Justice and Contracts

The idea that there is a sort of social contract that defines our rights and duties in a society is an old one, tracing back to at least John Locke. But, of course, none of us has actually agreed to such a contract, although immigrants must agree to obey the law in order to become citizens. Locke came up with the idea of tacit consent, if we enjoy the benefits of government we consent to the law and are bound by it. In contract law, not all contracts are enforceable. For instance, to be a contract there must be consideration (something given in exchange for a promise). Likewise, the mere fact that you and I make a deal does not make it fair. In Sandel’s words, the contract must respect autonomy and reciprocity; it must be voluntary and mutually beneficial. He uses the example of an elderly woman who agreed to a contract to pay a contractor $50,000 to fix a leaky toilet (supposedly a true story). Enforceable? Morally binding?

But a contract between parties who were equal in power and knowledge and equally situated would be a perfect contract. The terms of such a contract would be just by virtue of their agreement alone. This explains why Rawl’s idea of the original position behind the veil of ignorance is so powerful. It is the pure form of an actual contract.

Rawls proposes that the first principle that would be agreed upon would be a principle of equal liberties for all citizens, including the right to liberty of conscience and liberty of thought. We wouldn’t want to be oppressed, even if it turned out that we were in the minority. We want to pursue our ends and be treated with respect because we are human beings. What other principles would we choose?

As an aside, thinking about justice and contracts is part of what my friend objected to about changing the terms of the agreement later, such as if I work and pay Social Security taxes based on the promise that I will be taken care of when I retire, then it is unfair if the majority change the rules after I have made the contributions asked of me. The fact that there is not an actual contract doesn’t matter. What matters is our understandings when we made the deal.

Of course, any employer can fire anybody for any reason with no recompense if there is no employment contract. And in this country any remedy for such a breach of contract is not going to be you keeping your job. In companies that haven’t paid back their TARP loans, they are partly employees of the taxpayers. Why can’t our representative lower their salaries or prevent outrageous bonuses? We never had the understanding that these guys could pay themselves whatever they want. So I think the moral argument still fails here. But it also shows why this is an inadequate response even to bank pay. The guys at Goldman Sachs who have paid their TARP money back can give themselves whatever bonuses they want, subject to the wishes of the shareholders, which appear to be inadequately protected by the board of directors.