PROPERTY RIGHTS AND THE THEORY OF CONTRACTS

Murray Rothbard gives us a necessary lecture:

THE RIGHT OF PROPERTY implies the right to make contracts about that property: to give it away or to exchange titles of ownership for the property of another person. Unfortunately, many libertarians, devoted to the right to make contracts, hold the contract itself to be an absolute, and therefore maintain that any voluntary contract whatever must be legally enforceable in the free society. Their error is a failure to realize that the right to contract is strictly derivable from the right of private property, and therefore that the only enforceable contracts (i.e., those backed by the sanction of legal coercion) should be those where the failure of one party to abide by the contract implies the theft of property from the other party. In short, a contract should only be enforceable when the failure to fulfill it is an implicit theft of property. But this can only be true if we hold that validly enforceable contracts only exist where title to property has already been transferred, and therefore where the failure to abide by the contract means that the other party’s property is retained by the delinquent party, without the consent of the former (implicit theft). Hence, this proper libertarian theory of enforceable contracts has been termed the “title-transfer” theory of contracts.

We strongly suggest everyone read this.