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Coercion, Contract and the Limits of the Market

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  • Kaushik Basu

Abstract

A central proposition on which much of normative economics is founded asserts that if two or more adults voluntarily agree to an exchange or trade and this does not have a negative fall-out on others, then government should not stop this exchange. Yet, on a variety of matters (hazardous work, the right to give up trade union rights in order to work in an export-processing zone) we tend to justify government or international interventions banning seemingly voluntary exchanges. This lecture will explore the meaning of coercion and voluntariness and try to articulate general principles for describing certain markets as 'obnoxious'. The principles will be applied to different labor market problems, ranging from sexual harassment to hazardous work.

Suggested Citation

  • Kaushik Basu, 2004. "Coercion, Contract and the Limits of the Market," Econometric Society 2004 Australasian Meetings 355, Econometric Society.
    • Handle: RePEc:ecm:ausm04:355
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    References listed on IDEAS

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    1. Sen, Amartya Kumar, 1970. "The Impossibility of a Paretian Liberal," Scholarly Articles 3612779, Harvard University Department of Economics.
    2. Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-427, June.
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    7. Ashwini Deshpande, 1999. "Loan Pushing and Triadic Relations," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 914-926, April.
    8. Neeman, Zvika, 1999. "The Freedom to Contract and the Free-Rider Problem," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 685-703, October.
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    10. Arrow, Kenneth J, 1994. "Methodological Individualism and Social Knowledge," American Economic Review, American Economic Association, vol. 84(2), pages 1-9, May.
    11. Basu, Kaushik, 2003. "Prelude to Political Economy: A Study of the Social and Political Foundations of Economics," OUP Catalogue, Oxford University Press, number 9780199261857.
    12. George Akerlof, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(4), pages 599-617.
    13. Peter C. Fishburn, 1970. "Intransitive Indifference in Preference Theory: A Survey," Operations Research, INFORMS, vol. 18(2), pages 207-228, April.
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    Cited by:

    1. Basu, Kaushik & Pattanaik, Prasanta K., 2014. "Nash equilibria of games when players'preferences are quasi-transitive," Policy Research Working Paper Series 7037, The World Bank.
    2. Hänke, Hendrik & Barkmann, Jan & Blum, Lloyd & Franke, Yvonne & Martin, Dominic A. & Niens, Jasnna & Osen, Kristina & Uruena, Viviana & Witherspoon, S. Annette & Wurz, Annemarie, 2018. "Socio-economic, land use and value chain perspectives on vanilla farming in the SAVA Region (north-eastern Madagascar): The Diversity Turn Baseline Study (DTBS)," DARE Discussion Papers 1806, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    3. Julio J. Elías & Nicola Lacetera & Mario Macis, 2019. "Paying for Kidneys? A Randomized Survey and Choice Experiment," American Economic Review, American Economic Association, vol. 109(8), pages 2855-2888, August.
    4. Raul Caruso, 2011. "Relational Goods at Work! Crime and Sport Participation in Italy: Evidence from Panel Data Regional Analysis over the Period 1997–2003," Chapters, in: Wladimir Andreff (ed.), Contemporary Issues in Sports Economics, chapter 3, Edward Elgar Publishing.
    5. Arvanitidis Paschalis A. & Kyriazis Nicholas C., 2013. "Democracy and Public Choice in Classical Athens," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 19(2), pages 213-248, August.
    6. Julio J. Elias & Nicola Lacetera & Mario Macis, 2016. "Efficiency-Morality Trade-Offs in Repugnant Transactions: A Choice Experiment," NBER Working Papers 22632, National Bureau of Economic Research, Inc.
    7. Raul Caruso, 2008. "Reciprocity in the shadow of threat," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 55(1), pages 91-111, April.
    8. Kim, Iljoong & Kim, Jaehong, 2015. "Frivolous Suits In The Infinitely-Repeated Litigation Game With Uncertainty," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 56(1), pages 21-33, June.
    9. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2010. "Smallholder Participation in Agricultural Value Chains: Comparative Evidence from Three Continents," MPRA Paper 27829, University Library of Munich, Germany.
    10. Barrett, Christopher B. & Bachke, Maren E. & Bellemare, Marc F. & Michelson, Hope C. & Narayanan, Sudha & Walker, Thomas F., 2012. "Smallholder Participation in Contract Farming: Comparative Evidence from Five Countries," World Development, Elsevier, vol. 40(4), pages 715-730.
    11. Raul Caruso, 2010. "Butter, Guns And Ice-Cream Theory And Evidence From Sub-Saharan Africa," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(3), pages 269-283.
    12. Sandro Ambuehl & Muriel Niederle & Alvin E. Roth, 2015. "More Money, More Problems? Can High Pay Be Coercive and Repugnant?," American Economic Review, American Economic Association, vol. 105(5), pages 357-360, May.
    13. repec:hit:hitjcm:v:56:y:2015:i:1:p:21-33 is not listed on IDEAS
    14. Kaushik Basu, 2007. "Identity and altruism: The Moral basis of prosperity and oppression," Discussion Papers 08-08, Indian Statistical Institute, Delhi.
    15. Michael A. Clemens, 2018. "Testing for Repugnance in Economic Transactions: Evidence from Guest Work in the Gulf," The Journal of Legal Studies, University of Chicago Press, vol. 47(S1), pages 5-44.
    16. Dan Munter & Lars Lindblom, 2017. "Beyond Coercion: Moral Assessment in the Labour Market," Journal of Business Ethics, Springer, vol. 142(1), pages 59-70, April.

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    Keywords

    coercion; contracts;

    JEL classification:

    • A - General Economics and Teaching

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