Hobbes and Business

Chapter XV talks about enforcing contracts. It is here that I think Hobbes makes an argument that does currently, and historically, divide those who think about such issues.

At the time of signing, contracts are invalid if there is fear of nonperformance by either party. In “Hobbes and Contracts” I pointed out property is a necessary part of contracts. In XV Hobbes points out that property also rests on contract, that contract is necessary for property. That a piece of property is mine means both that I have a right to it AND that you give up, renounce, your right to it. The form of the contract is: I give up the right to take that; you give up the right to take this.

HOWEVER, in a state of nature there is no assurance you, or I, will abide by the agreement. In fact, according to Hobbes, we have plenty of incentives not to keep our agreement. This means we must each fear nonperformance of the other party. We know this when we “sign”, from the beginning, and therefore there is no such contract and no such thing as property.

According to this argument, then, property and contract only exist where there is a state. “... the validity of covenants begins not but with the constitution of a civil power, sufficient to compel men to keep them: and then it is also that propriety begins.” (By “propriety” Hobbes means property.)

This is important for our purposes because business does not exist without property and contract. If Hobbes is right, it means that business cannot exist without the state. Business owes its very existence to the commonwealth. I believe this has significant moral and policy implications about the relationship between business and government. We shall return to this point .... in time.

BK

PS. Make sure to read the post(s) below as well.

Hobbes and Contracts

Much of Chapter XIV is dedicated to discussing what contracts are, how they come to be, and when they are valid or void. Chapter XV talks about enforcing contracts.

Even though he is talking about the state Hobbes is also discussing two fundamental concepts of business: contract and property.

I) Contract is how we trade rights as well as tangible goods and services. Remember in the state of nature we have a right to all things – including each other. Contract is how we stipulate what rights we are giving up. In simplest form, a contract for us to trade $1 for a can of soda is an agreement that I will relinquish my right to the $1 in exchange for you relinquishing your right to the soda. It is also notification that once we sign I will now claim the soda as my property and you will do the same with the money. This is the difference between trading and stealing. In stealing you get the good, but never the corresponding right to the good.

II) Notice, in this account, that property is a necessary part of contract. If something is not mine, I cannot trade the right to it. Contract depends on property.

On both I and II Hobbes is in agreement with modern theorists and practices. In fact, I know of no real debate concerning these two points.

Bill

Hobbes, Equality, and War

This is just a short, but extremely important point. As some of your classmates have pointed out – equality and threats to life drive Hobbes’ argument. In fact, please note, that for Hobbes equality really means equal ability to contend by battle. By which he means the equal ability of people to kill each other. As he points out, even the strongest amongst us must sleep.

We are equal, because we can kill each other. This is why we ultimately cannot trust each other (our diffidence). We all know this. Each person then is a potential threat where there is no state, government, and law. To preserve our own lives we must respond to this threat. We are always ready to defend ourselves or attack as we see fit. It is this state of constantly being ready to fight that is WAR. Think of the Cold War. Fighting is war too, but it is included in that definition.

Therefore, I offer, that Hobbes’ state of war is not simply about conflicts of self-interest. It is conflicts of self-interest that may reasonably be solved by battle that includes attempting to kill your opponent.

I make this point to present the possibility that this is not what we mean by business competition.

BK

The Purpose of Hobbes

Many may be wondering what the purpose of Hobbes is here. After all, it can be a strange reading. The purpose is to establish a baseline and encounter certain concepts that we will find again and again.

I) The baseline I want to focus is on, is what Hobbes calls “war”. What is it? Why is it? How can it be avoided?

II) The central concepts Hobbes, and business, uses are: liberty, rights, contract, and justice. These are just to name a few.

Now you perhaps can see, or already did, the juxtaposition. People use the languages of both I and II to talk about business. Are we being realistic? Are we being sloppy?

More to come ....

BK