Rights and Trade, the Implications of Human Rationality

bySpencerMorgan
Intodayscolumn,Idliketoexaminecloselytheroleofreasoninganditsrelationshiptoourinterpersonal actions.Wevealreadydefinedsomeuniversalbarriersthatguideourinterpersonalactions,andthesewe havelabeledrights.Butwhatisitaboutmanthatentitleshimtothesespheresoffreeaction? Lastweekwetouchedonmansuniquenature.Unlikeallotherlivingorganismsofwhichweknow,man livesnotbyasetofinstinctstoguidehisactions,butbyreasoninresponsetoperceptionsfromtheoutside world.Hisactionsarevolitionalandevenhisrationalresponsetoperceptionsisitselfvolitional,orchosen. Unlikeanyotherformoflife,mansurvivesandimproveshislifebytheuseofthisrationaljudgment. Thishassomeveryimportantimplicationsonthewayhumansinteract.Thefirstis,aswehavealready discussed,thatheisentitledtotheexercisesofthisrationaljudgmentandtoactuponitinallselfowning spheresofaction. Anotherresultofthisrationalnature,istheprocessoftrade.Often,thefinancialworldischaracterizedasa dogeatdogcompetitionwhereineverybenefitrealizedbyonepersonorgroupofpeopleisattheexpense ofcompetinginterestsofothers.Thisfallacyignoresthewayexchangesarebasedonmansrational capacity,andhowfundamentallyunlikeabattlebetweeninstinctdrivenanimalsthemarketplaceoffree exchangesis. FallaciesAboutExchange Thisconfusionhasbeenaidedbyprevailingeconomicnotionsthroughtheages,evenamongthemost promarketvoices,whichheldthatvalueinanexchangewastiedtolabor,andcouldbetreatedasafixed amount.Ifallitemsbeingexchangedareviewedashavingafixed,objectivevaluethennoexchangecanbe mutuallybeneficial.Thishasledtotheexploitationbytradefallacy,becauseatradethenbecomesa processbywhichonepartymustlosevalue(ascomparedagainstthissupposedobjectivevalue).Sucha theoryoftrademustholdthatexchangesarisefromimmoralpressuresorignoranceofthetruevalueofthe goodsorservicesbeingtraded.Itwouldbeimpossibleforbothpartiestoanytradetobenefitbyan exchange. AsagroupofAustrianeconomistsobservedinthelate1800s,thischaracterizationofvalueinexchanges isproblematic,anddoesnotexplainwhypeoplechoosetoparticipateinexchanges.CarlMengerobserved thatvalueinanexchangeisafunctionofarational,subjectivevaluedeterminationbyeachofthetwo partiesinvolved.Whenanuncoercedtradehappens,itisbecauseeachpartytotheexchangehas determined,basedontheirindependentandsubjectivedeterminationsofvaluethattheexchangebenefits eachofthemindependently. Thisabilitytouseabstractjudgmentbasedonvaryingcircumstancesandpotentialities,andarriveat subjectivevaluedeterminationstomotivateatrade,isauniquelyhumanrationalcapacity.Itisthecapacity thatallowshumanstoexchangewitheachotherformutualbenefit. Thustheimplicationofourrationalnatureisthattheprocessoftradeandbarriersofrightsbecomethe moralguidelinesfortheinteractionofrational,volitionalbeings.Innextweekscolumn,wellexaminehow thisprincipleoftrade,alongwiththespecializationitenables,hasbeentheimpetusforallofhuman civilization.