Sunday, March 2, 2014

Be Careful When "Sticking It" to "Big Business"

NOTE: I am reproducing several articles from my old blog. The first, "The Best Argument Against the FairTax", should have been included among the other essays I reposted recently, but was not. The second, "The Problem of Pornography", is one I found while searching for the FairTax article, and as it seemed interesting, I decided to reproduce it here. "I  Knew I Was On To Something" is cited in the second essay, and is one of my favorite essays about a topic which troubles me greatly. In fact, I am surprised I did not reproduce it earlier. (The same quote it discusses is the subject of my "Stupid Quote of the Day" series on December 30, 2012. Since I plan to reproduce that whole series sometime this week, I am not copying that essay tonight.) "The Politics of Psychiatry" mentions the Potter Stewart quote examined in "The Problem of Pornography" (and is amusingly controversial to boot), and "Finding What You Are Looking For" is cited in that essay. "False Precision" provides a good analogy, showing the futility of "scientific management" of economics, a topic examined again in "The Perfect Model". "Be Careful When 'Sticking It' to 'Big Business'", though burdened with a horrifying number of needless scare quotes (thankfully, something I have given up in recent years), is an interesting predecessor to the argument I made best in "In Praise of Contracts". "Kelo, Home Schooling and Drug Laws - Inconsistent Theories of "Social Costs"" is an interesting examination of the harm done by pragmatic solutions, often proposed by moderates and even conservatives. "Trial by Parenthood" consists of my reflections on how having children divides us into two groups. "An Interesting Contrast" meanders here and there, covering everything from the definition of hypocrisy to the benefits of search engines, yet, somehow, it manages to amuse me. "Why Term limits Will Fail (And Should)" is one of my earlier examinations of the subject of term limits, a topic examined again in "Critique of a Congressional Reform", "Some Thoughts on Term Limits", "Damn the Torpedoes!", "Making the President Irrelevant", "Racketeering Through Legislation", "Power and Disorder", "Our Aristocracy" and "The Problem of Professional Politicians, or, The Impossibility of a True 'Ousider' Candidate". "The Cost of Big Government" takes an all too brief look at precisely that, the cost of big government. "Transparency, Corruption and Reform" is a frequently cited essay looking at the relationship between the size of government and the amount of corruption.  Finally, "A Perfect Quote" provides a very brief statement I found on IMDB, which perfectly summarizes the greatest problem with the political left.

I have often objected tot he government's, especially the courts', tendency to interfere in our private right to contract, but often my complaint has fallen on deaf ears. People simply do not see the harm in the fact that the courts have forced people to sell implied warranties with every good, and refused to allow buyers to waive such warranties. Most often they think that only big corporations are harmed by such rulings, and, as even conservatives often distrust "big business", they can't worry much about such things.

However, you need to be careful about laws which help "the little guy", as often they are not half as helpful as we think.

Let me start with a simple example. You have a used car you want to sell. You are quite a car buff and have tinkered with it, made modifications, and generally produced a fine automobile. In need of quick cash, you put it up for sale. A buyer comes, offers a fair price, and you make the transaction. He wraps it around a tree that night, and soon you hear from his attorney. The attorney claims that your modifications made it unsafe and thus you are liable for his injuries, damages, pain and suffering, and so on.

"Wait!" you think "I was prepared. My contract specifies all the modification, and also says I will not be liable for any injuries." Well,l that would work, except that the court claims that, through your modifications, you produced a unique car, making your changes "design defects". Or maybe they don't take that route, but simply argue that the customer cannot sign away his implied warranty. Or maybe your changes were such that your car is an ultra-hazardous good, and you are under strict liability rules. 

Of course, all of those are a bit of a stretch, but people have won cases on less. It may only be one in ten or one in twenty that get through to trial, but for the defendant in that one in twenty, it ruins his life. Could the buyer really waive future claims, all this could have been avoided, but that is not allowed under today's liability laws.

Or let us look at "orphan drugs". Some of these are the victim of regulations, where meeting FDA guidelines would cost more than the drugs could possibly return, but others are the victims of liability law. Drug makers have been frequent victims of liability suits, and they know that even explicit disclaimers, waivers of liability, even videotaped signings of such waivers, are no guarantee they won't lose millions. Which means that a drug which has a very limited set of buyers, which also has even the slightest risk of a dangerous side effect, will likely never be produced.

For those suffering from a disease, this is far from ideal. Many would gladly sign away the right to sue, but the courts have made that impossible. Even explicit waivers are no longer sure, and so people are deprived of the chance to buy a drug which might make their lives better, or even save them from early death.

But, as I said at the beginning, most people don't see the argument in these terms. The populists have done a good job at convincing not just liberals, but many supposed conservatives as well, that the right to contract only benefits "big business", and that an unfettered right to contract is a danger not a benefit.

That is simply absurd. Does an unfettered right to free speech benefit only newspaper owners? Does the right to travel benefit only airlines? Does the right to assemble benefit only convention centers? The right to contract is the right of free individuals to agree to an exchange on their own terms, without the government interfering. And while in some cases the right to contract may help big business more than an individual, I can point to hundreds where the opposite is true. 

Think of it this way, the essential question is who will choose how contracts are interpreted, you or the state. And if it is the state, then who has the greater advantage? If you do not like the way the state reads certain contracts, you are out of luck. If a big business dislikes the way the state reads a contract, they lobby for a change. In other words, by letting the state define contracts, big business is at a huge advantage, by allowing contracts to be defined by the contracting parties alone, everyone is put, as much as possible, on equal footing.

Of course, the courts are not the only one interfering in the right to contract, legislatures and regulators do as well. From banning the sale of some goods, to determining the conditions under which sales can occur, to determining prices for some goods, the state is very deeply involved in undermining our ability to contract as we wish. However, that argument would require more time than I currently have, so it will have to wait for another day. 

Originally posted in Random Notes on 2008/07/28.

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