I’m not letting go of this cake thing just yet. There’s much more to explore! First up, let’s take a look at the way economics is done. In economics, when we wish to elucidate a given concept, we often set up a simple thought experiment in which we hold all confounding factors constant, and just allow the one thing we’re interested in studying to vary. So to take a very simple example, we could propose the following:
Ron has a dollar in his pocket. He walks into a store that has twenty pieces of candy for sale. What is the highest price the store could charge that would allow Ron to buy all the candy?
Now, there’s nothing wrong with this example in a vacuum. It does, however, make a ton of assumptions — that all the candy is interchangeable from both Ron’s and the store’s perspective, that Ron would be willing to spend all his money on candy, that Ron would want all twenty pieces of candy at any price, that no other potential customers are also attempting to buy the candy, and so forth — that, while totally sensible from the limited perspective of our experiment, make it completely inapplicable as, say, a basis for public policy. If anybody were to say the government ought to intervene and set a maximum price of five cents on all candy so Ron can always buy it all, and that this example "proves" it, I suspect that basically nobody would have trouble understanding why that makes no sense.
A common illustration used to demonstrate the interaction of supply and demand and the concept of "market clearing" is the example of a horse market. We stipulate the existence of a place where people with horses show up to sell them and people looking to buy horses show up to buy them, and then we vary the "demand schedules" of the participants to show how the market will allocate horses and money in different ways depending on the preferences of the participants (I haven’t the space here to develop the concept fully; instead, I refer the interested reader to the masterful treatment in Murray Rothbard’s Man, Economy, and State). As before, the illustration is perfect as far as it goes, but anyone attempting to extrapolate the whole network of human exchange from this gedankenexperiment will soon be fouled by the unstated assumption that the sellers of horses care about nothing except getting the maximum quantity of money for their horses, and the buyers of horses care about nothing except getting the maximum quantity of horse for their money.
The latter is more obviously absurd. Can you even imagine behaving this way? You walk into a horse market, pull out your wallet, and say "bring me horses, and keep ’em coming! I’m not leaving until I’ve maxed out on horse!" Nobody would behave in such a fashion! Clearly there are attributes of horse other than simply quantity that any prospective buyer would care about. How old is the horse? How tall is the horse? How much does it weigh? What sex is it? What color is it? Does it have a history of illness and/or death? I don’t know anything about horses, but I can come up with an entire laundry list of questions that would still distinguish, in my eyes, one horse from another. It would take a very special buyer indeed to care only about quantity of bulk horses and be willing to disregard literally every other feature.
It is similarly foolish to assume that horse sellers are possessed of a single-minded focus on maximizing the amount of money they can get for their horses. This is less obvious, since surely getting more money is going to be a pretty high priority for most sellers of anything, but it’s still not going to be the sole, absolute focus. Surely we can conceive of a situation in which a seller of horses would care about how the buyers intend to treat the horses, yes? For example, would we consider it impossible that a seller would sell a horse to Smith for $45 rather than to Jones for $50 if he thought Smith would take excellent care of it, while Jones would starve and flog the poor beast? No doubt some sellers would opt for Jones and money, but are we really willing to state that no sellers would pick Smith instead? Not too far from my house is a musk ox farm, and they’ll sell you a musk ox if you want one. However, before they’ll make the sale, they’ll require you to prove that you know how to care for a musk ox and you’re set up to do so, and they’ll refuse the sale altogether if they think you’re going to mistreat or kill it. According to the simplistic view, they should sell the musk ox to the highest bidder and move on, but that’s clearly not actually how people behave.
This is, in fact, the simplistic, discredited idea of "Homo Economicus" coming back once again. It is simply untrue that people behave in a narrow-minded, profit-maximizing fashion. That is the sort of conclusion one can reach if one confuses economic models with reality. It is also the conclusion that animates the people who believe that the baker should sell his cakes to the first people who offer to meet his asking price, while ignoring all other considerations. It is really quite absurd, and completely divorced from how people behave in the real world. All the baker is doing, everything Gary Johnson and his defenders proclaim is wrong, is considering factors other than maximum monetary profit. Aren’t we supposed to think that’s a good thing?
When I was younger, I played a lot of collectible card games. I spent entirely too much of my disposable income (and much of my non-disposable income too!) buying packs of cards. Foolish? Perhaps, but, hey, what’s the point of being young and stupid if you’re going to make sound financial decisions? Regardless, I had a friend who owned a store that sold collectibles of all sorts — cards, figurines, teddy bears, you name it. He decided that, since we were friends and I was perpetually broke, he would sell me cards at cost. I’d pay his price for my "fix," and he wouldn’t make a dime on the sale. Obviously there’s no way to look at this as maximizing his profits, and that’s clearly not what his goal was; he was trying to do something nice for a friend. Should the government have stepped in and prevented that? After all, that’s discrimination: he didn’t give a discount to just anybody, but only to me.
This is the usual way people behave, in fact. In my business dealings, I’ve routinely charged different prices for different people. If you’re putting in a really large order or you’re doing something like a charity auction, maybe I’ll give you a discount. If you’re a good buddy (or just in the right place at the right time), maybe I’ll even give you something on the house. This is how most businesses behave because this is how most people behave: we have a whole diversity of values and desires, and we act to satisfy all of them to the best of our ability. We are not ants, robotically focused on our economic productivity, and, as libertarians, we should not idolize ants nor violently compel people to be more ant-like.