A Reply to Kliemt’s “Tricks or Treats

     

Like many people, I first encountered Tony de Jasay’s work in his monthly columns on Econlib.  The series have been titled “Reflections from Europe” and “Thinking Straight.”  Given Jasay’s prodigious body of work in print, and its larger impact in the world of ideas, it is strange that so many of us first heard of him in an online forum.  Still, I suspect that more than a few readers of Hartmut Kliemt’s fine online essay on Jasay, “Tricks or Treats,” will be encountering Tony’s work for the first time.  So, welcome!  Better late than never.

Jasay’s first “online” essay for Liberty Fund was “Your Dog Owns Your House” (April 22, 2002), and it was brilliant.  More important, it connects to my reaction to Kliemt’s piece, so let me explain.

If Albert needs a new roof on his house, and Beatrice is a competent roofer offering this service for sale at competitive prices, there is likely a range of mutually beneficial exchanges that might in principle be arranged.  Perhaps Albert values the new roof at $10,000 and Beatrice knows that her burly crew of roofers can install a new roof, including Beatrice’s reservation profit, the price of shingles, and all labor, at $5,000.  The price they agree on may depend on local conditions, but if there are several roofing companies and the cost of labor and shingles is common to all agreements, the price will be something close to $5,000.  Competition drives prices to the cost of production.

However, this “cost of production” notion is facile.  How will the agreement be enforced?  It is possible that Beatrice is simply honest by nature, and that Albert is, also.  Thus after their handshake Albert might advance $2,000 to buy shingles, and Beatrice might show up with shingles rather than running off with the money. And Beatrice might complete the job to the precise specifications of the agreement.  And then Albert might pay the remaining amount he agreed to pay at the time of the handshake.

Or, they might not.  Anticipating these problems reduces the expected value of the handshake agreement for both parties.  What they would like to do is specify additional terms for the arrangement; these terms are often gathered together under the dismissive title “transactions costs,” but they are costs of agreement no less than the labor or the shingles.  In a repeated interaction cooperation might emerge, but no homeowner needs a roof more often than once every 20 years or so, if the roof is competently installed.

Which means that both parties would be better off, and would seek to contract for, coercive punishment of the other party in the event of breach of contract.  Albert would be willing to pay, and Beatrice would be willing to pay, something extra for a third party to extract some painful or expensive bond, even if that agreement in effect coerces Albert himself and Beatrice herself.  In Oliver Williamson’s terms, the “Fundamental Transformation” is a problem:  before we sign the contract, both of us recognize that breach is a problem and we seek a strategy that commits us to comply.  After the contract is signed both of us expect the other party—and may ourselves try—to find a hole in the arrangement and exploit it.  My present self seeks to bind my future self to comply, because if I can do that I can get a better net price in the contract.  

Albert and Beatrice might hit on a clever solution:  buy a big smelly dog, and train it.  This seems expensive, but someone may well have foreseen the value of such a commodity and be willing to provide just this sort of dog.  So Zed the dog is purchased. Zed’s job is simple:  bite the legs of anyone who breaches an otherwise valid contract.

The whole point of renting Zed—large and loyal and sharp-toothed—is that the costs of obeying contracts are cheaper than breaching.  In equilibrium, if Zed is well-trained (he cannot be bribed with doggy treats), there will be no biting and contracts always bind. This means that Zed can be rented out to many pairs of potential transactors, because Zed has very little to do. Everyone is happy, and contracts are easily negotiated because enforcement is cheap and sure.

Jasay would not dispute the value of credible commitments for contracts.  His quarrel comes when contractarians, particularly of the Rousseau-style Social Contract type, use a mythical form of this argument to justify actual states.  He reserves special scorn for those who argue that contracts would be unenforceable without a state, and then simply (as he puts it) “jump over their own shadows” to say that a larger, “social” contract is the answer.  Who, pray, could be expected to enforce that contract, the one from which all other contract enforcement is derived?

Thus, there are two problems to be solved, one practical and the other ontological.  The practical problem is illustrated by Jasay’s “My Dog Owns My House” essay.  If people such as Albert and Beatrice decided, perhaps rationally (in the sense described above), to hire Zed as third party enforcer, it will be difficult to restrict Zed to limited role.  One might imagine that Albert returns home from work one day and finds Zed sitting on the couch, drinking Albert’s best scotch and cleaning his Kalashnikov.  “Get off the couch!  Put down my gun, and stop drinking my scotch!” demands Albert.

Zed looks up coolly.  “This isn’t your scotch, or your gun.  In fact, this isn’t even your house.  You wouldn’t have this house without my protection.  I think there need to be some changes around here.”  Now, from Albert’s perspective, and from all of those who contracted for enforcement, that arrangement was straightforward:  Zed was paid for his services, and there is no further obligation.  But Zed is fully capable of violating that contract, because there is no Zed-Zed dog that has agreed to bite dogs that fail to carry out their agreement to enforce agreements.  Thus any notion of a “limited state” is nonsense, in Jasay’s view.  If you create a state, the state will think it owns your house.  As President Obama put it, “You didn’t build that.”

The second problem is ontological.  Jasay illustrated it in his 1999 review of Buchanan and Congleton’s Politics by Principle Not Interest. 

That is, while it may be true that consenting to be coerced in private contracts is possible, because it is implied by the nature of the contract itself, the notion of coercion in a social contract is quite different.  One might accept, in Jasay’s paraphrase, the Hobbesian logic that some “coercive agent” is useful. But there is no contract or consent, and in fact we cannot even act “as if” there had been contract or consent, because it was the very impossibility of those things that gave rise to the (ostensible) case for a state in the first place.

As Kliemt notes in the main essay for this forum, Jasay’s project is to argue that conventions—including, centrally, private property and keeping promises—can acquire moral force even in the absence of ratification by legislation or state endorsement.  But I’m not sure that Kliemt accurately portrays certain important background facts.  He claims, “The original founding of the state is always an act of imposition.”  I might agree that it always has been an act of imposition, but Buchananites (such as I) might argue that state-like social structures, such as clubs or neighborhood associations or small units in federal systems, could at least in principle be the product of voluntary associations.  I would agree, however, that the key point in founding obligation on consent requires actual consent, and even rules that people now obey and find useful do not, in the absence of actual consent, obtain moral force through any bootstrap or “as if” contractarian hocus pocus.

Most importantly, Kliemt makes a compelling argument about the need for some other form of motivation to justify the moral force of conventions that emerge spontaneously, but are not directly self-enforcing.  Here, as Kliemt gently but firmly suggests, Jasay might avail himself of the now increasingly well-documented human tendency to value rules and rule-following for their own sake, once they are established as conventions.  This “intrinsic” value of rules could solve, or at least mitigate, the difficulties in (otherwise) enforcing satellite agreements such as promise-keeping.  One could use an “evolved brain architecture” argument (Barkow, Cosmides, and Tooby 1992) or a “social norms” argument (Gaus 2015; 2013) in ways that would make Jasay’s project look much less like a “trick” while fully preserving the “treat.”

Kliemt’s critique and extension of Jasay’s model of “anarchism, but...” is both useful and fundamentally faithful to the original intentions of that model. Jasay does not just claim that existing states are not legitimated by tacit consent; he goes on to conclude that no state could be legitimated, even by actual consent.  This is, indeed, the fundamental anarchist conclusion.  The reason that Jasay is not an anarchist is that he concedes that, despite the failure of contractarian justifications, rational individuals would certainly acquiesce, and might even want to acquiesce—something close to voluntary endorsement—to the empirical fact of the existence of the state.  Just don’t call it voluntary.

Barkow, J., Cosmides, L. and Tooby, J. 1992. The Adapted Mind: Evolutionary Psychology and the Generation of Culture. New York: Oxford University Press.

Gaus, Jerry.  2013.  “Why the Conventionalist Needs the Social Contract (and Vice Versa).”  Rationality, Morality, and Markets. 4: 71–87.

_________.  2015.  “The Egalitarian Species." Social Philosophy and Policy.  In Press.

Jasay, Anthony de.  1999.  “On Treating Like Cases Alike:  Review of Politics by Principle Not Interest.” The Independent Review, IV (1): 107–18.

Jasay, Anthony de. 2000. “The Intellectual Portrait Series: A Conversation with Anthony de Jasay” (with Hartmut Kliemt). Indianapolis: Liberty Fund, 2000. </titles/959>.

Jasay, Anthony de.  2002. "Your Dog Owns Your House." April 22. Library of Economics and Liberty. Accessed 8/22/2015.