Although moral hazard is a well-known economic concept, there is a long-standing controversy over its moral implications. The language economists use to describe moral hazard is often value-laden, and implies moral judgments about the persons or actions of economic agents. This in turn leads some to question whether it is actually a scientific concept, or simply a convenient tool for criticizing certain public policies. At present, there is no consensus about the moral meaning of moral hazard, or about whether the (...) concept can be salvaged by economists. As a first step toward resolving this problem, I suggest a contracts approach to moral hazard. I use the ‘title-transfer’ theory of contract to clarify the moral content of moral hazard, thereby increasing its value to scholars in numerous disciplines. A contracts view is useful for economic policy discussions because it does not include hidden value judgments. At the same time, however, it is also valuable for ethicists because it directly explains a moral dimension of behavior under moral hazard, namely, the violation of property rights. (shrink)

Libertarian philosophy asserts that only the initiation of physical force against persons or property, or the threat thereof, is inherently illegitimate. A corollary to this assertion is that all forms of speech, including fraudulent advertising, are not invasive and therefore should be considered legitimate. On the other hand, fraudulent advertising can be viewed as implicit theft under the theory of contract: if a seller accepts money knowing that his product does not have some of its advertised characteristics, he acquires the (...) property title to the customer’s money without voluntary consent, which is theft. The balance between these two logical extensions of property rights—the right of free speech and the right of contract—lies somewhere in the area of communication philosophy, and can be explained through understanding the role of communication in human interactions. Advertising is a form of communication that may convey important information about the conditions of the proposed contract. These conditions are expressed in particular words that may have different meanings in different circumstances. Therefore to determine whether a particular example or “misinterpretation” is mere sophistry or a type of fraud, the judicial system has to approach each issue on a case-by-case basis. The border between legal and illegal should be determined by precedents and by expectations based on commonly accepted definitions of terms—what people commonly understand by the words and other forms of communication they use. (shrink)

In this paper, I show that Polleit and Mariano (2011) are right in concluding that Credit Default Swaps (CDS) are per se unobjectionable from Rothbard’s libertarian perspective on property rights and contract theory, but that they fail to derive this conclusion properly. I therefore outline the proper explanation. In addition, though Polleit and Mariano are correct in pointing out that speculation with CDS can conceivably hurt the borrowers’ interests, they fail to grasp that this can be the case only in (...) some peculiar circumstances that I identify. In other words, they miss the bigger picture, the one outside special circumstances, in which CDS trading has the opposite effect. That is, CDS facilitate debt accumulation, including government debt accumulation. Finally, I point out how this can precipitate the collapse of fiat money regimes. An incidental goal of the analysis is to provide a better account than Polleit and Mariano of recent government interventions in and around CDS markets. (shrink)

Walter Block discusses publications by Robert Nozick, the unjustifiably ignored Michael Levin, and Ayn Rand, each of whom has criticized anarcho-capitalism, the system that takes laissez-faire capitalism to its logical extension: here, all goods and services, particularly including courts, police, and armies would be provided by competing private firms and individuals. This paper considers their arguments and rejects them.

attempt to justify the State, or at least a minimal State confined to the functions of protection. Beginning with a free-market anarchist state of nature, Nozick portrays the State as emerging, by an invisible hand process that violates no one’s rights, first as a dominant protective agency, then to an "ultra-minimal state," and then finally to a minimal state. Before embarking on a detailed critique of the various Nozickian stages, let us consider several grave fallacies in Nozick’s conception itself, each (...) of which would in itself be sufficient.. (shrink)

Libertarianism holds that agents initially fully own themselves and have moral powers to acquire property rights in external things under certain conditions. It is normally advocated as a theory of justice in the sense of the duties that we owe each other. So understood, it is silent about any impersonal duties (i.e., duties owed to no one) that we may have.

Barnett and Block claim that Bagus and Howden support indirectly the concept of market failure. In this paper, we show that maturity mismatching in an unhampered market may imply entrepreneurial error but cannot be considered a market failure. We demonstrate why fractional-reserve banking leads to business cycles even if there is no central bank and why maturity mismatching does not per se lead to clusters of errors in a free market. Finally, in contrast to the examples provided by Barnett and (...) Block, we assure that maturity mismatching does not imply the creation of two incompatible contracts due to the fungible nature of money. (shrink)

After all, Lee is Professor of Economics and holder of the Bernard B. and Eugenia A. Ramsey Chair of Private Enterprise Economics at the University of Georgia. In addition to holding a named chair in “Private Enterprise Economics,” he is also the former president of the Association of Private Enterprise Educators, a group devoted to not only the study of markets, private enterprise, property rights, and capitalism, but one which is largely, but not exclusively, made up of academic economists with (...) strong free market views and strong skepticism of government actions (it started many years ago as an association of free enterprise chair holders but has expanded to include anyone with a strong free enterprise perspective).2 As well, Lee has been associated with another group that claims a market orientation, the Center for Study of Public Choice, both at George Mason University and at Virginia Polytechnic Institute & State.. (shrink)

In the present paper we argue that the theory of contracts embraced by many libertarian scholars and relied upon by them in sundry important debates (e.g. over morality of the fractional reserve banking or loan maturity mismatching etc.), that is, the title transfer theory of contracts (TTT) should be rejected as not being able to account for the binding force of future-oriented contracts, including contracts deemed enforceable by those scholars themselves. The TTT claims that the only contracts that should be (...) legally binding are these where the debtor’s failure to abide by them constitutes a violation of the creditor’s private property rights. However, as we argue, no default of the debtor in a future-oriented contract can in itself amount to such a violation. (shrink)

Wollen (2022) is a critique of deontological libertarianism, the version of this philosophy predicated upon private property rights and the non-aggression principle. The launching pad for this article of his is the difficulty faced by conjoined twins, who diverge sharply in their view of their desirable future. The present rejoinder maintains that this author’s critique fails; further, that it really has little or nothing to do with conjoined twins per se, but, rather, aims at an entirely different challenge, that of (...) the tie or the dead heat. This latter is a critique that all political economic philosophies face, without exception, and libertarianism does no worse on this challenge than any other, the critique of Wollen to the contrary notwithstanding. (shrink)

The scope of libertarian law is normally limited to the application of the non-aggression principle (NAP), nothing more and nothing less. However, judging when the NAP has been violated requires not only a conception of praxeological notions such as aggression, but also interpretive understanding of what synthetic events count as the relevant praxeological types. Interpretive understanding—or verstehen—can be extremely heterogeneous between agents. The particular verständnis taken by a judge has considerable moral and political implications. Since selecting a verständnis is pre-requisite (...) to applying the NAP, the NAP itself cannot tell us which one we ought morally to choose. Therefore the application of the NAP calls on moral and political considerations outside of the NAP itself. Since some of these are more consistent with an endorsement of the NAP than others, libertarianism is not a “thin” commitment to the NAP alone, but a “thick” commitment to the NAP and other supporting moral and political considerations. (shrink)

In a number of recent articles, the debate on the ethics of fractional reserve “free” banking has been extended to loan maturity mismatching, specifically the banking practice of borrowing short and lending long. Barnett and Block :711–716, 2009; 2010) claim the practice is illicit, because like fractional reserve banking it creates duplicate property titles. They argue there is a continuum in the time dimension between the two kinds of activities. Bagus and Howden :399–406, 2009; 106:295–300, 2012a; Eur J Law Econ, (...) 2012b; Bus Ethics 22:235–245, 2013) maintain that loan maturity mismatching does not create duplicate titles and is not illicit, and that from an economic and legal perspective there is no continuum with fractional reserve banking. Cachanosky and Evans enter the debate from the free-banking standpoint and view both practices as legitimate. In this paper, I agree with the conclusions of Bagus and Howden, but adopt a different approach to support this position. Using the title-transfer theory of contract, I demonstrate from first principles why loan maturity mismatching does not create duplicate property titles and is a legitimate practice. Employing this same theory, I then present a novel argument to show why the contractual arrangements found in fractional reserve banking are logically contradictory and illegitimate. (shrink)

Gender greatly impacts access to opportunities, potential, and success in corporate leadership roles. We begin with a general presentation of why such discussion is necessary for basic considerations of justice and fairness in gender equality and how the issues we raise must impact any ethical perspective on gender in the corporate workplace. We continue with a breakdown of the central categories affecting the success of women in corporate leadership roles. The first of these includes gender-influenced behavioral factors, such as the (...) requirements and expectations of gendered verbal and nonverbal communication styles as well as appearance. We move on to address the impact of family on corporate leadership opportunities and success, discussing the asymmetrical evaluation of an individual’s potential, authority, and competence based on gender stereotypes of familial obligations and expectations. Finally, we address how gender impacts access to networking and sponsorship opportunities and the long-term effects of systematic limitations on women’s inclusion in the upper echelons of corporate leadership. We conclude with a summary of the questions and issues raised by our discussion and direct individuals to consider how different ethical systems and moral requirements might influence their interpretations of gender and leadership in the corporate workplace. (shrink)

In contrast to eminent historical philosophers, almost all contemporary philosophers maintain that slavery is impermissible. In the enthusiasm of the Enlightenment, a number of arguments gained currency which were intended to show that contractual slavery is not merely impermissible but impossible. Those arguments are influential today in moral, legal and political philosophy, even in discussions that go beyond the issue of contractual slavery. I explain what slavery is, giving historical and other illustrations. I examine the arguments for the impossibility of (...) contractual slavery propounded in the Enlightenment and their offspring expounded in recent writings, including those by Barnett, Cassirer, Ellerman, Rawls, Roberts-Thomson, Satz and Steiner. I show that they involve confusions between abilities and rights, free will and freedom, directing and doing, what may be true sequentially and what may be true simultaneously, default rights and universal rights, impermissibility and impossibility, and metaphorical and literal uses of language. (shrink)

: In the late seventeenth and early eighteenth centuries, stockbrokers, speculators, and stockjobbers were often accused of fraud and price manipulation. Seven key regulatory acts were passed into law in England from 1697 to 1737. Evidence suggests that well into the nineteenth century, virtually none of these laws were adhered to or seriously enforced. An ….