Exploitation is using a superior negotiating position to inflict great costs on someone else, at small benefit to yourself.
If someone is inflicting any cost on me for their own benefit, that is not a mutually beneficial trade, so your definition doesn’t solve the problem. You cannot just look at subtrades either—after all, you can always break up every trade into two transactions where you first only pay a cost, and then only get a benefit at someone else’s expense.
My definition is closer to this:
A trade is exploitative when it decreases a society’s wealth generating ability.
When people are paid less, they are less able to invest in the future. This includes upskilling, finding more promising ventures, starting their own business, or raising children. Some people are better at this than others, and an efficient market would give them control of more money to show this (roughly exponential). For example, if you are twice as good at wealth-creating than me, you should have about seven times as many dollars. If I make a trade with you, I should keep about 12% of the wealth created. Of course, this has to be after costs are taken into account.
The cost of subsistence is pretty negligible—maybe a few thousand dollars per year in the rural United States. Any other costs a company imposes on you should be paid before you distribute the pie you created. So, if they ask you to live in San Francisco and drive a car, that is easily $50,000/yr in before-earnings costs. Now, suppose your work as a developer nets them $500,000/yr. You should be making about $100,000/yr after taxes, which would be around $200,000/yr before taxes. If you are making less, there are three scenarios:
Your company is more than twice as good as you at wealth generation.
My intended meaning of the wording is that the “infliction” is relative to a more Pareto-optimal trade. E.g.: in the ultimatum game, us splitting a dollar with 99 cents to me and 1 cent to you is a positive-benefit trade, but is still inflicting a cost if you assume the negotation begins at 50⁄50.
The idea of the subtrade is an interesting thought, but I think any trade needs to be considered an atomic agreement. E.g.: while I might physically hand the convenience store clerk a dollar before they give me the candy bar, it can’t be broken down into two trades, because the full agreement is there from the outset.
But if they demand an extra $1 bribe in the middle, giving me the choice “Pay another $1 and get candy bar, call authorities and waste a lot of time, or pay $0 and get no candy bar,” then that’s a new trade
A trade is exploitative when it decreases a society’s wealth generating ability.
Suppose my son really wants to be a circus performer, but I want him to go to college; he says that, if he couldn’t be a circus performer, he’d be a doctor. My son is about to enter a big circus competition, and I tell him that, if he wins, I’ll give my full blessing and financial support for him to attend circus academy instead.
By that definition, it sounds like my offer to let him pursue his dream is actually exploitative!
if you are twice as good at wealth-creating than me, you should have about seven times as many dollars
This is for me the most interesting part of your comment. I want to know how this was derived.
Suppose my son really wants to be a circus performer, but I want him to go to college; he says that, if he couldn’t be a circus performer, he’d be a doctor. My son is about to enter a big circus competition, and I tell him that, if he wins, I’ll give my full blessing and financial support for him to attend circus academy instead.
By that definition, it sounds like my offer to let him pursue his dream is actually exploitative!
The normal context of something like that is that you don’t believe he’ll win and are doing it to shut him up. If he has no chance of winning, offering to do X if he wins doesn’t reduce wealth, so is not exploitative.
I had the movie version in my mind, where the disbelieving parent comes around on seeing the kid’s success (c.f.: October Sky, Billy Elliott). I myself felt a version: my parents were very against me applying for the Thiel Fellowship, up until it became clear that I might (and did) win.
Dollars are essentially energy from physics, and trades are state transitions. So, in expectation entropy will increase. Suppose person i controls a proportion pi of the dollars. In an efficient market, entropy will be maximal, so we want to find the distribution
argmax−∑pilnpi,subject to ∑wipi=Total Societal Wealth Generation.
For a given Total Societal Wealth Generation, this is the Boltzmann distribution
pi∝eβwi
where β is the temperature (frequency of trades). I subsumed βwi as a single constant in my earlier comment to simplify matters. I was incorrect in my earlier statement; if my βwi is two higher than yours (not twice as large), I should control e2≈7 times as many dollars. I suspect some of the rise in CEO-to-worker compensation comes from β increasing, some from a less conscientious society, and some from exploitation.
If someone is inflicting any cost on me for their own benefit, that is not a mutually beneficial trade, so your definition doesn’t solve the problem. You cannot just look at subtrades either—after all, you can always break up every trade into two transactions where you first only pay a cost, and then only get a benefit at someone else’s expense.
My definition is closer to this:
When people are paid less, they are less able to invest in the future. This includes upskilling, finding more promising ventures, starting their own business, or raising children. Some people are better at this than others, and an efficient market would give them control of more money to show this (roughly exponential). For example, if you are twice as good at wealth-creating than me, you should have about seven times as many dollars. If I make a trade with you, I should keep about 12% of the wealth created. Of course, this has to be after costs are taken into account.
The cost of subsistence is pretty negligible—maybe a few thousand dollars per year in the rural United States. Any other costs a company imposes on you should be paid before you distribute the pie you created. So, if they ask you to live in San Francisco and drive a car, that is easily $50,000/yr in before-earnings costs. Now, suppose your work as a developer nets them $500,000/yr. You should be making about $100,000/yr after taxes, which would be around $200,000/yr before taxes. If you are making less, there are three scenarios:
Your company is more than twice as good as you at wealth generation.
You are creating less than $500,000/yr of value.
You are being exploited!
My intended meaning of the wording is that the “infliction” is relative to a more Pareto-optimal trade. E.g.: in the ultimatum game, us splitting a dollar with 99 cents to me and 1 cent to you is a positive-benefit trade, but is still inflicting a cost if you assume the negotation begins at 50⁄50.
The idea of the subtrade is an interesting thought, but I think any trade needs to be considered an atomic agreement. E.g.: while I might physically hand the convenience store clerk a dollar before they give me the candy bar, it can’t be broken down into two trades, because the full agreement is there from the outset.
But if they demand an extra $1 bribe in the middle, giving me the choice “Pay another $1 and get candy bar, call authorities and waste a lot of time, or pay $0 and get no candy bar,” then that’s a new trade
Suppose my son really wants to be a circus performer, but I want him to go to college; he says that, if he couldn’t be a circus performer, he’d be a doctor. My son is about to enter a big circus competition, and I tell him that, if he wins, I’ll give my full blessing and financial support for him to attend circus academy instead.
By that definition, it sounds like my offer to let him pursue his dream is actually exploitative!
This is for me the most interesting part of your comment. I want to know how this was derived.
The normal context of something like that is that you don’t believe he’ll win and are doing it to shut him up. If he has no chance of winning, offering to do X if he wins doesn’t reduce wealth, so is not exploitative.
I had the movie version in my mind, where the disbelieving parent comes around on seeing the kid’s success (c.f.: October Sky, Billy Elliott). I myself felt a version: my parents were very against me applying for the Thiel Fellowship, up until it became clear that I might (and did) win.
Dollars are essentially energy from physics, and trades are state transitions. So, in expectation entropy will increase. Suppose person i controls a proportion pi of the dollars. In an efficient market, entropy will be maximal, so we want to find the distribution
argmax−∑pilnpi,subject to ∑wipi=Total Societal Wealth Generation.For a given Total Societal Wealth Generation, this is the Boltzmann distribution
pi∝eβwiwhere β is the temperature (frequency of trades). I subsumed βwi as a single constant in my earlier comment to simplify matters. I was incorrect in my earlier statement; if my βwi is two higher than yours (not twice as large), I should control e2≈7 times as many dollars. I suspect some of the rise in CEO-to-worker compensation comes from β increasing, some from a less conscientious society, and some from exploitation.
Isn’t $\beta$ proportional to the inverse temperature, and so should be smaller now (with easier, more frequent trading)?