Buyer beware, the seller is a hero

[aelf]

Nothing can be judged properly without knowing its purpose, but human purposes are not always evident. People with nefarious goals attempt to keep them secret. And what the goal of what economists call economics is is entirely mysterious. One view, often held by most people, is that the legitimate purpose of commerce is to provide goods and services that people need. Judged by this goal, the economy is an abject failure. Another, often held by vendors, is that markets exist for efficient capital formation while protecting the interests of investors. As Peter Drucker has said, “The purpose of a business is to create a customer,” and such businesses can be successful by marketing bads and disservices as well as goods and services. Whether this makes a difference to economists is unclear. Of course, if capital accumulation is the goal, American=style Capitalism functions very well; it stamps out billionaires as regularly as it stamps out automobiles, but it certainly does not provide people with the goods and services they need. The question is, why not?

Kenneth Arrow, an eminent American economist, has said “Virtually every commercial transaction has within itself an element of trust,” and Alan Greenspan, in his mea culpa, mea culpa non, has said much the same thing by remarking on the trust people have in their pharmacists. Yet everyone should know that this trust is misplaced.

As early as 1523, more than half a millennium ago, caveat emptor came to be used commonly in Europe in relation to commercial transactions. As I’m sure most readers know, the phrase means, “let the buyer beware.” The expression came into use because it was common knowledge that vendors would lie and cheat whenever given an opportunity to. To protect themselves from this common lying and cheating, buyers were warned to be wary of vendors bearing goods since they were, more often than not, Greeks bearing gifts.

The general commercial practices of lying and cheating were legalized in American jurisprudence in Laidlaw v Organ (1817) where it is argued that buyers must take responsibility for their purchases because, “The interest of commerce not permitting parties to set aside their contracts with too much facility, they must impute it to their own fault in not having better informed themselves of the defects in the commodities they have purchased.” Although this principle now lacks the universal application it had in the 1800s, it still is applied generally in most consumer transactions. Thus caveat emptor makes commerce an untrustworthy, fraudulent activity. Every buyer should always expect to be cheated, especially in today’s markets where products are designed to make thoroughly inspecting them impossible.

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This is an interesting train of thought. Conservatives and market liberals themselves like to say "caveat emptor" in arguing that each individual is responsible for his/her own decisions - that's why the fault for the collapse of the housing bubble that was the prelude to the 2008 financial crisis, the effects of which are still haunting us, can be blamed on the irresponsible borrowers (and also, if it suits one's purposes to blame big government, partly on a government that encouraged home ownership among the poor).

Yet the whole notion of caveat emptor is tellingly ignored in another genre of right-wing discourse that has been prominent in the wake of Obama's speech on shared prosperity: that of the Randian noble entrepreneur. For example:

We consider entrepreneurs American heroes and, as we've opined recently, we think many corporations brim with humanity. Business can't operate unfettered, of course, without any form of oversight or control. But our view, essentially, is that business is a source of great good for society, with the power to create hope and opportunity like no other institution going.

Indeed, the positives so outweigh the negatives that lately we've been trying to identify why some people hate business so fervently. After all, the risks of this movement's efforts to demonize business are frighteningly high.

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So, which is true? Are business owners our saviours, or are they a group that we as buyers must always watch out for? Or have certain groups simply taken to calling profiteers and some professional swindlers (e.g. those who sell people bad loans) heroes?

Policy-wise, an interesting corollary is this: are business owners job creators, or are they in the business of business? Meaning, do they create jobs willy-nilly as long as the taxation regime and regulatory framework are favourable, or do they create jobs when there is money to be made? If it's the latter, then shouldn't the better course of action be to ensure that there are going to be buyers? Where does this leave all the austerity policies that take away the buying power of the majority, if the goal is to create jobs? (Or, as Bill Clinton might say, how is the arithmetic sound?)

So are business owners in business, or are they heroic citizens who can be counted on to save the humanity and "create hope and opportunity"? Which rhetoric is correct, or how do they sit in relation to one another?

Thoughts, please.

 

[galdre]

Anyone who thinks business owners are saviours in any way has not read any history. Most people are selfish to some degree and the more power/wealth (since wealth is a form of power) a person wants (or craves) the more selfish they tend to be.

 

[Borachio]

The first duty of any commercial business is to make a profit. Any business that fails to do so, must, tritely, go out of business.

But any supplier of a good or service has a responsibility (under any sensible law) to make sure the good or service is fit for purpose; and must not misrepresent the good or service. Failure to do so is plain fraud.

 

[Formaldehyde]

I've never understood the lack of morality in many businessmen, much as I don't understand why it is so frequently missing from American foreign affairs. What is even more baffling is how many of them claim to be Christians, and that even some of them claim that atheists and agnostics have no morals.

Business ethics seems to be an elective course that is quite poorly attended.

 

[JollyRoger]

Nice tags.

There does seem to be an unhealthy worship of sellers, especially when it is clear to anyone with a passing familiarity with the Old Testament, that cheating sellers have been a problem since ancient times.

 

[bhsup]

Aelf, I suspect most businesses are very much in the middle of the two extremes you describe. Just like workers. The extremes are in the minority.

 

[aimeeandbeatles]

I read in a book that cavit emptor cant really apply today because because they put everything into boxes where youre not allowed to take it out and examine it for defects, though in the past you could because there weren't boxes. But they never really changed the law all that much.

 

[Farm Boy]

Today you also tend to buy a complex product the exact workings of which the consumer does not understand through a crapton of middlemen. The dynamic has fundamentally changed in a lot of regards.

 

[Murky]

I think one of the biggest problems with the modern economy is that business and government make it too easy for the seller to get the upper hand in transactions and does little to help the buyer to know if they are making a good decision. It's all geared towards extracting wealth from the masses and funneling it to a greedy 1%.

 

[Leoreth]

I think the usual right-wing reasoning to reconcile both perspectives would be to say that a buyer would always be able to tell the difference and make the optimal choice, so only "heroic" vendors would prevail, while those trying to cheat you would disappear.

I don't think I need to say that this relies on an overly optimistic assumption.

 

[hobbsyoyo]

I read in a book that cavit emptor cant really apply today because because they put everything into boxes where youre not allowed to take it out and examine it for defects, though in the past you could because there weren't boxes. But they never really changed the law all that much.

We do have protection in the form of warranties and whatnot.

 

[JollyRoger]

We do have protection in the form of warranties and whatnot.

It's easy enough for a seller to stick you with a contract that waives warranties and whatnot and/or makes them very difficult to enforce.

 

[Farm Boy]

^ this.

 

[hobbsyoyo]

Yeah you're right. Plus, the one sided mandatory arbitration clauses. Derpa derp

 

[Borachio]

But then, in the West, you're dealing with mature markets and the business class is getting increasingly desperate to sell you something - anything. While, on the other hand, the average consumer is getting satiated, and increasingly cynical. (But, of course, the gullible always need protecting from themselves. And if you don't understand some financial product, then don't buy it. Or buy it and sue them later for wrongful selling. All work for lawyers.)

 

[Berzerker]

Conservatives and market liberals themselves like to say "caveat emptor" in arguing that each individual is responsible for his/her own decisions - that's why the fault for the collapse of the housing bubble that was the prelude to the 2008 financial crisis, the effects of which are still haunting us, can be blamed on the irresponsible borrowers (and also, if it suits one's purposes to blame big government, partly on a government that encouraged home ownership among the poor).

i always took buyer beware as advice, not exoneration for frauds. but HELL YEAH it suits my purpose to blame big government for inflating the bubble and leaving us taxpayers with the bill.

 

[JollyRoger]

And if you don't understand some financial product, then don't buy it. Or buy it and sue them later for wrongful selling. All work for lawyers.)

If you can sue. Many written contracts bar you from the courtroom.

 

[Borachio]

Well, there's a clue. Don't sign any that do. Or if they do, but do so in very very small print, take them to court anyway for miss-selling a contract.

There's no lawyer so smart that another can't outwit him. (I bet you know this.)

 

[Farm Boy]

Well, there's a clue. Don't sign any that do. Or if they do, but do so in very very small print, take them to court anyway for miss-selling a contract.

There's no lawyer so smart that another can't outwit him. (I bet you know this.)

Lawyers are expensive. Unless you can get one willing to work on contingency fee in the hope that things get rolled into a class action(in which case things are probably over anyhow) how exactly are you going to come out ahead attempting to take things to court?

 

[Borachio]

Apart from being a lawyer, you aren't. And you need to be a smarter one than the opposition.

The law is kind of a dumb thing. And is only needed when people 1) don't trust each other, and 2) try to do each other down. (1 and 2 amount to the same thing in the end.)