In my previous, somewhat whimsical post I asked if perhaps obfuscation is the lubricant for social intercourse.
That question is itself question-begging (and Prof. Rossman already raised this concern): It assumes that the transaction in question actually produces an economic surplus, but is blocked by moral considerations. Can we be sure that’s true? For whom? It seems I want to treat obfuscation as friction, as a tax, something that reduces the size of the surplus of the disreputable exchange. Professor Rossman rightly notes this may not be true.
One obvious problem would be the situation where the disreputable exchange does not create a (net) surplus. I’m thinking of externalities: The standard economic story is that “we” (whatever that means) should “account for” (whatever that means) the “social costs” (whatever that means) of an action, not just the private cost.
A common example is noise or pollution: If Art sells something to Betty, and Betty uses the item, is Carl somehow harmed? (Perhaps: once you’ve heard Betty, you’ll know what I’m talking about…. ) The reason I added all the scare quotes is that it is not clear how we can take account of social costs. We don’t know their value, in an exchange. The Coase Theorem is based on the important insight that the very idea of an “externality” is contingent, and perhaps not well defined. It may be a product of the (mis)specification of property rights.
When we consider disreputable exchanges, the kind where obfuscation matters, as “externalities” we enter some very deep waters. Suppose that it’s really true that the idea of two people of the same sex getting married offends me. Or, suppose that the idea of a woman taking money for a demeaning (in my mind) sex act offends me. I don’t mean a little; I mean it offends me to the point that I can’t sleep, and I want to go break something. Openly allowing these things, like gay marriage for the right or like prostitution for many leftist feminists, would cause an “externality” (sorry, I can’t help it about the quotes!).
The problem of judging which externalities to account for is a lot like the legal doctrine of standing, or the notion that I have to have been affected in a particular, legally recognized way to be able to “stand” in court and sue for injunction or damages. In politics, though, “standing” only requires that I’m registered to vote. The harm I perceive is made real simply by my perception of it.
And that means that people who are offended by prostitution or gay marriage can vote against it. They aren’t directly affected, but they feel a harm, an externality caused by having these contracts validated by the state officially. You often hear a (presumably intentional) misunderstanding of this problem: “Don’t approve of abortion? Don’t have one!” That’s not an answer, if there is a powerful negative externality for me from having Betty be able to pay Art to perform an abortion. It’s not an answer for prostitution, either: If I am very upset by the idea that Art can pay Betty for sex, there is an externality.
Now, in some cases (abortion and same sex marriage, for example) the courts can simply deny political standing for externalities: you don’t get to vote for what you want, even if you feel it very strongly. The result of this may be violence, because the open state endorsement of abortion rights and gay marriage rights imposes an externality on people who think these things are immoral.
But in other cases, as in prostitution and kidney exchange, we outlaw the state enforcement of voluntary bilateral contracts, for reasons of felt negative externalities by people not party to the proposed exchange.
So obfuscation is sometimes made necessary by the combination of externalities and democracy. The contracts can be consummated, and in some ways even enforced, as long as we don’t admit what’s going on. Thus there ere are escort services and “civil unions,” which both obfuscate the externality-causing contracts.
I wonder if all four of Rossman’s obfuscation mechanisms (gift exchange, bundling, brokerage, and pawning) can be thought of as ways of allowing people who strongly feel a negative externality from the open endorsement and enforcement of disreputable exchanges a way to pretend that it’s not happening.
If so, then obfuscation is not a tax or dissipation of the surplus at all. It is a way of increasing the size of the surplus by repackaging the framing of the exchange.