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George Mason School of Law

George Mason School of Law. Contracts II Contract Law in the State of Nature F.H. Buckley fbuckley@gmu.edu. Hobbes on the State of Nature Hobbes, Leviathan 14.18 (1651).

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George Mason School of Law

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  1. George Mason School of Law Contracts II Contract Law in the State of Nature F.H. Buckley fbuckley@gmu.edu

  2. Hobbes on the State of NatureHobbes, Leviathan 14.18 (1651) • If a covenant be made wherein neither of the parties perform presently, but trust one another, in the condition of mere nature (which is a condition of war of every man against every man) upon any reasonable suspicion, it is void… • For he that performeth first hath no assurance the other will perform after, because the bonds of words are too weak to bridle men's ambition, avarice, anger, and other passions, without the fear of some coercive power; which in the condition of mere nature, where all men are equal, and judges of the justness of their own fears, cannot possibly be supposed. And therefore he which performeth first doth but betray himself to his enemy.

  3. Contract Law as a solution • Suppose that the defector is penalized through legal sanctions so that the incentive to defect disappears.

  4. But what if we’re in a State of Nature? • International Law • Russia • Marriage under no-fault • Vague promises • Social promises • Fidelity

  5. Credible Commitments in a State of Nature: Four Strategies • Self-binding • Union • Reciprocal Altruism • Social and Internalized Norms

  6. Credible CommitmentsSelf-binding • I might persuade another party to trust me if I make it painful for me to breach • Doing this without contract law: The use of hostages

  7. Hostages: The Burghers of Calais Rodin 1885

  8. Not hostages: The burgers of Calais McDonald's at Walmart, 8 South St., Calais, ME 04619

  9. Modern examples of hostages to solve the problem of trust in bargaining • Bankruptcy and secured lending

  10. Modern examples of hostages to solve the problem of trust in bargaining • Bankruptcy and secured lending • Rings

  11. Modern examples of hostages to solve the problem of trust in bargaining • Bankruptcy and secured lending • Rings • Romantic love

  12. Credible CommitmentsUnion strategies • Hume : “Tho' this self-interested commerce of man begins to take place, and to predominate in society, it does not entirely abolish the more generous and noble intercourse of friendship and good offices.”

  13. Credible CommitmentsUnion strategies • Hume : “Tho' this self-interested commerce of man begins to take place, and to predominate in society, it does not entirely abolish the more generous and noble intercourse of friendship and good offices.”

  14. Union strategiesThe Theory of the Farm Allen and Lueck, The Nature of the Farm

  15. Union strategiesMarriage amongst princely families Victoria and Albert, 1840

  16. Credible CommitmentsUnion strategies • Vertical integration • Klein, Crawford, Alchian, 21 J.L. & Econ. 297 (1978) Armen Alchian

  17. But see R.H. Coase, The Acquisition of Fisher Body by General Motors, 43 J.L.E. 15 (2000)

  18. Credible CommitmentsReciprocal Altruism Robert Trivers: Cooperative behavior amongst animals Axelrod, The Evolution of Cooperation (1984)

  19. Credible CommitmentsReciprocal Altruism Axelrod’s Iterated Prisoners’ Dilemma

  20. The winner and loser… Anatol Rapoport Gordon Tullock

  21. TFT in action: The Christmas truce of 1914 You’re a good sort, Fritzie, for a Hun… Ver ist der turkey? Und der Belgians?

  22. TFT in action:Posner and Goldsmith on Ambassadors in International Law Carpaccio, The Legend of St. Ursula: The Arrival of the English Ambassadors

  23. TFT: An Application? • America is at war with France and Al-Quaeda. • American POW’s in France are housed in a five star hotel where they are feted with wonderful meals and fine wines. • American POW’s held by Al-Quaeda are beheaded, every one of them.

  24. TFT: An Application? • The Geneva Convention prescribes that POW’s shall be provided with exercise facilities. • Is America in breach of this if it offers French but not Al-Quaeda POW’s exercise facilities?

  25. Example of TFT communitiesOld-boy networks Bullington Club members, 1987 2. David Cameron 8. Boris Johnson

  26. Example of TFT communities“Americans like to form clubs.” Tocqueville “Americans like to form clubs”

  27. Racial CommunitiesDiamond district, West 47th Street, NYC L. Bernstein, 21 J. Legal Stud. 115 (1992)

  28. A genetic basis to reciprocal altruism? Robert Trivers, 46 Quart. Rev. Biol. 35 (1971) If TFT is individually rational, no “group selection fallacy” problem

  29. A genetic basis to reciprocal altruism?

  30. Credible CommitmentsSocial and Internalized Norms • Ruth Benedict on shame cultures • The Chrysanthemum and the Sword (1989)

  31. Credible CommitmentsSocial and Internalized Norms David, Andromache Mourning Hector

  32. East-enders handing out the white feather

  33. But just how long did that last? Lytton Strachey

  34. But still… • Consider the following examples of cooperative behavior: • Not littering • Gas Guzzlers • Helping out in an emergency: the Good Samaritan

  35. Are Social Norms Always Benign? Gericault, Portrait

  36. Are Social Norms Always Benign? • If so, what’s wrong with blackmail?

  37. Are Social Norms Always Benign? • Suppose that they’re always benign • Is blackmail still a problem? What costs does it impose?

  38. Are Social Norms Always Benign? • Suppose that they’re always benign • Is blackmail still a problem? • What are the costs of blackmail? • Embarrassment • Blackmailer’s information production costs • Victim’s efforts to hide his vice

  39. Credible CommitmentsWhat happens when shame is internalized? Georges de la Tour, Repentant Magdalene

  40. Credible CommitmentsWhat happens when shame is internalized? Holman Hunt, The Awakening Conscience Tate Collection

  41. Credible CommitmentsInternalized Norms • “There is a man inside me who is angry with me” • Robert Frank, Passion within Reason (1988)

  42. Visible Guilt Solves the Lemons Problem • If Homo Economicus Had a Choice, would he want a conscience? • Robert Frank, 77 AER 593 (1987) • “Speech is the gift God gave us to hide our thoughts.” Talleyrand • Which explains why we have faces…

  43. Whom would you vote for? Alexander Todorov et al., Inferences of competence from faces predict election outcomes. Science (in press)

  44. Deception detection: Guilt and facial signalsZygomatic smiles Zygomatic smiles Paul Ekman, Darwin and Facial Expressions (1973); What the Face Reveals (1997)

  45. Microexpressions • We are able to detect visual cues that can be seen for only a fraction of a moment • Two stable equlibria

  46. Microexpressions De la Tour, The Fortune Teller

  47. Microexpressions

  48. Spot the liar • Two mothers. Which one killed her children?

  49. Kim Philby

  50. Some Cold War History… In September 1945 Soviet cipher clerk Igor Gouzenko defected and told the RCMP of an espionage apparatus at the Anglo-Canadian nuclear research center in Montreal

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