Coercion, contract and the limits of the market
It is a widely accepted principle of economics that if two or more adults voluntarily agree to a contract or an exchange that has no negative fall-out on others, then the government should not stop such a contract. This is often called the 'principle of free contract' (PFC). There is a body of writing in economics which upholds the PFC. Yet, this ubiquitous principle is ill-defined and full of ambiguities. For instance, since it refers to voluntary choice, its proper use presumes an understanding of what is 'voluntary' and, therefore, also, of what is coercive. What is ironic is that, while philosophers and legal scholars have debated and analyzed these concepts and the validity of the principle of free contract, there is very little discussion of these in economics, even though so much of economics is founded on this principle. This has caused a lot of policy confusion. The aim of this paper is to construct general rules for when we may violate the PFC. The argument is constructed within the Paretian framework. Hence, the violation of the PFC is not justified by appeal to deontological ethics or non-welfarist criteria. This is not an easy task since the principle of free contract is often viewed as a rule that is a derivative of the Pareto principle.
(This abstract was borrowed from another version of this item.)
Volume (Year): 29 (2007)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://link.springer.de/link/service/journals/00355/index.htm|
|Order Information:||Web: http://link.springer.de/orders.htm|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Sen, Amartya & Pattanaik, Prasanta K., 1969. "Necessary and sufficient conditions for rational choice under majority decision," Journal of Economic Theory, Elsevier, vol. 1(2), pages 178-202, August.
- Basu, Kaushik, 2003.
"Prelude to Political Economy: A Study of the Social and Political Foundations of Economics,"
Oxford University Press, number 9780199261857, March.
- Basu, Kaushik, 2000. "Prelude to Political Economy: A Study of the Social and Political Foundations of Economics," OUP Catalogue, Oxford University Press, number 9780198296713, March.
- Wulf Gaerther & Prasanta K. Pattanaik & Kotaro Suzumura, 1991.
"Individual Rights Revisited,"
Discussion Paper Series
a238, Institute of Economic Research, Hitotsubashi University.
- Sen, Amartya Kumar, 1970. "The Impossibility of a Paretian Liberal," Scholarly Articles 3612779, Harvard University Department of Economics.
- Basu, Kaushik & Van, Pham Hoang, 1998. "The Economics of Child Labor," American Economic Review, American Economic Association, vol. 88(3), pages 412-27, June.
- Akerlof, George A, 1976. "The Economics of Caste and of the Rat Race and Other Woeful Tales," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 599-617, November.
- Neeman, Zvika, 1999. "The Freedom to Contract and the Free-Rider Problem," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 685-703, October.
- Arrow, Kenneth J, 1994. "Methodological Individualism and Social Knowledge," American Economic Review, American Economic Association, vol. 84(2), pages 1-9, May.
- Sen, Amartya, 1970. "The Impossibility of a Paretian Liberal," Journal of Political Economy, University of Chicago Press, vol. 78(1), pages 152-57, Jan.-Feb..
- Ashwini Deshpande, 1999. "Loan Pushing and Triadic Relations," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 914-926, April.
When requesting a correction, please mention this item's handle: RePEc:spr:sochwe:v:29:y:2007:i:4:p:559-579. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.