The Foundations of a Market Economy: Contract, Consent, Coercion

by Yulie Foka-Kavalieraki and Aristides N. Hatzis
University of Athens – Department of Philosophy and History of Science

European View, vol. 9, no. 1, pp. 29-37, June 2009


Abstract:
This article shows how contracts are the institutional foundation of a market economy. Contracts create wealth, allocate risk and are based on consent. There is no perfect competition and the markets are characterized by a number of failures; therefore, contracts are not perfect. However, the existence of these failures does not undermine the importance of contract and consent. A common critique of the market economy is that most transactions are based on some form of coercion. The authors try to address this misconception by showing that a contract is the result of coercion not in cases where a choice is hard for a party but when it offers a choice the party does not want to have.


Keywords: Contract, Consent, Coercion, Market economy, Market failures, Rationality, Perfect competition, Uncertainty


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