitive, defined across all goods).
A firm maximizes profit in a competitive market.
When firms maximize profits and individuals maximize utility, and there are no missing markets for anything people have preferences over, then (assuming production has decreasing returns to scale at some point and a few other things) markets achieve a general equilibrium that is Pareto optimal.
**Note: also no public goods, externalities, and symmetric information.
So: people have preferences for altruism. They maximize their utility, in part, by buying FT coffee. Because they prefer the bundle they choose with FT coffee over the bundle they choose with non-FT coffee and whatever other goods they could afford with the price difference.
So, in this example, classical economics is all perfectly happy with FT, and if the FT market did not exist, the market outcome would NOT be Pareto efficient, because individuals would have no mechanism through which they could consume altruism.
This is Micro Theory 1 in any graduate school.
The interesting point is the one that Bianca made: when did Utility Maximizing come to mean “All that should matter to you is your own consumption”.
I have a feeling that, in a general sense, even the Chicago people think that is a pretty gross twisting of what the theory actually says.
My guess is that this is a result of the modeling decisions Economists have made over the years. Modeling consumption of goods is easy, and empirically measurable too. Modeling altruism and measuring it are very difficult. So everyone who takes Econ sees only models where preferences are defined only over a couple of consumption goods, and they come to think that that is what makes people “self-interested” in the utility maximizing sense.
It is not.
j
bianca steele 04.10.10 at 8:41 pm
jrc:
Thanks for the explanation.
I had gotten the impression that maximization of profits is only a modeling assumption, and that micro-economics doesn’t have normative implications (at least on that point) for firms (though it may have practical implications on how they should behave in the market). I didn’t know this was required by the macro theory (though maybe I would have known if I had been reading John Q.’s posts).
jrc 04.10.10 at 9:12 pm
Bianca:
Even though this is an economy wide kind of result, that is actually a micro theory condition for general equilibrium. Amazingly enough, in most of the macro models you get in grad macro 1, there is only 1 agent. And he tends to produce for himself. Strange, I know. But you really don’t want to know why. And if you do, John Q is much better equipped to explain.
lemuel pitkin 04.10.10 at 9:18 pm
But this is exactly the point that Amartya Sen was responding to in his famous essay on the impossibility of a Paretian liberal (which John Holbo notably misunderstood last year.) The logic above only has bearing on a world where the states of the world people have preferences over, and the states of the world there are markets in, are the same. But in reality, the only dimensions of states of the world there are markets in is the distribution of goods (and that small subset of human activity we call services.) So for Classical economics to get any purchase, people’s preferences must also be limited to choices between states of the world distinguished only by the distribution of goods. And in particular, there aren’t markets in the states of mind of others — liberalism (not to mention common sense) categorically rules out binding contracts on others’ mental states. So if such preferences are common, then Classical economics is irrelevant to the world we live in.
Libertarians, to their credit, are interested in the world we live in. They’re committed to the idea that allocation by markets really does lead to efficient (i.e.) good outcomes. It’s not enough for them (or for anyone except first-year grad students, really) that some abstract mathematical system whose components we might happen to label markets has a formal property we might happen to call equilibrium. That system has to have some correspondence to the markets we observe in the real world. In which case, you really do have to assume that people’s preferences are only over states of the world distinguished by the allocation of goods, and people who claim to be taking others’ states of mind into account in their purchases are perversely acting against their own interests and moving the world further from optimum.
jrc 04.10.10 at 9:36 pm
Can i call you Lem?
Anyway, I absolutely agree. The assumptions I listed are indeed completely nonsensical in a real world. But when they are violated, as happens in the real world, economics has nothing to say regarding whether market mechanisms are optimal or not. One can assume away preferences over non-consumption things in order to make the welfare theorems hold, but then your same argument blows back and there is no relation between the theory and the real world.
My point is this: If Libertarians want to argue that theory shows the market is best, they are stuck making certain difficult (perhaps “batshit insane”) assumptions. But they should at least be quite clear on those assumptions.
But, if Libertarians want to exist in the “real world”….then I would ask what makes them think that market provision leads to “efficient” or “good” outcomes? I would say “efficient” goes out the window in any strictly defined sense (although perhaps could still exist in a relative sense, relative to some other system). As for “good”…well, that’s then an empirical question and an ethical question (defining and measuring). But there is no justification for saying that markets are efficient or good without the theory behind it.
Otherwise, you just end up arguing: be selfish, it’s good, because it makes the economics work, then we get efficiency. But there is no reason to believe that this efficiency, which requires people denying their true, altruistic selves, is in any way good.
Noumenon 04.11.10 at 9:02 am
You suck for making me guess what the error on the message was
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