The Normative Foundations of the Market - TAU 2023

 

Abstracts: 

 

Putting Freedom of Contract in its Place 

Rebecca Stone

A recent strand of influential theorizing about contract law, which I refer to as sovereignty theory, suggests that by putting the parties’ freedom to choose the terms of their agreements front and center contract law can simultaneously maximize efficiency and do justice between the parties. By honoring the terms that the parties have chosen under procedurally free and fair conditions, sovereignty theorists contend, courts do justice between the parties. And, given that individuals know better than anyone else what is in their own interests, self-interested parties will rationally devise agreements that maximize the joint value of their transactions, thus, in the absence of externalities, simultaneously maximizing social welfare.

Others have challenged the welfarist foundations of sovereignty theory. Here I challenge the contention that it instantiates principles of deontological justice. The intuitive appeal of a principle of equal freedom, I argue, arises from its application to parties’ determinations of substantive matters—the primary rights and duties that make up the substance of their agreement. It is plausible to think that, at least within some wide limits, what the parties decide should be the substance of their agreement does indeed set out what they owe each other as a matter of (ideal) justice. But it doesn’t follow, even assuming that that intuition tracks something that is correct, that we can appeal to the same principle when we are responding to departures from the ideal—that is, when it comes to responding to those who are imperfectly motivated to conform with the very principle that tells us what parties owe each other as a matter of justice. To respond to departures from the ideal, we must appeal to second-best principles of justice—principles that respond justly to the fact of injustice. And, because non-compliance presents the polity with a set of complex concerns of a different nature, there is no reason to believe that those second-best principles will in general resemble those that regulate the ideal. Thus, even if a principle of equal freedom may be part of ideal justice, it is must less clear that it should be the overriding principle when it comes to rules that are designed to respond to potential breaches of that very principle, as, I argue, many procedural and remedial rules in contract law are.

This is not to say that the parties will fashion procedural and remedial rules exclusively with such imperfect motivations in mind. Such rules may also be designed with a view to facilitating the compliance of well-intentioned actors by enabling them to identify the content of their agreement more easily. They may also be designed to encourage the formation of contracts by well-intentioned parties by giving them confidence that they won’t find themselves under unexpectedly onerous duties of performance. But insofar as the rules respond to the possible imperfect motivations of contracting parties, it is less clear that the principle of equal freedom should apply.

My aim in this paper is to build a framework for figuring out what the applicable principles are that is faithful to central deontological commitments. My starting point is the assumption that valid contracts arise from exercises of the moral power of promising and a particular conception of that moral power, which I call the settling conception, according to which promises are morally valid when they settle normative uncertainty about what justice between the parties requires without infringing on the rights of non-parties. Figuring out what justice demands is, of course, an immensely difficult task. On the settling conception, we should think of contracting parties ideally as offering their own visions of just relations between themselves. Insofar as their agreements represent plausible attempts to do so they are worthy of deference from the rest of us, including the courts, so long as the parties are morally authorized to settle that uncertainty.

The theoretical advantage of my approach is that it delivers a justification for granting a sphere of sovereignty to contracting parties while simultaneously setting principled limits on that grant. Insofar as the parties are settling normative uncertainty that they are authorized to settle, their free determinations of how it should be resolved deserve respect. But freely made agreements that don’t constitute plausible resolutions of uncertainty about justice do not.  Sovereignty theory, by contrast, cannot set principled substantive limits on the scope of the authority of contracting parties to write the rules that will govern them, because it doesn’t provide us with a framework for weighing the value of freedom against substantive fairness.

 

 

Borrowing and Belonging

Abbye Atkinson

Both formal policies and informal norms encourage a consumerist vision of American belonging, with debt as a primary means of consumption. Consequently, debt-based consumption implicates dignity in the American market society. In contrast, our policies and norms of debt relief, exemplified in the Bankruptcy Code’s euphemistic “fresh start” policy, are intentionally anti-dignitarian. These policies and norms marginalize, ostracize, and exclude distressed debtors who seek relief.

This Essay provides a new theoretical perspective on the perverse normative conceptions of debt by offering a new theoretical approach to debt relief: “Disentanglement.” Because debt-based consumption plays such an integral part in our conceptions of what it means to belong to America, to be American, our debt relief policies should similarly evince an approach that seeks to preserve dignity by disentangling the distressed debtor from the burdens of their debt, but importantly, without simultaneously encumbering the debtor with the burdens and markers of justified exclusion.

 

 

Contract as Debt

Mark Gergen

Debt is the most important type of contract. The common law enforced debts long before it enforced other types of agreements. An action to collect debt is the most common type of civil filing. For individuals, debt is the most common, and the most onerous, type of contractual obligation. But debt poses a significant challenge to moral theories of contract. The sharpest challenge is to theories, like those of Charles Fried and Peter Benson, that seek to justify contract law. Inevitably, a justificatory theory must take the position that contract law appropriately accepts the existing distribution of wealth as a given and allows a person to use a contract to exploit a pre-existing advantage over another person. In the case of personal debt, this arrangement often works out in ways that are palpably unfair because of the unequal distribution of wealth, the dynamics of innovation, the hard terms creditors can demand of poor debtors, and the inevitably coercive enforcement of debt. Personal debt also belies Seana Shriffen's moral objection that contract law undercuts the practice of promise-making and keeping by under-enforcing promises. The law of personal debt may be morally objectionable because it demands too little of creditors with respect to forgiveness; it is not morally objectionable because it demands too little of debtors with respect to payment. Debt poses a challenge and presents an opportunity to Hanoch Dagan's choice theory of contract because of the inherent inequality of interactions between creditors and individual debtors. It is difficult and interesting to imagine what the law of debt would look like if debtors and creditors were required to interact as substantive equals.

 

Relational Justice: A Theory of Private Law

Hanoch Dagan (with Avihay Dorfman)

Contemporary private law theories include many variants, but the conventional ones rely on one of two features, institutional or substantive, with some relying on both.  Institutionally, private law is often identified with the common law, implying that its core commitments revolve around the standing it secures to individuals seeking civil recourse and the accountability to these litigants typical of adjudication.  Substantively, private law is associated with a regime that vindicates people’s independence and formal equality, relegating to public law the responsibility for their self-determination and substantive equality. This approach may allow this responsibility to slip partly to private law (mainly due to people’s civic obligation to support just institutions) but still denies any primary and freestanding interpersonal responsibility for self-determination and substantive equality.  In this view, private law is, at its core, the law of dissociated persons.

In Relational Justice, we offer a comprehensive theory that rejects both of these conventional understandings of private law.  Conceptually, we claim that private law should be understood as the law governing our relationships with one another in our capacity as private individuals, not as citizens.  Private law sets up the terms of these interactions rather than merely responding to what parties in a particular interaction have done. This means that its ambition is both constructive and prospective.   Instead of merely addressing ad-hoc encounters, say, between this or that driver and pedestrian, private law constructs edifices of human relationship.  The terms of the interactions it prescribes are thus typically prospective: they often function as stage-setters, establishing preconditions for legitimate horizontal interactions.

Normatively, we maintain that the rules of private law should abide by the fundamental maxim of reciprocal respect for self-determination and substantive equality, to which we refer as relational justice.  We do not suggest that collectivist goals like distributive justice, democratic citizenship, and efficiency must be excluded from its domain.  As citizens, people are justifiably required to render some support to just legal institutions at the national level.  But this obligation cannot plausibly exhaust the significance of private law that, more than any other part of the law, underpins our quotidian horizontal interactions in a range of social spheres such as family, work, home, community, and commerce.  These personal interactions play an irreducible role in people’s lives and private law brings a unique set of considerations to bear on these social contacts.

 

 

 

Exploitation and Wronging

Nicolas Cornell

Consensual, mutually beneficial exploitation is a puzzling category.  There seem to be a range of contexts in which an interaction occurs between two parties—both of whom consent to the interaction and both of whom are made better off than they were before the interaction—and yet the interaction strikes many people as morally problematic in a way that might be described as exploitation.  We might say that one party is “exploiting” or “taking advantage” of the other.  There are many classic examples that might, under proper circumstances, fit this description—a sweatshop laborer, a sex worker, an organ seller, a surrogate mother, etc.

These cases present a puzzle as to what might explain the common reaction that there is something morally problematic.  By definition, after all, they do not involve harm and they do not involve a lack of consent.  These features led Joel Feinberg, for example, to classify such exploitation as a “free-floating evil,” accepting that such conduct is not actually a wrong to the other party.  Others, like Alan Wertheimer and Ruth Sample, have tried to illuminate the wrong in such cases in terms of more novel understandings of what we each are owed in an interaction.

This paper argues that the puzzle of consensual, mutually beneficial exploitation arises because of a problematic, though widespread, assumption.  Philosophers are prone to assume that rights and wrongings—that is, wrongs to some identifiable wronged party— are flipsides of the same coin.   To be wronged is to have had one’s right violated, and to have a right is for it to be the case that some conduct would wrong you.  I believe this assumption is mistaken.

If we abandon this assumption, then the cases of consensual, mutually beneficial exploitation can be more readily explained.  Though the exploited parties have not had any right of theirs violated, they have been wronged.  Feinberg is correct that there is no rights violation, but he is incorrect to conclude that the wrong must therefore be free-floating.  Others are correct to think that there is a distinctive, personal wrong that occurs, but mistaken to then try to trace this to something owed ex ante. 

This explanation is consistent with how we typically speak and think about such cases.  In order to illustrate this, I focus on sex workers.  By focusing on concrete statements and narratives, I hope to suggest how natural it is to think that these are cases of wrongings, and yet not cases of rights violations.  If this is correct, then it suggests a problem with our standard association of these moral concepts.

 

 

Market Free Speech

Avihay Dorfman

Market interactions consist of both voluntarily- and involuntarily-imposed obligations.  Norms against committing certain forms of physical violence, theft, misrepresentation, and discrimination represent involuntary obligations that often override, or constrain, voluntarily-imposed ones.  They exist by operation of law and, primarily, tort law.  The right to free speech and its correlative obligation to refrain from censorship, by contrast, is currently excluded from the class of involuntary rights and obligations, which means that market participants are generally not duty-bound to respect one another’s expressive acts and pursuits.  The ambition of this paper is twofold: Negatively, I criticize this state of affairs and with it the failure of both constitutional theory and tort theory to identify and address the problem; and affirmatively, I argue that considerations of relational equality (and relational justice, more generally) demand that market participants have horizontal, rather than only vertical, rights of free speech.  In that, I seek to defend the case for a new tort—private censorship.

 

 

Social Contracts and the Market of States 

Tsilly Dagan,

Taxation and representation are famously closely linked in the coercive coauthored project of political governance under the social contract. Traditionally, taxation uses the coercive power of the state, governed by political voice rather than market power. Under the social contract, at least ideally, the state uses the coercive power entrusted in it, in order to efficiently provide public goods and services and justly (re)distribute resources while treating its constituents with equal concern and respect.

In open economies, however, state power is subject to competition. Competition subjects the interaction of states and their constituents to market forces. Two features of global competition stand at the core of this paper: mobility and fragmentation. Mobility allows people to relocate and thus choose between competing jurisdictions en-block. Fragmentation goes beyond that, by allowing people to engage with multiple jurisdictions simultaneously, mixing-and-matching the public goods and services they consume across jurisdictions.

Both mobility and fragmentation significantly affect people and their interaction with their states and thus the social contract. Mobility is of course crucial in allowing people to explore opportunities beyond states’ borders and is thus essential for their self-determination and wellbeing. At the same time, however, it is also the source of significant concerns for equal concern and respect including distributive justice. Fragmentation in turn offers a-la-carte menus which enable some taxpayers to (even) better tailor public goods and services to their preferences. This is beneficial in terms of maximizing their preference-satisfaction, and in promoting their self-determination, but it also often exacerbates the potential harms of mobility. If taken to its extreme fragmentation also challenges the very structure of the game by entertaining a new type of affiliation with the state—a non-subscription option allowing (some) individuals to interact with various states while being a member of none. Opening this non-subscription option is much more than providing taxpayers with more (and more nuanced) choices. Rather, its availability threatens to unravel the social contract by breaking the traditional structure of the system in allowing certain taxpayers to function as free agents attached to no community.

The challenge this paper presents is how to re-construct the market of states in a way that allows the re-formation of states’ social contracts. Such renewed social contracts should facilitate individuals’  power to make choices that transcend national borders while at the same time restore states’ ability to provide all its constituents with the essential public goods they need and their rights as citizens to be treated justly.

 

 

The Good Life after the Age of Growth 

Daniel Markovits

I suspect I’ll present a chapter on the rise of the growth ideal and the role that this ideal played in generating growth in fact.  The theme will be that pre-growth civilizations prized use value and despised exchange value, and that the age of growth began when this frame was reversed, to prize exchange over use value.

 

 

Revisiting Possessive Individualism (through IP Laws) 

Mikhail Xifaris

This paper is a (philosophical) inquiry into the modes of justification of intellectual property, circulating both in everyday life and legal discourses. After identifying the dominant narratives (whose heroes are Locke, Hegel, Bentham), it locates them within the liberal political tradition, describe the anthropological core on which they are based, and use this description to discuss Macpherson’s model of “possessive individualism,” to suggest a more modest but hopefully more robust reformulation.

The second part of the paper inquiries into alternative narratives (both in everyday life and legal discourses), aiming at destabilizing the anthropological core on which intellectual property is based. Within these narratives, a peculiar attention will be given to the discourse refusing the supposedly logical connection between the ownership of the “proper” and the holding of property rights on one’s own works (and their fruits), to conclude that even within a liberal framework, there is no necessity for the marketization of our creations. 

 

 

Normative Conventionalism about Contracts

Thomas Christiano

Normative conventionalism is the view that the nature of contracts and their normative force is primarily explained by reference to the normative force of conventions or institutions that create relations of contract.  The normative force of the conventions derives from the system of such conventions satisfying some criteria of justice and efficiency.  And the obligations of persons derive from the requirements that persons do their shares to uphold the justice and efficiency of the convention and treat each other in accordance with the norms of justice as they have been laid down. 

I do not argue that approaches such as the duty of fidelity or the normative powers approach are incapable of explaining the existence of obligations.  Though I am sympathetic with Hume’s thesis that the will cannot bind itself and I have reservations about the duty of fidelity, I do not need these arguments here.  Instead I argue that normatively desirable conventions either are the source of obligations or that such sources can gradually replace naturally produced obligations in an increasingly complex society.

In this paper, I attempt to defend what I am calling normative conventionalism with a new argument and against some powerful critiques.  In particular, I defend it against the criticisms that the divergence between contract and promise undercuts moral agency and that conventionalism fails to account for the directedness of the obligations of contract.