Welcome Materials and Office Hours
“What is a Contract? … Building the Ladder of Trust … Participation … The Ladder of Trust”
Summaries
- Welcome Materials and Office Hours > Navigation > Using the Video Player
- Introduction > What is a Contract? > What is a Contract?
- Introduction > Building the Ladder of Trust > Coordination between Voluntary Parties
- Introduction > Building the Ladder of Trust > Communication, Agreement, Understanding, and Trust
- Introduction > The Ladder of Trust > Trust
- Introduction > The Ladder of Trust > Promise
- Introduction > The Ladder of Trust > Building Contracts through Trust, Promise, Money, and Credit
Welcome Materials and Office Hours > Navigation > Using the Video Player
- You have several tools associated with these videos.
- Some of them are standard video buttons, like the play Pause Button on the bottom left.
- Like most video players, you can see how far you are into this particular video segment and how long the entire video segment is.
- While you are going through the videos, you can speed up or slow down the video player with these buttons.
- You can also click on any of the words, and you will notice that the video jumps to that word.
- The video slider at the bottom of the video will let you navigate through the video quickly.
- If you ever find the transcript distracting, you can toggle the captioning button in order to make it go away or reappear.
- Now that you know about the video player, I want to point out the sequence navigator.
- Right now you’re in a lecture sequence, which interweaves many videos and practice exercises.
- You can navigate directly to any video or exercise by clicking on the appropriate tab.
Introduction > What is a Contract? > What is a Contract?
- Not just some huge, formal agreement between large corporations where one is going to buy the other, so on.
- They’re going to look after your car, more or less, and you’re going to pay them.
- Well, that’s important because that’s how they’re going to know which suit is yours.
- Even if there wasn’t a receipt, you’re dropping it off there and coming back a couple of days later and picking up the suit, well, they expect to get paid.
- Understood between you was they’re going to feed you and you’re going to pay them.
- So what happens? It snows, and a bunch of local kids come knock on your door and say, sir, can we shovel out your driveway and your walkway, and so on? How much? $20. OK. So they do it, and then they knock on the door.
- While you’re out of town, they come and they shovel out your driveway and do all that.
- Now, you might ask, why do we have a MOOC on this? Why am I asking you to join me for really quite a number of sessions and quite a lot of work- your work, my work- on the subject of contracts? One thing I’m going to tell you, I’m not going to turn you into lawyers.
- I’m not going to teach you how to draft a contract or deal with a situation where somebody sues you or claims something.
- What I’m going to do is for you to understand what’s going on as you go through your lives in a jungle- or maybe not a jungle, a forest.
- So if your service station then tells you, it’s the transmission, and that’s going to cost you $1,500, you know what the transmission is.
Introduction > Building the Ladder of Trust > Coordination between Voluntary Parties
- They’re pretty practiced athletes, and they’re making that very thin boat go very fast through the water.
- That guy can slow down, speed up, and it’s not a problem.
- What’s the difference? This can go much faster, and it does that through coordination.
- How do you get that? Well, there are different ways to get it.
- Because we’re talking about coordinating the activities of maybe just one or two people, or a few people.
- The people who are going to shovel out your driveway, for instance.
- Coordinating the activity between free men and women.
- Later on, we’ll see what would happen if somebody says, I didn’t really mean it, because they had a whip to me! We’ll talk about that later.
- Because, for the time being- and mainly, we’re talking about coordination of free people who are getting together to do something.
- It’s a famous painting done in the 14th century in Siena.
- The people in Siena- Siena was a republic, by the way- the people in Siena, in their town hall, wanted a great painter, Ambrogio Lorenzetti, to picture what happens in their well-run city.
- Well, that requires money or credit, and that is a highly coordinated activity.
- Well, you know, that dance is a little bit like the college eight.
- How do those people in that jazz group somehow know that it’s time to speed up, or it’s time to try that in B minor or something of that sort? There’s nobody there with a whip.
- It’s a little bit more, much more, like the college eight.
- There, the coordination takes place through subtle hints in the jazz group.
Introduction > Building the Ladder of Trust > Communication, Agreement, Understanding, and Trust
- How do you get coordination? You get coordination through communication.
- Let’s get inside the notion of coordination for a moment.
- What is inside coordination? Coordination depends on a number of things.
- There has to be communication, agreement, understanding.
- Different people who are playing in that jazz quartet have to understand what it is they’re trying to do.
- It’s not only that you have to understand what the other people you are coordinating with want.
- What is trust? A crucial notion that is going to underlie everything we’re talking about.
- So what do we have? We’ve got understanding, and we’ve got agreement, which is a precursor of course to contract, and we’ve got trust.
- You see, you’ve got all kinds of people beating up on each other.
- Underlying the good situation is agreement and trust and understanding.
- Of course, the most famous example of understanding is illustrated here in this famous painting by Pieter Bruegel.
- No. What God did was he caused these people all to speak different languages.
- So they couldn’t understand each other and when the understanding stopped, so did the coordination and so did the building project, and there you see it’s half finished.
Introduction > The Ladder of Trust > Trust
- In early times, and among children and strangers, trade was just like that.
- I have five pairs of sandals, and you, my friend, have a pair of boots.
- I want the boots, you want the sandals for your family.
- Human beings are planners, and they plan by thought, not just, as bears acquiring body fat as winter approaches, by instinct.
- So let’s go back to the sandal example and complicate it a little bit.
- You only make your wonderful boots for the cold weather.
- I am willing to swap my five pairs of sandals, which I’ve just made, for one pair of boots.
- You want the sandals now, and don’t want to have to wait until October when you will have finished making the boots which we will trade for.
- What a pity if you lose a whole summer at the beach because you don’t have the boots on hand yet to make the primitive swap.
- You say you are even willing to throw in a couple of pairs of heavy socks with the boots if I will just give you the sandals now.
- You lose a whole season at the beach, and I lose the two pairs of socks.
- I have to believe that, come winter, the boots will be there and you will let me have them.
- Remember trust? Remember the stick figure falling over and being caught? I have to trust you.
- It allows planning, and planning is coordination over time.
- How do we structure that trust? How do we build with it? I’m not going to just turn the sandals over to you as a gift and hope that, comes winter, you will be similarly generous.
- You think of me and want me to be warm and dry.
- If you don’t notice that I need boots in winter or if you notice and don’t care, even if I remind you, but in June, I gave you all those sandals.
- We climb up to a higher level of interaction, and it puts sandals on your family’s feet in summer, and boots and socks on my feet in winter, because it leads us to trust each other.
- Trust allows us to coordinate our activities, not just like the rowers in the college eight, but over time.
- What allows us to coordinate our activities over long periods of time is trust.
- Promises are, in turn, of course, made up of speech, and understanding they assume speech, and understanding I promise is one of the things we say to each other to make things happen.
Introduction > The Ladder of Trust > Promise
- We may be strangers and have no reason to trust each other’s promises.
- You didn’t have to promise me that you’re going to give them to me.
- With your money in my pocket, I can go to anyone who has boots to sell, not just someone I made sandals for.
- I take gold or wampum or greenbacks for my sandals because the greenbacks stand for your promise to make me boots, or anyone’s promise to give or do something I may want.
- I can buy the boots from anyone who has boots with your, now my, money.
- I can take your promise, which you paid for my sandals with, and put it in my pocket.
- When I give you my June sandals for nothing, nothing but money, all I have to do is trust that the dollars are not forgeries, that the gold is not fool’s gold.
- So you see how promising is this great productive invention and how its value is amplified more than you can imagine by the invention- a later invention- of money.
- The idea of inventing promising is a little bit odd, a little bit like saying who invented speech.
- Historians and anthropologists have accounts about when and where money was invented, and those are interesting.
Introduction > The Ladder of Trust > Building Contracts through Trust, Promise, Money, and Credit
- Trust gives us promising, and promising creates value.
- Money is promises to and from people in the past and in the future- people we do not know and will never meet.
- You think you will have money by wintertime, when you have made and sold your boots, or raised and slaughtered your beef, or whatever.
- Instead of promising me boots in winter, you promise me money in winter- and maybe a bit more money than if you paid me right now, in June.
- If I believe your promise, and you keep it, we are both happier.
- Contracts are, with some exceptions we will come to, promises.
- Contracts are promises the government will stand behind.
- Remember some of the examples of everyday contracts we mentioned at the very beginning? You go into a restaurant and take a seat, and you’re handed the menu with choices and prices.
- You promise to pay, and they promise to cook you a dinner.
- You and the restaurant staff don’t trust each other the way the friends, the boot maker and the sandal maker, trust each other, or the rowers in the college eight trust each other.
- That’s because the promise you have made are contracts.
- We can depend on people we don’t know and maybe don’t even trust, because contracts are promises the government will stand behind.
- If we have a good government- remember the painting I showed you earlier on, Buon Governo?- we can make trades and go about our business, we can trust each other, as if we were friends, because the government stands behind our contracts and makes us act in a trustworthy way, as if we were friends, as if we trusted each other.
- In a good government which is governed fairly and where people can go confidently about their business, buying and selling, making and taking, the citizens come to trust each other.
- We go from trust to promise to contracts, and then maybe, even, to friendship.
- Next, we start on when promises are and when they are not contracts, and the rarer tricky cases when contracts are not promises at all.
