I hate to say it, but Matt Yglesias has just gone too far this time. If you want to apply simplistic economic arguments to complex social situations, you can’t just wave your hands and suggest that the market for dragons in Westeros and neighboring lands is riddled with Akerlof style information asymmetries and complementarity problems. Instead, you should be waving your hands and arguing that under reasonable assumptions, there isn’t a market for dragons in the first place. The problem isn’t an Akerlof-style one, where there are unobservable variations in quality between dragons. The actual qualities of dragons for plunder and conquest appear to be highly visible – the bigger your dragon, the better they are at toasting enemy armies (the slavers in the TV series know this, and go for the largest of the litter). The problem is that the actual good being bought and sold is not the dragon-as-a-physical-entity, but the loyalty of the dragon-as-a-physical-entity. And this simply isn’t a salable commodity, as best as we can tell from George R.R. Martin’s books and the television series. Daenerys can’t sell a set of affections which appear to be rooted in a quasi-maternal bond, based on the Targareyn bloodline, or some combination of the two. Dragons don’t seem to vary in this quality.
Furthermore, even if George R.R. Martin’s world was one in which Daenerys were somehow able to transfer the loyalties and affections of a dragon to another, this problem would still be insuperable, because dragons are so powerful. The buyer of the dragon’s loyalty could never be sure that Daenerys had actually ‘sold’ it, because loyalty is unobservable. Perhaps Daenerys and the dragon were simply waiting for the right moment to turn on them. And since dragons mature, and fully grown dragons can more or less do whatever the hell they want, Daenerys and the dragon are essentially too powerful (PDF) to make bargains that they have a long term incentive to keep. This is a classic form of Thomas Schelling’s credible commitment problem – Schelling remarks in The Strategy of Conflict that the right to be sued is very valuable, because it allows one to make credible commitments. Daenerys, with her dragons, is too powerful over the longer term to be able to make credible commitments.
Hence, the sale of the Unsullied could never occur in equilibrium. The slavers are offering a military asset whose loyalty is unimpeachably transferrable – once the Unsullied have a new master, they obey that master unquestioningly. This is why they are supposed to be so valuable (lots of dubious implications in there of course …). Daenerys is offering a military asset whose loyalty is at best unobservable. Therefore, it can’t be readily sold or exchanged. The exchange should never happen.