1. George Mason School of Law
Contracts I
T. Contract Law
in the State of Nature
F.H. Buckley

2. Recall the Bargaining Problem
What if the seller must deliver before buyer pays
Or if the seller must pay before buyer delivers 2 2

3. Contract Law as a solution Leviathan3 3

4. 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 (1651) 4 4

5. 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 (1651) 5 5

6. State of Nature International Law Weak Rule of Law Unenforceability 6

7. State of Nature: I. International Law
Signing of NAFTA Treaty 1992 7 7

8. 2. Weak Rule of Law: Corruption

9. Thick and Thin Rule of Law
Thick RoL: civil rights, democracy, personal liberty
Thin RoL: enforcement of contracts, property rights 9 9

10. State of Nature: 3. Unenforceability
Illegal Contracts
Vague Contracts
Uncertainty, Output, Requirements
Opportunism and Contract Modification
Mistake, Impracticability 10 10

11. Credible Commitments in a State of Nature11 11

12. Credible Commitments in a State of Nature
Self-binding 12 12

13. Credible Commitments in a State of Nature
1. Self-binding
2. Union 13 13

14. Credible Commitments in a State of Nature
1. Self-binding
2. Union
Reciprocal Altruism 14 14

15. Credible Commitments in a State of Nature
1. Self-binding
2. Union
3. Reciprocal Altruism
4. Social and Internalized Norms 15 15

16. 1. Self-binding
I might persuade another party to trust me if I make it difficult for me to breach 16 16

17. Self-binding: Ulysses and the Sirens17 17

18. Self-binding: Hostages
I might persuade another party to trust me if I make it painful for me to breach
The use of hostages 18 18

19. Self-binding: Hostages
Why are hostages killed if ransoms are not paid? 19 19

20. Self-binding: Hostages
Why might a retailer refuse to settle slip-and-falls? 20 20

21. Self-binding: Rings Brinig, Rings and Promises, 6 JLEO 203 (1990)21 21

22. Self-binding: Secured Lending22 22

23. 2. Union strategies 23 23

24. Union strategies Marriage amongst princely families
Victoria and Albert, 1840 24 24

25. Union strategies: Families Doug Allen and Dean Lueck, The Nature of the Farm (MIT Press, 2003)25 25

26. Union strategies: Vertical Integration
As a response to post-contractual opportunism:
Klein, Crawford,
Alchian, 21 J.L. & Econ. 297 (1978)
Armen Alchian 26 26

27. 3. Reciprocal Altruism 27 27

28. 3. Reciprocal Altruism Robert Trivers, 46 Quart. Rev. Biol. 35 (1971)28 28

29. A genetic basis to reciprocal altruism?
Fish employing the cooperative strategy 29 29

30. A genetic basis to reciprocal altruism?30 30

31. Reciprocal Altruism in Game Theory
Axelrod, The Evolution of Cooperation (1984)
Tit-for-tat as a dominant strategy for iterated PD games 31 31

32. 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 32 32

33. The winner and loser…
Anatol Rapoport
Gordon Tullock

34. TFT in action: The Christmas truce of 1914
You’re a good sort, Fritzie, for a Hun…
Ver ist der turkey? Und der Belgians? 34 34

35. TFT in action Carpaccio, The Legend of St. Ursula:
The Arrival of the English Ambassadors 35 35

36. TFT: An Application? America is at war with France and the Taliban.
American POW’s in France are housed in a five star hotel where they are feted with wonderful meals and fine wines.
American POW’s held by the Taliban are beheaded, every one of them. 36 36

37. TFT: An Application?
The Geneva Convention prescribes that POW’s shall be provided with exercise facilities.
Is America in breach of this if it offers French but not Taliban POW’s exercise facilities? 37 37

38. Example of TFT communities Old-boy networks
Bullington Club
members, 1987
2. David Cameron
8. Boris Johnson 38 38

39. Examples of TFT communities “Americans like to form clubs
Examples of TFT communities “Americans like to form clubs.” Tocqueville
“Americans like to form clubs” 39 39

40. Racial Communities Diamond district, West 47th Street, NYC
L. Bernstein, 21 J. Legal Stud. 115 (1992) 40 40

41. 4. Social and Internalized Norms
Ruth Benedict on shame cultures
The Chrysanthemum and the Sword (1989) 41 41

42. Social Norms: Honor Not fight? “I would feel terrible shame
before the Trojans
and their wives
of the flowing robes.”
Iliad 6:441 42 42

43. 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. 43 43

44. Social Norms: Honor 44

45. Social Norms Today?
Lytton Strachey 45

46. Yet we never lack for social norms
Lytton Strachey 46

47. 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 47

48. Visible Guilt and the Lemons Problem
If Homo Economicus Had a Choice, Would He Want a Conscience?
Robert Frank, 77 AER 593 (1987) 48 48

49. Visible Guilt and the Lemons Problem
Which explains why we have faces… 49 49

50. Deception detection: Guilt and facial signals Zygomatic smiles
Paul Ekman, Darwin and Facial Expressions (1973); What the Face Reveals (1997) 50 50

51. Whom would you vote for?
Alexander Todorov et al., Inferences of competence from faces predict election outcomes, 308 Science 1623 (2005) 51 51

52. Microexpressions
We are able to detect visual cues that can be seen for only a fraction of a moment 52 52

53. Microexpressions De la Tour, The Fortune Teller53 53

54. Microexpressions
De la Tour, The Fortune Teller 54 54

55. Microexpressions
De la Tour, The Fortune Teller 55 55

56. Microexpressions
De la Tour, The Fortune Teller 56 56

57. Microexpressions
De la Tour, The Fortune Teller 57 57

58. Microexpressions
De la Tour, The Fortune Teller 58 58

59. Microexpressions 59 59

60. 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? 60

61. How the Cold War Began In September 1945 Soviet
cipher clerk Igor Gouzenko defected and told the RCMP
of an espionage apparatus
at the Anglo-Canadian nuclear research center in Montreal 61

62. Some Cold War History…
Gouzenko told the RCMP that Dr. Alan Nunn May, a British scientist in Montreal, had revealed nuclear secrets to the Soviets and provided them with samples of U-233 and U-235—a few days after Hiroshima 62

63. Some Cold War History…
The RCMP passed on the information to MI-5 63

64. Some Cold War History… Which assigned it to their head of Soviet
Counter-Intelligence…
Kim Philby 64

65. Some Cold War History…
Who said ”we’re not concerned” 65

66. Some Cold War History…
But Gouzenko’s work on Venona helped unmask Burgess, Maclean and Philby (and Alger Hiss) 66

67. Kim Philby 67

68. Ooops… I forgot a fifth enforcement strategy in the state of nature
Can you think what it might be? 68

69. Meet Nick the Chin
I’m tinkin’ youse should pay
what youse owe 69