Bayesian Investor Blog

Jeff Hummel recently gave an interesting talk on the subject of how the law should treat a contract that involves one person becoming enslaved to another. The title made the talk sound like a quaint subject of little importance to present day politics, and I attended because Hummel has a reputation for being interesting, not due to the title of the talk. But his arguments were designed to apply not just to the status that was outlawed by the 13th amendment, but also to military service (not just the draft, but any type where the soldier can’t quit at will) and marriage.
Hummel argues that instead of asking whether slavery ought to be illegal, we should ask what a legal system ought to do when presented with a dispute between two people over enforcement of a contract requiring slavery.
Some simplistic notions of contracts assume that valid contracts should always be honored and enforced at all costs, but the term efficient breach describes exceptions to that rule (if you’re unfamiliar with this subject, I recommend David Friedman’s book Law’s Order as valuable background to this post).
In the distant past, people who failed to fulfill contracts and had insufficient assets to compensate were often put in debtors prisons. That was generally abolished around the time that traditional slavery was abolished, and replaced with a more forgiving bankruptcy procedure. Hummel suggests that this wasn’t a random coincidence, and that a slave breaching his promise to his master ought to be treated like most other breaches of contracts. If bankruptcy is the appropriate worst case result of a breach of contract, then the same reasoning ought to imply that bankruptcy is the worst result a legal system should impose on a person who reneges on a promise to be a slave.
Hummel noted that the change from debtors prisons to bankruptcy happened around the time that the industrial revolution took off, and suggested that we should wonder whether the timing implies that we became wealthy enough that we could afford to abolish debtors prisons, and/or whether the change helped to cause the industrial revolution. Neither he nor I have a good argument for or against those possibilities.
If this rule were applied to military service, unpopular wars would become harder to fight, as many more soldiers would quit the military. As far as I can tell, peer pressure kept soldiers fighting in any war I think they ought to have fought, so I think this would be a clear improvement.
The talk ended with some disagreement between Hummel and some audience members about what should happen if people want to have a legal system that provides harsher penalties for breach of contract (assume for simplicity that they’re forming a new country in order to do this). Hummel disapproved of this, but it wasn’t clear whether he was doing more than just predicting nobody would want this. I think he should have once again rephrased the question in terms of what existing legal systems should do about such a new legal system. Military/police action to stop the new legal system seems excessive. Social pressure for it to change seems desirable. It was unclear whether anyone there had an opinion about intermediate responses such as economic boycotts, or whether the apparent disagreement was just posturing.