Atlas Shrugged: The Lion’s Share

Atlas Shrugged, part II, chapter III

Now that we’ve seen Lillian’s reaction to her discovery of Hank’s affair, let’s flash back briefly. Earlier in the chapter, while Hank and Dagny were in bed together, she said this to him:

“Hank, I want nothing from you except what you wish to give me. Do you remember that you called me a trader once? I want you to come to me seeking nothing but your own enjoyment. So long as you wish to remain married, whatever your reason, I have no right to resent it. My way of trading is to know that the joy you give me is paid for by the joy you get from me — not by your suffering or mine. I don’t accept sacrifices and I don’t make them…. If ever the pleasure of one has to be bought by the pain of the other, there better be no trade at all. A trade by which one gains and the other loses is a fraud.”

The contrast we’re meant to see is that Dagny only wants to continue their liaison as long as it gives them both pleasure, while Lillian wants to keep Hank chained to her even though he hates their marriage. Notably, what’s left out of this equation is Lillian’s feelings and desires. After all, the “trade” of Hank’s fidelity may bring pleasure to Dagny, but it brings pain and suffering to her, and even though Hank promised to be faithful to her, that pledge is irrelevant because shut up that’s why.

But there’s an interesting point to be made here. Rand expects her heroes to live by the same moral code in business as they do in their personal lives, so Dagny’s statement is clearly intended to be a general principle. She takes it for granted that in a capitalist utopia, every trade would benefit both parties. The reason she believes this is that in her worldview, it’s only the government, or some other illegitimate source of coercive power like a nagging wife, which can force a person to make a trade that disadvantages them. If there were no coercion and people were free to choose, then trades that weren’t mutually beneficial wouldn’t be made, and we’d all be better off.

This assertion showcases Ayn Rand’s almost childlike naivete about how her theories would play out in practice. Eliminating government as she wants wouldn’t decrease coercion at all. In fact, it would increase it.

To see why, let’s imagine we live in a free-market utopia, and let’s play by the rules and stipulate that I can’t directly force you to do my bidding. But what I can do is wait for an accident of circumstance to come along, something that puts you in a position of desperate need, and then offer to help you only if you’ll agree to onerous terms. The result is the same; the only difference is that I’m letting nature create the coercion for me. In a world where there’s no social safety net for people to fall back on, this would happen all the time.

For example, if I’m a wealthy commodities trader and you’re a cash-crop farmer in a poor country, I can demand that you sell your harvest to me for less than it cost you to produce it. Even though you’re losing money on the deal, you’d have to take it, because any money is better than none, and while I can always shop around elsewhere, you can’t afford to wait; your crop will rot in the fields if it’s not bought. (This has often happened with coffee farmers.) Or, more speculatively, what if I’m a doctor who’s invented the cure for a deadly disease; can I demand that you be my slave for life in exchange for giving it to you?

A contract that’s agreed to only because of a vast disparity in bargaining power is sometimes called a leonine contract, after an Aesop’s fable about animals that go hunting together:

The Lion went a-hunting with the Fox, the Jackal, and the Wolf. They hunted till at last they surprised a Stag and took its life. Then came the question how the spoil should be divided. “Quarter me this Stag,” roared the Lion; so the other animals skinned it and cut it into four parts. Then the Lion took his stand in front of the carcass and pronounced judgment: “The first quarter is for me in my capacity as King of Beasts; the second is mine as arbiter; another share comes to me for my part in the chase; and as for the fourth quarter, I should like to see which of you will dare to lay a paw upon it.”

In Rand’s eyes, any contract that wasn’t the direct product of force or fraud is “fair”. In the real world, we recognize that naturally occurring coercion can give rise to the same harmful result. That’s why a contract can be voided by a court on the grounds of unconscionability, if it’s grossly unfair to one party. (Admittedly, this is a power that judges don’t use nearly as often as they should.)

The recognition of this unfairness has also given rise to the concept of fair trade, where wealthy consumers agree to pay a higher price so that impoverished producers can make a living wage from their labor. Ayn Rand would probably denounce this as “altruism”, which is the supreme evil in her philosophy (remember, she thinks it’s immoral to give things to other people just for their benefit). Then again, as we’ve just seen, she also holds that trade shouldn’t occur unless both parties gain by it. It’s the insistence on these mutually contradictory propositions that throws Objectivism into a paradox it can’t resolve.

Other posts in this series:

Atlas Shrugged: Hobo Sign
Weekend Coffee: February 22
A Christian vs. an Atheist: On God and Government, Part 10
Thoughts on the Chapel Hill Shooting
About Adam Lee

Adam Lee is an atheist writer and speaker living in New York City. His new novel, City of Light, is available in paperback and e-book. Read his full bio, or follow him on Twitter.

  • Doug Langley

    NO!! Not another link to TV tropes!!

    Making us visit that site as the price of reading your post is a real leonine contract.

  • Naked Bunny with a Whip

    You get to see the mindset of capitalistic coercion come up whenever there’s a discussion of unemployment. How many times have you seen someone complaining about “lazy” people who won’t take jobs that pay less than the meager amount they can get from unemployment insurance?

  • Sue White

    Wow, they have the most romantic pillow talk, don’t they? I wonder if they got receipts?

  • Naked Bunny with a Whip

    It’s a world where everyone talks in speeches, innit?

  • Korey Peters

    DAMMIT DOUG! I didn’t even notice that TV Tropes link until you pointed it out. Well, here goes my morning…

  • Doug Langley

    Thank God Rand doesn’t tell us it’s tax deductible as a business expense.

  • eyelessgame

    A term I like for this sort of naivete is “assume perfectly spherical humans in a vacuum.”

  • Doug Langley

    “. . . in a capitalist utopia, every trade would benefit both parties.” And thus capitalism produces the best outcome for everybody. It sounds so logical, like many naive beliefs. But economists have identified a number of fallacies which appear self-evident but in reality don’t work. There are a number of conditions where individuals do what seems best for themselves but the net result makes things worse for everyone. For example, a bank run. It makes sense to pull your money out while you can, but when everyone does it, the bank crashes and people are worse off.

    Which brings us back to Adam’s previous question: how does Midas Mulligan close his bank and pay off every creditor? It’s pure fantasy.

  • Michael

    Some libertarians attempt to “solve” the bank run problem by proposing full reserve banking, i.e. having the chase on hand at all times to pay out on every account-some even go so far as to label fractional reserve banking as fraud. Of course, a bank that did this would probably have far less money to lend out, and thus lower profits (it might also be an even sweeter target for bank robbery). So the “solution” offered, like most they make, does not appear to fly.

  • Michael

    I don’t think “coercion” would be the correct term-in law that means a person using force or threats to gain someone else’s compliance. It would still be taking advantage of the situation with the results that you posit though.

  • arensb

    Do they at least compare notes to make sure the trade was fair? “Let’s see, we had one round of missionary, another round with reverse cowgirl and I came both times… but wait, I hit your elbow against the side table while you were coming, and threw you off your stride, so I guess I owe you a blow job in change.”

  • X. Randroid

    A trade by which one gains and the other loses is a fraud

    This shows that Rand does not understand trade. To take a simple case, suppose Hank sells his stock in company X and buys shares of company Y because he thinks X is going downhill while Y is up-and-coming. Turns out he’s just wrong; Y tanks, X soars … and Hank loses. More generally, a lot of trade is driven by disagreement between the parties on the relative value of what’s being traded, and in such cases they can’t both be right.

  • X. Randroid

    As I recall contract law, the issue is usually framed in terms of disparity in bargaining power. If one party’s bargaining power is reduced to zero, some courts will describe the disparity itself as coercive. Others might not call it coercion, but they all agree on the necessity of imposing limits on what can be done to a party with no bargaining power.

  • Doug Langley

    So to resolve the issue, Rand makes some very unrealistic assumptions. Hank is a super genius who is never wrong and always chooses the correct stock. Rational men never disagree, they see every situation from the same view. On and on.

    And she assumes everyone has perfect information. No one hid or soft pedaled crucial facts.

  • Michael

    I guess it depends on if coercion only applies when a person is the one behind the threat. Taking advantage when the threat of destitution is hanging over someone’s head versus personally threatening them with harm, say. In either case I agree it’s not good, just possibly a quibble with the word for it.

  • sealiagh

    “Rand makes some very unrealistic assumptions”

    Yup, that pretty much sums up Rand and Objectivism.

  • Alex SL

    I am afraid I don’t understand how that would work. If a bank has all the money at hand that people have deposited in it so that it could pay all of them out in the case of a run, how would it make any loan whatsoever? It seems to me as if you cannot have a credit system without the risk of bank runs, full stop. What am I missing?

  • Michael

    Yeah, it doesn’t make any sense when you think it through. Apparently they haven’t done that.

  • Doug Langley

    Employment has so often been a leonine situation. Look at the history of people slaving away in factories for 12 or 14 hours a day, backbreaking work, dangerous, toxic, all to earn a pittance that could barely feed a family. Why on earth did they accept it? Because we live in an economy where we need money to live. No money? No food, you starve. No shelter, you die from exposure.

    Which is the flaw in the argument “The employee chose work of his own free will, no one forced him into it, so he should not complain”. Wrong, he was forced into it by the fact that starvation was the only alternative. Granted, he could beg and try to find an alley to sleep in, but that’s unreliable.

  • Ben

    Any fees and charges the bank made for holding the money could be loaned out, presumably.

  • raylampert

    The legal term is “duress”. A contract made under undue duress is voidable. But as my contract professor told me, you want the other person to be under as much duress as legally possible.

  • unbound55

    To be clear, it isn’t a matter that economists have identified those fallacies. The economists are actually pretty clear up front that for capitalism to work well / consistently, there are a number of conditions necessary. The short list that comes to mind includes:

    1) There must be a large number of competing sellers. (Large number does not equal a handful or two)
    2) There must be a large number of competing consumers.
    3) The products being sold must be identical (this includes features and quality) or easily distinguishable when they are not identical.
    4) The consumers need to have near perfect knowledge of the product or service being purchased (i.e. they must be able to distinguish easily between feature and quality discrepancies).
    5) There must be low barriers of entry into any market.
    {I’m pretty sure there was a couple more, but I don’t remember right now}

    Capitalism was originally described in terms of food markets in ancient greece. Anyone could farm outside the city with minimal knowledge and minimal investment (5), you had large markets of sellers (1) selling identical products (3) to large numbers of consumers (2), and it was easy to tell if you were buying rotten fruit or vegetables or meats vs good fruit or vegetables or meats (4).

    The markets of today don’t exist with those conditions. So to call the current environment capitalism is, in a sense, an insult to the very concept.

  • Science Avenger

    “Letting nature create the coercion” is equivocation and completely unecessary to the point you are trying to make. To make your trader-farmer situation coercive, have the trader buy the delivery trucks the farmer uses to get his goods to market, thus creating the desperate situation and then offer the deal. It’s not coercion you are rightly criticizing in naturally occurring desperate situations, it’s unequal bargaining positions. To be coercian, the coercer has to create the situation, like putting the gun to your head.

    Further, even in your example the farmer gains from the exchange. But his gain is not at all equitable, which is really what you are getting at. There is no balance in negotiations if one side is in a far superior position. Thus among other things, we have anti-trust laws.

  • uykhvasdrvtjyku

    Why would anyone put their money in a bank if the bank charged you for the privilege? The way it’s supposed to work is that the bank pays you to borrow your money. If they provide services like checking, then they can charge some nominal fee for that. But merely for a savings account? Any idiot would just keep their money in cash.

  • uykhvasdrvtjyku

    Aside from this making it impossible for banks to loan money (their raison d’etre), how do libertarians propose to stop banks from keeping a reserve less than 100%? Pass a government regulation?

  • J-D

    There would still be one motive: security. People already pay banks for this service. In effect, the proposed model means replacing all at-call bank deposits with the equivalent of safety deposit boxes.

  • J-D

    Yes, it would reduce liquidity ‘quite a bit’. And the Sahara is ‘somewhat’ dry and the Marianas Trench is ‘fairly’ deep.

  • uykhvasdrvtjyku

    Yeah, but historically speaking, banks weren’t all that secure. They got robbed a lot. Employees embezzled money. Security is much better today (and of course, there is deposit insurance from that bothersome government of ours), but security is expensive, and without revenue from lending, banks would have to charge all of that to depositors. It just doesn’t seem like a workable model.

  • Steve Ruble

    Someone is going to need to pay for security, whether the money is stored in cash in people’s homes or in banks. Personally, I’d rather pay someone a monthly or annual fee to hold the money, rather than paying a monthly or annual fee to a security/alarm company and incurring the additional risk of my house being a higher value target for burglars.

  • J-D

    Historically speaking, people did do it. And people still do it. The safety deposit box business does well enough for banks to continue operating it.

    On the other hand, far fewer people use safety deposit box services than interest-bearing at-call deposit accounts. The model is ‘workable’ in a limited sense, but it would mean a drastic reduction in the scale of banking operations and radical changes to the way the economy functions, far more radical than is appreciated by the people who advocate the change.

  • uykhvasdrvtjyku

    Yes, you’re right. As you say, it would look quite different from the banking system we all know and loathe.

  • Doug Langley

    Fair enough. I was just commenting on Adam’s observation “She takes it for granted that in a capitalist utopia, every trade would benefit both parties.” Rand fell for the fallacy of “If everyone acts in his self interest in every transaction, the result is prosperity for all”.

  • Michael

    From what I’ve read, they feel is should be deemed fraud (as customers do not explicitly agree to have their money lent out, apparently) and prosecuted as such. Of course, they *could* agree to that, but apparently the full-reserve banking libertarians believe that their model is better and would outclass the fractional reserve banks. This does not seem probable.

  • Michael

    True, it’s duress in regards to contracts, but coercion also exists as a crime. Duress is the right term here.

  • unbound55

    I wasn’t trying to be negative to your comment overall, I just wanted to clarify that point since it is something in economics that is rather well understood.

    Rand, as well as the vast majority of Libertarians I’ve dealt with, seems to treat capitalism very similarly to religion in that they just seem to have faith that it will all work out magically. But neither Rand nor most Libertarians have taken the time to educate themselves on what makes capitalism work well and how little it actually takes for capitalism to fall apart. Like any good relationship, it actually takes a lot of work to keep it running well, and it can quickly spiral out of control if you just assume it will work well without any attention.

  • Kelvin Mace

    Seems to me that the difference between the Libertarian definition of capitalism and fraud is a very elusive distinction.

  • schticknic

    Well, it seems to me that not only did Rand not understand real world trading in general, in a modern sense, but did not have any understanding of trade history or context. People from generation to general seem to forget this context and history too. There’s a reason for usury laws. There’s a reason why there used to be the practice of Jubilee. It was naturally UNDERSTOOD that a capitalistic system produced vast inequality and that at some point, the people at the bottom needed some help to, um, CONTINUE to purchase, priming the pump for the economy. Not producers and looters … just the natural order of laissez faire capitalism … this concept doesn’t seem difficult to me. “oh, well, I have ALL of your money now, I suppose i’ll need to give some back to you so that you can live, and of course, buy more from the companies I own.” I’ll never understand the rapacious greed of the capitalists.

  • Doug Langley

    Reminds me of the Perry Mason episode where our hero is arguing with a duper rich guy. (He’s so arrogant, you just know he’s going to be the victim.) Perry loses his temper (which rarely happens) and snaps, “Just how much money do you want?” “If I can away with it,” comes the smooth reply, “all there is!”

  • Economics Guru

    In a competitive market the price a coffee trader will offer a grower is one where he/she can make a profit. If the trader offers too low a price another trader will offer a higher price, if they offer too high a price then they will not make a profit. Profit here being the risk they take for being a trader in the market. If a grower’s production costs are so high that they cannot turn a profit given the market price then they should leave the market. This will help reduce supply and drive up prices and/or reduce inefficient allocation of resources in the market. Growers with lower production costs will be able to stay in the market, however, and there will be a net benefit to society as coffee can be grown more cheaply.

    Where government should be involved is making sure the market is competitive, i.e. no monopolistic traders exist, and making sure there are adequate other opportunities outside of the coffee production industry (in this case) for growers who are uncompetitive.

    The government absolutely should not force the market to purchase at a certain price. This simply creates market distortion which will snowball into market collapse and all will suffer.

    Economics is a very simple, if much hated social science.

  • GCT

    If a grower’s production costs are so high that they cannot turn a profit given the market price then they should leave the market.

    Because it’s always so easy to just do something else, to just move to another location, to just get another job, etc.

  • Economics Guru

    Note the latter part of my comment:

    >Where government should be involved is making sure the market is competitive, i.e. no monopolistic traders exist, and making sure there are adequate other opportunities outside of the coffee production industry (in this case) for growers who are uncompetitive.

  • Economics Guru

    Note again that 99/100 times that there is a mono-raw material economy it is due to government interference. As is actually exactly the case with the coffee trade.

  • GCT

    Fair enough. Although, I wouldn’t necessarily call it “simple”.