The Libertarians' Contract Fetish

Last week was sort of Chicago School week for me over at The Big Money, with articles about Super Freakonomics and Gary Becker's vision of corporate ethics (the second an expansion of a recent Chumpchanger post). One thing I didn't talk about in those pieces is the love of "contracts" you'll find in Chicago economists from Milton Friedman on down, and more broadly among folks who think of themselves generally as "libertarian."

What's always struck me as weird about libertarians is that they don't think much of social responsibility, but somehow make an exception for sticking to contracts. What the contract says doesn't matter at all, only that we keep to it. It's fine for just about any decision to be governed by expediency, except that of whether to honor a contract. Which is bizarre, partly because it's not clear where the special status of contracts comes from, and partly because libertarians tend to apply a much more stringent version of what it means to honor a contract than you'd imagine (I would think they would say that if you can persuade a court to let you get away with whatever you've done, you've honored a contract by definition).

I have the suspicion that part of the motivation here is the search for what Paul Krugman calls beauty in economic theory. Models of how people behave and, more important, should behave, are just so much easier to construct if they actually do at time Z what they said they would do at time X. But that convenience doesn't turn it into a moral law. On the contrary, the great thing about contracts is that they make no ethical claims. They don't get their power from morals, but from courts. Which for libertarians is probably part of the problem: in their world, contracts are clear, ethics are fuzzy and hard to understand. In the real world, it tends to be the other way around.