Free to Choose

When is an exchange fair? Fairness or equity is a concept with no meaning, unless it refers to both an object (the exchange in this case) and a subject. When someone protests – “That isn’t fair!”, one must ascertain two things to make a judgement – What isn’t fair?, and to whom? Generally, the object refers to a proposed or actual event or action, and is known. But the subject is often neglected or obscured. Therefore, if we are to be able to ascertain whether an exchange is fair, we have to start by clarifying who we are referring to (the subject).

An exchange means to give one thing, in place of receiving another. We often refer to exchanges between groups, or between multiple parties, and this presents a problem when the question of fairness is introduced. In an exchange, fairness is assessed by making a value judgement between what is received, and what is given. Values being that which one acts to gain or keep. Values presuppose the existence of a “valuer”, and this can only ever be an individual. Groups do not have values. Groups are only collections of individuals, and cannot possess independent values. Why? Simply, because groups do not possess independent (ie. inherent) existence. That which does not have independent existence, cannot have independent values.

If values are only held by individuals, then value judgements and the evaluation of fairness can only concern individuals. A primary misconception behind many errors regarding the fairness of capitalism, is the idea that values and fairness or equity applies to groups. People casually refer to what is fair for society, workers, or any group of people and fail to understand that the only person they can truly speak for is themselves. The most one could say, is that groups might consist of individuals who share some common values.

Regardless of whether every individual in a group receives and gives up the same thing, it is still the province of every individual to make their own value judgement. One can abrogate this responsibility and act on someone else’s value judgement, but one can never have their values decided by someone else. Consequently, to say that a group considers something unfair, is to either assume everyone in the group has the same values, and makes the same judgement, or to arrogate to oneself the right to determine every member’s value judgement. Neither is tenable. Even when all the members of a group are unanimously agreed, one can only say – all the members of the group are unanimously agreed. Unanimous agreement on the question of fairness at a particular point in time, does not confer inherent values on the group.

If a fair exchange can only be determined by an individual’s value judgements, then some may argue that I am throwing any objective standards of fairness or equity out the window. Indeed, I am asserting that value judgements are necessarily subjective, as is each individual’s concept of fairness. However, a critical distinction needs to be made at this point. The values we hold are subjective by definition – values are that which we (as individuals) act to gain or keep. However, the proper or moral values are not. The values we ought to pursue are objective - the same for you and for me. (see essay Human Nature - for an explanation why).

However, few people consistently and consciously pursue the moral values necessitated by human nature. Rationality is a choice, and as with any choice, there are many who choose alternatives. This is where the concept of fairness gets tricky. Fairness is commonly considered to be synonymous with equity and justice, and can mean – to show no partiality, to get what is deserved, or “right judgement”. At this point, It becomes incumbent on me to reiterate that in this essay I am only interested in the definition of fairness with respect to exchange, and not every possible application under the sun.

Let us inspect each definition of fairness with regard to exchange. What does it mean to show partiality in an exchange? Is it unfair if I choose one product over another, because it is cheaper or of better quality? Obviously not. The same holds true if I chose one employee over another because they are better qualified. But, what if I were to choose a product of lesser quality and higher price because I liked the label on it? Is that unfair? Can the producer of the cheaper, higher quality product call me to account? And is the producer of the more expensive, and less valuable product able to justifiably complain? The answer is of course no to both questions. I am free to choose what I want, and if I choose irrationally, no-one has the right to force me to make a rational choice.

Does this not then apply equally to the question of employment? Is not an employer entitled to a “free choice” with respect to how he spends his income, and makes his business decisions? If an employer chooses the indolent, yet attractive secretary over the productive, plain one, does anyone have a right to force him to choose differently? And if so – why? What is the difference between the consumer and the employer? Are they not both making decisions based on their own values, concerning their own property?

Yet, many people would protest that the employer is acting unfairly. They argue that attractiveness is not a valid criteria in hiring employees to perform a job, unless it directly relates to the function of that job. Who is to decide what is and isn’t a “valid” criteria for making judgements? As I suggested at the start, onlyindividuals have values, and only individuals make value judgements. Criteria for choosing products or employees are in actual fact - values. Therefore, it cannot be society as such which decides on the valid criteria (values). Thus, the people who advocate laws (backed up by the threat and use of force) to compel everyone to use specific criteria, may speak of social or normative values and ethics – but in fact it is only one group of individuals imposing their values on every other individual.

Does this mean I am supporting an employer’s right to discriminate on any criteria of their choosing? Possibly, but I will defer my answer to a later point. The relevant question at issue for you, is whether anyone has the right to compel someone to act morally and punish them if they don’t. Nobody is arguing for instance that using race as a criteria (value) over ability is moral. But what is disputed is under what circumstances (if any) a person may be compelled to act morally – or indeed rationally. (they are one and the same thing under the ethics of rational self-interest – see Human Nature). For the irrational and immoral consumer – we generally agree that her choice may not be constrained, and requires no sanction. For the irrational and immoral employer – most of us would feel it is quite proper to limit her freedom, and punish transgressions. Why the difference?

A likely answer is that when an individual’s actions affect only themselves, we are quite prepared to tolerate irrationality and immorality. When their actions adversely impact on others, we then consider it justifiable to circumscribe their freedom of action. Yet, this resolution is not as cut and dried as it might seem. The consumer who chooses to ignore the cheaper and higher value producer is affecting that producer by his actions. However, his action does not impute a cost to the producer – it is actually only the “loss” of a potential benefit. Similarly, the employer who discriminates against the black candidate does not costthe black candidate anything (as long as she is honest about her prejudices), but simply withholds a potential benefit. Can one legitimately construe a person’s decision to not confer a benefit on another – as an adverse impact? Is the “loss” of something you never had, a real loss?

To this question, I expect one argument would be that every individual is equal, and therefore has the right to be treated equally. Thus, discrimination based on race is unjust. But once again, this does not hold water in our analogy. A consumer who discriminated between producers of a product on the basis of race, would not be forced to act morally, or punished for acting immorally. Why? Only because we all recognise that the producer who was discriminated against had no entitlement to receive, or even be considered for the business of the consumer. A “loss” of something you never had, was never owed, and you are not entitled to, cannot remotely be considered a real loss, nor an “adverse impact”. The same principle must surely also apply to the employer.

The last gasp of an objection is based on an equivocation on the meaning of “rights”. Interpreting the right to “equal opportunity” as ruling out discrimination based on immoral or irrational criteria is one such equivocation. Rights protect and define freedom of actions. Not equality or fairness of outcomes. They certainly do not dictate positive obligations or entitlements. The only obligation required of a right is that of consistency – that in exercising your right to freedom of action, you do not infringe the freedom of action of others. This misconception of rights requires further elaboration, and is explicated in the essay -Natural Rights.

Hence, we are now able to properly answer the question of what circumstances (if any) entitle us to constrain an individual’s freedom of action. The answer proves amazingly simple, and yet ingenious. Applying purely the principle of consistency, we can assert that an individual’s freedom of action in a social context (his rights) is constrained only by his obligation to recognise that the same rights apply to everyone else. Thus my freedom of action is limited only in so far as I am not entitled to infringe on any other individual’s freedom of action.

Given this recognition of every individual’s natural rights, the only legitimate role a government is entitled to undertake without voluntary consent, is to protect individual’s rights. Therefore no individual has a right to a job being provided by another individual. They have a right to work, to pursue productive endeavour, to engage in voluntary contracts, and to the proceeds of their labour, but not to compel any other individual to employ them, no matter what their merits or qualifications. No individual, and by extension – no government, has the right to restrict an individual’s freedom, given that they are not impinging on the rights of others.

The idea that no one has the right to constrain a man’s freedom of action given that he is not infringing anyone else’s, is rather disconcerting. Consider the implications. It means that an employer may discriminate on the basis of sex, race, beauty and any criteria he likes, in choosing to hire someone. His freedom to do so doesn’t make it right or moral, but one cannot use force to dictate what his criteria can or can’t be. In fact to discriminate on the basis of race is immoral, because it is in contradiction with the values required by man to live. Yet, neither society, government or other individuals have the right to coerce, threaten or force the employer to act morally, for he is not encroaching on anyone’s rights.

Let us now examine the second definition provided for “fairness or equity” – that which is deserved. Something deserved, is that which is merited, or which someone is entitled to. In the context of an exchange, neither party is owed anything to begin with. By definition, an exchange means that someone receives something and gives up something else. Both party’s starting balance is zero. This leads us to the salient conclusion of this essay. No exchange is ever necessary. Every exchange is a matter of choice. We can now answer the original question – “When is an exchange fair?”. The answer being – When it is voluntary.

A voluntary exchange can never be unfair. The charge of “unfairness” cannot apply to voluntary exchanges. If one chooses to exchange, then the exchange is necessarily fair for you. If it is unfair, unjust or inequitable – you would not choose it. Thus if the exchange is “free” (ie. unconstrained) for both parties, then it is fair for both parties. It may be instructive to examine an example at this point.

Imagine you were crawling along in the Sahara desert, dying of thirst, and came upon a man with water. What is a fair price to pay, if he is willing to sell? The answer is whatever price is agreed upon. He may ask for a “thankyou” in exchange, or $5000. Both are perfectly fair, if you agree to pay them. If you agree to pay $5000, you have not been “ripped off”. You have simply paid what the water was worth to you. If the water wasn’t worth $5000 to you, then you wouldn’t have paid it. One can clearly see in this example why it makes absolutely no sense to speak of a “fair price or wage” without reference to a subject and a context.

Another person (subject) might have decided $5000 was more than the water was worth, and declined to exchange. Maybe their life isn’t worth $5000 to them, or they are a perennial optimist and figure on encountering a cheaper water merchant before they die of thirst. The point is that fairness is a value judgement which can only be made by individuals. There is no specific price or even range of prices which can be defined as fair for everyone. Context is equally important. If one was not in the desert but in the supermarket, it is extremely unlikely one would agree to pay $5000 for water. Nor is it likely if one had plentiful supplies of water with them, and wasn’t dying of thirst.

A second point also needs to be made in relation to fairness. An exchange doesn’t have to take place, for us to be able to determine whether the terms of the exchange offered were fair. If both parties were free to choose to exchange or not, then they have both made value judgements, and the outcome is fair for both of them. If you declined to purchase the water at $5000, then the outcome is fair for you, as it is in accordance with your value judgement – that $5000 was worth more than the water. Consequently, the gauge of fairness is not successful exchange but freedom. The essential corollary to note is that -Outcomes are irrelevant in evaluating fairness. The only standard of evaluation is whether both parties were completely free to choose.

That you may die of thirst in the desert because you were being charged $5000 for water might seem totally unfair. And, the assertion that it is not unfair, is probably outrageous to most people. However, that is only a reflection on the general conception of “justice” and “fairness” in society. It might be “heartless” to define fairness or equity in this way, but that doesn’t make it wrong. Truth is not subject to sentimentality.

Given the asserted standard of fairness in an exchange is the freedom to choose, you might argue that if you didn’t have $5000 that you weren’t really free to choose. To make this suggestion, is to forget that in an exchange, neither party is owed anything. One does not turn up at the Chicago Bull’s training camp and demand special consideration for selection because its not your fault you were born short. Neither would you turn up to an auction of Picasso’s paintings and expect to be handed money with which to bid with. “Freedom to choose” does not mean that all choices are available to everyone regardless of their ability, capacity, attributes and property. The freedom refers to freedom from force, coercion and restrictions on your actions as long as they are not violations of other people’s freedom.

A person born without legs does not have the “freedom” to choose to walk. Someone without the appropriate qualifications does not have the “freedom” to operate as a neurosurgeon. Some of our choices (like walking for a person born without legs) are constrained by our nature, and not subject to any determination. Some of our choices are completely free – like looking both ways before crossing a road. And some are both determined and determinable – such as whether we play for the Chicago Bulls. The point is that the “freedom to choose” is a freedom from force, coercion and restriction. It is not a guarantee of anything. Not that you will walk. Nor that you can cross roads and never be hit by cars. Nor that you will ever play for the Chicago Bulls. And because everyone has this freedom as a right, the only constraint on an individual’s freedom is that they do not restrict another person’s freedom.

The implications of this right for the question of what constitutes a fair exchange are enormous because they are contradictory to the common conception of fairness, equity and justice. An employer does have a right to use any criteria he wants when selecting candidates. A producer does have a right to offer his product at any price he likes. And a fair wage is not what you or I, or society or the ILO says it is, but whatever wage an employee freely agrees to work for. To reiterate then -

The only standard of evaluation of the fairness of an exchange is whether both parties are completely free to choose.