Straining Toward Natural Law: Margaret Radin and Contract Degradation Part 1.5.1

Last week I posted some initial comments about Professor Margaret Radin's article Access to Justice and Abuses of Contract here. I had planned to get to Part 2 this week but an apposite comment by Eric Enlow, dean of Handong International Law School in Pohang, Korea, has forced me to reconsider two points I made my first time around.

Dean Enlow first questions my conclusion that, just as contracts are means by which humans obtain private goods, so too public remedies for breach of contract are private goods. Quoting myself,

[I]s a right to claim damages for breach of contract a public good? It seems not: the remedy of contract damages--like the practice of contracting--is a private good. 

To which Dean Enlow responds, 

I don't understand why the practice of courts' remedying of breaches of contract concerns only private good. To the contrary, if courts create a state of affairs where the public knows that a breach of a private contract may be remedied, then it creates public conditions where people may contract at lower costs and with greater confidence. Courts thereby facilitate more commercial transactions by lowering transaction costs. Courts may also promote the moral development of personal responsibility in taking responsibility for certain commitments with others and making amends for harms caused by failing in those commitments. 

In other words--my words--provision of a civil remedy for a private wrong (damages suffered as a result of breach of a contract) contributes to the public good in two ways. First, contract law works to increase the frequency of the social practice of contracting and, second, contract law functions as a tutor of private virtue, in particular the virtue of promise-keeping or fidelity. The first promotes an increase in the aggregate number of private goods while the second, the goad of potential civil liability for contract breach, works to increase our individual well-doing, our individual flourishing. In turn, individual flourishing contributes to the flourishing of society as a whole.

In response, I agree with the second of Enlow's points but not the first. With respect to his first criticism, increasing the quantity of private goods (what economists call welfare maximization) may be good for an individual but the effects of American consumerism (my thoughts about consumerism here; even better ones here) suggests that welfare maximization may in fact detract from growth in individual and collective virtue. (Some earlier thoughts on that point here.) In any event, and returning to a point I made in my initial post, I remain unconvinced that welfare maximization is a condition sufficient to identify a public good. I suspect that nothing can be a public good that affirmatively reduces our capacity for private goods but I don't believe the converse follows. In other words, increasing welfare is a necessary but not a sufficient condition by which to identify a public good.

I stand corrected by Enlow's second observation. Promotion of the virtue of fidelity is a public good and contract law can promote fidelity. It is particularly vexing to have overlooked this point because I've made it on previous occasions (see my posts here and here). We all must admit that we need socially instantiated practices to grow in virtue, a habitual turn to the good, and contract law is one such practice. Thus, I affirm that contract law is a public good.

In conclusion, I am grateful to know that someone reads what I write and takes the time to respond thoughtfully to it. Dean Enlow raised an additional point about my Aristotelian account of justice to which I hope to respond soon.

Straining Toward the Natural Law: Margaret Radin and Contract Degradation Part 1

Speaking Aristotelian-ish, the social practice of contracting is an example of a formal means [cause] by which human beings achieve their natural end of flourishing. Flourishing entails growth in the virtues, one of which is justice. And among the components of justice is "commutative," which entails a rough equality in exchange. In other words, when all is said and done, a contractual exchange of money (or information) for goods or services should be a fair one. (Caveat: a fair exchange need not be on arithmetically equal terms; it need only be a fair chance at arithmetical equality.)

Contract law exists in part because sinful human beings sometimes fail to contract in a just manner. It's unlikely that contractual assent produced at the end of a gun represents a fair exchange. Contract law thus concludes that the party under duress need not uphold her end of the bargain. (Indeed, the law of unjust enrichment goes one step further than contract law and permits such a victim to recover what has already been transferred.)

But what about contractual assent to terms that a party had no knowledge and, even if the terms had been known, wouldn't have been understood? I'll Margaret Radin provide an example taken from Access to Justice and Abuses of Contract (download here):

Facebook promulgated new terms of service in January 2015. Many readers of this essay, perhaps a large majority, are users of Facebook. But very few users know that new terms were imposed recently, and fewer have read them.

If someone did read the terms and wished to disconnect and delete her account, she would discover that certain things will nevertheless stay in Facebook’s power: “Information associated with your account will be kept until your account is deleted, unless we no longer need the data to provide products and services.” [italics added] Moreover, “information that others have shared about you is not part of your account and will not be deleted when you delete your account.” In other words, Facebook will continue to feature your stories and photos in advertisements. You are deemed to “agree” to Facebook’s terms by having continuing to use Facebook after January 1, 2015.

Facebook's terms of service are relatively benign, and use of Facebook is without charge to its users. (It's marketers to whom Facebook sells information that make it extremely profitable.) Nonetheless, all of us have clicked "I agree" for goods or services that we have purchased that include sets of terms we have not read, and at least some of which limit our rights (e.g., to complain publicly about shoddy products or to litigate if the other party breaches). Are such terms a legitimate part of the social practice of contracting? In other words, do they represent a rough equality in exchange? And, even if they don't, should the law of contracts do anything about it?

On the one hand, contemporary contract law is agnostic about the legitimacy of such terms. In other words, the law doesn't care about (or perhaps doesn't believe in) commutative justice. And even if a judge believed that a contract was using terms in an unjust manner, he must conclude that contract law as it now exists provides no recourse. Unlike an unfair exchange produced at the end of a gun, an unfair exchange produced by terms is beyond the power of the law to redress.

Radin, on the other hand, says no, such terms are not legitimate; and yes, the law of contracts should do something about them. But, one asks, how does she know any particular term and the resulting exchange is illegitimate? And how does she argue that the law of contracts should do something about it?

With respect to the first question, she suggests that terms in contracts for goods or services for which there is market failure are almost certainly so one-sided as to be wrong. Market failure occurs in the presence of two factors: (i) when a rational consumer cannot acquire sufficient information about the product to evaluate its value and (ii) the term disclaims liability for damages caused by the product's defects. Consider Radin's example:

Fine print embedded in a composite product may be deployed in a non-competitive market or in a market in which too many consumers lack information about the product, a situation that leads to a race to the bottom. If consumers do not have the information needed to evaluate a product (a situation known as information asymmetry, because the firms themselves do have the information about their products), firms can lower quality without lowering the price, or can lower the price but lower quality more. When that happens, firms that do not lower quality will receive lower revenues and perhaps be driven out of the market.

Even if we agree that there's something "wrong" about that, what should contract law do about it? Are civil governments in the business of reversing races to the bottom? Surely, no one wants to pay more and get less but why should courts or even legislatures get involved in fixing this problem? At this point Radin provides no argument relying, it appears, on moral intuition. (For the limits of moral intuition as a basis for human rights, not to mention contract remedies, see my piece Looking for Bedrock.)

Is there an argument that would warrant Radin's desire to modify the rules of contemporary contract law and forbid certain disclaimers? As I suggested in Who Bears the Burden? The Place for Participation of Municipal Residents in Chapter 9, public choice theory may be that argument. Can disallowing disclaimers in conjunction with defective goods be justified by application of public choice theory?

Let's start with the first question: What is public choice theory?  Public choice theory provides a framework of analysis to identify public goods, goods that that should be provided by civil government at taxpayer expense. Other goods are private and need not be provided by civil government. Public choice theorists posit two markers to distinguish public goods from private ones: First, quoting from Who Bears the Burden?: "A public good is one which should be produced, but for which there is no feasible method of  charging the consumers." Second, provision of such goods at public expense prevent the problem of free riders, those who would take advantage of a good, such as residential streets, without paying. If non-payers can't excluded from using a good without paying, free market participants won't provide (much of) it.

On such an understanding, is a right to claim damages for breach of contract a public good? It seems not: the remedy of contract damages--like the practice of contracting--is a private good. Thus, public choice theory does not justify disallowing contract disclaimers. (Indeed, as I argued in Principled Pluralism and Contract Remedies, civil government need not provide a remedy for breach of contract although it certainly may do so.)

Well, if not public choice theory, is there any other foundation on which to base a rule disallowing disclaimers? There might be, and that's where the need for a substantive account of natural law becomes necessary. Radin and other Progressives are onto something--enforcing unbargained-for disclaimers of remedies for breach of contract may be unjust--yet the thinness of the Progressive account of justice fails to provide warrant for their disallowance. By contrast, a natural law account offers a basis for limiting the ability of one party to use the form of contract to deny its substance.

Perfecting Humans and Raising Children

Yesterday I posted a short piece here about the increasing use of genetic testing of pre-born children with a view toward weeding out the "undesirables." The article to which I linked discussed the availability of OTC tests that could be administered to the mother's blood to determine whether the child she was carrying suffered from Downs Syndrome. Only more such tests can be expected to hit the market over the coming years, which, in the not-too-long run, will allow parents to abort children who in utero show the existence of even potential medical problems.

Over a week ago there was a well-written piece in the online edition of The Wall Street Journal. You should be able to find it here. Anthropologists at UCLA conducted a week-long study of 32 middle-class Southern California families. Not an ordinary study, mind you, but one that involved recording virtually everything each family did in their home. The results come as little surprise to me: "The families had very a child-centered focus, which may help explain the 'dependency dilemma' seen among American middle-class families."

What's a "dependency dilemma," you ask? "Parents intend to develop their children's independence, yet raise them to be relatively dependent, even when the kids have the skills to act on their own." In other words, by catering to their children's whims, parents undercut the very life skills that make them capable of exercising independent judgment. Such life skills include dealing with frustration and failure, which, after all, are more a part of life than success. Insuring your child has every conceivable experience and chauffeuring him or her to every activity, and failing to requiring even a limited level of reciprocity, is geared toward creating a child who in unprepared for the so-called real world.

Both using abortion to cull the heard, so to speak, and raising children in middle-class America have the same goal: perfection. But not moral perfection; not excellence in the virtues of character. Perfection understood in the narrow sense of controlled material success. The market meets the family, and the market wins. When parents in effect consume their children, the family has been turned inside-out. Of course, such parents should be wary of how their children might consume them when their performance begins to slip after, say, age 70 or so.

The Republocrat Cometh

Carl Trueman is one of the keynote speakers at the upcoming Renewal Conference at Westminster Reformed Presbyterian Church in Suffolk, Virginia. The title of the conference, Voting for Jesus: Engaging Politics with the Gospel, suggests that there will be a rollicking good time. To gear up for the festivities, I decided to read Trueman's short book, Republocrat: Confessions of a Liberal Conservative (P&R 2010).

Trueman has the advantage of an outsider; he's English. While he understands the political issues facing contemporary America, he's not so deeply embedded in the process that he can't see the bigger picture. And while he frankly admits his British political proclivities, he's careful to plant all political processes outside the work of the Church.

It's that point--the American penchant to identify political positions with the Kingdom of God--that most exorcises Trueman. While he's quick to place the blame for the politicization of the Christian faith on both the Left and the Right, his comments are mostly directed at the Right's successful merger of Evangelical Christians, the Republican Party, and Fox News. This Rightward focus makes sense given Trueman's professional and ecclesial milieu. He is an ordained minister in the Orthodox Presbyterian Church and serves as Dean at Westminster Theological Seminary both of which are largely populated by well, let's face it, older, white, conservative folks. While his critiques of evangelical blindness are largely spot-on, co-authoring the book with a like-minded alien posted in a Left-leaning institution might have made the book even more appealing.

More "fair and balanced" would not, however, have improved it. Trueman's penchant for well-placed zingers make the book fun to read. Never snarky but not kind and gentle, either.

Trueman is by no means indifferent to the effects of culture. He freely acknowledges that the leading contemporary form of economic activity, capitalism, has done more to eliminate poverty than anything in history. (Click here for a perceptive piece supporting just this point.) But Trueman implores Evangelicals  thereby neither to identify a particular form of capitalism with the Gospel nor to forget that capitalism does not exist without (and indeed might undermine) the virtues of civic life necessary to maintain that very system.

In true American bottom line, pragmatic fashion, I think Trueman's most significant observation is this: the meliorating effects of two-party democracy undercuts the Manichean tenor so many Americans invest in our recurring quadrennial election cycle. If each of the past [fill in the blank] elections had been as billed--the "most important ever"--why does so little seem to have changed? And why should we believe that this is the one (candidate or election)? God's kingdom will prevail regardless of the next American president.

So come on out to the Renew Conference on February 24-25. Good fun should be had by all.

Confessionalization

Peter Leithart notes here about the value of the "confessionalization thesis" as a tool to explain the rise of the modern state.  I found confessionalization useful in correlating the rise of Puritanism and market capitalism in early modern England here.  Puritan covenant theology was not the cause of market capitalism but the failure of the Jacobean monarchy to take either into account led to its decapitation and the eventual triumph of England's parliamentary system.