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Thoughts On the Right NOT to Contract

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The following record of my stream-of-consciousness thoughts was inspired by the wedding-cake case being heard today by the United States Supreme Court [2] and by a stimulating conversation that I had with some of my GMU Econ colleagues, especially Virgil Storr.

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Jim Buchanan starts one of his papers (I don’t now recall which) by noting that an important distinction between markets and government is that exit is much easier in markets than it is in governments.  The right to say “no” – “the right not to contract” (to steal a term that I once heard Randy Barnett use) – is indeed an essential part of markets.

Normally, this right to say, and the ease of saying, “no” – the right to exit and the ease of exiting –  are normally thought of as protecting consumers.  Because McDonald’s cannot force you to buy its hamburgers, it has an incentive to offer to you a good burger at a low price.  But even if McDonald’s refuses to improve its burgers, it can’t harm you.  Because you can easily choose to dine at any number of other restaurants, or at home, if you don’t like McDonald’s offerings, McDonald’s has no power over you no matter how many billions of dollars Ronald McDonald has stuffed into his McBank account.

But if buyers have – and should have – the right to say “no,” shouldn’t sellers have the same right?  Shouldn’t there be symmetry?  After all, those whom we conventionally classify as “sellers” are also – and in the same transactions – buyers.  Sellers buy the money – sellers buy the purchasing power – of those whom we conventionally classify as “buyers.”  Similarly, buyers also are sellers of the money – buyers also are sellers of the purchasing power – that is sought and bought by those whom we conventionally classify as “sellers.”

And so if the right and ability to say “no” is important for the functioning of markets, why is this right and ability not more widely understood as belonging to merchants, manufacturers, and other sellers no less than it belongs to people in their role as consumers?

If, say, Baker offers cakes that are judged by consumer Jones as being of poor quality, Jones is not damaged because Jones is not forced to buy Baker’s cakes.  But suppose that, while Jones has the right to refuse to trade with Baker, Baker has no right to refuse to trade with Jones.  Doesn’t Jones then have the power to inflict harm on Baker – harm that is analogous to the harm that Baker would inflict on Jones if Jones had no right to refuse to trade with Baker?

Asked differently: if we understand that Baker would be irresponsible and a source of harm to consumers if consumers could not refuse to trade with Baker, shouldn’t we understand also that consumers would become irresponsible and a source of harm to Baker if Baker could not refuse to trade with consumers?  If the right and ability to say “no” is important to discipline market participants to serve each other’s best interest, shouldn’t this right and ability be possessed by Baker no less than it is possessed by Jones and other consumers?

Despite my firm conviction that the ultimate goal of economic activity is to promote consumption rather than to promote production, all of my priors prompt me to believe that the right to say “no” – the right not to contract – should be possessed equally by all market participants, on the selling as well as the buying side.

I understand that money is a far more homogenous good than is even the most commodified good or service sold by manufacturers or merchants.  I understand also that the number of people who possess and are willing to spend money is much larger than is the number of people who possess and are willing to sell any of the other particular goods or services exchanged on markets.  Is this reality sufficient to explain why many people believe that while no consumer should be forced to trade with, say, a baker, no baker should have the right to refuse to trade with a consumer?

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