FREEDOM OF CONTRACT
AND THE INFOSPHERE OF DEMOCRACY:
What Kropotkin Didn't Understand
Until He Stopped Being a Master of Serfs
Lecture to Law Students
American University of Armenia
28 April 2000
2014 Note: The following was the second presentation in a lecture series at the Department of Law of the American University of Armenia. Like the first, it sought to delve deeply into fundamental issues of self and society, property and contract, and their relationship to free and responsible participation in the Conversation of Democracy. (Hotlinks were added starting in 2001.)
"Of the many ways in which humans differ from animals, the most interesting — from the standpoint of law and economics — is that we, as individuals, not only can but must "stand in the shoes" of others, and can and must see the world from others' standpoints." 
As I indicated in my first lecture in this Series, when I shared the above thought with reference to the fundamental relationship between "property rights" and the Rule of Law, our capacity to stand in each other's shoes — our capacity for empathy — is closely related to the origins of law. In even the most primitive societies, people tend to come to the aid of neighbors whose property is being threatened by thieves. It is part of the Golden Rule.
To be fully human means to comprehend that, as I am a "me" with various attributes of selfhood that are "proper to" me — that are, indeed, "naturally fitting" to me, and in a word are "mine" — so, also, you are your own "me" with various attributes of selfhood that are "proper to" you, that are properly yours. Your body — most naturally and obviously — is yours. So is your mind, although — if it is any good — it contains the harvested genius of centuries. And therefore the "work" of your body and mind should be "proper to" you and subject to your disposition. 
The basic distinction between mine and yours, when illuminated by the Golden Rule, calls forth the realization that neither of us has to steal from the other in order to obtain the other's property. Instead, we can negotiate an agreement transferring property rights from one to the other. Indeed, "property rights" naturally imply "contract rights" — and, together, these rights are fundamental not only to economic prosperity but also to what we have come to call constitutional democracy: a government under law that seeks to balance, and thereby maximize, the blessings of liberty, equality, fraternity.
In some profound sense, the more freedom people have to engage — as equals — in the give-and-take of contractual relationships, the more adept they seem to become at the ordinary give-and-take that animates both friendship and constitutional democracy. Private contracts, no less than the Social Compact undergirding a law-based state, are absolutely dependent upon what I have previously called "the cybernetics of society": personal and societal governance based on free-flowing, feedback-rich information.
Information, and our attitudes towards it, and our determination to maintain and "grow" the InfoSphere — the memesphere or noosphere, or Ecology of Mind — is the key.
Orders of Consciousness
I want to explore this idea. To do so, let me first suggest a basic trinity of truths.
1. At some point, a child comes to awareness of its distinct selfhood. It becomes a "me" in relation to the world. Let us call this "first-order consciousness" — the awareness of one's unique relationship to one's own feet, shoes, standpoint.
2. Almost immediately thereafter, this "me" starts to discover his or her capacity to perceive (in the mind's eye) what the world looks like to others. Let us call this "second-order consciousness" — the awareness that every "me" has a unique relationship with his or her own shoes, and that each understands that all other self-aware humans are also aware of others' (a) self-awareness and (b) other-awareness.
3. Over time, however, first-order and second-order consciousness calls forth a far deeper insight: How I am known by my neighbors, my community, and the world, is a crucial aspect of what is "proper to" me, of what is mine, and of whether I can maintain my property, or dispose of it as I choose, or otherwise build the substance of my reputation, my good name. It is not that others' perceptions of us are all-important; but they are not unimportant — not in the marketplace of things, ideas, values. Indeed, after we are gone, our reputations can live on. Honest Abe Lincoln is now immortal, based not only on his powerful writings, but also — perhaps mostly — on something far more powerful: his reputation.
Let us call this mindfulness of the value of personal reputation "third-order consciousness" — the awareness that "me" is related in some fundamental way with how others think of me and relate to me … over time, and perhaps beyond time.
As suggested, a crucial element of third-order consciousness is an awareness of the value — for each of us, and for our entire biosphere and the InfoSphere that our biosphere has brought into existence — of honesty, of accurate feedback, of "peer review" in its broadest sense. The existence and ongoing health of this InfoSphere obviously requires constitutionally-guaranteed freedoms of inquiry, expression, and association. Perhaps less obviously, the InfoSphere also requires constitutionally-guaranteed property rights; that was the thrust of my first WSP [Writing Seminar Program] lecture. Even less obviously, perhaps, yet most compellingly, the InfoSphere requires constitutionally-guaranteed contract rights.
Saying this is perhaps no profounder than saying that modern civilization is impossible without all the elements — obvious and hidden — which together compose modern civilization. So be it. But let us return to the Golden Rule.
In a two-person or even two-household world, the Golden Rule cannot reveal its full power. While it is true that, as I would not be the victim of thievery, so I would not be a thief, the better formulation should be less abstract: In my village, in my community, I would not wish to be viewed as a thief, else my fellow humans will be less likely to protect me against thieves. My neighbors are protected from my inclination to steal from them because we all know that each of us harbors similar inclinations against each other's property, yet each of us realizes that none of us can gain from stealing if we are perceived as a thief by our fellow humans. A liar succeeds only when perceived as honest.
Third-order consciousness promotes not only an information-rich neighborhood, where "goodsiblinghood" (what is often called brotherhood) among your neighbors or "godsibs" leads to hearty "gossip"  about you, everyone, everything; such third-order consciousness also changes our relationship to each other and to society, and changes our understanding of that relationship. It promotes a deeply textured appreciation for all the stuff that composes "communication" — words, writings, actions, even silence. I believe that people who grow up in a free-market environment that upholds and encourages private contractual relationships become "naturally acculturated" towards an appreciation of the value of such third-order consciousness. They start to learn at an early age how to navigate in a world in which — precisely because people are equal and free — they are also highly dependent upon each other. They must build friendships. They must develop networks of professional colleagues and business partners. They must build relationships that are not zero-sum (one person's gain is another's loss) but win-win — where all can benefit because genuine value is being created. Rather than fighting over how to distribute the pie, they cooperate to enlarge and improve the pie.
Thus, it is not merely our capacity to stand in each other's shoes that makes us human. On a deeper level, what makes us human and what makes society possible is our capacity to stand in the shoes of our community, of society at large — and to see how the community views us, or might view us differently if we gain a reputation for honesty … or dishonesty. Our relationship to society depends to a profound degree upon our understanding of this relationship. And this understanding depends, in turn, upon a culture of understanding which places great emphasis upon the "communication content" of everything we say and do, or fail to say or do.
Much of the law of contracts has to do with whether one person's words and actions, including silence and non-action, allowed another person to reasonably conclude that an offer had been made and accepted, or a counter-offer had been made and rejected, or a defect in performance had been followed by an offer to cure the defect, or an offer to cure had been rejected … and, if so, whether due to valid or invalid reasons, etc. And the overarching concern in all these issues has to do with third-order consciousness: not what I perceive, not what you perceive I perceive (although that comes closer to the mark), but what one or both of us ought to have known society will assert we ought to have perceived.
Freedom of contract implies the existence of a law of contracts which ordains, in effect, that we are not free (not legally justified) to perceive whatever we want to. We must stand not only in another's shoes but also in the shoes of society, as personified by a potential "future judge" who in turn will have to stand in our "previous shoes" to determine whether another's previous words and actions, in light of all the circumstances, allowed us to reasonably conclude that an offer had been made, etc.
Case in Point: CISG
Perhaps my point here can be best expressed by articles 8 and 9 of the United Nations Convention on Contracts for the International Sale of Goods (1980), which is commonly known as CISG:
Article 8. Interpretation of Statements or Other Conduct of a Party
(1) For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.
(2) If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.
(3) In determining the intent of a party or the understanding a reasonable person would have had, due consideration is to be given to all relevant circumstances of the case including the negotiations, any practices which the parties have established between themselves, usages and any subsequent conduct of the parties.
Article 9. Usages and Practices under the 1980 Convention
(1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves.
(2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned.
I believe that people who grow up in a culture where the kinds of thinking reflected in CISG are part of the InfoSphere, are better able to be good citizens of a law-based state, a constitutional democracy devoted to securing the blessings of liberty, equality, fraternity. The key, I believe, is that they become more "competent" in third-order consciousness, and accordingly become more competent at broadcasting and receiving — and valuing — feedback.
Prince Kropotkin grew to maturity acquiring the skills necessary to becoming a master of serfs. But, as an adult, he came to realize that managing his estate was complicated, if not impossible, due to the "culture of serfdom" which taught serfs to give their superiors "pleasant lies" rather than the kinds of accurate information managers need in order to make wise choices and take sensible actions.
Eventually, Kropotkin came to realize that unless his serfs could obtain their liberty, and could thereby become his equals — in short, unless they ceased being serfs and he ceased being a master — neither he nor they would be able to manage his estate competently. He realized that, unless serfdom was abolished, Russia would never prosper, could never be happy.
Almost 150 years ago, an Armenian helped summarize — as well as anyone could — why a healthy InfoSphere is so essential to a competent government and a happy citizenry. We do not know the Armenian's name. We only know his thoughts. They are contained in Tom Bethel's book, "The Noblest Triumph: Property and Prosperity Through the Ages" (1998), at pp. 233-234:
Nassau W. Senior, professor of political economy at Oxford, traveled to Cairo and Constantinopole in the mid-nineteenth century and vividly described the Ottoman tyranny and poverty. Turkey, he found, was a society without books, roads or rule of law; without a middle class, public opinion, newspapers or post office. It was a society of polygamy, wanton divorce and the seclusion of women; a society in which there seemed to be more dogs than people, yet with vast tracts of unoccupied land; and in which all official transactions were mediated by bribery. Property was perennially insecure, and any wealth not concealed from the authorities would soon be confiscated by them. "Everyone, however rich, knows that in a generation or two his grandchildren or great grandchildren will be porters or hewers of wood." All power was vested in the sultan, who had stolen "from the treasury more than a third of the public revenue", and who was building on the shores of the Bosporus endless pasteboard palaces. Yet he could remedy nothing for he knew nothing. In describing the sultan, an Armenian friend of Senior's pinpointed a key defect of despotism: "He can know nothing of anything that his ministers do not choose to tell him. He does not read, and if he did, there is no press; he sees nobody, he never has seen anybody, except his brothers-in-law and sons-in-law, his women and his servants, and occasionally a minister or an ambassador who comes to bully him or to deceive him." 
One can hardly improve on this account of why dictatorships fail. Exactly 14 years ago, the world was starting to learn about the Chernobyl accident. But several days after monitoring equipment in the West had picked up evidence of a major radiation leak, the USSR was still denying that anything was wrong. Years later, it became clear that President Gorbachev was probably telling the truth when he told the press that he was unaware of any problem. The official information from Chernobyl was so calamitous that inferiors were afraid to tell their superiors … all the way up the "chain of command" to Gorbachev.
Gorbachev's problem was very familiar to Kropotkin. Unfortunately, Kropotkin's insights into the kind of society that is necessary to keep reliable information flowing freely to where it is most needed, was not incorporated into Russian and Soviet political philosophy. In the present post-Soviet era, the time has come to remedy that problem. In doing so, I hope that you — the future of this region — will be able to help build an informed consensus about how to create an InfoSphere worthy of the best that humankind is capable of. In doing so, you must not omit consideration of the importance of constitutionally-guaranteed contract rights — not only for this region's prosperity, but also for its capacity to govern itself competently. "Government" must be "cybernetic"; a government deprived of institutionalized feedback is a contradiction in terms, an absurdity.
To build a cybernetic society, you must focus not only on the Social Compact but also on the general conditions necessary for private contracts. You must focus on creating constitutionally-guaranteed contract rights. And then you must focus on ordaining competent contract law. Exploring the depths and heights of CISG is a good way to start. Happy explorations!
1. See Barnabas D. Johnson, Dedichotomizing Law and Economics by Recontextualizing Self and Society, 16 March 2000. Back
2. On the distinction between self and society, and on distinction-making more generally, see ibid. Thus — even ignoring acquisition by contract — what is "mine" might contain elements that are not "primarily" products of my effort or invention. Issues of ownership and the transfer of property rights are necessarily contextualized by our increasingly-nuanced conception of self, society, and the social construction of (for example) technology-rich property. Back
3. There might be a close linguistic connection between "godsibling" and gossip. In some medieval societies, in addition to having godparents, children had godsiblings — contemporaries who were specially tasked with supplying each other accurate feedback. Gossips talk about you behind your back in order to determine whether, and if so how, to confront you with "unwelcome news" that you need to hear directly, from a trusted source. This is the focus of a somewhat autobiographical essay that discusses my earliest interest is the cybernetics of society. Back
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