One if the biggest delusions about economic transactions is that the two traded items are supposed to be “equal” to each other. In an economy that uses money this would mean that a certain amount of money is “equal” to a good.

This is an example of an economic theory that makes no sense.

Imagine two people trade a mule for a cow. Would you expect them to trade back in the next minute?

But if the cow and the mule are “equal” then why not? Neither party loses or gains. If the items are equal then neither one is better off for the trade.

But then why trade at all? Claiming that an item or price is “equal” in a transaction makes the actual exchange meaningless and literally useless.

People trade things of less use for things of more use. They trade worse for better. In this sense trading is just another aspect of the same kind of decision-making that takes place when people choose how to spend their time, without reference to exchanging with another person. You decide you would rather post a blog than work on that book of essays on Romans you hope to finish some day because it can be finished faster and gain more immediate response. You decide that you are never going to read that history book so you taking to Vintage Stock to get credit toward that SuperMario Wii game you know your girls will like. One decision is “in” your own mind and the other is with a store that believes they are better off giving you a low price and getting your book to offer on their shelves.

For an economic theory to be cogent, it has to account for history. The economic actors need to be pursuing a new situation. If your economic theory works just as well when you “run the movie backwards” then it is probably not a theory suitable for the real world.

Who gets exploited in these decisions. Hard to say. Deciding to write the blog post may be the wrong decision from one point of view. Maybe the history book is really brilliant and you ought to read it. But then again, maybe your Romans essays are never going to be as good as you hope they will be, and will never profit you anyway. And if you’re never going to read the history book it really doesn’t matter how good it is.

Notice here that each person in a transaction is responsible for deciding what will make him or her better off. Is there a situation when this is not the case? Typically, one doesn’t allow adults to persuade children to trade with them. Parents claim the right to veto such decisions. This shows there is a case to be made for second-guessing and interfering in transactions. It also shows that doing so can be demeaning to adult persons, treating them like children.