- Sister Y's The Right to Marry
- A Really, Really, Really Long Post About Gay Marriage That Does Not, In The End, Support One Side Or The Other also recommended by CharlieSheen
What would be an example of a penalty clause that 'inflict(s) technical externalities on third parties'? I might add the stipulation that those parties must also be parties to the contract.
I'm not asking that this entity actually do anything beyond the specific tasks related to contract enforcement that it has been assigned. It isn't intended to bring about immortality or make perfect predictions about the future or prove that it is physically possible to fulfill a contract (I assume that every formalized contract would have a penalty clause which is provably possible, such as a monetary debt or a lien)
I did also throw in a magical 'free from coercion' clause, specifically to sidestep extortion. It's a patch that I can't figure out how to make more elegant; if "If I don't get money now the bank will foreclose on my house, so I agree to work for [employer] for three years in exchange for a fair large advance" is allowed, why isn't "If I don't pay off [bookie] now, he will break my legs, so I will agree to [oppressive treatment by third party for below-market compensation]" or even "I agree to submit to [oppression] by [extortionist] in exchange for one cent and not getting shot."
My comment was not restricted to "penalty clauses", it includes contracts more generally. Obviously we can think of contracts which would cause negative externalities if they were enforced, e.g. through a penalty clause. Refusing to enforce some of these contracts increases utility.
Re: extortion, it's not clear what the correct decision-theoretic analysis is. One might think that the real issue is not so much with the extortion itself (since this is in fact a contract to which Coasian arguments should apply), but with any attempt to expend rea...