Confusions about contract and freedom in libertarian and free market thinking

Libertarians argue a free society is a contractual society, one based on agreement between equals rather than force by the strong against the weak.  In my view they are correct.  But I have long since ceased to call myself a libertarian, even though in the abstract I agree with their basic ethical precepts.  My reason is that libertarians do not understand their own precepts.

For example, unlike the simple clarity of abstract logical deductions about contracts and agreement, human life is irretrievably messy.  Every element in a life is one thread among many that together comprise the tapestry of that life. Like threads in a tapestry, each takes on its meaning not simply by its isolated qualities, but also by how they relate to the context in which it exists.

This holds as strongly for abstract moral principles as for anything else.  I have found that ethical arguments blind to the importance of context are always, or virtually always, radically defective.  The libertarian ideal of voluntary contracts solving the practical problems of creating a free society is an excellent example.

The error in libertarian ideas about free contracts is that they take an abstract logical ethical principle and apply it to real world contexts where all sorts of very concrete issues modify how it manifests.  I will start with an example with which a libertarian will agree.

Example One

I am walking along a deserted street when a mugger threatens me: “Your money or your life.”  I give him my money. At the end of the exchange we are both better off. He has the money and I have my life, which otherwise would have been forfeit. The libertarian would say, and I agree, this is a bad example of a contract because it was not mutually voluntary. The context of coercion rather than actual coercion within which the transaction took place meant the exchange was coerced. (I was not physically held down and my wallet taken- I reached into my back pocket and gave it to him. The same act in a different context would have an entirely different meaning, turning a theft into an act of charity, for example.) So far, so good.

Example Two

My property was lost in a war or natural disaster and you offer me and my children food and shelter, but only if I become your slave. The alternative is probable starvation for me and my children, I might well make the deal. My kids and I are better off as we are not starving to death.  My ‘owner’ is better off for he has a slave.  Is the contract a voluntary one?  All too many ‘libertarians’ would say “yes.” (p.333)  I am rendered propertyless as a result of aggression or circumstances beyond my control, and then someone took advantage of my misfortune to exact a terrible price for staying alive. But they did not do the aggressing themselves.  They took advantage of an opportunity to make a formally voluntary exchange.

Some libertarians will agree with me that this contract is invalid. They would argue that we cannot sell ourselves.  There are two dimensions to this argument, and both weaken the libertarian case.  First, if we cannot sell ourselves what happens to the prime libertarian principle that we “own” ourselves?  Clearly a word game is being played since ownership implies what is owned can be alienated because ownership is not the same as being identical to something.

Setting that problem aside, another problem asserts itself.  For thousands of years slaves were bought and sold between willing buyers and sellers.  There was even a market price for them that arose the same way a market price existed for horses and cotton.  And in a very real sense what constituted slavery did not include ownership of the core ‘self.’  Slaves were never property in the way a horse was. If my horse kicked you, I was liable. If my slave kicked you, the slave was liable.  The slave owner owned all that could be owned.

When we realize that property rights are a bundle of discrete rights, as is now generally appreciated by economists, there is no logical barrier in my selling you control over me except for my inalienable personal responsibility for my actions that hurt others. In other words, the argument against slavery by some libertarians does not have the weight they think it has.  Every quality of how I act other than my moral responsibility can be defined and given over to control by another.

Happily, many libertarians and other advocates of ‘free markets’ would be discomfited by this example, but its flaws cannot be derived from any abstract principles of property and contract. In truth, for them as for others, at bottom, it is the context  of external necessity leading to subordinating oneself to another that bothers them.

Let us now add a slight modification.

Example Three

Consider the same conditions holding as for example two, but slavery is illegal.  Therefore, to preserve your life and the lives of your children, instead of being my slave you must be my servant for 14 hours a day, doing any and everything I command you to, for a term of 60 years. During this time I control who you can talk with, when you can eat, what you can read, and how you spend your time. You do not have time to look for other alternatives nor accumulate enough wealth to quit for a while to look for a job and still feed your kids.  There is little real difference between slavery and this arrangement except that at the end of the allotted time at the end of my work day I am free to feed my kids, wash up, and go to bed as a ‘free’ man.

I am very close to describing many modern day employment relations, especially under conditions of high unemployment, except that today the hours are shorter. They once were not, as they continue to be in the developing parts of the world, such as China, India, and Bangladesh. Formal equality can mask enormous inequality and the resulting imposition of something very close to private despotism under the rubric of free contract.

A libertarian, ‘conservative’, or classical liberal might respond that the relationship is still voluntary because I am free to quit. But that freedom, important as it is, requires one condition to make any difference: viable alternatives.  Each person’s freedom is greater the more attractive the alternatives that exist.  By the same token, the fewer such alternatives the more practically constrained their freedom becomes, no matter how great it is formally. In other words, again, context matters.

Contracts among equals

Let’s approach this issue from the other direction. What would a contract among equals look like?

It seems to me we would normally have something closely approximating this: each person has something the other would like to have. Each person can get along reasonably well without what they desire from the other. Each person has other options that while not as desirable as what they hope for from dealing with the other, are not regarded as deeply undesirable. In such a case any exchange between them will leave them both better off and be fully voluntary in contextual terms as well as formal terms.

For years I had a business selling my artwork on stationery,  envelopes, and note cards.  The money I made paid for my Ph.D. as well as other things.  When I sold to a customer they had many alternative sources for cards and writing paper.  I had many customers. No single one was economically crucial to me. Each of us hoped to gain from the exchange but neither of us would be seriously impacted in our own estimation if we did not make the exchange. We were equals in as much a sense as the word can apply to a concrete relation between human beings.

The farther we get from this ideal the farther away we are from a fully voluntary relationship. In other words, again, context matters.

An objection considered

Against my argument some people will contend that once we get away from purely formal legal definitions of equality the term becomes too uncertain to have real meaning.  Indeed, if people were truly concretely equal in every respect they would all have the same attributes and things, and there would be no need for any exchanges at all.

I agree.

Once we get to discussing concrete relationships the term ‘equality’ becomes a source of confusion.  If used rigorously the term is best reserved for describing purely abstract relationships.  But this does not make the issue of what constitutes noncoercive relationships go away.

Coercion is not a purely formal relation.  To be sure violence is coercion. But what about the threat of violence as in my mugging example?  Most would agree it is coercive as well.  But as the recent spate of ‘stand your ground’ killings demonstrates, “threat” is anything but an impersonal objective issue. Threatening to fire a woman if she does not grant sexual access, when that woman has a family to feed and unemployment is high, would be considered a threat of violence or its equivalent by most decent people.

The same point holds for violence. It is not simply physical and again context matters. Two prize fighters in a contest are seeking to inflict physical damage on one another, but violent as the fight is, it is not violence in this legal and ethical sense.  On the other hand, sustained verbal abuse can have a catastrophic impact on a child.  In some cases it drives the child to suicide and in others leaves life-long scars that impede the child’s ability to live a fulfilling life and sometimes encourages him or her to repeat the pattern on their own children. Violence is a complex term that bleeds off into very nonphysical realms where the dividing line between what is and what is not violence is not clear. That is why we often add the term “physical” to violence in some contexts, “verbal” in others and “psychological” in still others.

At the concrete level equality is only a rough guide, useful but not definitive, because most relationships are only possible when some kind of inequality exists so that both parties gain in some sense by entering into them. About the only one I can imagine where this may not hold is when people need one another for company, because they are lonely.

Getting Clear

Unequal relationships are beneficial when in the eyes of both parties they not only leave them better off, they expand the range of desirable alternatives from what they were before the relationship.  The more they expand them the more beneficial they are. To put it another way, desirable contracts expand the desirable conditions in the context of a life. Formal equality creates conditions that maximize people’s likelihood for discovering such possibilities to the degree they exist.  It is necessary but not sufficient because other factors may drastically limit the existence of such possibilities.

Exchanges and contracts at the concrete level are desirable not because they exemplify formal equality.  They are desirable because of their capacity to enrich lives and increase well-being. To the degree our actions are influenced by need and desire, this point always holds. We are trying to maximize not equality but flourishing. In appropriate contexts the freedom to make voluntary contracts expands the opportunities for flourishing to all parties involved. But some contexts do not work out this way and ‘free market’ thought has great difficulty recognizing them because it is stuck at the level of an inhuman formality blind to the realities of human existence.

The important question then is not whether or not contracts are formally voluntary. It is what contexts provide conditions for voluntary contracts to lead to the opportunity for the flourishing of all involved.  Often the answer to both questions will be the same. But also often they will not.