Exploitation

Mercedes and I have been talking about the concept of exploitation recently.  If someone takes a job at a sweatshop (or Wal-mart?) are they being exploited? One economist that has been thinking about this issue has developed a term meant to distinguish between truly voluntary exchanges, which he calls "euvoluntary", and exchanges that seem somehow unjust.  The economist is Mike Munger, and he explains his views in a podcast.

The key element that Munger uses to define euvoluntary exchange is that for euvoluntary transactions, there must not be a great difference between the option under consideration and what is called the BATNA (Best Alternative to the Negotiated Agreement).  Basically, if the alternative to making a transaction is too much worse than what the agreement offers, it isn't truly voluntary. Imagine you are dying of thirst in the desert and someone comes up to you with a bottle of water that he offers to sell for $25,000.  If the alternative is death by thirst you are likely to agree.  You are desperate.  But the existence of this desperation means that in some sense the transaction is not truly voluntary.

Unfortunately I think there are a few problems with this definition.  It includes some things it shouldn't and leaves out some things it should include.  Let's go back to the desert and consider a man that comes up to you offering not a whole bottle of water, but just one sip for $25,000.  Suppose that this sip will decrease your chances of dying from 98% to 96%.  The BATNA in this case (98% chance of dying from thirst) is much closer to the option being considered, but the transaction still feels a bit exploitative.  You are still desperate.

Now consider a situation where you are dying of thirst in the desert and someone comes up offering you a package that includes a bottle of water, a portable device that can gather water from the air, and a 4 year contract with the NY Yankees to play backup shortstop for $15 million/year.  In return he wants a written promise to pay him $50 million.  The difference between becoming a millionaire and dying of thirst in the desert is immense.  That is the BATNA is much worse than the option provided.  You are desperate.  But somehow this doesn't seem like exploitation.

Now consider someone working at a sweatshop.  Suppose that if they didn't work at a sweatshop they could work in a field making about 95% as much for %105 of the effort.  That is, the sweatshop deal is just a bit better than their other options. Does the fact that the sweatshop offers a deal that is just a little bit better mean that they are offering a more voluntary transaction than one who offers wages that are twice as much?
What about the minimum wage worker that could probably find a hundred other minimum wage jobs?  Does the existence of all these other bad alternatives make the transaction more voluntary?

Putting aside the questions for the moment, I should point out that Munger does not believe that a transaction must be euvoluntary in order to be just.  He views is as a sufficient condition, but not a necessary one.  In fact, he makes clear that when government prevents people from making exchanges (such as selling organs, working for less than minimum wage, etc) it is often the lowest members of society that suffer.  They are the only ones desperate enough to engage in this sort of transactions.  But preventing them from dealing in this way doesn't change the underlying conditions that made them desperate.

So what do you think?  Are their some voluntary transactions that are unjust?  Is there some category of voluntary transactions that are always just?  Should government prevent us from making any category of voluntary transaction?