This is a revised and corrected version that incorporates comments by Roderick Long. The original version of this article and Roderick Long's comments were published in Formulations Volume VII, No. 3, Spring 2000, pp. 9-16.

The Gambling-Stakes Paradigm for Loans and Labor Contracts

by Roy Halliday

Libertarians do not agree on how the non-aggression principle applies to those who fail to pay their debts. If you do not have enough money to pay back a loan when it is due, does the loan contract imply that you have an enforceable obligation to work until you repay the loan? Can you enter into a loan contract that has the potential result of giving someone the right to force you to work? Such a contract could be tantamount to a voluntary slavery contract.

Robert Nozick, during his brief libertarian phase, believed that a free system would allow people to sell themselves into slavery.1 Randy Barnett argues against voluntary slavery but advocates involuntary slavery to force criminals to pay their debts to their victims.2 Murray Rothbard agrees that voluntary slavery contracts are not enforceable, but he regards failure to pay a debt as equivalent to theft, and he regards thieves as having given up their right to not be forced to work and to be imprisoned, if appropriate, until they pay their debts (restitution) and then to be punished on top of that (retribution).3 Other libertarians like me regard imprisonment for debt as a violation of the non-aggression principle, whether the prisoner is a criminal or not and whether he signed a voluntary slavery contract or not. Another libertarian view might be to enforce whatever debt-repayment procedure is specified in the loan contract.

These disagreements about when forcing someone to work is an act of aggression are also disagreements about what constitutes a free market. Depending on how we interpret the non-aggression principle, a free market can include or exclude such things as slave markets and debtors prisons.

Forcing People to Work

The argument in favor of voluntary slavery goes like this: If you own something, you have the right to sell it, rent it, give it away, risk it, or make any other arrangements regarding the disposition of it, as long as you don't violate the rights of others. It seems to follow from this that if you own your own body, you may unconditionally transfer ownership of it to another person. That person would then be the rightful owner of your body, and he could rent it, sell it, dismember it, destroy it, or, if you are still alive, he could make you his slave. Anything that person wanted to do to you would be his right, and you would be a criminal if you resisted.

Why can't you legitimately transfer ownership of your labor to another person and become a slave such that you would have a legal obligation to obey all your master's commands? Suppose you voluntarily sell yourself into slavery and, after a while, you run away because you are tired of being bossed around. Should law-enforcement agencies try to catch you and return you to your master?

If voluntary slavery is legitimate, it is the ultimate example of placing property rights (of the slave owner) above human rights (of the slave). I tend to agree with Jean Jacques Rousseau's argument that you would have to be an idiot to volunteer to be a slave and if you are an idiot, you are not competent to make contracts. But for those of you who do not regard voluntary slavery contracts as absurd on their face, I offer three additional arguments for your consideration.4

The Moral Autonomy Argument

1. You cannot legitimately make a contract to do something that you have no right to do such as to sell someone else' property without their consent.
2. A crime is something that you have no right to do.
3. So you can't legitimately make a contract to commit a crime.
4. If you make a contract to become someone's slave and to obey that person's orders, the contract cannot legitimately include an obligation to obey that person's orders to commit crimes, because you have no right to give that person such authority in the first place.
5. So if your master gives you an order, you still have the duty to decide whether it would be a crime to obey the order, and if the order is an order to commit a crime, you have a duty to disobey the order.
6. If you have a duty, you must have the right to do your duty and you must have ownership and control of your mind and body so that you can perform your duty.
7. So you cannot legitimately give up complete ownership of your mind and body through a voluntary slavery contract. You cannot voluntarily give up your moral autonomy.

The Inalienability Argument

1. At any particular moment prior to becoming a slave you are the owner of your body.
2. Consequently, you have the right to alienate parts of it. For example, you could donate an eye or a kidney or some blood to someone who needs it.
3. However, your body as a whole, while you are alive, is different from other kinds of property in ways that are not taken into account by the argument for voluntary slavery. The deliberate actions of your body are controlled by the decisions of your mind (your will). Your mind, therefore, owns the parts of your body that it still controls.
4. This ownership and control cannot be transferred. It is truly an inalienable right. Your body, while you are conscious, is different from all other property, because control of it cannot physically be alienated from your will. When you sell your car, the new owner can drive it without your cooperation--you do not have to steer it or even be in it. But when you sell your body, the new owner cannot get any work out of it without your willing cooperation.
5. To sell something is to give up ownership and control of it.
6. Your purposeful actions such as your labor are controlled by your will, which is inalienable.
7. Therefore you cannot sell your labor and you cannot sell yourself into slavery.

Even Randy Barnett, who advocates slavery for criminals, accepts this argument for non-criminals: "... if control cannot be transferred, then a right to control cannot be transferred. One may as well consent to transfer a right to control the movement of the stars."5

The Fraud Argument

1. You have no right to trade (give away, sell, rent, wager, or use as collateral) something that you don't own.
2. The labor that you perform in the future will be controlled by the decisions that you make in the future (your future-will).
3. To enter into a voluntary slavery contract now is to trade ownership and control of your future labor now, which entails trading ownership and control of your future-will along with your body.
4. Such a trade can only be legitimate if you own and control your future-will at the time you trade it. In other words, the argument for voluntary slavery assumes that the person contracting to become a slave has the ability now to control the decisions that he will make in the future concerning the labor that he will perform in the future. If he does not have this ability, the trade is fraudulent.
5. We do carry out plans, perform multi-step tasks, make appointments and keep them, and so on. If we had no such ability we couldn't accomplish much. We expect each other to have some self-control. We rely on each other to keep our promises. Promise-keeping makes cooperation possible and is mutually beneficial.
6. So your current-will has some control over your future-will. Your will is somewhat self-determining.
7. However, your will is not completely self-determining. That is, your intentions when you make a commitment do not have the power to control your future intentions enough to guarantee that you won't change your mind. If we had this power, then everyone who has ever filed for a divorce must have been just kidding or lying when they took their wedding vows. They must not have intended to stay married in the first place. This is clearly not the case. So it must be true that we do not now own and control our future feelings and decisions and labor.

   Even though people do make long-range plans and, in many cases, demonstrate continuity in their intentions over time, there are so many instances of people changing their minds that it should be clear that you do not now control your long-range future intentions sufficiently to claim ownership of them. You cannot guarantee that the intentions you have now will be the intentions you have in the future, especially in the distant future.

8. 8. Since, the argument for voluntary slavery assumes that the person contracting to become a slave has the ability now to control the decisions that he will make in the future concerning the labor that he will perform in the future and since he does not have this power, it is fraudulent for him to sell himself into slavery.

The fraud argument applies not only to loan contracts and labor contracts and voluntary slavery contracts, but to any other contracts involving promises to think, feel, or act in a specified way. Promises to stay married to someone, and promises to work for someone or to serve in the armed forces, and solemn oaths to sell your soul to the Devil and worship him forever are all promises involving future thoughts and emotions, which we do not now own or control. No matter how sincere these promises may be, they cannot transfer rights from one person to another. You always retain the right to quit a job, desert the army, get a divorce, or renege on a promise that involves your future-will.

The fraud and the inalienability arguments do not apply to property that can be controlled without your will. For example, it is legitimate to put up your car or your house as collateral for a loan because, unlike your labor, your car and your house are alienable property that are not intrinsically tied to your will. Another person can physically operate your car or live in your house regardless of your past, present, or future intentions. But another person cannot make you work unless you currently choose to work. The decision to work that controls your labor is the decision you make at the time you work—not before or after. Your decision to work or not work at any given moment is physically and logically inalienable, consequently, your right to work or not work is inalienable.

Gambling

Gambling is the model for the legitimate way to make contracts involving your future intentions. Bets can be used innovatively to make your future more secure. For example, you could make a bet with your spouse that for the next 10 years the two of you will continue to live together and to support any children that may result from your union. If you stop living together during that time, title to whatever property you wagered belongs to your spouse. The stakes might be called alimony or child support. Either spouse might risk paying the alimony or child support, depending on the terms of the bet.

Insurance policies are another way to use the gambling-stakes paradigm to make your future more secure. If people in a free nation want to insure themselves against some of the uncertainties of the future, they will create financial incentives for entrepreneurs to create insurance companies, which, if they are sufficiently capitalized with money from investors, can legitimately offer policies to customers to insure them against many contingencies. Insurance policies are wager contracts that spell out in detail who owns what in the event that a specified contingency does or does not occur. An insurance policy is a way to hedge your bets.

Performance bonds are another variation of the gambling-stakes solution to the problem of uncertainty caused by the requirements of moral autonomy and freedom. A performance bond is the stake that you put up when you bet that you will perform services for someone in the future. Performance bonds are often used in the entertainment industry to encourage stars to show up and perform as advertised. The star does not exchange title to his services. Instead, the star makes a bet that he will perform as specified in the contract (the terms of the bet). The general form of the bet is: the star bets something that he owns (a performance bond--usually money) and the booking party (theater owner, movie producer, or whatever) bets something he owns (a performance fee--usually money). The title to the performance bond and the performance fee will belong to whoever wins the bet. The subject of the bet is whether the star will perform as specified in the contract.

To justify labor contracts, we need to look at them from a new point of view. We need to see them as wagers. For example, you do not exchange title to your body and its labor for money. Instead, you make a bet with your employer. You bet that you will work for the employer and he bets that you won't. You risk nothing except your reputation for promise-keeping (which you don't own anyway6) and the transformations that you make to the employer's property that result from any labor that you may perform at his request. The employer risks paying you money (wages) and other benefits, and capital investment. If you perform the services as prescribed by the terms of the bet (employment contract) then the employer "loses," and the wages that he wagered (note the similarity between these two words7) and the other benefits he risked become your property and the transformations that you made to his property by the labor that you performed become they employer's property. If you decide not to work for the employer (if you quit your job) then you lose (or fail to gain) title to whatever wages and benefits were detailed in the terms of the bet.

Unsecured Loans, Secured Loans, and Risks

However, property that is not alienable or that is not owned by the person seeking to negotiate a loan is not legitimate collateral. For example, I have no right to put up your house as collateral for my loan without your permission. That would be fraud. No legitimate property titles are exchanged by fraud. A loan contract in which the borrower risks collateral that he does not own is not a valid contract, so the money loaned still legally belongs to the loaner and the loaner has the right to use force if necessary to get his money back.

You could make unsecured loans to family members and friends, and maybe they will pay you back. If they don't, you may have an enforceable claim to the money in their possession, but you cannot force them to work to pay you back. They have a moral obligation, but not a legal obligation, to work for you. That is, whether they work to pay you back indicates something about their moral character, but they retain the enforceable right to not work. So unsecured loans are very risky. It would be unwise to make such loans unless you are motivated more by charity than by the prospect of financial gain—and you can afford to lose the money and still meet your own obligations.

To increase the chances of reaping financial gains by loaning money, you should only loan money to people who put up enough collateral to satisfy you. Then, if they fail to pay their debts, the collateral that they wagered becomes your property and you are sufficiently reimbursed.

Conclusion

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