Well, I figured your description of the market as “less free” because of the new law meant you disapproved, seeing how you self-describe as being pro-freedom. I don’t think it was a tremendous leap for me to do so.
Well, actually, I was interested in the disconnect between the description of a law that makes bankruptcy more difficult to invoke as making the market “less free” and a worldview that says bankruptcy protection should not be available unless negotiated for in the first instance.
I mean, certainly, even in the real world a creditor and debtor can negotiate terms under which the debtor will be relieved of the debt (even if this is unlikely as a practical matter). There’s nothing stopping this sort of “private bankruptcy law” from manifesting itself in negotiated loan documents. But in the real world we also have actual bankruptcy law, which exists whether the parties to a loan like it or not. This new law makes bankruptcy protection more difficult to obtain. So it seems to me that the changes in the law would, from your point of view, make the market “more free,” rather than “less free.”
First, as someone who’s dealt with loan documents professionally, the notion that a lender would ever, under any circumstances, allow a provision to be inserted into those agreements that allowed the creditor to escape full payment is, as a practical matter, absurd. Loan documents are notoriously inflexible. The terms that get negotiated are invariably things like what financial ratios must be kept, what collateral will be given, and the like. But actual repayment? You’d have better luck convincing Roy Moore to modify the Ten Commandments.
Secondly, it should be noted that bankruptcy law doesn’t just exist to relieve the debtor; it also provides a structure for multiple creditors to determine their respective rights to repayment. Rarely does a debtor own only one creditor, and that framework is an invaluable tool.
And, forgive me Lib, but this question pops into my head: if a debtor has two creditors, one secured, one unsecured, and the debtor fails to pay the unsecured creditor, and as a consequence the unsecured creditor seizes collateral upon which the secured party is relying, is that an initiation of force on the part of the unsecured creditor against the secured creditor?
Good question. Another question created by multiple creditors: What if the debtor defaults on only one debt, and is put in the debtor’s prison? Isn’t that coercion against the other creditors who have, unitl now, been paid according to the terms of the loan?
That is certainly true in our present system. I suspect a lot of it is that all such contracts occur in the context of a society with government-established and -enforced bankruptcy regulation. Therefore, provisions to escape full payment are there because the government has added them thru legislation.
I can see, as I mentioned, a standard set of contracts developing in Libertaria that establish the same sorts of conditions under which the debt need not be repaid as under current bankruptcy legislation. And another, different standard set, which make no such provision. Interest rates would be significantly lower with those contracts that disallow bankruptcy, since the consequences of default are so much higher and thus greater effort would be taken to avoid it.
Interesting question. I suppose it could be dealt with sort of how common vs. preferred stock is done. Certain kinds of debts could take precedence over other types. I imagine this would be reflected in the varying rates of interest charged as well as in the clauses of the contract.
Contracts would be nightmarish things to read, no doubt - every freaking one of them would have to replicate the entire bankruptcy code or its equivalent.
I saw it, but it didn’t strike me as a particularly libertarian principle. In other words, I don’t see precisely why unsecured debt would be anathema in Libertaria.
There was a time in my life where, even by liquidating all my assets, I could not have paid off the outstanding balance on my mortgage. But to me, that is something different from “taking on debt that I cannot afford”. I could afford it, in the sense that I had a job sufficient to meet the monthly payments, and my prospects of remaining in that job (or a better one, as it turned out) were such that I believed (and the lendor agreed) that I could meet the payments without default. But the contract only became due and payable over time. The lendor could, if he chose, call in the debt all at once. But he chose not to do so, not out of any charitable impulse but because payments with interest were what he wanted to get out of me. As he did (and does).
And, even if I lived in Libertaria, I can see that the same circumstances applying. I would rather not have to wait to save up the entire amount of the cost of my house before I got a mortgage - indeed, if I had that much, there would be no particular advantage in not simply paying cash. But that does not have a lot to do with libertarianism, AFAICT.
Certainly, with no bankruptcy protection, the consequence of defaulting on unsecured debt would tend to be higher in Libertaria. Thus I would bet the interest rates would be lower. A good deal if you don’t default, a bad one if you do. But I imagine that is a selling point for those who espouse libertarian values - bear your own cost, reap your own benefits, take care of yourself because the government isn’t going to do it for you.
I am increasingly likely to think that Libertaria has just as much demand for lawyers as any other. I bet more of their time would be spent going over contracts, but the time they aren’t spending reading government laws is taken up reading private contracts.
I’ve answered it repeatedly. You are a citizen of Libertaria in your hypothetical, are you not? (Otherwise, why ask me?) As such, you had already agreed to arbitration of contract disputes. What occurs if you fail to pay is that (1) your lender forgives you, (2) you and your lender work out new terms suitable to both of you, or (3) your lender files charges against you.
Another repeatedly answered question, and frankly an unbelievable one. How can you enter the agreement in good faith if you signed it in bad faith? Your signature indicates your consent to the terms. If you do not complete them, then you misrepresented your consent. That’s deception. Mistrepresentation is deception. What if your government or your lender did the same to you? What if your lender signed that he would loan you the money, and you made all your preparations, but he said ha ha just kidding? What if your government signed that it would secure your rights, but when you charge someone with coercion, it says, sorry but that won’t be convenient?
I greatly admire your ability to analyze a system, such as Libertaria, by disregarding presumptuous baggage brought to bear from other systems. You are a person with whom I would be interested in bouncing off ideas. With respect to your comments to Dewey, it is clear that you understand that a man will trade off one thing for another if he makes any choice at all. I would dearly love a society in which lawyers are doing something worthwhile.
Lib, I’ve finally come around to understanding that liberty is really the only issue in these sorts of contract discussions, or rather that many of the hypotheticals that get thrown out attempt to demonstrate that there would be “unfair” results, or non-utilitatarian results, or things of that nature . . . and that really doesn’t matter, because the issue is that people can agree between them to do whatever they want to, and no one’s going to tell them they can’t. In other words, people can contract with each other that if they don’t pay the debt back that they have to work in a sweatshop for a given term, or become a slave for life, or get killed. Presumably you’d get better interest rates for these kind of agreements, but no one’s going to stop you from doing it (or the other guy from enforcing it).
But I just see this as a freedom of contract issue as opposed to any fraud/coercion angle, at least as we currently define it. Right now you commit fraud if you tell someone a statement that is untrue, and you know it isn’t true, and you mean them to rely on it, and they do, and they are damaged as a result. If you sign a contract with the intention of doing whatever, but don’t, then you haven’t committed fraud, at least as we understand it now. It’s a contract breach, certainly. Usually even if it’s a result of circumstances beyond your control (and certainly in Libertaria if the contract says so.) I just can’t see how you can commit fraud and/or misrepresentation regarding some future event. You’ve got the freedom to contract however you want and even if if has results that we would generally consider unjust, you’ve got to live up to your deals, I’ve understood that. But I do not believe that we have to put some moral blame or criminal onus on every contract breach, although the breacher still may have to pay the forfeit.
Huh wha? How is it “unbelievable” to suggest a situation in which someone signs a contract in good faith, sincerely expecting to be able to fulfil it, and then is blindsided by circumstances?
He gets sick and loses his job, his wife suddenly needs expensive medical treatment, his bank manager absconds with his assets, whatever. He doesn’t have the money that he expected to have in order to repay what he borrowed.
I can see how a Libertaria contract would still demand that he meet his obligations as specified or face charges: the creditor is still owed his money and it’s not the creditor’s fault that the debtor can’t pay it, after all. But I completely fail to see how the debtor’s conduct can be described as “deception” or “fraud”.
He promised to do something that to the best of his knowledge was in his power to do, and owing to unexpected circumstances, it suddenly was no longer in his power. I can see how you can argue that he’s still on the hook for his debt, but I simply can’t see how you can accuse him of fraud.
Unless I’m just misunderstanding you again. Maybe we need a hyperbole smiley.
[In preview: Or yeah, what Ambrosio said. It’s breach but not fraud.]
Reading “nightmarishly complex” contracts where “every freaking one of them would have to replicate the entire bankruptcy code or its equivalent”, as Shodan suggested, might not be what everybody would think of as “worthwhile”, though.
This seems to be a recurrent theme in the hypothesized actual workings of Libertaria: in order to conform to an ideal of entirely voluntary action in all circumstances, the citizens have to spend huge amounts of time formally identifying and consenting to all possible conditions that could affect their transactions. I honestly can’t see how anybody would have enough time in a real-world Libertaria actually to get anything done.
This is absolutely not true. I honestly and accurately represented both my ability and commitment to repay the loan. Just becuase an unforeseen circumstances that are beyond my control affects my ability to repay the loan doesn’t suddenly change me into a liar and a thief.
When you agree to meet someone for dinner do you mean that you will make a reasonable effort to meet them for dinner or do you mean that there is absolutely no possible way that you will not meet them for dinner? If its the latter then you are operating on an entirely different meaning of the word agree (this wouldn’t be the first time) than everyone else is.
I mean are you telling me that if you are meeting someone that has agreed to meet you for dinner and they get run over by a car in front of the restuarant rendering them unable to eat dinner you would consider them a liar?
Perhaps I should have investigated the honesty, ability and integrity of my loan company or government before I signed on the dotted line. Unless they misrepresented their intentions or abilities, or are currently lying about their ability to meet the terms of the contract I see no deception nor physical force taken against me. Why Libertaria decides it necessary to compensate for my negligence in this instance but not in anyother regarding economic transaction is still unclear.
Your viewpoint is perfectly understandable, and I respect it. However, as I see it, deception is simply a form of force — i.e., a tool for nullifying a man’s voluntary volition. We don’t always mean to hurt others. Clearly, it is a difference of intent if a slap you in the head because I think you’re ugly or if I slap you in the head because my hand slipped from the pole I was leaning against. But in either case, if your head then requires stitches, then unless it had been your willful desire to have a busted noggin that day, it seems only right that I see to your repairs, no matter whether my action was a praxis (in the Misean sense) or not. A coercion need not be a thing done out of anger. And a response need not be a punishment. But in all things, a man who has been peaceful and honest must not be made to suffer for the actions of someone else. That is the very essence of noncoercion.
Welcome to the board.
(Kim, hopefully this post addresses your concerns as well.)
Clearly then, I do not comprehend what you are trying to say. It seems to me that the scenario keeps shifting, but maybe I just misunderstand. Here’s how I’m reacting internally to what you’re saying, so maybe you can tell me where I’m off base:
[internal voice]
If you both did not agreed that you would pay, then you wouldn’t be asking the question because without that basic ingredient, it wouldn’t even be a contract. But if you haven’t agreed that you would pay, then why is there a problem when you don’t?
You won’t be thrown in jail for having your hand slip.
Becuase its not that you don’t its that you can’t. You would not be upset at a person who missed an appointment becuase they were ran over by a car but you would if they just blew it off. This is becuase when you agree to do something it doesn’t mean that you will move heaven and earth to complete the task. It means that you will make a reasonable effort to complete the task or make reasonable accomodaions if you can’t. Of course if there is language in a contract stating otherwise then that takes precidence.
Right, but, if I ask you to hit me in the face and you do it, then I’ve consented to your use of force against me, although you would be hard pressed to say that I had used force or coercion on you! In that exact fashion I see entering into a contract as consent for coercion to be used on a breaching party, even though breach itself is not (usually) itself fraud or coercion, because it can be totally out of the control of the person who breaches. That’s why my creditor can go after my property and/or person after a breach when normally no one may do so; I agreed to let them do this when I made the agreement with them. My creditor may forgive my debts or restructure them in some way, but they don’t have to do this.
I see that as being a function of lawyers in Libertaria. Sort of what legislators do now.
I could even see the government of Libertaria setting up a system of bankruptcy regulation similar to our current one - but making it apply to contracts only if both lendor and debtor agree. Thus you would have the option (as a lendor or borrower) of signing loan agreement of type A, which contains the clause 'this loan is subject to the qualifications of the Libertaria Loan Act, which allows for binding arbitration regarding restructuring of the loan upon application by either party". Or type B, which contains the clause “upon default, the lendor reserves the right to confiscate all property of the debtor and subject the debtor to a term of involuntary servitude at ten dollars an hour until the balance of the loan is repaid” or some such.
Maybe the confusion over “coercion” or “deception” is that in Libertaria, you are expected to fulfill contracts pretty much no matter what. That is to say, under the current system of bankruptcy, “I can’t repay” doesn’t refer to the same circumstances as in Libertaria. In the US, “I can’t repay” means essentially “I would rather suffer the negative consequences of declaring bankruptcy than repay”. Not that those who declare bankruptcy are always lazy deadbeats - but they can be seen as making a rational choice between two outcomes, and choosing the least bad.
In Libertaria, there is no opt-out (if the contract doesn’t provide one). You are on the hook, even when you have made what would be considered a “reasonable effort” (under our current system) to repay, but failed. So that even if you sold your house and your car and all your investments and everything you possessed and still came up short, the lendor could force you to sell a kidney or something to make up the difference.
I think there is usually an assumption that the lendor just wants his money, and would therefore often be amenable to some kind of restructuring or renegotiation. If it is in the lendor’s best interests to throw the debtor into prison in hopes of squeezing money out of his friends or relatives, as seems often to have been the case in Victorian England, he could still do that. And in a Merchant of Venice Shylock scenario, where one party is out to get the other rather than turn a profit, I suspect things could get ugly.
Portia doesn’t seem to have been a libertarian. As I understand it, the decision as to whether or not the quality of mercy is strained is up to the lendor in Libertaria.
I will admit, I am having a tough time wrapping my head around this, if only because the ultimate product of the system being discussed seems quite hellish to me for the vast majority of people. Especially in this instance- how many people, across all classes, have multiple creditors maintaining their standard of living, from humble to opulent? The thought of giving creditors, in the face of default, virtually unlimited authority in deciding the disposition of their debtors terrifies me.
Though glossed over, we’ve heard mention of debtor’s prisons and forced labor (all dependent on the goodwill of the creditors)…does anyone find that this is a better system than exists now? How far short of slavery does this end? Or does it? All in the name of ‘freedom from coercion.’
I contend that while Freedom is a virtue, it is not the only, or even the highest one when considering a government. Most people want freedom is a fairly circumscribed area, and then want systems in place to make the rest of their lives secure and fairly predictable. You are one of the only people I know to argue vehemently for the freedom to starve, for the freedom to be imprisoned, for the freedom to become a slave- as though this is somehow empowering, or a vital part of the human condition.
I am not impressed with any political philosophy that can exist only in theory. Is not politics the art of the possible? I’m hoping there’s just something I’m missing in the analysis, but more and more, this seems like a bad dystopian novel rather than any attempt to construct a viable social order. I can not see something like this existing on any scale, for any length of time, especially in competition with other cultures that employ a more utilitarian approach. If you disagree, then perhaps you can explain why ‘the market’ has not blessed us with some incarnation of this among the hundreds of different socio-political systems in existence today.
Well, that’s it. I’m not going to tiptoe around the issue, and if i have misread something in your posts, please correct me. But debating this sort of philosophy is like debating creationism as a valid scientific theory. You can argue ‘them’s the breaks’ for any objection we discuss, but then don’t expect to be taken seriously.
Ah. But you had issued a Libertaria edict, saying “defaulting on a loan is a breach, and breach is a crime”. You did not distinguish between “non-deliberate breach” versus “deliberate breach”. And that distinction is the very essence of bankruptcy protection. Do you want to take back your silly edict and re-phrase it?
Now, what makes you think that anyone would want to exchange “ideas” with someone who is admittedly “morally weak”. How about you start working on your “weaknesses” before calling others silly and myopic. What makes you think other people are interested in hearing you bouncing off your own silly, myopic and morally weak ideas?
I’m not sure whether it’s the case that we disagree, or whether we’re just thumping two different heads of the same drum set. I certainly agree with you that a person cannot control things beyond his control. I mean, by definition he cannot do that. And I also agree that terms of the contract will override other considerations. So I’m having trouble pinning down what point you’re making. Are you saying that all risk ought to be assumed by the lender? If so, that hardly seems fair. Why shouldn’t he charge interest rates of !00% if that’s the case, and demand collateral held in trust for every loan?
Indeed. In fact, given Kim’s concern about the effort required to guard yourself in Libertaria, I’m surprised that the same thing is of no concern to her in America. Do you have any idea how many laws, regulations, orders, decrees, ordinances — and whatever other synonyms there are for magisterial whim — there really are? I mean, in a land where ignorance of the law is no excuse for breaking the law, why is it that Americans aren’t hauling around libraries of the federal, state, and local rules everywhere they go? It seems to me that America, if it did not exist and were offered as a hypothetical, would scare the Bejeebus out of anyone not used to to thinking about it. The presumption might be that in America, not only would there be lots of lawyers, but everyone would have to be a lawyer.
How is it “unbelievable” to suggest a situation in which someone signs a contract in good faith, sincerely expecting to be able to fulfil it, and then is blindsided by circumstances?