Thursday, February 28, 2008

The Morality of Trade

I can think of nothing truer to Commercial Law than to offer as my first post a rejoinder to Paul who added this comment to An Ode to Mercury: "Merchants were considered little better than thieves for much of the history of western civilization. . . . Until modern economic thinking, and general liberalization of religion, emerged during the enlightenment, gains from trade were commonly viewed with skepticism at best."

If merchants "were [ever] considered" no better than thieves, I say, consider who's doing the considering. The possibility of gains from trade in the hands of "merchants" was and is the key driver for social and economic mobility and the political instability that comes with it. Feudal lords had much to fear and loathe at the possibility that by trading among themselves serfs might drag themselves out of hunger and ignorance. And so too the Church. Trade is possible only when people assert property rights. Assertion and exploitation of property rights by political subordinates is the beginning of the end of a social order based on birthright and violence.

On the same day I read Paul's comment, I saw that the California Court of Appeals had confronted and laid to rest an argument based on the skepticism about commerce that Paul observed,--that gains from trading property are morally inferior and, in this case, unworthy of protection by specific relief. In Real Estate Analytics LLC v. Vallas, a seller agreed to sell 14 acres of coastal California real proeprty to Real Estate Analytics, a developer, who planned to develop and resell it. The seller backed out and Analytics sued for specific performance. The seller wheeled out a steaming stack of equitable maxims before the trial court as to why the equities against specific performance tipped in his favor. The trial court agreed. The buyer was unworthy of an extraordinary remedy because to it the contract for the property "was nothing more than a vehicle to make money." (Analytics got a check for $.5 million instead). The court of appeals reversed. The buyer's purpose in entering the contract — to sell the property for a profit (gasp!) rather than holding it for the pleasure and privilege of the estate was as noble and deserving of equity as any other purpose.

Pardon my ardor. Commerce is not a cuss word.


Dan Barnhizer said...

Gordley's just price article cited an interesting conjecture on the morality of trade by Acquinas in Secunda Secundae Partis, Q77:

Objection 4. Further, if one were bound to tell the faults of what one offers for sale, this would only be in order to lower the price. Now sometimes the price would be lowered for some other reason, without any defect in the thing sold: for instance, if the seller carry wheat to a place where wheat fetches a high price, knowing that many will come after him carrying wheat; because if the buyers knew this they would give a lower price. But apparently the seller need not give the buyer this information. Therefore, in like manner, neither need he tell him the faults of the goods he is selling.

Reply to Objection 4. The defect in a thing makes it of less value now than it seems to be: but in the case cited, the goods are expected to be of less value at a future time, on account of the arrival of other merchants, which was not foreseen by the buyers. Wherefore the seller, since he sells his goods at the price actually offered him, does not seem to act contrary to justice through not stating what is going to happen. If however he were to do so, or if he lowered his price, it would be exceedingly virtuous on his part: although he does not seem to be bound to do this as a debt of justice.


Given that Acquinas repeatedly questions trade and usury solely for the sake of profit in Q77 & Q78, the above example appears out of place in suggesting that trade on the basis of specialized knowledge for higher profit is not necessarily wrongful.

Holmes said...

As a former student of Professor Reilly, I'd like to add my "Hear, hear!" Though not many of her former colleagues at my law school would agree and would be aghast that "other consideratons" aren't given first priority over the making of money. However, I wonder if an analysis of the benefits of free trade and property rights, while valuable, still cedes ground to opponents. Isn't it better, as with debates such as abortion, to simply say it is a right in a free society as a part of self-determination, benefits be damned? In other words, if we lived in Bizarro World where free trade did not have the benefits of government owned capital, would it still be inherently more moral in a liberty sense to have favor personal property rights? I might have made a "peppercorn" of sense here.

Anonymous said...

Aquinas is drawing a distinction between private knowledge about market conditions (which he says is not unjust to withhold) and private knowledge about problems in the thing being sold, which if hidden becomes a form of misrepresentation.

Duke of DeLand said...

Years ago when I was a Chamber of Commerce Exec., we used the phrase "Profit Is Not a 4 Letter Word"...
I find it still appropriate and a true response to the Democrat policies of taxing the heck out of business profits.


Alison M. Kilmartin said...

I am continually amazed that the very vehicle that puts food on the tables of so many is scorned around those very same tables.

If people could only rise above the "little man" they see themselves as in their own minds, they would see that in a free market the sky is the limit, for everyone. No doubt it is harder for some than others, but none are without recourse.

Kelly Joy said...

The seller did not claim to be "as high as a Georgia pine"? Wow, shocking that a California trial court would conclude the way they did.

Sue Andrews said...