“A market is a gathering of buyers and sellers to exchange goods and services.”
This surprisingly simple definition of a market invites an explosion of complexities, nuances, exceptions, and even perfectly legal contradictions. Markets have provided me with a lifetime of education, opportunities, frustration and enjoyment.
A Market Must be Voluntary
When a few robbers accost a couple walking, or a gangster says to the shop owner, “Nice shop you have here …..” the parties may be considered as extreme versions of buyers and sellers, but the exchange is not voluntary. Annually every single adult participates in the single largest “exchange” in the world, with various taxing agencies of governments. Exchanges perhaps, but certainly not voluntary. While we can adjust the price somewhat with the many tax adjustments and exceptions, we cannot easily opt-out.
Markets have a number of elements. In a perfect market, each of these elements must be voluntary:
- Participation – both buyers and sellers may opt in or out.
- Exchange medium and terms – cash, credit, gold, crypto
- Goods and Services Offered –
- Features of Goods and Services
However, like data, markets want to be free and even with involuntary exchanges, market participants find ways to manipulate the exchange. When Amazon, like many companies before it, decided to create a second headquarters, it approached several localities, which responded with all sorts of tax reductions, deferrals, exemptions, and special exceptions. Eduardo Saverin, co-founder of Facebook, changed his citizenship to Singapore, partially to mitigate his tax burden on his stock holdings in Facebook. The American colonies of Great Britain objected to involuntary taxes so much that the cry, “No taxation without representation,” spurred up the Boston Tea Party and was one small contributor to the eventual rebellion against Great Britain.
On a more plebeian level, Florida, South Carolina, Idaho, Oregon and Arizona have seen considerable in-migration in the past few years. California, New Jersey, Massachusetts, and New York are in the top ten states for outbound migration. Many factors, including jobs, climate, and living costs, affect migration. In addition, it may be no coincidence that the top ten states for outbound migration also have higher tax burdens. Even just plain folk can find ways to negotiate involuntary tax transactions.
Evolution – the Biggest Market in the Universe
My favorite market is the biggest market in the world, or maybe even the universe — evolution. Evolution provides almost endless examples for modern markets and products. Evolution mimics human qualities so frequently and faithfully (or is it the other way around?) that Richard Dawkins, probably the most famous expert on evolution since Darwin, titled his seminal book The Selfish Gene.
Is Evolution Really a Market?
Is evolution is truly a market? Does it have buyers, sellers, goods/services, and exchange? Is it voluntary? Maybe the service for sale is survival into the next generation. Then evolution could be compared to an auction market, where many buyers bid on the rights to create the next generation. Those slots are pretty limited, so the bidding is very high–the price is always the actual life of the bidder. and its descendants. It is a tough market, so tough that evolution may qualify as the most brutal market in the world, or even the universe.
Like taxes, evolution may be considered an involuntary exchange. But even here, some species learned to relocate to less taxing environments. Some fish learned to breath air and walk on the ground. Quite a few animals even learned to fly, thus moving to a new locale with less competition. Other instances of species relocation, specialization, symbiotic coexistence, and of course cheating, abound.
We know that markets include cheating, a common human trait. But is cheating exclusively, or even primarily, human? Maybe not. Richard Dawkins documented some famous non-human cheaters. Cowbirds, notorious avian cheaters, lay their eggs in the nests of other birds. Cowbird eggs are bigger than other bird eggs, and hatch sooner. Immediately after hatching, the cowbird chick pushes the other eggs out of the nest to eliminate competition for food from the hapless bird parents. They nurture and raise the single cowbird chick, instead of their own chicks.
Even genes cheat. Every gene wants to survive to the next generation, hence the phrase “selfish gene.” Most genes achieve immortality by endowing the animal or plant with some skill to improve its ability to survive and reproduce. This approach, however, has severe drawbacks for the selfish gene. What if the skill does not produce a survival advantage, or if the gene cannot spread across the species fast enough? What if the environment changes to negate any survival advantage? Gotta be a better way.
There is a better way, if a gene is willing to cheat. Why not just jump into the germ line for the next generation and skip all the problematic probabilities of survival advantage? It works, and some genes figured out how. These genes achieved genetic immortality without all the trouble and risk of improving survival for the entity.
Parasites cheat. They steal food and even reproductive functions from other lifeforms. Parasies are so common that one entire lifeform, the viruses, are all parasites, which cannot survive without hijacking the reproductive functions of other plants and animals.
Cheating is common, even endemic to most other lifeforms, not just humans. Where there is a market, there are cheaters. Sigh.
The Prisoner’s Dilemma is a classic in game theory. If you follow game theory, read this post to learn how cheating upset the entire game.
Almost all human interactions can be viewed through the lens of a voluntary exchange in a market. Sometimes we can improve our relationships with others by being a little more helpful, a little friendlier, and a little less demanding.