What is exploitation? I wish to try to get at a specialized sense of this word, not its common usage. I would define exploitation as
- deliberately "pushing people off" of rationality - using knowledge of cognitive bias to cause people to act in a manner contrary to rational interest maximization
- for profit or easily measurable gain
- causing great suffering and harm in a fairly direct way
My definition of "exploitation" would not, for instance, cover the case of prostitutes "exploiting" their customers. First, I would not (necessarily) consider a value (we could more pejoratively call it an "appetite") to be a cognitive bias, and sex must certainly be seen as a value. Second, even if prostitutes exploit cognitive bias in "marketing," it must be rare that the prostitute causes great suffering and harm to a client. It might be more accurate to say that the prostitute causes much rejoicing - or, at least, relief from suffering. This is not what I mean by exploitation. (Actually, my concern with exploitation is more in the marketing methods used to secure the exchange, rather than the exchange itself. Here is the tricky part - this might include marketing for any transaction, from prostitution to cars to stocks to food.)
I am aware that it is strange to take the case of "prostitute exploiting client" first in the sex work scenario. The more common case proposed as an example of exploitation is the exploitation of the prostitute by pimps (or, perhaps, clients). I think the most realistic position on this is that not all sex workers are exploited, but that many are. Pimps, for instance, (1) deliberately use a knowledge of cognitive bias (if not outright violence) (2) for profit, (3) often creating great suffering. As with obscenity prosecutions, we must keep our eyes on the real harm - the exploitation, the departures from trustworthy consent - and not some aesthetic judgment. The fairest and most realistic tactic, to me, seems to be to regulate the deliberate exploitation of the individuals whose suffering we worry about - not to directly limit the freedom of the individuals themselves. In other words, the pimp has no claim for a right to ply his "trade" in the just society, whereas the prostitute does.
But why not allow exploiters to exploit, so long as they don't utilize coercion or fraud? To answer this, we must first ask, why should the state protect individuals from violence, theft, and fraud?
There are several possible answers to this question. To the person whose moral system is grounded in utility maximization through rational self-interest (in classical economics, for instance), violence, theft, and fraud are suspect because transactions that take place as a result of violence, theft, or fraud are not utility-maximizing - we have reason to suspect that this type of transaction reduces utility, because the transaction is either not voluntary or entered into with false information. In addition, violence, theft, and fraud cause over-investment in security, again interfering with free market utility maximization. And yet another problem is that violence, theft, and fraud produce nonfunctional income: income unrelated to efficient economic activity (which would be utility-maximizing). (The enforcement of contracts - a function Robert Nozick ascribes to the minimal state - might be justified on similar grounds, such as preventing over-investment in hedging against nonperformance.) To the person more concerned with individual rights, violence, theft, and fraud are serious examples of the violation of what is generally taken to be the most important individual rights. It is actually not clear to me exactly why Nozick would allow the state to protect against violence, coercion, and fraud, and to enforce contracts, but I am currently re-reading Anarchy, State and Utopia with an eye to figuring this out.
Preliminarily, the same reasons that justify a proscription of violence and coercion (and enforcement of contracts) may be applied to what I have termed exploitation. The deliberate, calculated practice of lulling a person away from rationality encourages transactions that are not rationally utility-maximizing. We should have no faith in these transactions, just as we have no faith in "transactions" that are the result of theft or fraud. Exploitation is attractive as a field, and, left unchecked, is likely to draw investment away from economically efficient enterprises and toward its own unproductive, harmful enterprise. Income from exploitation may be seen as nonfunctional income - the income is unrelated to economic efficiency, unrelated to any contribution to the productive economy.
For purposes of comparison (this is really different from anything Nozick is talking about), this is Galbraith's explanation of nonfunctional income:
It is the normal assumption of economists in advanced communities that income rewards economic effort. Since it induces that effort, it is functional. There has been ample dispute over whether particular functions are over- or under-rewarded, and this is the foundation of the ancient quarrel between Marxians and non-Marxians. But the adequacy of reward for service is not the central issue in this model; the problem is that numerous claimants [in the economies of Latin American countries] - landlords, members of the armed services, government functionaries, pensioners - render no economic service at all. And the best rewarded businessman is not the one who performs the best service but the one whose political position or franchise accords him the most secure monopoly. It is useful to have a term for the income which is so divorced from economic function, and one is readily at hand. It may be called nonfunctional income. [John Kenneth Galbraith, "The Causes of Poverty: A Classification," in Economics, Peace and Laughter, Houghton Mifflin, 1971]
Of course, there are ethical reasons to prohibit exploitation - reasons that, I would argue, are not redistributive. Prohibiting exploitation does not redistribute wealth from the savvy to the vulnerable; rather, it acts to prevent a redistribution from the vulnerable to cheaters that does nobody any good (except the cheaters). We should give no more credence to the "right to exploit" than to the "right to defraud" or the "right to violently coerce." In fact, we might properly consider a "right to be free from investment in exploitative tactics" - a right not to be the target of tactics, backed by significant investment, designed to push us off our rationality, and to enter transactions that appear voluntary, but that benefit the exploiter, but not the exploited. This is not the same as saying there should be no right for an individual to enter transactions (or take actions) that appear to be contrary to his self-interest.
Another, less formal way of thinking about this is to imagine the evolutionary arms race that must have occurred in our EEA between cooperators and cheaters. Cheating is an attractive strategy, and mechanisms to successfully cheat, as well as mechanisms to detect cheating, must both have high fitness value (though cheating-prone genotypes occur with much lower frequency than cooperator genotypes if society is not to collapse on itself). The cheating-detecting strategy that is the current human standard model was developed to deal with fairly straightforward cheating by individuals and small coalitions. Faced with massive investment in "cheating technology" by corporations, the natural cheating-detecting mechanisms of individuals must fall short. When predators and prey evolve together, the "arms race" often results in an equilibrium, with both predators and prey surviving in sustainable numbers. Similarly, cooperators and cheaters were able to coexist for millions of years. But when a predator either develops a major new technology, or is faced with prey species with whom he did not evolve, the predator is at risk of wiping out the entire prey species - and, ultimately, the entire ecosystem, including himself. Large mammal extinction was the result of early humans arriving on continents with an existing package of technology that the mammals had no defense against. Massive investment in cheating technology leaves cooperators just as vulnerable to these new super-cheaters as the American megafauna were to the early humans. Some say the cooperator collapse is already here.
Edit: Even Richard Posner thinks that deregulation of the banking industry has shown itself to be bad policy. "I have long thought it troublesome that Alan Greenspan was a follower of Ayn Rand," he quips.
What's the right path, then? "The correct approach," says Judge Posner, "is to carve down regulation to the optimal level but then finance and staff and enforce the remaining regulatory duties competently and in good faith."