Fallacies of Capitalism 15: The Voluntary Transactions of Actors in an Economy

A voluntary transaction refers to an economic exchange between two or more parties where each party willingly participates without coercion or external pressure. In a voluntary transaction, individuals are assumed to engage in the exchange because they perceive it to be mutually beneficial, based on their own preferences and subjective judgements of value.

However, the "voluntary transactions" fallacy arises when this concept is applied without considering the power imbalances and information asymmetries that can exist in real-world market transactions. While voluntary transactions are a foundational concept in market economics, it is important to recognise that not all transactions occur under ideal conditions of equal power and perfect information. Here are some additional points to consider:

1. Power imbalances: In many transactions, there can be significant disparities in bargaining power between the parties involved. For example, in labour markets, workers may face limited employment options and economic pressures, while employers may have more leverage in determining wages and working conditions. These power imbalances can influence the outcomes of the transaction, potentially leading to exploitation or unfair terms.

2. Information asymmetry: In voluntary transactions, it is assumed that both parties have access to complete and accurate information about the goods, services, or conditions involved. However, in reality, information can be unevenly distributed between buyers and sellers. Sellers may possess superior knowledge about the product, its quality, or potential risks, while buyers may lack access to the same information. This information asymmetry can undermine the notion of fully informed and voluntary choices.

3. Coercive pressures: While voluntary transactions should be free from coercion, individuals can face external pressures that limit their choices and compromise their ability to make truly voluntary decisions. These pressures can include economic necessity, social or cultural expectations, or systemic inequalities. For example, individuals may accept low-paying jobs or unfavourable contracts due to limited alternatives or the need to meet basic needs.

4. Market failures: The assumption of voluntary transactions fails to account for market failures, such as externalities or the undersupply of public goods. Externalities occur when the actions of one party impose costs or benefits on others who are not involved in the transaction. Market failures can result in suboptimal outcomes, where voluntary transactions do not account for the broader social or environmental impacts.

By considering these factors, it becomes clear that the "voluntary transactions" fallacy oversimplifies the complexities of real-world market interactions. Recognising the existence of power imbalances, information asymmetries, and other limitations is crucial for understanding the potential consequences of market transactions and designing policies that promote fair and equitable outcomes.

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NGOs, Kiran Bedi, The Media: Who’s The ‘Farest Of Them All?

By Farzana Versey

27 October, 2011
Countercurrents.org

Kiran Bedi is indeed wrong, but when media persons sit to judge her it is a bit of a laugh. Clearly, they do not look in the mirror.

Instead of seeing this as an opportunity to question all sorts of voluntary agencies and their modus operandi, we have a situation where a person is pinned down for wrongdoing without a backward glance at how the whole NGO business works, often with the media’s involvement.

Kiran Bedi has been fudging her bills, where she charged inflated amounts from her hosts. The main source was airline tickets. She would travel by economy class, that too at a discount because of her gallantry award, and charge business class fares. We now have these sanctimonious NGOs tell us that they took it at “face value”. Most NGOs send the tickets themselves. So, why did they let her use her travel agent? And what sort of auditing departments do they run? The reason for keeping quiet is not that they were afraid of Ms. Bedi’s wrath – they obviously did not mind shelling out Business Class fares – but because their finances will lead to many question marks.

This is my point. The media and certain activists have taken a convenient yo-yo stand on the Jan Lokpal Bill campaign. They propped him up and were completely besotted by Team Anna. After they were done with the photo-ops of the caps and the fasting and dancing, they realised that there were chinks in the armour. No one was interested in the deeper questions – it came down to superficial put-downs.

Let us get this fudging business clear. Kiran Bedi has admitted to it and says she will return the excess money that she wanted to use for her own NGO. Where do the NGOs get this kind of money that they can afford to invite people from different cities for seminars? I have often posed this query when we rubbish other institutions. Do you know that most of the activists themselves travel Business Class, stay at fancy hotels, and order the best food – for what? To gupshup about the state of the nation, the homeless, female foeticide, dowry, terrorism, communalism?

Check out the number of people who have left their high-paying corporate and bureaucratic jobs to “serve the nation” or “become useful members of society” or, “fight communalism”. They could do all of these by continuing to work. The reason is that activism has become a paying proposition. Have you seen the huge ads put up in newspapers inviting you to attend some conclave or the other? Is it affordable or even appropriate to shell out this kind of money on overheads? Besides government grants, there is a good deal of foreign sponsorship and donations from industrial houses. While the international ‘intervention’ often comes with some amount of side-effects (pushing of substandard products and services clubbed with the do-good, feel-good stuff), some of the Indian business black money that is not stashed away in banks abroad is routed to charitable organisation, with income tax exemption.

Why does the media not raise a voice about this? Has the media ever questioned journalists who attend these same seminars? Oh yes, the same journalists who give inflated bills to their accounts departments for their travels and hotel stays and “related expenses”. Journalists who sit at the desk and make phone calls but charge taxi fare for the quotes. Journalists who try to get tickets and freebies because they think they are in a position to ‘arrange something’. Journalists who do not have to spend a paisa at restaurants and spas because they just might mention it, in passing, in their next column. Journalists who give us scoops that are fed to them by interested parties or who conduct sting operations that are again paid for by interested parties.

Of course, it is not only the media at fault, but also those who host such talks. Corporate India’s ladies who lunch get a big high when they invite a person who can indeed talk and add to their resume. They flash such people as trophies to display their own worth as ‘aware citizens’. That some media people are doing their evening show with this group should be an eye-opener rather than a can-opener.

If, as some commentators wish to know, why people from public office enter the fray late in the day to become part of NGOs, then one might wish to ask them why they have timed their queries now and not for all these years. Do they ponder about it when they go on government-sponsored junkets?

The problem is that this whole Anna Hazare campaign has been a sham, and revealed more shams both on the inside as well as on the outside. It showed us how the ruling party and the opposition got to pay politics; the arrests also reveal a lot about those who got away without a scratch to their reputations. It is rather disingenuous of Digvijay Singh to say that if Kiran Bedi can offer to return the money, then every bribery case can be closed by saying the bribe-taker will return the money, including, A. Raja.

This is some gumption. A minister in the government of India is caught in a scam of frightening proportions and another government person uses this as an analogy. He is also quite gung-ho about such a thing happening at the highest level. The 2G Spectrum scam is not just about bribes, but also about how the nation was taken for a ride with the government, big industrialists and lobbies involved. It is about how the government functions and not merely who took how much. This case has come under scrutiny; many others do not.

If political agencies get a chance, they try to co-opt the activist groups. Most are willing to go along because it is the easy option. In some cases where they need the government to act, it does become a crucial mutual involvement. Therefore, if a political party invites activists, and they fudge figures about travel expenses, then what will the political parties do? Why not question the complete lack of balance by media groups? One can understand individual commentators taking a particular position, but why do they blatantly follow the newspaper/TV channel line? Where is their independence? Those who talk about objectivity should really look in their own backyards. There is favouritism everywhere and the media indulges in it as much as politicians, and the ‘activist’ role of the media should also come under scrutiny.

Tavleen Singh, Indian Express columnist, while raising some important points, makes a rather shocking comment: “My own observation is that many NGOs working in India appear to be funded by organisations bent on ensuring that India never becomes a developed country… In order for India to become a halfway developed country, we need new roads, airports, ports, modern railways and masses more electricity. In addition, according to experts, we need 500 more cities by 2050. The odd thing is that the NGOs who oppose steel plants, nuclear power stations, dams and aluminum refineries in India never object to the same things in China.”

Is this the definition of development, and the only model? As I have already said, many NGOs do have an agenda, but not only if they are funded by organisations that do not wish to see a developed India. By this logic, Gujarat should have no NGOs. And why must Indian NGOs object to what happens in China? Has the Indian government opposed the self-immolation of Tibetan monks and nuns in support of the Dalai Lama’s return? Has the BJP done so? Has the media done so?

Forget the NGOs for a while. Think about how these plants were to come up, who was to be uprooted and how it would affect the environment. If this development is only for those setting up factories and making India technologically advanced, then why are we still the hub of western-powered outsourcing? Are the NGOs involved here?

Why absolve the fat cats of business only to hit out at the NGOs unless they are specifically playing dirty? How many media people have taken free jet rides, attended fancy wedding functions abroad and written glowing accounts of them? Will they be sanctified as the facilitators of development? Or do they need to get closer to the seats of such power or perhaps such development? These are trick or treat queries. Ask them we must, for there is much beyond Kiran Bedi, whose banshee persona was in fact given a boost by the media when they needed her sound bytes. They were birds of a feather, until she was grounded.

The still-feathered ones have taken wing and are giving us a bird’s eye-view.

Farzana Versey is a Mumbai-based writer.