In a world where people were perfectly equivalent, they would be completely solitary. People try to trade– exchange products and services, consisting of personal beliefs– since it remains in every ones interest to do so; and it remains in their interests to do so because they are unequal, that is, different in their preferences (tastes) or in their production possibilities, or normally in both.
We will trade if you have an orange and I have an apple while I choose oranges and you apples.
If I have to compromise the production of more apples when I produce an orange than your own production cost (of an orange in terms of apples given up), I will produce only apples and you will produce only oranges. By trading the largest part of my apple production versus the largest part of your orange production, I will acquire more oranges and you more apples.
One implication is that bans on exchange by a third-party– for instance, the current American and worldwide sanctions on exchanges including specific Russian individuals– enforce a cost on both sides. The only reason, if there is one, for such bans is that they are momentarily indispensable to keeping a basic context of free exchange in the future. (One caution is that “momentary emergency” is not an expression that Leviathan acknowledges.).
James Buchanans financial approach to this pollical-philosophical problem is especially fascinating: it considers politics as another type of exchange, this one concerning the standard rules of life in society (see my review of his book Why I, Too, Am Not a Conservative in the current concern of Regulation, as well as my review of his joint book with Gordon Tullock, The Calculus of Consent, on Econlib). In Buchanans viewpoint, political authorities are justified to impose such guidelines only if a strong presumption exists that they are in the interest of all their residents or subjects, which is the very same as saying that they are essential to preserving a basic context of complimentary exchange for the future.
Whether Buchanan is best or not on the details, comprehending the problem in financial terms, which means in regards to exchange in between celebrations supposed to be “natural equals” (even if their situations and preferences are different), does appear vital. In Why I, Too, Am Not a Conservative, Buchanan wrote (p. 17):.
Without either a generalized understanding of fundamental economics or a widespread determination to postpone to the warnings of those who do comprehend, upkeep of any liberal order ends up being difficult.
Even if we have the very same preferences– to take a basic example: we both choose a diet of 1/3 apples and 2/3 oranges– it will be in the interest of each of us to specialize in the production of one or the other fruit as long as each has different production possibilities, whatever the source (nature, support, habit, or even third-party disturbance) of this difference. If I have to compromise the production of more apples when I produce an orange than your own production cost (of an orange in terms of apples forgone), I will produce just apples and you will produce just oranges. By trading the largest part of my apple production versus the largest part of your orange production, I will obtain more oranges and you more apples.