Voluntary exchange

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Voluntary exchange is the act of buyers and sellers freely and willingly engaging in market transactions. Moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred.[1]

Voluntary exchange is also a fundamental assumption made by neoclassical economics.[2] That is, when neoclassical (mainstream) economists theorize about the world, they assume voluntary exchange is taking place. Building on this assumption, mainstream economics goes on to conclude a variety of important results, e.g., that market activity is efficient, that free trade has net positive effects, and that markets in which economic agents participate voluntarily make them better off. Notably, mainstream economists, having made the assumption of voluntary exchange, have thus defined away the possibility of finding exploitation. Marxist economists, one of the major alternatives to neoclassical economics, simply assume exploitation. Thus it can be said that economics broadly cannot objectively test for the existence of exploitation of one party or group by another. This is arguably a major failure of the discipline.

Mainstream economists have shown that voluntary exchanges are more conducive to economic efficiency than exchanges mandated by governments.[1] On the other hand, there is no theoretical basis for arguing that partially or completely involuntary exchange is preferable to other arrangements, such as government mandates.[3]

Voluntary exchange is sometimes at the root of arguments about the morality of markets. Libertarians often invoke the morality as well as the efficiency of voluntary exchange to argue against government mandates, including many forms of taxation. The morality of markets, even those rarely adhering to true voluntary exchange, are nonetheless in dispute.[4][5]

References[edit]

  1. ^ a b "AmosWEB is Economics: GLOSS*arama". Amosweb.com. Retrieved 19 November 2014. 
  2. ^ "The Voluntary Exchange Theory of Public Economy". Qje.oxfordjournals.org. Retrieved 19 November 2014. 
  3. ^ "Public Economics, Market Failure, and Voluntary Exchange". Papers.ssrn.com. Retrieved 19 November 2014. 
  4. ^ "The Morality of Market Behavior". Openmarket.org. Retrieved 19 November 2014. 
  5. ^ World Archipelago. "What Money Can't Buy". Macmillan. Retrieved 19 November 2014.