George Mason School of Law Contracts I T. Contract Law in the State of Nature F.H. Buckley fbuckley@gmu.edu

What if bargains aren’t possible? Hobbes on the State of Nature If a covenant be made wherein neither of the parties perform presently, but trust one another, in the condition of mere nature (which is a condition of war of every man against every man) Hobbes, Leviathan 14.18 (1651) 2 2

What if bargains aren’t possible? Hobbes on the State of Nature If a covenant be made wherein neither of the parties perform presently, but trust one another, in the condition of mere nature (which is a condition of war of every man against every man) upon any reasonable suspicion, it is void… For he that performeth first hath no assurance the other will perform after, because the bonds of words are too weak to bridle men's ambition, avarice, anger, and other passions, without the fear of some coercive power; which in the condition of mere nature, where all men are equal, and judges of the justness of their own fears, cannot possibly be supposed. And therefore he which performeth first doth but betray himself to his enemy. Hobbes, Leviathan 14.18 (1651) 3 3

Credible Commitments in a State of Nature 4 4

Credible Commitments in a State of Nature Self-binding 5 5

Credible Commitments in a State of Nature 1. Self-binding 2. Union 6 6

Credible Commitments in a State of Nature 1. Self-binding 2. Union Reciprocal Altruism 7 7

Credible Commitments in a State of Nature 1. Self-binding 2. Union 3. Reciprocal Altruism 4. Social and Internalized Norms 8 8

1. Self-binding I might persuade another party to trust me if I make it difficult for me to breach 9 9

Self-binding: Ulysses and the Sirens 10 10

Self-binding: Hostages I might persuade another party to trust me if I make it painful for me to breach The use of hostages 11 11

Self-binding: Hostages Why are hostages killed if ransoms are not paid? 12 12

2. Union strategies 13 13

Union strategies Marriage amongst princely families Victoria and Albert, 1840 14 14

Union strategies: Families Doug Allen and Dean Lueck, The Nature of the Farm (MIT Press, 2003) 15 15

Union strategies: Vertical Integration As a response to post-contractual opportunism: Klein, Crawford, Alchian, 21 J.L. & Econ. 297 (1978) Armen Alchian 16 16

3. Reciprocal Altruism 17 17

3. Reciprocal Altruism Robert Trivers, 46 Quart. Rev. Biol. 35 (1971) 18 18

A genetic basis to reciprocal altruism? Fish employing the cooperative strategy 19 19

A genetic basis to reciprocal altruism? 20 20

Reciprocal Altruism in Game Theory Axelrod, The Evolution of Cooperation (1984) Tit-for-tat as a dominant strategy for iterated PD games 21 21

Reciprocal Altruism in Game Theory Round 1: Cooperate or Defect Round 2: Cooperate Round 3: Cooperate Round 4: Cooperate Round 5: Cooperate Round 6: Cooperate Round 7: Cooperate Round 8: Cooperate Round 9: Cooperate Round 10: Cooperate Round 11: Cooperate Round 12: Cooperate Round 13: Round 14: Cooperate Round 15: Cooperate Round 16: Cooperate Round 17: Cooperate Round 18: Cooperate Round 19: Cooperate Round 20: Cooperate Round 21: Cooperate Round 22: Cooperate Round 23: Cooperate Round 24: Cooperate Round 25: Cooperate Round 26: Cooperate Round 27: Cooperate Round 28: Cooperate Round 29: Cooperate Round 30: Cooperate Axelrod’s Iterated Prisoners’ Dilemma 22 22

TFT in action Carpaccio, The Legend of St. Ursula: The Arrival of the English Ambassadors 23 23

Example of TFT communities Old-boy networks Bullington Club members, 1987 2. David Cameron 8. Boris Johnson 24 24

4. Social and Internalized Norms Ruth Benedict on shame cultures The Chrysanthemum and the Sword (1989) 25 25

Social Norms: Honor Not fight? “I would feel terrible shame before the Trojans and their wives of the flowing robes.” Iliad 6:441 26 26

Social Norms: Honor Yet if I fight and die, "I see you there in Argos, toiling for some other woman at the loom, or carrying water from an alien well ... “There goes the wife of Hector” they will say when they see your tears. “He was the champion of the Trojans, when Ilium was besieged.” And every time they say it, you will feel another pang at the loss of the one man who might have kept you free." Hector to Andromache. 27 27

Internalized Norms When Shame becomes Guilt “There is a man inside me who is angry with me” Thomas Browne Georges de la Tour, Repentant Magdalene 28

Visible Guilt and the Lemons Problem If Homo Economicus Had a Choice, Would He Want a Conscience? Robert Frank, 77 AER 593 (1987) 29 29

Visible Guilt and the Lemons Problem Which explains why we have faces… 30 30

Deception detection: Guilt and facial signals Zygomatic smiles Paul Ekman, Darwin and Facial Expressions (1973); What the Face Reveals (1997) 31 31

Microexpressions We are able to detect visual cues that can be seen for only a fraction of a moment 32 32

Make the Mule You are a plainclothes detective at LAX, charged with identifying drug smugglers as they exit a plane. How do you pick them out? 33