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What's Morally Special about Free Exchange?*

  • Allan Gibbard (a1)
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Is there anything morally special about free exchange? In asking this, I am asking not only about extreme, so-called “libertarian” views, on which free exchange is sacrosanct, but about more widespread, moderate views, on which there is at least something morally special about free exchange. On these more compromising views, other moral considerations may override the moral importance of free exchange, but even when rights of free exchange are restricted for good reason, something morally important is lost. For some, free exchange may preserve liberty, in some morally significant sense, or realize some such moral value as “to each his own.” Alternatively, a system of free exchange may have a special moral status by virtue of the kinds of pragmatic arguments that economists give, arguments that free exchange produces good social results. Whether free exchange has any such virtues as these is the broad question I address in this paper. I offer what I have to say somewhat in the spirit of an overview. Philosophical scrutiny and economic analysis combine, it seems to me, to delineate fairly clearly what is, and what is not, morally special about free exchange.

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1 Rawls John, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971).

2 See especially Nozick Robert, Anarchy, State, and Utopia (New York: Basic Books, 1974).

3 Gibbard Allan, “Natural Property Rights,” Nous, vol. 10 (1976), pp. 7786.

4 Nozick, Anarchy.

5 See, for example, Smith Adam, The Wealth of Nations (Edinburgh, 1976, and New York: The Modern Library, 1937), and Varian Hal R., Microeconomic Analysis (New York: Norton, 1978).

6 See Varian, Microeconomic Analysis, p. 147, and Varian , “Distributive Justice, Welfare Economics, and the Theory of Fairness,” Philosophy and Public Affairs, vol. 4 (1975), pp. 223247.

7 For a review of fallacies involving the Pareto principle, see Sager Lawrence G., “Pareto Superiority, Consent, and Justice,” Hofstra Law Review, vol. 8 (1980), pp. 913938.

8 See Varian, “Distributive Justice.”

9 I draw this from Dworkin Ronald, “What is Equality? Part 2: Equality of Resources,” Philosophy and Public Affairs, vol. 10 (1981), pp. 283345, and from recent unpublished work of Hal Varian.

10 This is argued in Gibbard Allan, “Health Care and the Prospective Pareto Principle,” Ethics, vol. 94 (1984), pp. 261282.

11 See, for example, Gibbard Allan, “Social Decision, Strategic Behavior, and Best Outcomes,” Gottinger H. and Leinfellner W., eds., Decision Theory and Social Ethics (Boston: Reidel, 1978), pp. 153168; Social Choice and the Imperfectability of a Legal Order,” Hoffstra Law Review, vol. 10 (1982), pp. 401413; and Groves Theodore and Ledyard John, “ Some Limitations of Demand Revealing Processes,” Public Choice, vol. 29 (1977), pp. 107124.

* Some of the work on this paper was done while the author wasa Fellow at the Center for Advanced Study in the Behavioral Sciences, with support from a Fellowship for Independent Study and Research of the National Endowment for the Humanities, and from the Andrew W. Mellon Foundation. The author is extremely grateful to all these sources of support.

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Social Philosophy and Policy
  • ISSN: 0265-0525
  • EISSN: 1471-6437
  • URL: /core/journals/social-philosophy-and-policy
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