Re: Bugs in free markets.

From: hal@finney.org
Date: Sun Sep 03 2000 - 23:37:26 MDT


Wei writes:
> There must be opportunities in the world for making profits while doing
> evil. The corporation as a form of relatively efficient organization
> allows more of these opportunities to be accessed.

Yes, that makes sense; organizing in a group amplifies your power, for
good or evil. However corporations and other groups are not inherently
evil or wrong, any more than are other power amplification systems like
science and technology.

> A lot of evil contributed to big corporations seem to consist of
> situations where two parties voluntarily cooporate on some effort, but
> because one of the parties is in a significantly weaker bargaining
> position (because of market conditions, lack of information, or
> whatever), most of the benefit deriving from the effort goes to the other
> party (i.e. shareholders of the corporation). Is it evil to take
> advantage of other people, even though they would prefer that you did?

IMO it is not evil to engage in interactions which are voluntary for
all parties. As I understand these situations, the "victim" actually
has his situation improved, but just not as much as the victimizer.
However I know that many people have a different intuition.

There was an article in the 3/28/98 issue of Science News about
experiments in a game where there is a sum of money which will be
divided between two people. The first person makes an offer to the
second person of how the money should be split, and the second person
agrees or not. If he agrees they both get the money and it is split
according to the offer. If he disagrees, neither gets the money.

The first person has all the leverage in this game; he can keep almost
all the money and offer a pittance to the second player, and it is to
the second player's advantage to accept. However in practice, if he
offers too little, the second player will refuse. Most people offer
a substantial fraction to the second player, 30% or more, which is
usually accepted.

It seems that most people have instinctive beliefs about fair behavior
in situations of unequal power. Applied to the case of corporations,
they consider it wrong for corporations to use their market power to
help themselves, even when they do so only by offering lesser advantages
to others. Microsoft is a good current example.

Hal



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