libertarian wrinkle: coercion exception for infromation

Great Debates
1

Let me start out by setting some ground rules. I want to explore the rationale for a possible exception to an important principle, not question the principle itself. So even if we’re considering the exception, I want us to do so from the position of valuing and fighting for the principle.

Basically, the principle is this:
Coercion is wrong, and more specifically to this particular discussion, it is wrong for the government to set rules on who can trade with who and how as long as the two parties involved are voluntarily choosing to interact. No person should face any government enforced obligation to provide a good or a service to someone else unless they choose to do so.

The question then, is this: economically, complete information is ultimately very very good for people’s ability to interact and trade with each other. The lack of reliable information about products and services creates a considerable loss of surplus, whether because of buyer’s/seller’s remorse, or people simply not buying or selling at all when they would have been willing to. So, should the role of even a very limited government (nigh the libertarian one) include enforcing or at least encouraging (via subsidy) buyers and sellers to provide all the complete information they have about the products involved in the transaction, or even invest in researching it themselves?

I’m thinking about things like requiring resturants to post their smoking/non-smoking policy outside so that people can make an informed decision. I’ve been pretty hard line before on these boards about how wrong it is for governments to force resturant owners to ban smoking, when both they and their customers can freely choose whether to offer smoking, or pass the place by because of the smoking policy, respectively. But I realize that in practice this can be sticky: people who want more non-smoking resturants don’t have a good way to collectively select what they want, and vice-versa.

Finally, a caveat, which creates the problem: information is not costless to provide. Safety testing a product, doing research into social costs, even posting signs or advertising information to potential buyers, is expensive. So we can’t avoid the fact that, by asking people to provide relevant information on request, we ARE engaging in a form of coercion.

2

Supplying information is the primary function of culture not government, but when the implied normal function of any product or service holds the potential of serious injury to the user.

This information, along with any necessary control, should be the function of collective government.

3

But it’s OK when the market requires that information.

Simply put, if it pays off to advertise that you’re a non-smoking restaurant then no restaurant is going to complain about posting it. It’ll be seen as benevolent advertising.

I don’t see that requiring restaurants to post their policy outside would be worthwhile at all. But I can see them deriving a benefit from it.

And it allows the population (vis-a-vis the number of smokers/non-smokers) to determine the demand for smoke-free eating establishments.

4

Interesting question. I haven’t got a definite opinion, just like to add a few viewpoints.

I believe that in France restaurant owners and hotels are required to post their menu and prices near the entrance so you can see for yourself before entering. I like this very much since I’m a bit shy for first going in and then leaving if it’s too expensive. It also makes it easier to compare prices. Of course one could always go in, ask prices, then leave, but I’m not sure how many people would be up to that.

With respect to giving information, the OP seems to go much farther than any legal system I know of. AFAIK, most legal systems require parties to offer relevant information where that is known. If relevant information was withheld, the contract is void or can be rescinded for misrepresentation. On the other hand, the other party is held to check for themselves. That is what all the ‘due diligence’ investigations with corporate takeovers are about.

Put simply: the core information must be provided for, the other party may not lie when specifically asked for something, but there is no requirement to give all information.

I am still rather baffled by the US legal system, where (if I am correct) on the one hand people are not easily held to aid others, but on the other hand rumor has it that consumers can sue companies for non-essential lack of information. I am thinking of the so-called puppy in the micro-wave story, which may well be an urban legend. The case about customers falling on slippery floors, however, is AFAIK true, while a recent case such in The Netherlands was rejected in lower court since the customer should look out himself as well.

5

Apos, I think the party line of “the market will take care of it” applies here. If an economic advantage can be gained by putting out all relavent information, then people will do so. If not, then it’s kind of pointless to force them to.

6

An interesting question indeed.

First off, I don’t think a subsidy is going to work. Too hard to distinguish between information required by the business and information provided for consumers. It’s regulation that could do the job, if it could be done at all.

Let me try to address this from several perspectives:

  1. Information as a public good for consumers.
    Consumers have a collective interest in demanding better information and the sum of their individual willingnesses to pay exceeds the price businesses would accept to provide such additional information. In this scenario, consumers would be willing to compensate businesses for the cost of providing information of a better standard in the form of higher prices and/or taxes, but due to free rider problems cannot organise it themselves. The government, by mandating information standards, would make consumers better off and businesses would be indifferent.

Now I know you said you didn’t want to discuss the principle of non-coercion, but as soon as you start talking market failure, non-coercion is surely a touchstone and not a principle. If you want to talk about an exception to the non-coercion “principle” because of a loss of surplus, it’s because you think non-coercion is usually a good instrumental way of maximising the sum of surpluses.

  1. Business interests
    Alternatively, one might imagine that businesses are caught in a many-party prisoners’ dilemma. In this case, businesses would do better (ie returns to capital would be higher) if all businesses provided a higher standard of information but no business has an incentive to provide that standard if others aren’t and each business would be tempted to provide less if others provided the standard. In this case, businesses would all prefer if the government forced them to provide the information. Alternatively, it might be useful if businesses could collude on this point (not all collusion is a conspiracy against the public).

  2. “Veil of ignorance” approach
    In both these cases, adopting an appropriate “constitutional” perspective (beloved of many, including libertarians like James Buchanan) gets rid of the apparent tension between efficiency and non-coercion. If we were confident in supposing that all businesses would agree to some standard of disclosure as part of a desireable framework for doing business, then we would be somewhat justified in dismissing complaints about the implentation of such a standard as mere post-contractual bitching. Of course, the problem remains that the “agreement” in such circumstances is necessarily hypothetical.

It is interesting to wonder whether both capitalists and consumers would gain under such a scheme. My guess is they would. It’s also interesting to wonder whether consumers are conned into buying things they don’t want or know they are provided with less detail on product quality than they would be willing to pay for. For a libertarian, the first would be a real concern, the latter just a bit of a shame (or for the hard core ones, a contradiction in terms).

Sound like I support the idea? Time for a change of hats.

  1. A contrast between neoclassical economics and new institutional and Austrian economics.

What you’ve said here suggests that the economic system is essentially like a planning system: there is information (preferences, technology etc) and the task of economic system is trade. The appropriate way to measure (one dimension of) the performance of markets is see whether there are some trades unmade.

But another way to view the market system is that it is a process which generates and organises information. Hayek 1945 is the seminal presentation of this view. Under this view, there is no background, complete information set which could hypothetically be made available to everyone. The information is itself generated by the operation of market forces. Markets are not exchanges contingent upon a given level of information.

From this perspective, the idea that there is “lost surplus” from incomplete information is one that misses the point. The full information, perfectly competitive Arrow-Hahn-Debreu world is irrelevant. Firms themselves are a consequence of imperfect information. Contracts are always incomplete. Trying to get businesses to divulge information they don’t wish to might well be destructive of many opportunities.

Now I’m not a libertarian, so I have some sympathy for both views. I don’t buy the “market information is the only knowledge” view wholus bolus. But I suspect your actual libertarians are liable to lean pretty heavily that way and thus reject your idea.

7

I hope I’m not violating the ground rules here, but it seems to me that the No Coercion principle is moot under the circumstances.

Suppose that people don’t like the cost of entering a restaura…restura…cafe to find out of smokers are welcome or verboten. With that in mind, let’s assume that some customers will not enter a cafe that doesn’t post its smoking policy. This lost business represents a cost to the business owner. The business owner must weigh this cost against the benefits of not posting the policy. However, under a government that may, for example, levy a fine we find the cafe owner making the exact same decision. In one case the public is acting as a diffuse group of individuals, in the other they are acting in concert through the polity. Either way the cafe owner faces a cost and must weigh it against the benefits–the idea of there being no coercion is a fiction; the only thing that separates the two cases is how public desire is coordinated and acted upon.

Generally speaking, this is one of my objections to extreme libertarianism. How can someone possibly think that the market can completely eliminate coercion? If I’m a burgler and I get caught, I’m going to face “justice” either way and it will be against my will. But that’s for another thread.

Back to the topic at hand, I’d say that the principle of No Coercion is not sufficient to reach an opinion. I think we have to ask things like “Why is the market good?” and look at all the answers. You propose non-coercion, which we are accepting. But also there is efficiency–the competitive market maximizes the amount of human well-being available. Here we have two things to note: First is that only competitive markets are guaranteed welfare maximizing. Second is that we have a large, diffuse group of myriad individuals for whom it is expensive to coordinate. They have already done so throught the polity–it is the legitimate voice of “the people”. Let’s consider these briefly.

The first issue is one of maintaining as near an approximation to competition as possible. This requires information to be as perfect as possible. This requires that smoking policy be posted.

The second is one of the cost of the market failure: Is it more expensive to require cafe owners to post a sign, or is it more expensive to make cafe patrons go in and find out about the smoking policy? Personally, it looks like the lower cost is with requiring a sign. Of course, the cost to civil liberties must be weighed. Is this really such an infraction? Maybe.

So we have one unambiguous answer and one ambiguous answer. I’d have to say that it looks like requiring signs is the better option since it makes the market more perfectly competitive, and since the relative costs are currently ambiguous.

8

—Under this view, there is no background, complete information set which could hypothetically be made available to everyone. The information is itself generated by the operation of market forces. Markets are not exchanges contingent upon a given level of information.—

Well, this was Hayek’s well taken case against central planning: without a market, there is no “correct price level” because that only exists when people, buyers and sellers alike, are really facing a market in the first place.

But I don’t think that rules out the basic problems of asymetric information in exchange that plauge markets like used cars or insurance.

And again, I’m mostly coming at this from the perspective of throwing a bone to those people who would like to see, for instance, smoking banned outright.

9

I admit to having been accused of being a “statist”, and I suppose that is generally true. However, I don’t see why asymmetric info. requires caving to the attempts to ban smoking. Indeed, if it requires banning anything, it would require the banning of concealing information.

Consider an example. I’m taking the info from memory, please consult Gerd Gigerenzer’s book “Calculated Risks” for more specifics. For every 100 women who undergo annual mammography screening for ten years, this is regular screening not a response to specific symptoms, we can expect 50 of them to get false positive results. Of the remaining 50 positives, a non-negligable number will have cancers that may not need treatment, such as ductal carcinoma in situ. On the other hand, for women who undergo annual mammography screening, mortality due to breast cancer goes from something like 3 out of 1,000 to 4 out of 1,000, while mortality overall is not affected at all! The expectation of benefit is strictly for women over 50 years old.

Now! Please note that I am a cancer survivor. I am not taking this lightly!

Women are not being told the true risk figures in an easy to understand format. Should regular mammography screening be banned? I say no, quite emphatically. However, I will say even more emphatically that better information be provided. I assert that the same issues apply for smoking, et hoc genus omne. In cases where there is are clear externalities, such as disease resistance as a result of antibiotic abuse, then strict gov’t. control and/or banning may be appropriate. However, in the case of smoking, as well as the case of the smoking policy signs, the requirement should be for the best reasonably possible information in understandable language.**

**Please take a look at Gigerenzer’s book. He argues that people aren’t as dumb as they seem, rather risk is traditionally handled in ways that are contrary to how human intelligence evolved. For example, he argues that Bayes’s Rule, while a correct and valuable tool, takes out the base rates that help us understand. So instead of saying that a test has sensitivity X and specificity Y and base rate Z we should say that of every 10,000 people in the target group we can expect A to have the condition, of those A, B will be expected to test positive, of the 10,000-A who don’t have the condition, C will still test positive. Therefore the odds of a randomly chosen person who tests positive, the odds of having the condition is B/B+C–which is much easier to understand than Bayes’s Rule.

10

I find the thought that because there are external circumstances involved in making decisions that there must therefore be coercion present and now it is just a matter of sourcing it to be a bit of a stretch.

They can’t. Thankfully, they also don’t. If the market could eliminate coercion, there would be no need for a government.

hawthorne, your second point was what immediately occured to me after reading the OP (though admittedly it was a little less focused).

11

I really don’t see how the decisions of a polity generally taken to both represent the will of the people and protect their rights qualifies as coercion in any non-pedantic sense. Humans are social animals and living in a society involves conflict, coordination, and comprimise. In that regard it is reasonable that one who expects to live in and enjoy the benefits of society should also be willing to bear a few costs without crying “coercion” every time a decision she doesn’t like comes down. I also am not convinced that a system where the rights one enjoys are limited to the rights one can afford would produce desirable results.

In regards to the OP, the cafe owner is doing a harm to others by deliberately making the market less efficient. To say that the public should bear the cost of his offense doesn’t seem quite kosher. Government, in places like modern western democracies, is the legitimate representative of the people. Whether the people impose the cost of his offense on the cafe owner as a bunch of unconnected individuals or through their legitimate representative is hardly a choice between freedom and coercion. But that is the essence of the hard-core libertarian claim. In a situation like this that seems a little untenable.

To say that one situation is coercive and the other isn’t, then you have to first establish that the government does not legitimately represent the will of the people. Either way the cafe owner is having a cost placed upon him by the people. How can it be that when the people act as a diffuse group of individual actors it’s freedom, but when they act in concert through their legitimate representative it’s coercion?

12

Again, I find your apparent definition of “coercion” as “making a choice based on things beyond one’s control” to not even intuitively make sense.

13

Leaving aside intuition as an acceptable standard, I’ll say fair enough. I gave it a whirl. In which case, would you please explain to me how incurring a cost as a result of the will of the people is freedom whereas incurring a cost as a result of the will of the people is coercion.

14

I don’t know, is democracy a dictatorship?

15

—Therefore the odds of a randomly chosen person who tests positive, the odds of having the condition is B/B+C–which is much easier to understand than Bayes’s Rule.—

Oh, I agree totally. And that’s part of what I’m asking. The problem is that the cost of figuring out stuff like this, however, how to make people understand and appreciate the real risks in the best way possible, is not insubstantial. Many many, consumers obviously don’t take the time to do it right: and as a response, they often blame others when things aren’t what they expected. But if we decide that information is really really important to people’s free and fair personal decisions, who should pay for making information accurate and available?

—I don’t know, is democracy a dictatorship?—

Unless you explicitly mean “rule by one person” by “dictatorship” (which is the meaning, but would also make your quetion kind of silly, like asking “is an apple a garbage truck?”) then why can’t democracy sometimes be a dictatorship of the majority over a minority?

16

It can be, just like “coercion” can be “making a choice based on things beyond one’s control.”

17

I don’t think that’s an answerable question–without digging through at least a few other assumptions. For example, in a modern western democracy it is generally considered that the gov’t. represents the people and does so legitimately (I gotta find a synonym for that word). I agree with that view. So to my mind, I say that the polity has a right to tackle the question and where the situation that obtains is prima facie valid. It may not in “truth” be acceptable, but it has to be shown to be wrong rather than assumed.

Evidently there are others who feel that no government can legitimately represent the people. I’m on another listserve that’s packed with them–they rant about statists the same way that C_______ used to rant about capitalists. In that case the answer will probably be very different, asserting that any state intervention is coercion (even though without the state they seem to have no way to defend market efficiency from the myriad market failures).

That’s why I violated your ground rules regarding coercion and argued that is wasn’t fitting for the scope of the question.

I suppose I might take a tack that may be different from what I’ve been arguing by asserting as an axiom that the burden of correcting the market imperfection lies with actor most responsible for it. In that case, the cafe owner would bear the cost because it is up to him to ensure that the information about his product is as perfect as is practicable. The used car salesman would bear the burden of fully disclosing all the information about the vehicle–thus allowing us to avoid the lemon market failure. And so on.

What do you think?

Well, it may not be a dictatorship by definition, but that doesn’t mean that the minority enjoys any rights. So a democracy can’t be a dictatorship, however it can be oppressive and anti-liberal. In fact, there is a book review in the latest Economist about that very thing: The wilder shores of liberty. Fortunately, we live in a constitutional republic… :slight_smile: