Professor Pryor on Contract Law: Public Good and Justice

Professor Pryor writes with deserved authority in many fields, including the Christian theory of contract law. If you have never read his work on this subject, I recommend that you start here and here. In two posts on his blog, Pryor Thoughts, on April 6 and April 7, he kindly responded to two questions of mine arising from an excellent March 31 post, here, attempting to improve my understanding of the Christian view of contract law. All of these are worth reading. As is always the way with good answers (and rarely with bad ones), his charitable clarity in response to my questions led me to several other considerations. If he has the time, perhaps he will address two further sets of considerations of mine as well regarding: (1) Contract Law as a Public Good, and (2) Commutative and Rectifying Justice.

1. Regarding Contract Law as Public Good

First, in his April 6th post, Pryor agreed with my suggestion that contract law, (and, here by “contract law,” we mean the state’s public provision of civil remedies for breaches of private contracts) is a “public good” insofar as it promotes the virtue of fidelity in promise making. “Public goods” are usually defined as benefits which are nonexcludable and nonrivalrous, or in Pryor’s words (1) "one which should be produced, but for which there is no feasible method of charging the consumers…", and (2) “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 be excluded from using a good without paying, free market participants won't provide (much of) it.” The benefits arising from the increase in a people’s virtue through contract law fits this definition of public good because the benefits of living in a virtuous society marked by widespread fidelity are enjoyed by all without rivalry and without excludability because those who would opt not to develop the virtue of fidelity cannot be kept from free riding on the benefits for all of associating with the virtuous. Here we are in agreement.

But, with respect to my suggestion that contract law is also a public good because it promotes “public conditions where people may contract at lower costs and with greater confidence,” Pryor disagreed but not as far I can tell because he thinks that the benefit of lower transactions costs is excludable and rivalrous. Instead, Pryor rejected the idea that enforcement of contracts (necessarily?) is a public good because, even assuming the benefit of lowering transaction costs to those who otherwise couldn’t afford a needed transaction, he considers that this (may or must?) promote detrimental consumerism. Accordingly, he concludes that contract law is not (necessarily?) a public good because increasing material welfare is not a sufficient condition for a public good.

First, what we disagree about here is less important than what we agree on. I fully embrace and amplify Pryor’s point that the public’s real political good is not necessarily forwarded by every measure that increases the public’s material wealth. As Christians, it should be obvious to us that one fulfills neither political nor personal responsibilities by simply maximizing wealth. But, and this is primarily a terminological point but one obscures some other points of interest, I am not sure that in rejecting lowered transaction costs as a “public good,” he is continuing to use the economists’ sense of “public good.”

In the economists’ sense, to the contrary, I think that even if a nonexcludable and nonrivalrous benefit can be argued to be an ultimate detriment to the public in some secondary consequence, the benefit ought still to be classified as a “public good” regardless of other political or moral reasons for rejecting it. To call something a public good is simply to say something about the economic problems of purely private creation of the good. The economists’ sense of “public good” is not dependent on ultimate considerations of political and moral good; it is simply a benefit that is more likely to be created by the public in proportion to its benefit than by purely private actors because of free-rider problems. Obviously, as I am sure Pryor would agree, I am not convinced that we should refuse to call something a good with reference to one field because it is not a good in another. For example, consider goods in the arts of horse training versus veterinary: with respect to training, one might say that giving horses sugar cubes is “good” as a reward for desired behavior and still acknowledge that from the perspective of the veterinarian too much sugar is not “good” for the horse’s health. The sugar can be a trainer’s “good” and a veterinarian’s “not good.” The art of animal husbandry might be the art that weighed and balanced these goods together for the purpose of making a judgment about how a person should fulfill his moral duties in stewardship of the animal in relation to his other social and economic commitments. 

Returning to an economic example, take a paradigmatic case of a nonexcludable and nonrivalrous public good: suppose I observe that the USG’s current maintenance of a standing army is a “public good” because the good of physical security from foreign military threats is enjoyed nonrivalrously by all citizens (my use of physical security doesn't diminish others us of the same) and is nonexcludable because the cost of it cannot be charged on an individual basis only to those who would individually accept the benefit from such security, so that free riders would prevent enough of the good from being produced unless the government produced it. And, suppose Pryor were to deny that a standing army was a public good while admitting nonexcludability and nonrivalrousness. That is, suppose Pryor joined with many of our founding fathers in worrying that standing armies tend to encourage unjustly adventuristic foreign policy, to undermine popular sovereignty and to limit the formation of the virtues of temperance and courage arising from popular participation in well-disciplined militias.

I would respond that his concerns, while valid, were not directed to whether the benefit of physical security flowing from a standing army is a public or private good in the economists’ sense (that is, about the kind of benefit that an army is with respect to the economic problem of potential private underproduction without government involvement), but over whether a particular “public good” was really good in another sense of “ultimately beneficial for the public” under some specified circumstances.

While I fully agree with Pryor that “public goods” need not be produced by the public if there are other reasons not to do so, I don’t think he means to claim that benefits like lowered transaction costs (and this seems to me to be a clear kind of benefit to those who otherwise could not afford a transaction and lowering costs for these people is something we should clearly prefer ceteris paribus) cease to be a “public good” in the economists’ sense if they lead to secondary problems for the public that justify not providing the public good. To consider some other paradigmatic example, does a streetlight cease to be a “public good” if we determine that well-lit streets encourage late-night carousing? Do fireworks cease to be a “public good” because a drought sometimes makes fireworks too dangerous a fire hazard? Does a lighthouse cease to be a “public good” if it incidentally benefits pirates and we determine that the security risk of pirates outweighs the benefit of safer navigation into our harbor? Or would we be better off saying that sometimes an economic public good should not be provided by the government if other circumstances render it inappropriate to the overall good of a nation?

This is not to say that I disagree with Pryor’s insights about secondary negative effects of a strong protection of contract. The objections that he raises concerning contract are classic and very similar to Plato’s concerns about contracts and consumerism. In fact, I would add to his concerns.

In addition to consumerism, we might consider various other related vices that arise in contract-enforcing societies in addition to consumerism. I share Plato’s intuition that states which strengthen strong contractual rights too much tend to weaken virtues connected with other thicker and more important forms of association, like city, community and family. Where contract enforcement is weak, people rely on and are made to appreciate organic high-trust bonds of family and local political association. Whereas, when the state intervenes to promote contracting, the virtues of organic association are weakened and anonymous cash-nexus relations can become more profitable than intra-familial, intra-polis transactions. Although they are difficult passages to interpret, we have important fodder for considering this in relation to how Jacob’s ab/use of contract disrupts family relations with Esau and Laban. Plato, in part motivated by these considerations, thought that the law ought to limit contractual enforcement and indeed discourage people who are capable of other productive activities from entering into the business of trade per se, leaving it to the physically infirm and those otherwise disabled from doing more than holding property essentially in the role of consignment pending the arrival of a buyer. Perhaps, these considerations are included under what Pryor terms consumerism, but I think it is worth noting that enabling anonymous strangers to contract with confidence interacts with other methods for promoting economic well being, e.g., by allowing and protecting intimate group formation were trade happens within these groups. Given the collapse of the family today, I think it is worth considering whether contract law and other protections of anonymous commercial relations, especially the corporation, are diverting economic benefits from family and other forms of morally preferable association.

Moreover, even if we approve of contract law in light of these concerns because of its value in promoting general fidelity, we should still consider the incidental negative political effects that might arise from a nation’s promotion of the virtue of fidelity through state power before we declare it good in the fullest sense. For example, I think we should consider: (1) whether a state that views virtue promotion as within its political jurisdiction might be given too broad a scope of power to intervene in people’s personal lives; (2) whether nations’ whose sense of virtue deliberately excludes God and His Law and directs people to consider virtue as directed solely to the ends of state association will teach people a deformed idea of virtue as did the Roman Empire; (3) whether action that simply responds to state coercion can possibly be virtuous, as Aristotle denies, (4) whether virtue can be interpreted and encouraged by an idolatrous state without trespassing on the superior roles of the church and family in the area of virtue promotion.

So, in sum, terminological differences aside, I think I would agree and attempt to expand on Professor Pryor's concerns. I'll turn to his remarks about justice in the next post.