Markets and morality (part 1)

Note: This is the first of six blog posts in which we review Nathan B. Oman’s book The Dignity of Commerce: Markets and the Moral Foundation of Contract Law, University of Chicago Press (2016).

Nate Oman begins his beautiful book on contract law with The Merchant of Venice. At the center of Shakespeare’s classic morality play is a quasi-Faustian pact. A lifeless law professor might describe the voluntary bargain in The Merchant of Venice in dry, analytical terms as follows: S agrees to loan a large sum of money (3000 ducats) to B on the condition that A agree to guarantee repayment the loan. But what makes the simple loan agreement in The Merchant of Venice so memorable is its penalty clause: if the loan is not repaid in full by a certain date, S may elect to obtain a pound of A’s flesh! A Socratic law professor might then pose the following question: why shouldn’t the law enforce this contract? After all, the parties voluntarily and knowingly consented to these terms, however monstrous. (Or, to paraphrase Prince Hamlet: to enforce or not to enforce, that is the question …)

For his part, Oman argues that the formal legal decision whether to enforce the odious agreement between Antonio and Shylock in The Merchant of Venice does not depend on any deep deontological theory regarding moral autonomy or the moral duties of the contracting parties. (Indeed, deep down, we don’t really want the Venetian courts to enforce this wicked promise.) Nor does it matter whether the parties gave meaningful or voluntary consent. (After all, the consensual nature of Shylock’s immortal contract does not detract from its depravity.) More surprisingly, Oman even rejects economic theories such as efficiency or welfare (the holy grail of economic analysis of law) as the legal reason for enforcing voluntary agreements. The legal decision in Shakespeare’s morality tale is not about maximizing the sum total of economic welfare of the Venetian city-state because either wealth is not a value (Ronald Dworkin) or it is but one important value among many others (the rest of us).

There is thus a dramatic tension between our moral intuitions and the mercantile logic of the Rialto in Shakespeare’s play. As Oman observes: on the one hand, the pound-of-flesh contract should not be enforced in the interest of individual justice, but at the same time, the greater good–the integrity of Venetian trade in the future–demands that all commercial bargains be enforced. Oman thus makes an important and insightful observation about the immortal contract in The Merchant of Venice: “In the play, the law enforces contracts in order to make commerce on the Rialto possible” (p. 7). In a word, contract law is about markets, not morality. Why markets and not morality? Oman’s book explores this question in greater detail, and we shall review the rest of his book in future blog posts.

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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1 Response to Markets and morality (part 1)

  1. Pingback: Morality distribution channels | prior probability

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