New York University

From the SelectedWorks of Mario Rizzo

July 7, 2015

Abstract Morality for an Abstract Order

Mario J Rizzo

Available at: http://works.bepress.com/mario_rizzo/38/

 ABSTRACTMORALITYFORANABSTRACTORDER1
LiberalismsDifficultProblem

ByMarioJ.Rizzo

Revised,July7,2015

Abstract

ThefirstpartofthisArticleoutlinesaconceptionofthemarketasanabstractandcomplex
emergent order that is unplanned and has no specific ends. I draw on major classical liberal
thinkerstoelaboratethispictureinordertoemphasizetherolethatsuchadescriptionplaysin
theliberalcaseforamarketorder.Thesecondpartdescribesinbroadoutlinethekindsofrules
neededtosustainthemarket.Theserulescanbereasonablydescribedasabstract.Thethird
part connects abstract moral and legal rules with a psychological framework known as
construallevel theory. This framework usefully connects the degree of abstraction or level at
which a problem is construed with the evaluation and judgments of agents, including judges,
litigants and the general public. I argue that beneficence (generosity) is a concrete virtue and
justiceisanabstractone.Inaconcreteconstrualofamoralorlegalproblemthetendencyisto
evaluateanddecideonthebasisoftheconcretevirtueratherthantheabstract.Thefourthand
last part illustrates the general issues by discussing two relevant legal examples: the police
power and the contract doctrine of unconscionability. I also illustrate the interplay between
special interests and the benevolent attitudes of people spurred on by lowlevels of problem
construal.

The possibility of men living together in peace and to their mutual

advantagewithouthavingtoagreeoncommonconcreteaims,and
bound only by abstract rules of conduct was perhaps the greatest
discoverymankindevermade.

FriedrichA.Hayek2

TwoindividualsarewalkingdownBleeckerStreetinNewYorkCitysGreenwichVillage.Oneis
aneconomistandtheotherisahumanitiesprofessor.Theyseethatanicelittlegiftshophas
goneoutofbusinessafteraboutayear.Theyeconomistsays:Well,itisallforthebetter.They
soldupscalegiftitemsmainlyfortourists.Therewasinsufficientdemandforthiskindofthing

1
Unfortunately,thecriticallyimportanttermsabstract,complexandemergentdonothaveunique
definitionsineitherthephilosophicaloreconomicsliterature.IhopetomakeclearwhatImeanbyeachtermboth
throughcontextandmarkingoutthekeycharacteristicsasweproceed.
2
FriedrichA.Hayek,TheMirageofSocialJustice,2Law,LegislationandLiberty(Chicago1976)at136.

touristsusuallywantcheaperitems.Soitisagoodthingtheywentofbusiness.Nowthescarce
commercialrealestateinaprimeareawillbemoreefficientlyallocated.Thehumanistisabit
takenaback:Butwhataboutthecharmingfamilythatoperatedthestore?Theyallpitchedin
andworkedlonghourstomakeitwork.IalwaysfeelbadwhenIseesmallbusinesspeoplefail.
Mayberesourceswillbebetterallocated;butthatissoabstract.Ifeelforthepeopleinvolved.

Noticethatthehumanistdidnotadvocatecommercialrentcontrolorasmallbusinesssubsidy
oranyotherinterventioninthefreemarket.Hejustexpressedhisfirstcaringreaction.Hefelt
badabouttheconcreteindividualswhoranthestore.Atthecostofpossiblemisunderstanding,
letmesuggestthatthisiswheretheclassicalliberalsproblemsbegin.

ThePlan

Inthefirstpartweoutlineaconceptionofthemarketasanabstractandcomplexemergent
orderthatisunplannedandhasnospecificends.Wedrawonsomemajorclassicalliberal
thinkerstodrawthispicturetoemphasizetherolethatsuchadescriptionplaysintheliberal
caseforamarketorder.Thesecondpartdescribesinbroadoutlinethekindsofrulesneededto
sustainthemarket.Theserulescanbereasonablydescribedasabstract.Inthethirdpart,we
connectabstractmoralandlegalruleswithapsychologicalframeworkknownasconstruallevel
theory.Thisframeworkusefullyconnectsthedegreeofabstraction(level)ofconstruinga
problemwiththeevaluationandjudgmentsofagents,includingjudges,litigantsandthe
generalpublic.Iarguethatbeneficence(generosity)isaconcretevirtueandjusticeisan
abstractone.Inaconcreteconstrualofamoralorlegalproblemthetendency(orbias)isto
evaluateanddecideonthebasisoftheconcretevirtueratherthantheabstract.Inthefourth
part,Iillustratetheissuesofthepreviouspartsbydiscussingtworelevantlegalexamples:the
policepowerandthedoctrineofunconscionability.Ialsoillustratewithregardtothefirst
exampletheinterplaybetweenspecialinterestsandthebenevolentattitudesofpeople
spurredonbylowlevelsofproblemconstrual.

I.WhatistheMarket?

Thequestionbeforeusisnotwhatanyparticularmarketisthemarketforchickens,the
marketfortouristitems,andsoforth.Thequestionis:WhatisthisthingcalledtheMarketor
theMarketEconomy?3Oneimportantstrainofthoughtintheintellectualhistoryof
liberalism,perhapsculminatingintheworkofF.A.Hayek,hasexploredtheissuesinvolvedin
identifyingthesubjectmatterstudiedbyeconomistsor,moregenerally,bysocialtheorists.The
ScottishEnlightenmentphilosophersdidnotrecognizeanysharpdivisionbetweenthestudyof

3
HereinafterIusethesetermswithoutquotationmarksorcapitalization.

society,particularlythegreatorextendedsocialorder,andthestudyofasystemof
commercialexchanges.Societyandeconomywerecloselyinterwoven.Certaingeneral
principlesappliedtothestudyofeach.

Toidentifythesubjectmatterofsocialthoughtintellectualeffortisrequired.Theobjectsof
studyarenotimmediatelyorintuitivelyknown.Althoughallperceptioninvolvessome
backgroundabstraction(wecannotpointtoachairwithoutsomepriorconceptofachair),
someentitiesrequiretheemploymentofafairlyhighlevelofabstractthoughtsimplyto
identifythem.Notallsuchabstractionshavecounterpartsintherealworldbutthereare
importantabstractionsinthesocialsciences,particularlyineconomics,thathave.Myclaimis
thatthemarketisanentityofafairlyhighorderofabstractionthatdoeshaveacounterpartin
therealworld.Itdescribesthegeneralpatternofactualexchangerelationsthatareatthe
heartofaliberalsocialorder.

InthefollowingsectionsIwilldiscusssomeoftheissuesthathavearisenintheidentificationof
liberalismsobjectofstudy.Myintentisnottobecomprehensivebuttoshowbrieflythebroad
intellectualevolutionthathasleduptothecharacterizationofthemarketasanabstractorder
andacomplexsystem.

1.AdamFergusonandAdamSmith

Forourpurposestherecognitionthatsocietyorthemarketisanabstractentitybeginswiththe
ScottishEnlightenmentthinkers.IntheworkofAdamFerguson,forexample,thecomplexityof
thesocietalinterrelationsisjoinedtothedifficultyofcomprehendingthemandthusof
graspingtheideaofsocietyitself:

Those establishments [of society] arose from successive improvements that

were made without any sense of their general effect; and they bring human
affairstoastateofcomplication,whichthegreatestreachofcapacitywithwhich
humannaturewaseveradorned,couldnothavebeenprojected;norevenwhen
thewholeiscarriedinexecution,canitbecomprehendedinitsfullextent.4

ThispicturewasconsiderablyelaboratedbyAdamSmithssubsequentdiscussionof
specializationandthedivisionoflabor.Hisanalysisexplainedfarmorethantheimproved
productivityoflaborandtheincreaseinwealthengenderedbythegrowthofcommerce.
Smithsfamousdictumthatthedivisionoflaborislimitedbytheextentofthemarketmade
usthinkofsocietyasanextendedorderofinterrelations.Underaregimeoffreetrade,a

4
AdamFerguson,AnEssayontheHistoryofCivilSociety,5thed.(T.Cadell1782)at304.Onlineat
http://oll.libertyfund.org/titles/1428.SeealsoRonaldHamowy,TheScottishEnlightenmentandtheTheoryof
SpontaneousOrder,inThePoliticalSociologyofFreedom:AdamFergusonandF.A.Hayek(EdwardElgar2005),pp.
3984at5861.

personinonepartofScotlandcouldbenefitunknownindividualsinfaroffcountriesin
unknownways5.AScotsmanwasinarelationshipofmutualbenefitwithpeoplehedidnot
knowandinwayshecouldnotimagine.Thechainofbenefitgrewlongerandbecamemore
complexduetotheindirectionofinternationaltrade.AsweatermadeinScotlandmightbesold
toaFrenchmanwiththeproceedsfromthesaleofthesweaterbeingusedtobuyItalianwine.
InturntheproceedsofthatsalemightusedtobuyteafromChina.Inasense,thenthe
Scotsmanindirectlybenefitedateasellerinafaroffpartoftheworld.Thepurposeforwhich
theteasellerusedhisnewwealthisnotonlyunknowntohimbutirrelevanttoanyoftheother
participantsinthiscomplexwebofinterrelations.Nooneintendedthefullextentofallthese
interrelationsnorcouldpeopleeasilycomprehendtheirgeneralsocialeffect.

2.HerbertSpencer

InTheStudyofSociologySpenceremphasizesthedifficultiesfacedbyascientificstudyof
society,especiallyincludingitseconomicrelations.6Someofthesedifficultiesareafunctionof
theordinarylimitationsofthehumanintellectwhilethemoreimportantdifficultiesare
inherentinthesubjectmatterorphenomenathatareexamined.

Spencersmainconcerninhissociologicalandethicalworkswastheevolutionofhuman
conductespeciallyinitssocialcontext.Theframeworkthatheusedtoexplainthisevolution
impliedthatconductandsocialinstitutionspassfromanindefiniteincoherenthomogeneityto
adefinitecoherentheterogeneity.7Howeveropaquethisexpressionmayseemitisessentially
themoderninsightthatevolutionusuallyproducesgreatercomplexity.Itcanalsoberather
simplyillustrated.

Inthecourseofsocialevolution,theactionsofindividualshavebecomemoreandmoreinter
related(coherent),especiallyacrosstime,asindividualspursuetheirendsmoreindirectly.The
primitivemandivesinthewatertocatchafish;themoreadvancedmanmaybuildanetora
boat.Withexperienceandthegrowthoftechnicalknowledge,actionsbecomemoreprecisely
adaptedtowardtheirends(definite)withtherelatedeffectthathisrelationswithothers
becomemorepreciselydefined.Iwillgiveyouexactlythis,ifyougivemeexactlythatata
certaintimeandinacertainplace.Contractbecomesamorepreciserelationshipratherthana
primarilyopenendedrelationship.8Lastly,preferencesbecomemorevariedasknowledge,

5
FriedrichA.Hayek,AdamSmith:HisMessageinTodaysLanguage,inW.W.BartleyIIIandStephenKresge,eds.,
TheTrendofEconomicThinking:EssaysonPoliticalEconomistsandEconomicHistory,3TheCollectedWorksofF.
A.Hayek(Chicago1991),pp.119121.
6
HerbertSpencer,TheStudyofSociology(HenryKing&Co.1873),pp.75112.
7
HerbertSpencer,ThePrinciplesofEthics,vol.1(LibertyClassics1978[1897])at100.
8
Theimpliedcovenantofgoodfaithandfairdealingincontractlawdoesnotcontradictthispoint.Thiscovenantis
partlyarecognitionthatnocontractcancovereverypossiblecontingencyandsoitfunctionsinawaythatisin
keepingwithgeneralcontractlawsdefaultprovisions.Morespecifically,itspurposeistoensurethatnoliteralor

experienceandculturalinteractionsgrow.Tothiswecanaddstillfurtheradaptivevariationas
theenvironmentsbecomemorediverseduetocommunicationandtransportationadvances.
Actionsbecomethereforemoreheterogeneous.

Inparalleldevelopmentwithincreasingcomplexityofindividualbehavior,socialcooperation
itselfbecomesmorecomplex.Simpleformsofcooperationinwhichpeoplejointogetherto
huntananimalforfoodbecomereplacedbyheterogeneouscooperation.Intheformercase
likeeffortsarejoinedforlikeendsthataresimultaneouslyenjoyed.Herethereislittleorno
imputationproblemallcooperatorsarerewardedbyequallysharingthecatch.Inthelatter
caseunlikeeffortsarejoinedforunlikeends.9Inthiskindofcooperationthereisextensive
divisionoflaborandspecialization.Apersonwritinglegalmemos(A)ishelpingtoprovidelegal
services.Ineffect,hiswagesaretheimputedshareofthevalueofthoselegalservicesto
personC.Inturnthesewagesexchangeforashareoftheoutputofanagriculturalworker(B)
whoselaborconsistsofaverydifferentkindofactivity.Thusunlikeeffortsarecooperating,but
fordifferentpurposes.Thememowriterwantsfoodandtheagriculturalworkermight
conceivablywantlegalservicesbut,morelikely,hewantsclothingforhimselforhisfamily.

Thisformofsocialcooperationcannotexistwithoutvoluntarymoneybasedexchange.Thisis
becausethereisanimputationproblemwhenpeoplecooperateincomplexways.Thelabor
providedbyindividualsisheterogeneous(theyarenotalljusthunting)andtheproducts
producedareheterogeneous(theyarenotsimplyhuntingagivenanimal).Thetermsonwhich
suchinteractiontakesplacecannotfollowsomeintuitivelyappealingdivisionofthecatch.
Instead,allsortsofheterogeneousentitiesmustbesomehowvaluedandtheproduct(s)
distributed.Thismeansthatvoluntaryagreement(contract)andmoneyasamediumof
exchangeandmeasureofvaluemustsimultaneouslydevelop.

3.GrowingIndirectioninthePursuitofGoals

Withthegrowthofknowledgeandincreasingdivisionoflaboraswellasspecializationoftasks,
thepursuitofgoalsbecomesmoreindirect.Infact,theAustrianeconomistCarlMengerargued
thateconomicdevelopmentwasessentiallythegrowthofknowledge.Asnewcausal
relationshipsbetweenmeansandendsarediscovered,peoplecanmoreeffectivelysatisfytheir
wants.10ThesecondgenerationAustrianeconomistandfinanceministerofthecountryof
Austria,EugenvonBhmBawerk,furtherarguedthatthisprocesstooktheformoflonger,

provisionbyprovisioninterpretationofcontractlawwillunderminetheabilityofbothpartiestogainasoriginally
intended.SeeKirkeLaShelleCompanyv.ThePaulArmstrongCompanyetal.263N.Y.79;188N.E.163
9
Spencer,PrinciplesofEthics(citedinnote7)at172.
10
CarlMenger,PrinciplesofEconomics,trans.byJamesDingwallandBertF.Hoselitz(NewYorkUniversity1981)at
7174.

moreroundaboutmethodsofproductionthatweremadepossiblebytheaccumulationof
capital.11

Roundaboutmethodsofproductionaremanifestationofindirectionandnecessarilyinvolve
moreabstractgoals,thatis,goalsthatareincreasinglyseparated(abstracted)fromthe
individualsultimateends.

[O]n observing more closely the traders proceedings, we find that though to
theendoflivingcomfortablyhegetsmoney,andthoughtotheendofgetting
moneyhebuysandsellsataprofityetheischieflyoccupiedwithmeansstill
moreremotefromultimateends,andinrelationtowhicheventhesellingata
profitbecomesanend.[H]ebusieshimselfmainlywithinquiriesconcerning
markets, judgments of future prices, calculations, negotiations,
correspondenceAndtheseendsprecedeintimeandobligationtheeffectingof
profitable sales, just as the effecting of profitable sales precedes the end of
moneymaking, and just as the end of moneymaking precedes the end of
satisfactory living. His bookkeeping best exemplifies the principle at large.
Entriestothedebtorandcreditorsidesarebeingmadeallthroughtheday;the
items are classified in such a way that a moments notice the state of each
account may be ascertained; and then, from time to time, the books are
balanced If you ask why all of this elaborate processthe answer is that
keeping accounts correctly is fulfilling a condition to the end of moneymaking,
andbecomesitselfaproximateendadutytobedischarged,thattheremaybe
dischargedadutyofgettinganincome,thattheremaybedischargedadutyof
maintainingself,wife,andchildren.12

Moneyhasanabstractcharacterand,atthesametime,isanextremelypracticaltool.13
Withoutittheattainmentofourmoreremotegoalswouldbedependentonthedouble
coincidenceofwants.Withitwecanobtainaproductfrompeoplewhomwedonotknowand
couldnotreachdirectly.Itisanintermediatemeanstoourendsthathasnoneofthe
characteristicsofwhatwewantexceptexchangevalueequivalenceanequivalenceinterms
ofanabstractunitofmeasure.Ifweweretotraceasimpleexchangeintermsofthereal
goodsinvolved,evenaverypartialviewwillillustrateboththecomplexityandtheabstract
qualityoftherelationsinvolved.Forexample,Aproduceseggsandgets$25inexchange;then
hetakesthe$25andbuysabookfromB.Inonesense,thisisquitesimple.Inanother,wecan

11
EugenvonBhmBawerk,PositiveTheoryofCapital,2CapitalandInterest,trans.byGeorgeD.Huncke
(LibertarianPress1959)at1015.
12
Spencer,PrinciplesofEthicsat193194(citedinnote7).
13
See,forexample,GeorgSimmel,ThePhilosophyofMoney,3rdedition,ed.byDavidFrisby,trans.byTom
BottomoreandDavidFrisby(Routledge2004)at209211.

seetheenormouscomplexityofwhatisinvolved.ThereasonAcanget$25forhiseggsis
becauseCiswillingtobuythemtofeedhimselfsothathecancontinuetoproduceshirts.The
booksellerBiswillingandabletosellthebookbecausehecanusetheproceedstobuy
groceriesfromDsothathecancontinuetosellsbooks.Theproductionofshirtsandthe
productionofgroceriesthusfacilitatetheeggproducersobtainingofabook.14Thesystemis
complexandthetoolthatenablesitscomplexityisanabstractinstrument.

4.AbstractObjects:LowerLevelsEvolvingintoHigherLevels

Theprocessofincreasingcomplexityofsocialrelationsandincreasingabstractnessofsocial
objectsorinstrumentsgohandinhand.Thisisbecauseconcreteinstrumentsdonothaveas
muchversatilityorgeneralapplicabilityastheabstract.Forexample,doubleentrybookkeeping
isindependentof(abstractedfrom)theparticularsofthegoodsinanygivencase.Thisisoneof
thethingsthatmakeituseful,especiallyinthecomparisonofprofitabilityacrossverydifferent
firmsandindustries.Thecomparisonofprofitabilityisinturnacriticalaspectoftheexistence
ofstockmarketswhichenablefinancecapitaltobeallocatedacrossheterogeneouspurposes
withoutinvestorsneedingtoknowthedetailsoftheconcreteproductsorproduction
techniques.Thusafurtherlevelofabstractionfromthebasalleveldevelops.Moregenerally,
thedevelopmentofbasicfeaturesofmodernmarketscanbeviewedasaprocessofincreasing
abstraction.Spotmarketsareatarelativelylowlevelofabstractionsincethepropertiesofthe
goodsbeingtradedarequiteimportantatleasttotraderswhoarebuyingthegoodsfortheir
usevalue.Butoncearbitrageursenterthepicturethesepropertiesbecomelessimportant,as
the(in)consistencyofpricesbecomesthemajorconcern.Arbitragetransactionsarenotfarin
characterfromspeculationonfuturesmarkets.Peoplecanmakebetsonthepricesofgoods
notyetproduced.Theabstractcommodity,abushelofwheatofacertainqualityatacertain
placeinDecemberofnextyear,canitselfhaveapricetodayandinconsistenciesinthatcan
bearbitraged.15Supposethatatraderisnotsurethathewantsacommodityorassetinthe
future?Thenakindofcontingentmarketcanservehispreference,thatis,theoptionmarket.A
pricecanbedeterminedfortheoptiontobuyorsellaparticularcommodityorassetatsome
pointinthefutureforaspecifiedprice.Andoptionpricescanbetheobjectofarbitrageor
speculation.Atsomepoint,ithardlymatterswhattheoriginalproductwas.

5.FromAbstractnesstoComplexitytoEmergentOutcomes

AsIhavesaid,theincreasingabstractnessofsocialobjectsisvitaltotheincreasingcomplexity
ofsocialrelations.Butwhatisthiscomplexity?Ifwegointodetailherewewillfinda

14
ThisisamanifestationofSaysLawofMarkets.
15
Peoplewhosimplywanttohedgeriskcantakefuturespositionsthatwilloffsettheriskstheyfaceinthemarkets
inwhichtheyproduce.Thefuturespositionmaynotevenbeinthatsamemarketaswhenanexporterorimporter
seekstohedgeforeignexchangerisk.

plethoraofdefinitionsandnoapparentconsensusonhowthewordshouldbeused.Sowe
shallhavetomakedowitharoughandreadyapproach.Inthefirstplace,complexityneedsto
bedistinguishedfromcomplicatedness.Thelatterisanepistemicconceptallsortsofthings
canbecomplicatedforpeopletounderstand.Complexity,ontheotherhand,referstothe
thingwearetryingtounderstanditisanontologicalconcept.Admittedly,complexsystems
requirecomplicatedtrainsofreasoningtounderstandwhichiswhyEnlightenmentfigureslike
AdamFerguson,inthequotationabove,didnotdistinguishbetweentheincreasingcomplexity
ofsocialrelations(bring[ing]humanaffairstoastateofcomplication)andourinabilityto
[comprehendit]initsfullextent.

ComplexitycanbeviewedasasystemicconceptthatisconsistentwithSpencersviewofthe
tendencyofevolutionaryprocesses.Sowecanask:Whatcharacteristicsmustasystemhaveto
becomplex?First,itmusthaveadefinitecompositionwithadefinitestructureamongthe
componentsinadefiniteenvironment(s).16Second,theremustbeinteractionamongmany
heterogeneousagents(parts)actinginlocalspaces.17Third,thewholerelationmustexhibit
coherence.Fourth,theremustbesomegenerativemechanismorprocessofformation.18Some
complexordersmaybedeliberatelyproducedwhileothersmaybetheresultofprocessesthat
occurwithoutacentralcommandstructure.Thesearespontaneouscomplexorders.Andsome
ofthesemayproduceemergentoutcomesorproperties.Inotherwords,propertiesthatgo
beyondwhatanyofthecomponentpartsofthesystemindividuallypossess.Inthenextsection
weshowthattheliberalpictureofthemarket,especiallyasconceivedbyFriedrichHayek,isa
complex,spontaneousorderwithemergentoutcomes.

6.F.A.Hayek:TheMarketasaComplexSpontaneousOrder

ForHayek,asisfairlywellknown,themarketischaracterizedbymanyheterogeneousagents.
Eachofthesehasconcreteempiricalknowledge(theparticularcircumstancesoftimeand
place)thatisuniquetohisorhercontextinamarketspace.19Thisdivisionofknowledgeis
analogousto,andcompatiblewith,thedivisionoflabor.Eachagenttrades,withinaframework
thatprotectsespeciallypropertyandcontractrights,onthebasisofherownpreferencesand
localknowledge.Thereisnocentralplannertodirecttheiractivitiestowardanyexternally
decidedend.Thesystemasawholehasnoenditinthatsenseendsindependent.Toputit
provocatively,itispurposeless.

16
DavidA.HarperandAnthonyM.Endres,TheAnatomyofEmergence,WithaFocusUponCapitalFormation,82J
EconBehavior&Organization352(2012)at364.
17
W.BrianArthur,StevenN.Durlauf,andDavidA.Lane,Introduction,inArthur,Durlauf,andLane,TheEconomy
asanEvolvingComplexSystemII(AddisonWesley1997),pp.114.
18
RobinCowanandMarioJ.Rizzo,TheGeneticCausalTraditionandModernEconomicTheory,49Kyklos273
(1995).
19
FriedrichA.Hayek,TheUseofKnowledgeinSociety,35AmEconRev519(1945).

Individualagentsarebothlearningandadaptive.Intheirlearningcapacitysomeseenewdata
emerging(likeapoliticaldisturbancethatreducestheavailabilityofoiloranewdemandfor
copper).Theseindividualsengageinarbitrageorspeculativeactivitythatensuresthattheprice
ofoilorcopperrisesinlinewithitsincreasedrelativescarcity.Otheragentsinthemarketadapt
tothesechangesinawaythatisroughlyoptimalgiventheirindividuallocalcircumstances.
Therefore,alloftheagentstradingonthebasisoftheknowledgethattheyindividuallypossess
areabletoproduceasystemthateffectivelycommunicatestoothers,throughtheprice
system,theknowledgewhichtheydonotpossess.Thepriceincentivescreatedbythis
communicativesystemencouragetheagenttouseresourcesinawaythatisresponsiveto
demandsandsuppliesinthebroadereconomy.Thusthepricesystemservesasocialpurpose
withoutcentraldirection.Inotherwords,ittendstomaketheactivitiesofagentscoherentthat
is,asifseparatelyactingagentsweredeliberatelycoordinatingtheirheterogeneousplans.We
havehereallofthecharacteristicsofaspontaneouslycreatedcomplexsystematafairlyhigh
levelofabstraction.Therearenamelessandheterogeneousagentswhoactintheirlocalspaces
(perhapsgeographicallybutcertainlywithrespecttoknowledge).Theyeachengageindefinite
activitiesguidedbytheirknowledgeconjoinedwiththeirpreferencesandconstraints.The
interrelationshipoftheagents,underbroadframeworkconstraints,producesanemergent
outcome.Thisisasystemofpricesthatisasurrogateforexplicitknowledgeofsocialrelative
scarcities.

Thesystemcommunicatesmoreknowledgethananyindividualinthesystemhasorpossibly
couldhave.Thisistheessenceofanemergentproperty.Theconceptionofthisorderas
developingwithoutcentraldirectionenablesustocallitaspontaneousorder.Sometimes
Hayekusesthistermasashorthandforwhatwearemorelaboriouslycallingacomplexorder
withemergentoutcomesarisingwithoutcentraldirection.

Hayekalsoatothertimescallsthisanabstractorder.Itisabstractinthesamewaya
telecommunicationssystemisabstract.Thesystemcanhandleallparticularsoftimeandplace.
Acongratulatorymessageinthemiddleofthenightandademandforpaymentinthedaylight
hourseachemanatingfromdifferentpartsoftheworldcanequallybetransmitted.
Speakingmetaphorically,thecontentofthemessagesisofnoconcerntothesystem.Similarly,
sincethemarketorderhasnogoalsapartfromthoseofindividuals,itfavorsnoonehierarchy
ofvaluesoveranother.Whateverapersonconcretelyplanstoaccomplishthemarketbringsto
thatplan,ineffect,knowledgethathedoesnotpossess.Sohisultimateactionorplantakes
cognizanceofknowledgeispossessedbyothersfarbeyondhisvisionandcomprehension.Thus,
asecondsenseofthewordabstractistherebyintroducedintotheHayeksconceptionofthe

market.Itisanorderthatwecannotfeelortouchbutmustbebuiltuporconceptualizedbyan
effortofconsiderableintellectualdifficulty.20

II.TheNatureofRulesNeededToSustainanAbstractandComplexOrder

Wehaveconstructedapicture,necessarilywithbroadbrushstrokes,ofthemarketas
conceivedbythemostdevelopedstrainofclassicalliberalthought.Whilethesystemismore
thantheindividualscomprisingit,itcannotbesustainedunlesstheindividualsallowitto
function.Thetwomajoraspectsofitsfunctioningrequire(1)afairlyhighdegreeofcertainty
abouttherulesofthegametofacilitatevoluntaryexchangeand(2)freedomofthepartiesto
setthetermsofexchangeinordertofacilitateadaptationtotheparticularcircumstancesfaced
byagents.

However,itisimportanttoforestallsomepossiblemisunderstandingsbeforeIproceedfurther.
WhenIsaythattherulesofthegameinacomplexemergentordermustbeabstract,Idonot
meanthattheserules,intheirapplication,abstractfromallconcretefacts.That,ofcourse,
wouldbeabsurd.Considerthegenerallawofcontracts.Thekindsoffactsthatarerelevantare
thosewhichshedlight,asneeded,ontheexistenceofanenforceablepromiseorbargain,the
contentofthebargain,andtheappropriateremedyforbreacheswhenthepartiesdonot
explicitlyadoptthem.Thiskindoffactualinquiryfacilitatesthepartiesagreementincasesof
breakdown.Ontheotherhand,thefactsthatareirrelevant(orshouldbe)arethosewhich
mustbetakenintoanaccounttoproduceaparticularresultthatwasnopartoforatleast
runscountertothepartiesagreement.

Myconcernintherestofthispaperiswithamoral,andultimatelylegal,conflictthatthreatens
tounderminethissystem.Focusontheparticularcircumstancesandidentitiesofthosewho
engageinexchangechangestheframeworkofanalysis.Itredirectsattentiontotheparticular
outcomesofparticularcasesand,ifappliedglobally,tendstodistorttheaggregatefunctioning
oftheabstractorder.Appliedliterallyinasinglecase,verylittleharmwillbedone.
Nevertheless,theframeworkonceestablishedwillgeneratethroughprecedentialprocessesa
seriousdeteriorationintheemergentpropertiesofthemarket.Theseincludethetransmission
ofhighlydispersedknowledge,theprovisionofgainsfromtradetounknownothers,andthe
generationofusefulnovelty.Thesesocialbenefitsrestonasetofrulesthatunderdetermines
theoutcomesofthesystem.Anythingmoreconstrainingwouldnothaveemergentproperties.

1.TheLevelofConstrual

20
(Thisiswhatwemeanwhenwedescribesuchanorderasabstractratherthanconcrete:itcannotbeseen,
heard,ortouchedbutonlytracedbyourintellect.)Originalinparentheses.FriedrichA.Hayek,ANewLookat
EconomicTheory,inBruceCaldwell,ed.,TheMarketandOtherOrders,15TheCollectedWorksofF.A.Hayek
(Chicago2014),pp.375426,at385.

10

DavidHumeunderstoodthedangersofatooparticularisticunderstandingofissuesregarding
propertyrights:Whenamanofmerit,ofbeneficentdisposition,returnsagreatfortunetoa
miser,orseditiousbigot,hehasactedjustlyandlaudably,butthepublicistherealsufferer.
Weseeintheparticularcaseperhapspoorpersonreturningsomelostorstolenpropertytoa
manwhoisrich,butunabletoenjoyhisownfortune(amiser),andisinpublicdisrepute(a
seditiousbigot).Why,thirdpartiesmightask,shouldthewellbeingofsocietybereduced
byareturningwealthtoonewhowillenjoyitlessandwhoislessworthy?Perhapstheman
ofmeritshouldkeepit.Ineffect,Humeagreesthatwhenlookedatinanarrowvisionorin
particularisticdetail,thereisnoreasonforthemantorestorethefortunetotherichmiser.
Afterall,themanofmeritmayimpoverishhimselfbyasingleinstanceofintegrity.21

WecouldeasilyextendHumesexampletoacaseofcontractrights.Arichmiserwhohasa
largefarmhascontractedwithrelativelyunskilledworkerstoharvestcropsonhisland.Hepays
themacompetitivebutlowwage.Partofthewaythroughtheharvestingseason,theworkers
stopworking.Theythreatentoletthecropsrotonthevineunlesstheyreceiveahigherwage.
Shouldthelawpermitthisopportunisticbehavior?Viewedinanarrowparticularistic
framework,oursympathiesmaybewiththepoorworkers.Whynotallowthemiserfarm
ownertoloseprofitssothattheworkersmayhavethewagestheydeserve?

Ontheotherhand,iftheabovecaseswerecharacterizedinanabstractwaymakinguseofthe
anonymoustypesAandBourintellectandmoralemotionsaredirectedanotherway.Inthe
firstcase,AisthelegalownerofXwhichhasbeenlostorstolen.ShouldBwhofindsXbe
obligatedtoreturnittoA?Sure,itisanobrainer,mostofuswouldsay:Whatisthepointof
propertyrightsifstolenpropertyneednotbereturnedtoitsowner?Similarly,inthesecond
case,ifAcontractswithBtodoacertainjob,andthenwhenitispartlydoneandtimeisofthe
essence,refusestocontinueunlessthereisrenegotiation,thetypicalresponsewill:How
outrageous;Bshouldfinishorpaydamagesoratleastnotpreventothersfromfinishing.
Planningisdifficultifwecannotrelyonotherscontractualpromises.22

Thereisnomagichere.Theroleofabstractioninlawandinmoralsistodirectourmindsand
emotionstowardthewiderormoreinclusiveview.Abstractmoralityundergirdsanabstract
order.

2.ConcreteVirtuesandAbstractVirtues

21
DavidHume,ATreatiseofHumanNature,ed.byDavidFateNortonandMaryJ.Norton(Oxford2000[1740])at
319[3.2.2.22].
22
Forananalysisofabstractionincontractlaw,seeRichardA.Epstein,SimpleRulesforaComplexWorld(Harvard
1995)at7380.

11

ForHumebeneficenceisanaturalandconcretevirtue.Itisnaturalinthesensethatitdoesnot
restontheconventionthatonlyifothersarebeneficentwillIbebeneficent.Actsof
beneficenceproduceanimmediatepositivereenforcementirrespectiveofwhethertheyare
alsodonebyothers.Bytheirnaturetheyareresponsivetotheparticularcircumstancesofeach
case.Aparentfliestothereliefofhischild,transportedbythatnaturalsympathywhich
actuateshim,andwhichaffordnoleisuretoreflectonthesentimentsorconductoftherestof
mankindinlikecircumstances.23Justice,ontheotherhand,isanartificialandabstractvirtue.24
Itrestsonasocialconvention.Itsrationaleforanyindividualactordependsonothersadhering
toitsrulesaswell.Idonotstealorbreachmycontractsontheassumptionthatothersalsodo
not.Moreover,itscharacterisalsohighlyabstract:

All the laws of nature, which regulate propertyare general and regard alone
some essential variations of the case, without taking into consideration the
characters,situations,andconnexionsofthepersonconcerned,oranyparticular
consequences which may result from the determination of those laws in any
particularcase25

Thus,correspondingtothedifferentlevelsatwhichagivenissuemaybedescribedthereare
differentvirtues(moralsentiments)activatedbythesedescriptions.Justaswehaveabstractor
concreteconstrualsofproblems,wehaveabstractorconcretemoralresponsestothem.When
wethinkofthebehaviorofthemiserandthemanofmerit(orthepoorworkers)inconcrete,
highlyparticularisticterms,itseemsquitenaturaltothinkintermsofbeneficence.Whenthe
lifelessAandBdominate,justicemoreeasilycomestomind.Thistensionbetweenjusticeand
beneficencefiguresverystronglyinHumelegalandpoliticalphilosophyeventhoughhedoes
notexplicitlycharacterizeitassuch.

InhisPrinciplesofEthics,HerbertSpencerrevealsafairlyexplicitunderstandingofthetension.
Hewritesofgenerosity,ratherthanbeneficence,butthemeaningisthesame:

Themotivecausingagenerousacthasreferencetoeffectsofamoreconcrete,
special,andproximatekind,thanhasthemotivetodojustice,whichbeyondthe
proximate effects, usually themselves less concrete than those that generosity
contemplates,includesaconsciousnessofthedistant,involved,diffusedeffects

23
DavidHume,AnEnquiryConcerningthePrinciplesofMorals,ed.byTomL.Beauchamp(Oxford1998[1751])at
170.
24
JusticeforHumeis,inthiscontext,simplythebasiccommonlawrulespertainingtoproperty(firstpossession,
transferencebyconsent)andthosepertainingtocontracts(competence,consideration,voluntarinessincluding
theabsenceoffraudandduress).Itisclearlynotdistributivejustice.
25
Idat171,emphasisadded.

12

 of maintaining equitable relations. And justice we hold to be a higher

generosity.26

Thereareseveralthingstonotehere.WhileHumeputstheemphasisonparticular,concrete
circumstancesinthecharacterizationoftheproblem,Spencerputstheemphasisonthe
particular,concreteeffectsofanactofbeneficence.Thetwoareobviousrelatedbecausethe
actofbeneficentinterventionoccursinresponsetotheevaluationoftheparticularsthat
comprisetherelevantmeritsofthepartieswiththepurposeofimprovingthestatusofoneof
thepartiesinaparticularway.Secondly,Humesemphasisisonthemoralsentimentsactivated
whileSpencerseesthecognitivestageasanimportantintermediatestep.Concretethinking
inducesconcretevirtues,whileabstractthinkinginducesabstractvirtues.

ThethirdimportantpointisthatSpencerconsidersjusticeahigherformofbeneficence.Itis
morebeneficent(generous)tofacilitatetheworkingofabstractsocialorderthantohelp
particularknownindividualsincasesofconflict.Recallthatthemarketenablestheindividuals
whocomposetoexceedtheirownisolatedcapacitiesinthesensethatthemarketinteractionis
thesourceofbeneficialemergentoutcomes.Ultimately,itmakespossibleagreaterprovision
ofwealthandeffectivebeneficencethananydirectaidtothepoorcouldeveraccomplish.The
concretecharacterizationoftheindividualinteractionsinacomplexorderdoesnotencompass
thisinsight.

III.PsychologicalFoundationsforAbstractRules

1.ThePsychologyofProblemConstrual

Webegin,followingSpencer,withthecognitiveissue.Anylegalormoralquestioncanbecast
inrelativelyabstractorrelativelyconcreteterms.Shouldwesay:Aisinpossessionoflandfor
whichthelegaltitleisinadequateorthatMrs.Jones,anelderly,poorandillwoman,isin
possessionoflandforwhichthetitleisinadequate?Inonesensethereisnorightwayto
characterizethesituation.Butifthepurposeinsettlingsuchquestionsisthemaintenancean
abstractorderofinteraction,thenitmakessensetomovetotheabstractlevelof
characterization.

Inrecentyearstherehasbeenworkbypsychologistsonthecharacter,determinantsand
consequencesofdifferentlevelsofproblemconstrual.Peoplemayconstrueproblemsat
higherorlowerlevels.Theselevelsarenotdichotomousbuthierarchical.Wecanascendor
descendlevelsofconstrualfromtheveryloworconcretetorelativelymoreandmoreabstract
orhigherlevels.Thehigherlevelswillincludeatagreaterlevelofgeneralitytheobjectsatthe
lowerlevels.

26
Spencer,PrinciplesofEthicsat156(citedinnote7),emphasisadded.

13

 Higherlevel construals entail constructing abstract conceptualizations of

information about objects and events. [They], therefore, capture the
superordinate,centralfeaturesofanobjectorevent,andabstractingthesehigh
level immutable features conveys the general meaning of the event. Lowlevel
construals,alternatively,consistofsubordinate,incidentalfeatures.Inlowlevel
construals,eventsandobjectsareuniqueandspecific.Forexample,activation
of highlevel construals leads to categorization in fewer, broader, and abstract
units whereas activation of low levels leads to characterization in multiple,
narrowandconcreteunitsHighlevelrepresentationsarealsomorecoherent
and integrative, whereas lowlevel representations are more specific and
disparate27

Construallevelsarenotalwaysconsciouslychosen.Theymaybetheresultofvariationsin
psychologicaldistance.Psychologicaldistanceincludestemporal,spatial,hypotheticaland
socialdistance.Thegreaterthisdistancethemorelikelyaneventwillbeconstruedabstractly.28
Itisclearthatsomeeventscouldbespatiallydistantbutcloseonothersmeasuresofdistance
andviceversa.Obviously,thisintroducessomeuncertaintyintheempiricalassessmentof
psychologicaldistance.Itisconjecturedthatthemajorreasonpsychologicaldistancegenerates
abstractconstrualsisbecausetheagent,generallyspeakinghaslessdetailedinformationabout
distanteventsorobjects.This,ofcourse,isnotalwaysthecasebutconstrualleveltheory
claimsthattheassociationisovergeneralizedandoccurseveninsituationswheretheagenthas
equivalentinformationaboutnearanddistantevents.29

Returningtosomeoftheexampleswehaveused:Isthemantowhomagreatfortuneistobe
restoredamiser?Isthepartywhoisseeking,midcontract,ahigherwageapoorworker?Isthe
personwhohasbadtitletothelandapoor,ill,elderlyperson?OraretheyeachtheabstractA,
B,C?Supposetheyarephysicallydistantfromus,arestrangersandthecaseisfromlongagoor
evenalawschoolhypothetical.Then,ofcourse,thereismuchpsychologicaldistancebetween
theeventsandtheobservingparty,andthereforethesituationsarelikelytobedescribedinan
abstractway.Furthermore,wheneventsarecharacterizedabstractlytheyareseparatedfrom
theircontextsandthustheconnectionbetweentheinstantcaseandothersofasimilarkindis

27
KentaroFujita,YaacovTrope,NiraLiberman,andMayaLevinSagi,ConstrualLevelsandSelfControl,90J
PersonalityandSocialPsychology(2006),pp.351367at352.
28
YaacovTrope,NiraLiberman,andCherylWakslak,ConstrualLevelsandPsychologicalDistance:Effectson
Representation,Prediction,Evaluation,andBehavior,17JConsumPsychol(2007),pp.8395.
29
Idat84.

14

moreeasilymade.30Thepersontowhopropertymustbereturnedisastandinforallsuch
personswhohavelostorhadpropertystolen.31

2.EvaluationandJudgment

Theconstrualofaproblemandtheevaluationofitspotentialoractualsolutionsareclosely
related.Abstractconstrualstendtogenerateevaluationsinaccordancewithmoreabstract
normativecriteria.32Inthiscontext,psychologistsoftendistinguishbetweenprimaryand
secondaryvalues.Primaryvaluesattachtotheprimaryfeaturesofaneventwhichhavethe
characteristicofbeingthosethatendurethroughamassoftransient,inessentialandconcrete
features.Primaryvaluestendtobemoreabstract.Theyaremorelikelytobedeontological
ratherthanstrictlyconsequentialor,atleast,theyfocusmoreondistantratherthanimmediate
consequences.Peoplearemorelikelytocharacterizeasituationintermsofmoralruleswhena
situationisimaginedtobefartherintemporaldistancethannearer.33

Inaseriesofexperimentsfoundthattheseverityofjudgmentsofmoraltransgressionswas
reducedwhenlowlevel(concrete)mitigatingcircumstanceswereintroduced.34Forexample,
participantswereaskedtoevaluateincestbetweensiblingswhenthemitigatingcircumstances
ofcondomuse,secrecyandnointentiontorepeattheactwereincludedinthedescription.
Whenaskedtoevaluatethebehavior,thosewhoweretoldthatthetransgression(oftheno
incestrule)wouldoccurtomorrowjudgedthebehaviorlessseverelythanthosewhoweretold
itwouldoccurnextyear.Thesamepatternofresponseswasfoundwhensocialdistancewas
increased.

Thusmitigatingconcretecircumstanceswillbelikelytosoftennegativejudgmentsincasesof
ruleviolationswhenthepsychologicaldistancefromthetransgressionislower.Thissuggests,
butdoesnotdirectlydemonstrate,thatinalargepopulationofpeople,mitigating
circumstancescanbecomeoutrightexceptionstomoralrulesforatleastsomepeoplewhen
moralissuesareconstruedatalower,concretelevel.

3.Generosity

IntheprevioussectionIarguedthatpeoplewilllikelybemoresympathetictotransgressionsof
moralruleswhentheactinquestionisconstruedatarelativelyconcretelevel.Someofthe

30
[D]econtextualizationlinkstheactivitywithamoregeneralsetofevents,bringinginnewmeaningand
definitionthatisnotincludedinlowlevelrepresentation.Id.
31
CLTprovidesapsychologicalfoundationfortheviewthatabstractconstrualoflegalquestionsfocusesattention
ontheprecedentialconsequencesofadecisionintheparticularcase.Seebelow.
32
Idat8891.
33
TalEyal,NiraLiberman,andYaacovTrope,JudgingNearandDistantVirtueandVice,44JExperimentalSocial
Psychology(2008),pp.12041209at12051206.
34
Idat12071208.

15

mitigatingfactorsorrationalizationsforexceptionstotherulemaybequitereasonablewithin
therationaleoftheruleitself.Nevertheless,thelowerlevelconstrualopensthedoorinsome
casesquitewidelytounderminingtherulecompletelyonthebasisofmisplacedsympathyor
beneficence.RecallthatHumeimplicitlyandSpencerexplicitlyjuxtaposedjusticeand
beneficence.Thepointiseasiesttoseeincasesofbadtitletoland.Whetherthepossessor
shouldremaininpossessionisnotdeterminedbyhersympatheticnatureorbywhetherthe
landwouldbenefithermorethanitwouldbenefitthewouldbepossessor.Matterslike
adversepossession,whereapplicable,arerelevanttothestabilityofexpectationsandnot
estimationsofrelativebenefit.Theexistenceofcontractualrelationsissimilarlynot
determinedbywhetherthepromiseeisworthypersonaccordingtosomemoralcriteria.The
ascertainmentofwhetheranenforceablepromisehasbeenmadeproceedsbywayofshowing,
insomesuitablyobjectivemanner,bothpartiesintendedtobebound.Apromissordoesnot
becomeonesimplybecauseitisbeneficialtosomepartythatshetakeonthatrole.

Apersonofgenerousdispositioncaneasilybetemptedtoseesuchcasesaswarrantingsome
adaptationofthelegalrule(justice)tohisbeneficenttendencies.Createanexceptionto
standardrulesabouttitlesothattheold,illandpoorwidowcanhaveherlandandherhome.
Imagineanenforceableagreementbecausesomeoneofdistractedattentionthoughthewas
beingseriouslypromisedsomethingandreliedonit.Allofthesetendenciesareexacerbatedby
lowlevelconstrualofproblems.

Thereisamplepsychologicalsupportfortheviewthatbeneficenceorgenerosityisaconcrete
or,inthetechnicalsense,alowlevelvirtue.Thereisconsistentevidenceforthephenomenon
thatprovisionofconcretedetailsaboutapotentialbeneficiaryscharacteristicsandproblems
increasespeopleswillingnesstoprovidemonetaryassistancewhencomparedtoamore
generalorabstractdescriptionoftheclassofsimilarproblems.35Statisticalvictimsareless
likelytostirgenerosityinourheartsthanidentifiedanddescribedvictims.Thekey,onceagain,
ispsychologicaldistance.Thesmallerthepsychologicaldistancethemorelikelybeneficence
willovertakejusticeinourevaluationsandjudgmentswhentheconflictbetweenjusticeand
beneficencepresentsitself.

4.PsychologicalPrimingandLegalPriming

Itisawellestablishedtechniqueamongpsychologiststoprimesubjectsinexperiments
designedtoshowcausalrelationshipbetweentwovariables.Forexample,inthefieldof
construalleveltheorysubjectsaresometimesprimedtothinkabstractlyorconcretelybefore
beingaskedtocompletesometaskormakesomejudgment.Thisprimingmightbe

35
See,forexample,TehilaKogutandIlanaRitov,TheIdentifiedVictimEffect:AnIdentifiedGroup,orJustaSingle
Individual?18JBehavDecMaking(2005),pp.157167.

16

accomplishedbygettingpeopletothinkaboutwords(abstractions)orpictures(concrete
representations)inaprimingstage.Ofcourse,therearemanyothertechniquespossible.In
reallifethosewhoaretaskedwithraisingmoneyforcharitieswilloftenusedetailed
representationsofthoseinneedtoincreasedonationsasImentionedpreviously.

Primingalsooccursinlessrecognizedcontextssuchaslegaldecisiomaking.Muchofthisarticle
hasillustratedtheissueofhighandlowlevelproblemconstrualinhypotheticalcasesof
propertyandcontractrelations.Letspausebrieflytoseethelawprimesabstractproblem
construal.First,istheuniversallegal(andmoral)frameworkofprecedent.Adecisionisbeing
madeinthecurrentcase,withallofitsdetail,whichwillconstrainfuturesimilarcases.These
futurecasesareunknownandunknowableintheirconcretedetail.Sothemindsofthejudge
andlitigantsareorientedorprimedtoamoreabstractlevelthanmightotherwisebethecase.
RecallthestoryHumetellsaboutthePersiankingCyrus.36InhisyouthCyruswasaskedbyhis
teachertojudgetowhomabigtunicandasmalltunicshouldbegiven.WhenCyrusthinksthe
solutionshouldbethatthebigtunicgoestothebigboyandthesmalltunicshouldgotothe
smallboyhisteacherbeatsCyrus.Thetunicsshouldgototheboyswhorightfullyownthem
regardlessoftheappropriatenessoffit.Sincewedonotflogjudgesinoursociety,precedent
canserveasaroughsubstitute.37

Secondly,inthegenerallawofcontracts,theemphasisis(orshouldbe)onwhethertheparties
haveexpressedbysuitablyobjectivemeanstheirintentiontobeboundbyapromiseandwhat
theycontentofthepromiseorbargainis.Undercircumstancesthatmightreasonablybecalled
freedomofcontractthecontentofthebargainisofnoconcerntothecourts.Usingthefacts
ofthebindingpromiseanditscontentasthestandard,possibleconflictsand
misunderstandingswillberesolved.Mostoftherulesdevelopedforthesepurposesare
essentiallydefaultprovisionsdesignedtosupplementtheagreement,wherethepartiesare
silent,ratherthantorewriteit.

Ontheotherhand,thereisonefundamentalfactofthejudicialdecisionmakingprocessthat
primesallpartiestorelativelyconcreteproblemconstrual.Onsomedimensionsof
psychologicaldistancetheproblemtoberesolvedishereandnow.Specifically,thecasein
courtwillbeactual,nothypothetical;itwillbefilledwithparticularsaboutthepeopleinvolved
(incomeorwealthdisparitiesmaybeevidentevenwhennotofficiallyallowedinto
consideration).Temporallyitisnow,andnotinthemoredistantfuture.Andsocialdistance
mayalsobesmall.

36
Hume,Enquiry(citedinnote23),Appendix3at171.
37
Inalegalenvironmentinwhichfreedomofcontracthasalreadybeensignificantlyeroded,strictormechanical
adherencetothoseprecedentswhichfocusattentionondistributionalconcernswillincreasethedeviationsfrom
Humeanjustice.Precedentbecomes,inasense,alicenseforbeneficentdiscretion.SeeRizzoandWhitman,The
CamelsNoseisintheTent:Rules,Theories,andSlipperySlopes,51UCLAL.R.,pp.539592at568570.

17

IV.BootleggersandBaptists

Thepossibilityofdeliberatelyprimingproblemconstrualopensupapossiblerouteof
cooperationbetweenbootleggersandBaptistsinthehappyphraseofBruceYandle.38Inthe
caserelevanttoourconsiderationsthebootleggersarethosewhoforrentseekingpurposes
wishtorewritecontractsorreducethestabilityofpropertyrelations(asintheuseofeminent
domaintoeffectprivatepurposes).TheBaptistsarethosewhoaredrivenbytheirbenevolent
concernstotiltthescalesawayfromHumeanjusticetoadistributivelybetteroutcomeinthe
caseathand.Theymayalsobeconcernedtoproduceaggregatesocialoutcomesthatmeet
theirdistributivepreferencesbypermanentlyalteringthestructureofthelegalrules.This
bootleggerBaptistprocessisnotrestrictedtojudicialdecisionmakingbutalsohasapplication
inthelegislativecontextandinthejudicialinterpretationofstatutes.

Twoimportantjudicialportalsfortheimpositionofconcreteandseeminglybeneficentsocial
endsuponcontractualrelationsareexpansiveinterpretationsofthepolicepowerandofthe
generaldoctrineofunconscionability.Itisnotpossible,norisitnecessary,togointodetail
here.Oneexamplefromeachcategorywillservetoillustratemypoints.

1.PolicePowerInterpretation

Thepolicepowerisalooselydefinedpowerofthestatetoprohibitwrongfulconductandto
regulateessentiallyrightfulconductsoastoprotectthesafety,health,morals,andgeneral
welfareofthepublic.39Theexactscopeofthispowerhasbeenthesubjectofconsiderable
controversy.TherehavebeenexpansivereadingssuchasthatofJusticeWilliamO.Douglas.40
TherehavebeennarrowreadingssuchasthoseinthetreatisesofThomasCooleyand
ChristopherTiedeman.41Fromtheviewpointoftheanalyticalstructurepresentedinthispaper,
theexpansivereadingisinconsistentwiththemaintenanceoftheabstractorderofthemarket.

InanarrowLockeaninterpretationofthestatespolicepower,regulationofessentially
rightfulconductliketheexerciseofcontractualfreedomislegitimatetotheextentthatthis
exerciseinterfereswiththerightfulactionsofothersoperatingwithintheirownboundariesor
spaces.[P]roperpolicepowerregulationsspecifythemannerinwhichpersonsmayexercise

38
BruceYandle,BootleggersandBaptists:TheEducationofaRegulatoryEconomist,7Regulation(1983),pp.12
16.
39
Lochnerv.NewYork,198U.S.45at55(1905).
40
Anattempttodefineitsreachortraceitsouterlimitsisfruitless,foreachcasemustturnonitsownfacts.The
definitionisessentiallytheproductoflegislativedeterminations.Bermanv.Parker,348U.S.26at32(1954).
41
ThomasM.Cooley,ATreatiseontheConstitutionalLimitationsWhichRestUpontheLegislativePowerofthe
StatesoftheAmericanUnion(Little,Brown&Co.1868);ChristopherTiedeman,TreatiseontheLimitationsof
PolicePowerintheUnitedStates(F.H.Thomas1886).

18

theirlibertiessoastopreventthemfromaccidentallyinterferingwiththerightsofothers.42
Thisinterpretationseemsconsistentwithaneconomicemphasisonexternaleffectsonthe
rightsofothers.Thepurposeofthepolicepowerisnottopreventindividualsfrommaking
voluntaryagreementsthatputthemselvesatcertainhealthorsafetyrisksinexchangefor
compensation.Healthandsafetyisnotapretextfordistributionalgains(losses)foroneparty
oranotherinthecontextofmutualgainsfromtrade.Itisproperlyanexternalityconcernas
whenacontractualarrangementmayspreaddiseaseorendangersafetyamongthepublicnot
partytothecontract.

Onecouldalsolookatthepolicepowerfromamorepositiveperspective(generalwelfareof
thepublic).Perhapsthefreeexerciseofpropertyrightsmightberegulatedtoprovidea
genuinepublicgoodliketheremovalofsnowonthesidewalksinfrontofstores.Inthesekinds
ofcasestherelevantconceptualtestiswhetherthegeneralwelfareisenhancedorwhetherit
isthewelfareofaparticularsegmentofsociety.43Apersuasive,butnotalwaysdefinitive,
empiricalapplicationofthetestistoseewhetheraparticularlimitationonpropertyrightsor
freedomofcontractatissueissupportedbyspecialinterestgroups.

Thenarrowinterpretationofpolicepowerthusmaintainsahighlevelofproblemconstrual.
First,libertyrightsarelimitedbyviolationsofrightstootherparties.Thelimitationsonfree
contract,forexample,willbejustifiedbyequallyabstractrightsguaranteestopartiesoutside
thecontract.Thereisnodiminutioninthelevelofconstrual.Second,thegeneralityofbenefit
testensuresthatthelimitationsarenotdrivenbyparticulardistributionalconcerns.The
benefitsaretoeachandallaclassofindividualswhocompositionmaybelargelyunknown
andshouldbeirrelevant.

Animportantlessonconsistentwiththeoverallargumentadvancedhereisinthedissenting
opinionofJusticeJohnMarshallHarlaninthefamouscaseofLochnerv.NewYork.44Inthis
casetheStateofNewYorklimitedbystatutethehoursworkedbybakersnomorethansixty
hoursperweekortenhoursperday.Thequestionwaswhetherunderthepolicepowersthe
statecouldrestrictprivatecontractinginsuchawayastorequirethatthetermsof
employmentmeetwhatthelegislaturebelieveswouldpreventharmtothehealthofthe
bakers.Whilethemajorityruledagainstthelaw,Harlanupheldit.Hisreadingofhealth,safety
andwelfareofthegeneralpublicas,ineffect,thehealth,safetyandwelfareofanygroupthe
legislaturedeemsworthyiscritical.Itmeansthathecanfocusonthewelfareconditionof

42
RandyE.Barnett,RestoringtheLostConstitution:ThePresumptionofLiberty(Princeton2004)at328.Iamnot
hereconcernedwithwhetherthisisahistoricallyordoctrinallymoreaccuratereading.Myconcerniswitha
readingthatismoreconsistentwithamarketorder.Thisisanidealtypefromwhichonecouldcontrastactual
interpretationsofthepolicepower.
43
Hayek,TheMirageofSocialJustice(citedinnote2).
44
Seenote39at6574(JusticeHarlan,dissenting).

19

particularpersonsandnotonrightsviolationorthewelfareofeachandall.Anexpansive
interpretationofthepolicepowerthuslowersthelevelofproblemconstrualandthusbiases
theargumentagainstjustice(freedomofcontract)andtowardbeneficence(distributional
outcomes).

ItisinstructivethatinhisdissenthequotesLudwigHirt,aGermandoctor,whowroteabook
DieKrankheitenderArbeiter(TheDiseasesoftheWorkers)in1871whichhasadiscussion
aboutbakersandtheirworkrelateddiseases,presumablyinGermany,somethirtyyears
before:Thelaborofthebakersisamongthehardestandmostlaboriousimaginable.Harlan
alsoquotesanotherwriterwhodetailsthehealthdifficultiesattributedtotheconstant
inhalingofflourdust.45Butmostoftheotherdifficultiesseemtobethoseattributedto
generalizedhardworkthatinvolvestandingorbeinginahotenvironmentandconsumingcold
drinksinconsequence.Inanyevent,thequotationsamounttoalonglistofthepossibleor
actualproblemssufferedbybakers.

Fromaconstruallevelperspective,thesedetailsabouttheparticularproblemssufferedby
thoseinaparticulartradeofordinaryworkingpeoplewhichproducesaproductusedbyalmost
everyoneisashereandnowasthingsget.Thepsychologicaldistanceisquitesmall.In
consequence,thewaythedissentisstructureditplacestheabstractionoffreedomof
contractagainsttheconcretewelfareofonepartytothecontract.Introducingconsiderationof
thelatterasrelevanttotheissueathandisboththecauseandconsequenceoflowlevel
problemconstrual.TheCourtcouldnotfindthatthecontractualrelationsbetweenbakersand
employersviolatedtheexerciseofanyonesrightsorwasconducivetothegeneralhealth
deteriorationofthirdparties.Inconsequence,thedissent,ifitweretoupholdthestatute,had
toshifttodistributionalconsiderationsandclaimthatthesearepartofthehealthofthe
generalpublic.

UnderahighlevelconstrualofthepolicepowerandofthefactsinLochnertheabstraction
freedomofcontractistheprimaryvalue.Abroadinterpretation,ontheotherhand,leadsto
theconsiderationofmanyconcreteissueswithdistributionalconsequences.Concretehere
andnowissuesreducethelevelofproblemconstrual.Theyactasprimingfactorstoinduce
lowerlevelconstrual.Accordingly,thereductioninlevelencouragestheindividualtoindulge
secondaryvaluesattheexpenseofprimaryvalues.ThusIdonotdenythatthehealthofthe
bakersisaconcerntomostpeopleofgoodwill.Thequestioniswhichvalueswilldominate
justiceorbeneficence?

2.SpecialInterestLegislation

45
Ihavebeenunabletolocateacopyofthisbook.IrelyonwhatispresumablyJusticeHarlanstranslation.

20

ThereisagreatdealofevidencetosupporttheviewthattheNewYorkstatuteatissuein
Lochnerwasapieceofspecialinterestlegislation.46Theimpositionofmaximumhours(and
otherrequirementsnotatissueinthecase)functionedtoimposedifferentiallyhighercostson
thesmall,immigrantbakerswhohaddifficulty,asitwas,insupportingtheirfamilies.Mostof
thelargebakersalreadyconformedtothestandardsofthenewlawsothemaineffectwould
beonmarginalbakers.Furthermore,becausethestatutedidnotcontrolwages,itwouldbe
likelythatanysubstantialincreaseincostswouldcomeoutofthesmallbakerswagesor
profits.

Nevertheless,Ithinkitisamistaketoarguethatthelawwassimplyanexampleof
bootleggershavingtheirway.Thelawitselfispartoftheprocessofloweringthelevelof
problemconstrual.Itfocusesonthehardshipsofaparticularsegmentofordinaryworking
people.Inthefinalanalysis,therewasnoreasontoseparatetheplightoftheseworkerstothe
exclusionofothers,excepttodecreasethelevelofpsychologicaldistancebybeingvery
concreteimprovingthelotofhot,exhausted,illnesspronepeoplewholabortoproduceour
dailybread.Atthislevelofconstrual,beneficencewins.

Theroleofprimingthepublicwithcuesforlowlevelconstrualofproblemsneedstobemore
thoroughlyexplored.Casualobservationsuggeststhatthisisanimportantfactorinpolitical
effortstogetlegislationpassed.Tryingtopersonalizelegislativeissuesbyfocusingon
apparentlyworthycasesofmothersandchildrenneedinghelpinvitingthemtotheStateof
theUnionspeechesortosigningceremoniesorputtingtheminpoliticalcommercialsisall
quitefamiliar.Mobilizingbenevolentfeelingssometimesinconjunctionwithspecialinterestsis
apowerfulcombination.

3.GeneralUnconscionability47

Thedoctrineofunconscionabilitystemsfromequityjurisprudence,butinthelastfew
decadesthedoctrinehasgonemuchbeyonditsorigins.Atthemostgenerallevel,theword
signifieswhatiscontrarytogoodconscience.Thedoctrinehasbeenusetodenythe
enforcementofacontract,inwholeorpart,andtolimittheenforcementofparticular
unconscionableclauses.Whiletherearemanystandardreasonstovoidacontractincluding

46
See,forexample,DavidE.Bernstein,RehabilitatingLochner:DefendingIndividualRightsAgainstProgressive
Reform(Chicago2011).
47
Inthe1950sand1960stherewasaboomofsortsintheapplicationofthedoctrineofunconscionability.Inthe
late1970sitseemedtohaveleveledoffandthendeclinedinthe1980s.Inthe1990stherewereattemptstoapply
thedoctrineincasesofwherethepartiesagreedtosubmitcontractdisputestoarbitration.Ultimately,thiswas
discouragedbyvariousSupremeCourtdecisionssupportingarbitrationclauses.Mostrecently,however,therehas
beensomeresurfacingofthedoctrinesapplicationoutsideinthearbitrationarea.SeeCharlesL.Knapp,
UnconscionabilityinAmericanContractLaw:ATwentyFirstCenturySurvey,inLarryA.DiMatteo,QiZhou,
SverineSaintier,andKeithRowley,eds.,CommercialContractLawTransatlanticPerspectivesCambridge2013),
pp.309338.

21

misrepresentation(fraud),duress,undueinfluencebetweenpeopleinaspecialrelationship,
andmutualmistake,theideaofunconscionabilitycapturessomethingmore(orless)thanany
ofthese.Ithasbeenusedwhentheplaintiffhasnotbeenabletosupportwithadequate
evidenceanyoftheotherreasons.Acourtwhichhasdecidedtoenteruponthisterrainwill
useexpandableexpressionslikeabsenceofmeaningfulchoice,inequalityofbargaining
power,termsunreasonablyfavorabletotheotherpartyortheirequivalents.48Itisnow
customarytodivideunconscionabiltyintotwoaspectswhichreflecttheseterms.
Unconscionabilitycanbeeitherproceduralorsubstantiveorboth.49Theproceduralfocuseson
theprocessofagreementandthepossibleunequalbargainingpoweroftheparties.The
substantivefocusesonthecontentoftheagreementwhetherthetermsseemunfairbecause
theyadvantageonepartyfarmorethantheother.Inpracticethetwoareinterrelated.Ifthere
isnoproceduralunfairnessithardtoimaginehowtherecouldbesubstantiveunfairness;if
thereisnosubstantiveunfairness,whydowecareaboutproceduralunfairness?50

Acentralproblemwiththeuseofunconscionabilityisthewayitseekstodeterminethe
distributionaloutcomesofcontractsthatarenotfraudulent,donotinvolveduress,mutual
mistakeorundueinfluence.Itstrikesattheheartofgeneralabstractcontractlaw.Itopensthe
doortoreducingthepsychologicaldistanceofdisputesandthusloweringthelevelof
theoreticalconstrual.Insodoing,allmannerofparticularcircumstancesofthepartiesare
broughtintoconsideration.Asmanycourtshavesaidexplicitly:"Theconceptof
unconscionabilitymustnecessarilybeappliedinaflexiblemanner,takingintoconsiderationall
ofthefactsandcircumstancesofaparticularcase.51Thisreductioninthelevelofproblem
construalnecessarilybringswithitadecreaseinthelevelofcertaintyincontractualrelations.
Theconsiderationsofunconscionabilitycannotbestatedasrealrules;theycanonlybestated
asalistofconsiderationstobebalancedandgivenspecificcontentatthediscretionofcourts.
Toattainspecificoutcomesortopreventspecificoutcomesrequiresconsiderationofparticular
factsinwaysthatmustvaryfromcasetocase.Itisresultorientedintheworstmeaningofthe
term.

InDJColeman,Inc.v.NuFarmAmericas,Inc52summaryjudgmentforthedefendantwasdenied
inacasewhereanherbicidewasallegedtohavecauseddamagetoacommercialfarmers
crop.Theplaintiffinthiscasewantedtorecoverconsequentialdamages(thelossoftheentire
crop)ratherthanjustthecostoftheherbicideorreplacementoftheproduct,aslimitedbythe

48
Williamsv.WalkerThomasFurnitureCo.,350F.2d445(1965).
49
ArthurAllenLeff,UnconscionabilityandtheCodeTheEmperorsNewClause,115UPa.L.R.485(1967);
RichardA.Epstein,Unconscionability:ACriticalReappraisal,18JLawandEcon293(1975).
50
SeeKnapp,Unconscionability(citedinnote47).
51
DJColeman,Inc.v.NufarmAmericas,Inc,693F.Supp.2d1055,1072(2010).QuotingStrand,693N.W.2dat
924(quotingConstr.Assocs.,446N.W.2dat244).
52
693F.Supp.2d1055(2010).

22

warrantywhichwasstatedclearlyandprominentlyonthelabel.Thecourtfoundthatthe
warrantylimitationwasbothprocedurallyandsubstantivelyunconscionable.Asexpected,they
arguethereisasubstantialinequalityofbargainingpowerbetweenDJColemana
commercialfarmingoperationlocatedinNorthDakota,andNufarmpartofanenormous,
highlydiversified,andinternationalconglomerate.Further,theevidencerevealsthatthe
partieshadunequalbargainingpowerandtherewasnoroomformeaningfulnegotiation.53In
otherwords,theherbicidewasbought(muchlikepaint)onatakeitorleaveitbasis.The
partiesdidnotnegotiateprice,qualityorwarranty.Thecourtconcludedthatthelimitationof
remediesprovisionissubstantivelyunconscionable.Itisclearthattheallocationofriskfor
defectiveherbicidesisbettershoulderedbythemanufactureroftheherbicide,ratherthanthe
consumer.54

DJColemanwasnotasmallfamilyfarmproducingforitsownconsumptionbutacommercial
enterprisewhichhadusedthisherbicidewithoutincidentfortenormoreyears.So,for
maximumeffect,itmustbejuxtaposedwithadiversifiedinternationalconglomerate.There
wasnofindingofnegligenceonthepartofthemanufacturerdistributer;infactthatwas
dismissedbythecourt.Therewasnosuggestionthattheherbicidewasproducedina
monopolisticindustryorthattheplaintiffdidnothaveaccesstoalternatives.Therewasno
showingthatthestandardintheindustrywasforthemanufacturertoassumetheburdenof
insuringthecrops.Therewasnoevidencethattheplaintiffpaidapremiumpricethatwould
havesuggestedafullconsequentialdamageswarranty(someonehastopayforthat).Under
therubricofunconscionabilityorfairnessitallowsrewritingofthecontract,expost,to
ensurethatthemanufacturertakesonthecropinsurancefunctionbecause,inthecourts
opinion,itisthecheapercostinsurer.55

Tryingtopenetratethefairnessofabargainoutsideoftheabstractrulesofgeneralcontract
lawintroducesafocusontheconcreteeconomicdetailsoftheagreementprocessandonthe
substanceoftheagreement,thusinvitingmoreandmoredetailsandencouragingstillfurther
loweringofconstrual.Attentiontothetreesorplantsorflowersdisplacesattentiontothe
forest.Theforestlookslikethis.First,theprocessofdickeringandhagglingisnotthemeaning
ofcompetition.Theseactivitiesoccurindealswherethesellerssupplypriceandthebuyers
priceareunclear,wherethequantitiestransactedconstituteaverylargeproportionofthe
market,wheretheserviceorproducttransactedisunique,andotherexceptionalcases.For
valideconomicreasons,mosttransactionsdonotoccurthisway.Mostofusbenefitfromthe

53
Id.at1073.
54
Id.at107374.
55
Thisisnotsocleartomesincethemanufacturerhasnocontroloftheuseoftheproductoncesold.Ithasno
controloverwhattheproductismixedwithorthecontemporaneousnaturalconditionsorthevalueofthecrops
atissue.

23

activitiesofmarginalbuyers(orsellers)whoexercisepressureonpricesandotherproduct
variables.Thesemarketparticipantsaregenerallyelsewhere.Theyarenotinthehereand
nowofconcreteconstrual.Theyareunseen.Second,theoutcomesofmarketcompetitionare
theemergentoutcomeofthebasicabstractrulesofthegame.Inacompetitive(orevena
monopolistic)environmentthereisnofundamentalreasonforacourttoreallocatethe
insuranceaspectofanyvoluntaryarrangement,leastofallincaseswherethewarranty
limitationisplain.Butsupposeitwereinverysmallprintandthatthebuyerhadnothadten
yearsofpriorexperiencewiththeproduct,whatcanwemakeofthelackofnegotiationonthe
warranty?Again,thereareotherlargerandmoreknowledgeablebuyersinthemarketwho
wouldbeconcernedwithinsuranceforconsequentialdamages(assumingtheexanteestimate
ofthecostsweresignificant).Evenamonopolisticsellerwouldwanttoconveymorethan$1of
benefitat$1ofcostifitwereindeedthecheapercostinsurer.Soifthebuyeroftheherbicide
isfacedwiththesametakeitorleaveitwarrantyaseveryoneelse,itstrainscredulityto
declarethearrangementassubstantivelyunfairinanysenseotherthanthecourtspreference
fortheallocationofrisk.Keepinmindthatbuyersinthefuturewillbepayingforthejudges
personalpreference.

Conclusions

Modernconstrualleveltheoryshedslightonthepsychologicalconditionsthatareconduciveto
analyzingproblemsinamoreabstractormoreconcretemanner.Themostbeneficialaspectsof
themarketrequireaneffortoftheoreticalreconstructiontosee.Thisrequiresahighlevelof
construal.Thelegalandmoralrulesnecessarytosustainthismarketorderareabstract.They
arethreatenednotonlybytheabsenceoftheoreticalunderstandingabouttheirfunctionbut,
perhapsmoreimportantly,byatendencytoconstruespecificcasesconcretely.Thistendencyis
anunfortunatebyproductofacaselawsysteminaworldwherethemanofsystem(Smith)
predominates.56Theitchtofixtheparticularoutcomesneedssatisfaction.Withoutthe
presenceofstronginstitutionalconstraints,theparadeofparticularscaneasilyinduceconcrete
problemconstrualwhich,inturn,willreinforcetheadmissibilityofparticularsandstilllower
construallevels.Attheselowerconstruallevels,valueslikebeneficenceorgenerosityfocused
towardtheoutcomesofindividualcasescreateastrongincentivefirsttoexpansivelyinterpret
policepowerandunconscionabilitydoctrines,andsecondtousethemtowiggleoutofthe
abstractlogicofthatpreventscourtsfromimposingoutcomes.

Thesubtitleofthispaperisliberalismsdifficultproblem.Itisadifficultprobleminthe
contemporaryworldtoselltheideaofpurposelessabstractorder.Butthedifficultyiseven
greaterwhenitbecomesclearthatthemoralityappropriatetosustainingsuchanorderisan

56
AdamSmith,TheTheoryofMoralSentiments,ed.byD.D.RaphaelandA.L.Macfie(LibertyFund,1982[1759])
at233234(VI.ii.2.17).

24

abstractone.Themanofsystemisfocusedonachievingconcreteresults,especially
distributionalones,sohenecessarilymustfocusonparticulartransientcircumstancesand
processes.Courtsandthepolitical(legislative)processareunlikelytofollowgeneralrules,inan
ageofskepticism,justbecausetheyareorhavebeentraditional.Absentawidespread
understandingofthesystemandtherulesthatsustainit,Idonotseehowtheordercanbe
maintained.Theconcreteconstrualoflegalandpoliticalissuesgivesanadvantagetothe
virtuesofbeneficence,charityandgenerosityoverjustice.Itisnotthattheformerarepseudo
virtuesbuttheyarenotthevirtuesorvaluesthatarenecessaryforacomplexemergentorder.
Theconfusionliesisnothavingastillhighervirtuethatofknowingwhentobebeneficentand
whentobejust.57Whethersomeformofinstitutionalorconstitutionalconstraintcan
substituteforactualunderstandingbymostpeopleisstillanopenanddifficultproblem.

57
[N]othingisgenerous,ifitisnotatthesametimejust.Cicero,DeOfficiis,withEnglishtrans.byWalterMiller,
21CiceroinTwentyEightVolumes(Harvard1975),43.

25