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Economic Duress & Bargaining Power Inequality

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Willy Truth Posted: Tue, Mar 5 2013 12:46 AM

Do you believe there is such a thing as "involuntary acceptance"? It seems to be an oxymoron per se, but economics and law mention continue to mention it alongside terms like "bargaining power inequality/disparity" and "economic duress".

Accepting a contract under "economic duress" can has been defined as existing under the law when:

1. One party involuntarily accepted the terms of another,

2. Circumstances permitted no other alternative, and

3. Such cirucumstances were the result of coercive* acts of the other party.

*Coercive has been defined as "wrongful and oppressive conduct" and is further illuminated in the next definition:

Where one party wrongfully threatens to withhold goods, services or money from another unless certain demands are met, the availability on the market of similar goods and services or of other sources of funds may also provide an alternative to succumbing to the coercing party's demands. 

We are to look at each situation and decide if there is "wrongful, immoral, or oppressive" conduct on the part of the defendant.

These rules are demonstrated in the following case: A plaintiff was owed $157,000 as a commission for finding a lessee for defendant's property but in exchange for $5,000, the plaintiff signed a release of his claim against the defendant, essentially absolving defendant of his debt other than the $5,000. Afterwards, the plaintiff sued for the balance of the commission, alleging that the release had been executed under duress.

His complaint was originally dismissed, but was reversed on appeal in his favor.

So what do you guys think about the concept of "economic duress" or "bargaining power inequality" as presented before you? 

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Clayton replied on Tue, Mar 5 2013 3:00 AM

I do think that economic manipulation exists - but I think it is an extension of simple violence by subtler means. What free market proponents are saying is that if you extract the root of violent coercion, the other kinds of manipulation are either eliminated or drastically weakened. I mean, consider any of the public monopolies... are these not coercion by elimination of all alternative producers? You can only drive on the Department of Transportation roads. You can only buy electricity or water from the Department of Public Works. You can only speak over the Department of Communication's phone lines. And so on. Somehow, these public monopolies are not among the sinister, fat-cats who phone in to tell the Pentagon which country to bomb next... despite the fact that unlike the "monopoly" of Wal-Mart which is just a little above 10% of retail market... nothing close to the 100% market share of the DMV on car licensing or the 100% market share of police on armed patrol services[1].

The socialists, on the other hand, are deluded in thinking that violent coercion emanates from the subtler, economic coercion. Hoppe explains this here - they just have it completely backwards. Subtler forms of coercion ride the coattails, so to speak, of the more blatant, violent coercion of the State. Without the coattails to ride on, these other forms of coercion lose their strength and would naturally fade out for the most part. This is not to say that men become angels without a State... of course not. But without the State, they no longer have the coercive mechanism to create an "economic brotherhood"... that is, to punish defectors and preserve the cartel. Without the state, any cartel is unstable to defection and any monopoly is vulnerable to price competition.

Clayton -

[1]Not true everywhere, but it's close
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On a somewhat related point, what do you think about Chinese firms that employ people who have been thrown off their land by the Chinese government and so have no other option but to take up the employmenrt offered? Isn't this coercion? And if so, what is the morality of purchasing from Chinese firms such as this?

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I tend to solve problems like this by mentally eliminating the accused party. Would the workers be worse off if the employer didn't exist at all?

I guess satisfying this condition is not necessary in order to be acquitted, but it's sufficient, or at least forms a good first approximation.

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Somehow, these public monopolies are not among the sinister, fat-cats who phone in to tell the Pentagon which country to bomb next...

If I were a radical leftist I would begin my retort by saying that these "public" services have no "profit" incentive and are therefore disaffected by the economic predation inherent in capitalism and are therefore not coercive (of course, as a radical leftist, I would completely ignore the fact that government services are, in and of themselves, economic predation and coercive). It seems that many leftists define 'coercive' as anything that might cause people to act differently than how they would act if they had unlimited resources. Can actual trade, in any capacity you can think of,  really be reduced to "involuntary acceptance"?

Leftists turn a blind eye to any coercion of violence that is inescapably present in the foundations of their authoritarian engineered Utopias but will wring their hands and protest in the streets at the allegation of Wal-Mart disproportionately promoting men instead of women. The absolute horrors of capitalism. Government sure has done a good job at putting peoples' priorities in a state-approved blender.

subtler, economic coercion.

What do you mean by this? I assume you mean the "economic duress"/"bargaining power disparity" that is arguably present in free trade? 

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Bogart replied on Tue, Mar 5 2013 8:33 PM

Another silly idea that promotes the hatred many people have of freedom of association, contract and most importantly private proptery rights.  I do not know of anyone anywhere who buys a shirt and then thinks, I should have paid more for the shirt as I have all of the barganing power in this instance or worse thinks that some agent with violence at its disposal has to step in and make me pay more.  Keep in mind that I want my money at full price for the shirt more than the shirt, but at a 70% discount I will want the shirt more than the money.  And think of how I just screwed over the hundreds or in the case of Macy's thousands, or in the case of Walmart millions of poor minimum wage slaves and all of this happens right here in the good old USA.

How is this materially different from the buyer of labor, call them an employer choosing not to buy the services of an employee at the price two weeks ago, but will offer 30% of the price two weeks ago? 

Answer: It isn't.

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This thread deals with a problem I've tried to address here a few times.

I think everybody agrees that coercion is the use of violence as a tool of persuasion.

But this definition is not as objective as it might appear on the surface.

What is considered violence changes insofar as our knowledge of the world as well as expected behavior and conduct change.

Up until the discovery of radioactivity and its effects it wouldn't be a violation of your neighbors rights to stockpile activated uranium in your apartment, even if such a decision had a (not yet discovered) harmful impact in his health.

But when the radioactivity threats to health become well understood, the rules for what is to be judged as violence change in order to include reckless storage of radioactivity.

Now say I'm a wealthy individual, and I have a dislike for a poorer fellow, or I want to exert some sort of control over him. 

If I can use my wealth and influence to systematically shut down otherwise expected opportunities he might had encountered, or to lure and frustrate his expectations with false propositions so he becomes subject to my will, that is considered by many legal minds as a form of coercion and violence, even when each individual action I take is perfectly legal and not necessarily coercive per se.

One typical case is the corporate employee that is held somewhat hostage of his employer due to expectations of bonus and promotions that are not intended to materialize from the onset.

It is not necessarily coercion to not give a bonus or promotion to an employee, but to consistently suggest that he will get a considerable bonus or promotion in order to keep him, only to deny it once you no longer need the bait, is, and can trigger legitime litigation in most advanced societies.

"Blood alone moves the wheels of history" - Dwight Schrute
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