Does Contract Law Need Morality? The Slave, The Digital Pedophile, and The Indebted Gambler

Wenhao Liu and I have just posted to SSRN a draft of our paper discussing Nate Oman’s book, The Dignity of Commerce.  For those of you who have not yet read the Dignity of Commerce, I highly recommend it. I adopted it for my Advanced Contracts seminar last year and have done the same for this year. The book might also be a useful addition to a first-year contracts course, depending on your coverage, but it definitely works well for me in the more advanced setting.

In brief, The Dignity of Commerce sets out an ambitious market theory of contract, which Nate argues is a superior normative foundation for contract law than either the moralist or economic justifications that currently dominate contract theory. One of the book’s most important contributions is its emphasis on the positive role played by markets and thus, by extension, of contracts. In an era rife with warnings about the market’s dangers to society, Nate’s cogent reminder of the market’s benefits is both refreshing and welcome. I was particularly drawn to the discussion of the market’s (and, therefore, contract’s) often forgotten role in organizing productive social interactions. These social benefits, Nate argues, are so important that it is these benefits—rather than a commitment to markets in and of themselves—that justify the use of state resources to support markets, and thus contracts.

Nate’s theory is also descriptively appealing: by recognizing that conceptions of morality and blameworthiness impact contract law, The Dignity of Commerce surely provides a descriptively more realistic account of contract law than theories that contend that contract law is explained solely by economic considerations or solely by moral ones. We find Nate’s market theory of contract less successful as a normative or prescriptive theory, however. To our mind, Nate makes moral judgments about the validity of certain markets (and, therefore, certain contracts) without providing a theoretical framework to replace either the moralist or economic theories he rejects. As a result, we don’t think the market theory can provide meaningful guidance to courts, policymakers, or scholars confronted with the more difficult questions facing contract law.

We illustrate all of these points using the examples of forced slavery, “The Digital Pedophile,” “The Indebted Gambler,” and taboo (or pernicious) markets, such as commercial surrogacy and sex work. And, hey, what could be more fun than that?!

So, all in all, The Dignity of Commerce is definitely a worthwhile read and can easily be incorporated into contract law courses and seminars, especially if you try to spend some time asking students to think about the normative foundations of contract law and how courts should resolve some of the thornier questions that emerge.

And, of course, you should make sure to read our critique of the book, as well!

Policy Shock Has Arrived!

And you can get it at a discount.

My new book, Policy Shock: Recalibrating Risk and Regulation After Oil Spills, Nuclear Accidents, and Financial Crises  (Cambridge University Press, November 2017) is finally here. It is edited by Duke University Rethinking Regulation program members Edward Balleisen, Professor of History and Duke’s Vice Provost for Interdisciplinary Studies; Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy at the Nicholas School of the Environment; Kimberly Krawiec, the Kathrine Robinson Everett Professor of Law (AKA me!); and Jonathan Wiener, the William R. & Thomas L. Perkins Professor of Law, Professor of Environmental Policy, and Professor of Public Policy.

The book looks at responses to events over the last century in the U.S., Europe, and Japan, and assesses how they affected laws, regulations, and institutions. (A special discount of 30% off the list price is available from Cambridge University Press until June 1, 2018, by entering the code:  Policy17.)

I’ve included screen shots of the Table of Contents below. As you can see, some great authors are included here, representing contributions from law, economics, history, political science, psychology, engineering, and more.

I’ve also uploaded a pdf of the Introduction. 9781107140219_excerpt-2

You can also read this Q&A with my colleague and co-author, Jonathan Wiener, discussing the book.

GKE Debate in The Latest Issue of the American Journal of Transplantation

I’ve blogged a few times before about Global Kidney Exchange (GKE, formerly called Reverse Transplant Tourism). See, for example here, here, and here. The October issue of the American Journal of Transplantation (AJT) contains a news report and six letters to the editor about GKE (3 are replies by us to pushback on our original article in the March 2017 issue). You can see Al Roth’s discussion of the issue here.

The report, written by Lara Pullen, is very well done and worth reading in full here to get a sense of the debate.

As noted in the Report:

In a recently published paper, Dr. Rees and his colleagues stressed the financial inaccessibility of dialysis for most low-income individuals.[1] With the GKE, recipients from developing countries not only receive a kidney, but also financial support to help them pay for the medical costs of maintaining their organ after they return to their home country. “Because the GKE involves exchange, it benefits both the foreign pairs and the domestic pairs. It’s a win for patients and the donors who love them in both countries,” says Alvin Roth, PhD, professor of economics at Stanford University in Palo Alto, California, and co-developer of the GKE.. . .

In an editorial and series of letters, transplantation surgeons throughout North America have raised objections to GKE.[2-4] Among the concerns is that staggering numbers of financially incompatible yet biologically compatible pairs would desire entrance into the program, and would likely overwhelm it. Opponents also contend that cultural differences in developing countries will make it difficult to definitively determine potential donors’ motivations. The risk, then, is one of exploiting individual citizens in developing countries, as well as undermining national KEs that may be in their early stages in these countries.

Some have also raised concerns that kidney paired donation (KPD) transplants would violate the current U.S. law that limits paired donation transplants to biologically incompatible donors, as opposed to financially incompatible donors. Dr. Rees and colleagues voiced their opinion on this in a recent paper.[5] [KDK-Mike Rees and I address the legality of GKE at great length here]

Thus GKE remains the subject of very strongly held opposing points of view.

As I’ve already noted in a prior post, some of these concerns are valid, but addressable by proceeding carefully with GKE. Others are simply, in my opinion, ridiculous. In any event, we respond to these criticisms in our responses and I plan to say more on this in further posts.

My co-author (not on GKE, but on another paper concerning Advanced Donation – see here), Marc Melcher, is quoted in the Report and is characteristically thoughtful:

Dr. Melcher acknowledges the importance of cultural differences and corruption. He also suggests that these factors are not unique to transplantation, and that any time a non-governmental organization (NGO) enters a developing country to provide aid, there is risk of corruption and unintended consequences. This risk, however, does not stop NGOs from stepping in and trying to provide aid in a developing country. Dr. Melcher feels that Dr. Rees and the GKE should be viewed within the context of NGOs.. . .

Perhaps Dr. Melcher best articulates the middle-of-the-road response. Noting that there are always unintended consequences in any such venture, he suggests a deliberate approach. “On a case-by-case basis it certainly seems like a win-win situation,” he says. “My bias would be to lead with ‘yes’ and go slowly.”

The Report and Letters to the Editor are all free and available from the links below:


The AJT Report

Global Kidney Exchange: Overcoming the Barrier of Poverty (pages 2499–2500)

Lara C. Pullen

This month’s installment of “The AJT Report” debates the benefits, ethics and sustainability of Global Kidney Exchange. We also look at efforts to shore kidney paired donation implementation in the United States.


Letters to the Editor

Kidney Paired-Donation Program Versus Global Kidney Exchange in India (pages 2740–2741)

  1. Kute, R. M. Jindal and N. Prasad


Comment: Kidney Exchange to Overcome Financial Barriers to Kidney Transplantation (page 2742)

  1. S. Baines and R. M. Jindal


Global kidney exchange: Financially incompatible pairs are not transplantable compatible pairs (pages 2743–2744)

  1. A. Rees, S. R. Paloyo, A. E. Roth, K. D. Krawiec, O. Ekwenna, C. L. Marsh, A. J. Wenig and T. B. Dunn


Opposition to irresponsible global kidney exchange (pages 2745–2746)

Francis L. Delmonico and Nancy L. Ascher


People should not be banned from transplantation only because of their country of origin (pages 2747–2748)

Alvin E. Roth, Kimberly D. Krawiec, Siegfredo Paloyo, Obi Ekwenna, Christopher L. Marsh, Alexandra J. Wenig, Ty B. Dunn and Michael A. Rees


Open dialogue between professionals with different opinions builds the best policy (page 2749)

Ignazio R. Marino, Alvin E. Roth, Michael A. Rees and Cataldo Doria


Law & Markets Volume Is Out!

Al Roth with Taboo Trades seminar, March 23, 2016

I’ve posted a few times about the Duke Project on Law and Markets (see here, here, and here), which was led last year by Joseph Blocher and me. Like the Custom and Law Project that preceded it, this Project culminated in an edited volume, published this time by Law & Contemporary Problems.

Those wanting a more detailed description of the Project and papers in the volume can read the Foreword, but here’s a taste:

We started the Law and Markets Project at Duke Law School in the summer of 2015 in an effort to better understand the relationship between the legal system on the one hand and markets on the other. That relationship is central to understanding the nature and practical impact of legal rules, the degree to which those rules are shaped by economic forces, and the ways in which law and markets should or can operate independently. Further, it inevitably raises foundational and difficult questions. What are (or should be) the limits of markets? When, and through what mechanisms, should the law restrict the free exchange of goods and services? To what extent, and how, should the legal system address market driven inequalities in income, wealth, or access to goods and services like health care and education?

By addressing these questions, we hoped to generate interesting conversations that would deepen people’s understandings of their own and each other’s work and set the stage for collaboration going forward. We chose to focus our efforts on the Duke community, so as to help build those conversations and relationships. Given our colleagues’ broad and deep substantive and methodological expertise, this hardly felt like a limitation.

* * *

We held a symposium in early May 2016, the proceedings of which are collected in this issue. Duke faculty authored or co-authored all of the pieces, and the breadth of the topics demonstrates some of the many facets of the relationship between law and markets—from the sale (and tax treatment of) body parts to moral economies in the early Chinese land market; from the supply and demand of anticorruption enforcement to evaluating financial regulation; from markets and the environment to markets for sovereignty itself.

The volume table of contents are below, and the papers can all be downloaded here. The photos throughout this post are highlights from the Project’s workshop and reading groups, which are described in prior posts: here, here, and here.

I’ll be back in due course with more to say about my contribution to the volume, coauthored with Wenhao Liu (Stanford University, Department of Management Science & Engineering; Strategic Decisions Group International) and Marc Melcher (Stanford University, Department of Surgery): Contract Development in a Matching Market: The Case of Kidney Exchange.

Morality, Markets, and Contract Law at William & Mary

I’m looking forward to this upcoming event, Morality, Markets, and Contract Law, at William & Mary celebrating the publication of Nate Oman’s new book, The Dignity of Commerce: Markets and the Moral Foundations of Contract Law (University of Chicago Press 2017). I used Nate’s book in my contracts law seminar this year and recommend it for those interested in contract law theory and, in particular, for those interested in the intersections among contract law, markets, and morality.

The event is free and open to the public.

Hope to see you there!

Bay Area Friends: Third Annual Kagan Lecture

Bay area readers may be interested in the upcoming Robert A. Kagan Lecture in Law and Regulation at Berkeley Law’s Center For The Study of Law And Society. The lecture is Thursday, March 16, from 3:30 – 5:15pm (see the flyer for more info) and features Lauren B. Edelman (Agnes Roddy Robb Professor Of Law And Professor Of Sociology, U.C. Berkeley), who will discuss her work on legal endogeneity. Robin Stryker (Professor, School Of Sociology, University Of Arizona) and I will provide commentary.

I’m looking forward to this. Edelman’s work has had a great influence on my own thinking and writing about the regulation of business entities, and I’m looking forward to this chance to reflect on her (and Kagan’s) impact.

Hope to see you there!

GKE Debate in Current Issue of The American Journal of Transplantation

Figure showing the first GKE (to date)

Both Al Roth at his Market Design blog and Timothy Taylor on his blog, the Conversable Economist, have discussions today about our paper reporting the first Global Kidney Exchange (GKE) and the pushback it has received in the current issue of the American Journal of Transplantation. I’ve blogged about GKE (which Mike Rees and I previously referred to as Reverse Transplant Tourism or “RTT) before (see, e.g. here).

As Al says:

I’ve written earlier about the possibility of Global Kidney Exchange (GKE), in which foreign patient-donor pairs who cannot afford transplantation are invited to join American kidney exchange chains. The idea is that the cost of the foreign pair’s surgeries and postoperative care can be paid for by the savings that result whenever an American is transplanted (because transplantation is so much cheaper than dialysis).

The March issue of the American Journal of Transplantation  contains a report of the first foreign pair, and the chain of exchanges that included them.

Curiously, the issue also contains an editorial that is profoundly ambivalent about GKE, in a way that makes clear that the issues of repugnance that surround organ donation, and incentives, and equity, and patients and donors from developing countries, are not vanishing in the face of the benefits that GKE provides to patient-donor pairs from developing countries. (emphasis mine)

Taylor also has a nice summary of our paper:

Basically, the notion is to involve pairs of people from low-income countries–one needing a kidney, one offering to donate a kidney–in these interlocking chains of kidney donation. For those in high-income countries, the advantage is potentially a lot more compatible kidney donors. Because getting a kidney donation saves money on dialysis, it is possible to use that saved money and provide the kidney donation for free to recipients from the low-income country. The result is healthier people, and overall cost savings.

And of the accompanying editorial:

The same issue of the journal includes a short editorial called “Financial Incompatibility and Paired Kidney Exchange: Walking a Tightrope or Blazing a Trail?” by A. C. Wiseman and J. S. Gill (pp. 597-98). As they write, “there are numerous considerations that require equipoise …” They point out issues that could arise in how donors in other countries are identified, whether the benefits are equitably distributed, whether consent is freely given, how this might affect providers of transplant services in low-income countries, and more. All fair enough, and I suppose only a benighted economist could bristle against their request for “sensitivity to the ethical pitfalls.” I would only point out that while we are being sensitive to ethical pitfalls of global kidney exchange, 2-7 million people are dying every year without access to treatment for their kidney disease, and we should spare a little sensitivity for them, too. (emphasis mine)

I would go even further than Taylor or Roth. The editorial is very thoughtful and worth reading in its entirety, here. It also raises some important ethical issues that have to be considered as GKE goes forward and I am grateful to the authors for having so carefully engaged our paper. At the same time, though, the argument that GKE may be ethically problematic because the benefits are unequally distributed between the US and developing world patients is, for me, just a nonstarter (and, to be clear, I speak for myself here and not for any of my coauthors).

As Roth says:

Here’s one sentence that illustrates the power of repugnance (it suggests that maybe the Filipino pair who joined the kidney exchange were really being exploited…):

“At a societal level, American patients received a disproportionate share of the societal benefit enabled by the participation of the compatible Filipino pair in KPE, which may not be adequately remedied by the payment for transplantation and posttransplant care.”

Given the Filipino patient’s lack of access to transplantation (and possibly even dialysis – we discuss this in the paper) GKE almost certainly saved his life. To paraphrase Taylor, perhaps only a benighted lawyer could question how this life saving transaction is exploitative of a Filipino patient, just because some Americans also benefit from the trade. The Filipino patient doesn’t care whether one or one hundred Americans were transplanted because of the chain he enabled – only that he received a healthy, compatible kidney that he otherwise could not have.

Here’s our full abstract:

Kidney Exchange to Overcome Financial Barriers to Kidney Transplantation

by M. A. Rees, T. B. Dunn, C. S. Kuhr, C. L. Marsh, J. Rogers, S. E. Rees, A. Cicero, L. J. Reece, A. E. Roth, O. Ekwenna, D. E. Fumo, K. D. Krawiec, J. E. Kopke, S. Jain, M. Tan, S. R. Paloyo

American Journal of Transplantation, Volume 17, Issue 3 March 2017, Pages 782–790

Abstract: Organ shortage is the major limitation to kidney transplantation in the developed world. Conversely, millions of patients in the developing world with end-stage renal disease die because they cannot afford renal replacement therapy—even when willing living kidney donors exist. This juxtaposition between countries with funds but no available kidneys and those with available kidneys but no funds prompts us to propose an exchange program using each nation’s unique assets. Our proposal leverages the cost savings achieved through earlier transplantation over dialysis to fund the cost of kidney exchange between developed-world patient–donor pairs with immunological barriers and developing-world patient–donor pairs with financial barriers. By making developed-world health care available to impoverished patients in the developing world, we replace unethical transplant tourism with global kidney exchange—a modality equally benefitting rich and poor. We report the 1-year experience of an initial Filipino pair, whose recipient was transplanted in the United states with an American donor’s kidney at no cost to him. The Filipino donor donated to an American in the United States through a kidney exchange chain. Follow-up care and medications in the Philippines were supported by funds from the United States. We show that the logistical obstacles in this approach, although considerable, are surmountable.

And here’s the accompanying editorial:

Walking a Tightrope or Blazing a Trail?

by A. C. Wiseman, J. S. Gill

Abstract: Engaging compatible kidney donor–recipient pairs from other countries for participation in a paired kidney exchange program in the United States poses a number of ethical challenges that deserve close scrutiny. Rees et al’s article is on page 782.

Related posts:

Global Kidney Exchange (GKE) to Overcome Financial Barriers to Kidney Transplantation

Reverse Transplant Tourism

Reverse Transplant Tourism (cont.)

RTT Conclusion

Reverse Transplant Tourism Goes Live!!

More News Coverage Of Reverse Transplant Tourism

Guinea Pigs, Colonoscopy Artists, and Prostitution: A Typical Taboo Trades Valentine’s Day

What could be more fitting for a Valentine’s Day Taboo Trades class than some readings on commodification of the body?  For today’s class I chose:

(1) Martha Nussbaum, Sex and Social Justice, Taking Money For Bodily Services, pp. 276-298

(2) Carl Elliott, Guinea-Pigging, The New Yorker

(3) Cari Romm, The Life of A Professional Guinea Pig, The Atlantic (2015)

The concept of guinea pigging is one that I’ve written about here before, in Medical Research Subjects: Guinea Pigs, Laborers, Or Altruists?  According to the Oxford English Dictionary (as discussed by Romm), the first use of the word “guinea pig” as “human subject of an experiment” was in 1913, when George Bernard Shaw decried “the … folly which sees in the child nothing more than the vivisector sees in a guinea pig: something to experiment on with a view to rearranging the world.”

As used here, guinea pigs are healthy, professional medical research subjects who make money primarily through Phase 1 clinical trials (the trials meant to assess the safety and possible side effects of medications, rather than their efficacy). As noted by Romm, “The members of this group call themselves guinea pigs, or lab rats. They also call themselves professionals.”  This notion, of course, flies in the face of the preferred ethicists’ understanding of human subjects research, which likes to conceive of subjects as motivated by altruism.  As noted by Elliott:

Of course, ethicists generally prefer that subjects take part in studies for altruistic reasons. Yet, if sponsors relied solely on altruism, studies on healthy subjects would probably come to a halt. The result is an uneasy compromise: guinea pigs are paid to test drugs, but everyone pretends that guinea-pigging is not really a job.

Kieran Healy and I make a similar point about egg donors in our forthcoming paper, Repugnance Management and Transactions in the Body (forthcoming, American Economic Review: Papers & Proceedings 2017, 107(5)). As we say there:

The fact that egg donor compensation occurs within a gift-based cultural account poses other problems as well. Payments of up to $10,000 are hard enough to square with a gift narrative, but participants managed it. Egg donation is physically risky, after all, and there was a general consensus that egg donors deserved something for their efforts. Besides, all market participants recognized that without some compensation there would be very few egg donors. But once incentives enter the picture they threaten to undermine gift framing entirely. Would fertility centers and patients compete for the most desirable egg donors? How do you square extremely large payments that vary with the donor’s beauty, intelligence, or race with the notion that payments to egg donors are mere thank-you gestures or a token in recognition of physical discomfort? (emphasis added)

So, how does Nussbaum’s chapter on prostitution fit into all this?  In some years, I opt to assign Nussbaum’s chapter together with readings on sex work, but in some ways I find it a better fit with the human guinea pigs readings because Nussbaum makes her points about prostitution by analogizing to the commodification of the body more generally. Many readers, for example, will be familiar with Nussbaum’s famous example of the “colonoscopy artist,” who “gets paid for having her colon examined with the latest instruments, in order to test out their range and capability.”

When considered in this light, the job of guinea pig and that of prostitute (like all cases of bodily commodification) share some similarities – and some differences as well. In the end, Nussbaum is skeptical of commodification critiques, concluding that:

We need to scrutinize all our social views about money making and alleged commodification with extra care, for they are likely to embed class prejudices that are unjust to working people.


Gift Cards For Blood!

In a fun coincidence, this Red Cross drive, offering a $5 Amazon gift card in exchange for presenting as a blood donor came across my Facebook feed this morning.  I say it is a coincidence, because my Taboo Trades seminar was reading about precisely this issue today, in “Rewarding Altruism? A Natural Field Experiment” by Nicola Lacetera, Mario Macis, and Robert Slonim. The authors conduct a natural field experiment involving nearly 100,000 individuals on the effects of offering economic incentives for blood donations. Because cash compensation is not permitted, subjects received either a $5, $10, or $15 gift card. As is the case with the Red Cross drive featured here, anyone presenting to donate would receive the gift cards regardless of whether they donated. (Presumably, to undermine any incentive to lie about health histories in order to receive the compensation, as suggested long ago by Titmuss — who we read last week).

Lacetera, Macis, and Slomin find that providing material rewards led to a large and significant increase in the propensity to donate, and in a very standard way: the effect was increasing in the amount of the incentives. They also found that rewards led to some spatial (i.e. some subjects who would have donated at a particular center switched to a center offering a gift card) and short-term inter-temporal displacement (i.e. some subjects who would have donated later moved up the timing of their donations in order to take advantage of the reward offer). But the gift cards increased the likelihood of donation, even after accounting for these displacement effects.

Interestingly, the current drive is offering a $5 incentive, but the optimal incentive in the study, if I recall correctly, was $10 (although $15 generated more donations, it also cost more and resulted in more displacement effects).  That’s my recollection anyway.

So, give blood! And, for the moment anyway, earn money! (Oops, not money, a mere thank you gift, of course).