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The Function of Several Property and Freedom of Contract

Published online by Cambridge University Press:  13 January 2009


Suppose you are on a commercial airplane that is flying at 35,000 feet. Next to you sits a man who appears to be sleeping. In fact, this man has been drugged and put upon the plane without his knowledge or consent. He has never flown on a plane before and, indeed, has no idea what an airplane is. Suddenly the man awakes and looks around him. Terrified by the alien environment in which he finds himself, he searches for a door or window from which to make an escape. As luck would have it, he is seated right next to a window exit and he begins to pull the handle that will open the window. You are aware that opening the window exit at this altitude will cause the cabin to quickly depressurize and that this man, you, and probably several other passengers will be sucked out the window to your deaths. You desperately want to stop him from opening the window. Now assume that for some reason it is impossible to prevent him physically from performing the deadly act. Your only option is to rationally persuade him to leave the window exit alone. You cry out to him and, with both hands on the handles, he turns to face you and waits to hear what you have to say. What sort of argument would you make?

Research Article
Copyright © Social Philosophy and Policy Foundation 1992

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The research for this paper — which is part of a larger project — was supported by the Marshall Ewell Research Fund of the Illinois Institute of Technology, Chicago-Kent College of Law and by the Humane Studies Foundation. This paper was presented at the “Conference on Economic Rights” sponsored by the Social Philosophy and Policy Center and at a faculty workshop at Loyola University School of Law, New Orleans. I am grateful for the helpful comments provided by the participants at both events and by Ellen Paul.


1 Although the pressurized cabin and the design of airplane exits would make this impossible, assume that he can open the window exit.

2 These concepts will be defined below.

3 See Barnett, Randy E., “The Internal and External Analysis of Concepts,” Cardozo Law Review, vol. 11 (1990), pp. 525–35.Google Scholar

4 The rights of several property and freedom of contract are widely viewed as “economic rights.” Yet they can be as personal as any “personal right” one can imagine. Properly understood, the right of several property includes the right to control one's body, including one's sexual behavior. The right of freedom of contract includes the right to purchase books, birth control devices, or intoxicating substances from willing sellers. This is not, however, an analysis of the distinction between personal and economic rights. Instead, it is an analysis of the function played by the rights of several property and freedom of contract. Since, whatever else these rights embrace, they embrace economic activities then, a fortiori, this is an analysis of economic rights.

5 Hayek, Friedrich A., Individualism and Economic Order (Chicago: University of Chicago Press, 1948), pp. 7778 Google Scholar (emphasis added). For additional discussion of the knowledge problem, see Lavoie, Don, National Economic Planning: What is Left? (Cambridge: Ballinger, 1985)Google Scholar; Rivalry and Central Planning (New York: Cambridge University Press, 1985); Sowell, Thomas, Knowledge and Decisions (New York: Basic Books, 1980).Google Scholar

6 Although I have borrowed the term “personal knowledge” from Michael Polanyi, his use of the term differs markedly from mine, as do the types of problems his analysis is intended to address. See Polanyi, Michael, Personal Knowledge (Chicago: University of Chicago Press, 1962).Google Scholar

7 Personal knowledge includes a tacit dimension that, as Michael Polanyi has explained, contains “an actual knowledge that is indeterminate, in the sense that its contents cannot be explicitly stated.” Polanyi, Michael, Knowing and Being (Chicago: University of Chicago Press, 1969), p. 141.Google Scholar

8 This helpful phrase is Hayek's. See, e.g., Hayek, Friedrich, Law, Legislation, and Liberty, vol. 1 (Chicago: University of Chicago Press, 1974), p. 96.Google Scholar

9 Fuller, Lon L., “Positivism and Fidelity to Law: A Reply to Professor Hart,” Harvard Law Review, vol. 71 (1958), p. 644.CrossRefGoogle Scholar

10 The following discussion of centralized ordering is heavily influenced by Hayek. See, e.g., Hayek, Individualism and Economic Order, pp. 119–208; New Studies in Philosophy, Economics and the History of Ideas (Chicago: University of Chicago Press, 1978), pp. 232–46. Hayek's analysis and that of others arguing in the same vein is explained and applied in Lavoie, National Economic Planning: What is Left? and Rivalry and Central Planning.

11 The phrase “making the call” in American sports derives from baseball umpires who are said to “call” whether a pitch is a ball or a strike. So we could distinguish the question of who it is that is to make the call — the umpire — from the question of the correct call to make — a ball or a strike.

12 The fact that persons must take the knowledge of others into account addresses, not the problem of knowledge, but a pervasive problem of interest discussed in Section III: the partiality problem. The set of resource prices that results from this requirement, however, does address the second aspect of the first-order problem of knowledge by enabling persons to take the knowledge of others into account when they decide whether and how to act. In this respect, the ability of the requirement of consent to address the knowledge problem depends to some extent on its ability also to address the problem of interest.

13 For a discussion of the subjective costs of choice, see Buchanan, James, Cost and Choice (Chicago: Markham, 1969).Google Scholar

14 Once again, by forcing — as opposed to enabling — persons to take into account the knowledge of others, the requirement of consent also addresses the partiality problem discussed in Section III.

15 See, e.g., Hayek, Law, Legislation and Liberty, vol. 1, p. 121.

16 I discuss the implications of this principle for contract law in Barnett, Randy E., “Contract Scholarship and the Reemergence of Legal Philosophy,” Harvard Law Review, vol. 97 (1984), pp. 1223–45CrossRefGoogle Scholar; “A Consent Theory of Contract,” Columbia Law Review, vol. 86 (1986), pp. 269–321; “Contract Remedies and Inalienable Rights,” Social Philosophy and Policy, vol. 4 (1986), pp. 179–202; “Squaring Undisclosed Agency With Contract Theory,” California Law Review, vol. 75 (1988), pp. 1969–2003; and Barnett, Randy E. and Becker, Mary C., “Beyond Reliance: Promissory Estoppel, Contract Formalities, and Misrepresentations,” Hofstra Law Review, vol. 15 (1987), pp. 443–97.Google Scholar A condensed and revised account of this approach appears in Barnett, Randy E., “Rights and Remedies in a Consent Theory of Contract,” eds. Frey, R. G. and Morris, Christopher, Liability and Responsibility: Essays in Law and Morals (Cambridge: Cambridge University Press, 1991), pp. 135–72.CrossRefGoogle Scholar

17 See, e.g., Lomasky, Loren E., Persons, Rights, and the Moral Community (New York: Oxford University Press, 1987), p. 84.Google Scholar

18 See, e.g., Feinberg, Joel, “The Nature and Value of Rights,” in Rights, Justice, and the Bounds of Liberty (Princeton: Princeton University Press, 1980), pp. 151–52CrossRefGoogle Scholar: “Some identify right and claim without qualification; some define ‘right’ as justified or justifiable claim, others as recognized claim; still others as valid claim. My own preference is for the latter definition.”

19 I am not speaking now of the source of one's knowledge, which may or may not be “socially determined” according to the current vernacular. I am speaking of the knowledge in one's possession, however acquired, to which others have limited access.

20 This objection to the moral relevance of one's own knowledge is suggested by John Rawls's analysis of natural endowments. Compare Rawls, John, A Theory of Justice (Cambridge: Harvard University Press, 1971), p. 102 CrossRefGoogle Scholar: “No one deserves his greater natural capacity nor merits a more favorable starting place in society.”

21 Ibid., p. 102.

22 One must be careful to distinguish the principle of first possession that has long dominated the law of property from theories that seek to explain or justify the principle, such as the “labor-mixing theory” of John Locke. Offered here is a functional theory of the principle of first possession that stresses its role in handling the problems of knowledge and interest. For a concise account of how this principle is applied in the law of property, see Epstein, Richard A., “Possession as the Root of Title,” Georgia Law Review, vol. 13 (1979), pp. 1221–43.Google Scholar

23 A third important problem of interest — the compliance problem — involves gaps that may arise between the requirements of justice and the rule of law and a person's perception of interest. In most cases, these gaps are narrowed by powerful socializing influences. In others, they are narrowed by the use of force or power. The use of force or power results in two serious problems of power: the problem of enforcement abuse and the problem of enforcement error. Space prevents me from explaining how the liberal conception of justice and the rule of law, including the concepts of several property and freedom of contract, addresses these problems — but it does.

24 Within the public choice school of economics, “interest group theory” argues that much of the behavior of government actors can be explained as exercises of interest rather than as exercises of impartial judgment of the public good. For a sympathetic portrayal of this approach, see, e.g., McLean, Iain, Public Choice (Oxford: Basil Blackwell, 1987)Google Scholar; Mashaw, Jerry L., “The Economics of Politics and the Understanding of Public Law,” Chicago-Kent Law Review, vol. 65 (1989), pp. 123–60.Google Scholar For a critical appraisal, see Farber, Daniel A., “Democracy and Disgust: Reflections on Public Choice,” Chicago-Kent Law Review, vol. 65 (1989), pp. 161–76.Google Scholar

25 The Federalist No. 10 (Madison, James) (New York: Modern Library, 1937), p. 54 Google Scholar (emphasis added).

26 See Sugden, Robert, The Economics of Rights, Co-operation, and Welfare (Oxford: Basil Blackwell, 1986).Google Scholar

27 The theorist most responsible for stressing the nature and importance of profits and entrepreneurship is Israel Kirzner. See, e.g., Kirzner, Israel M., Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973).Google Scholar

28 See Barnett, Randy E., “Restitution: A New Paradigm of Criminal Justice,” Ethics, vol. 87 (1977), pp. 279301 CrossRefGoogle Scholar; “The Justice of Restitution,” American Journal of Jurisprudence, vol. 25 (1980), pp. 117–32. A functional analysis of the sort I apply here to the rights of several property and freedom of contract would add considerably to what I have previously said in defense of pure restitution and against both pure punishment and punitive restitution. However, because restitution is not considered an “economic right,” I do not offer this analysis here.

29 See Barnett, Randy E., “The Virtues of Redundancy in Legal Thought,” Cleveland-State Law Review, vol. 38 (1990), pp. 153–68Google Scholar; “Foreword: Of Chickens and Eggs — The Compatibility of Moral Rights and Consequentialist Analyses,” Harvard Journal of Law and Public Policy, vol. 12 (1989), pp. 611–36.

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