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

Foka-Kavalieraki, Yulie; Hatzis, Aristides N.

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

European View, Vol. 9, No. 1, pp. 29-37, June 2009

9 Pages Posted: 30 Dec 2009 Last revised: 15 Jul 2012

See all articles by Yulie Foka-Kavalieraki

Yulie Foka-Kavalieraki

University of Athens – Department of Philosophy & History of Science

University of Athens - Department of History & Philosophy of Science; National and Kapodistrian University of Athens - Faculty of Law; Athens University of Economics and Business - Department of Economics

Date Written: May 26, 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

JEL Classification: B40, D02, D63, D81, D86, K12

Suggested Citation: Suggested Citation

Foka-Kavalieraki, Yulie and Hatzis, Aristides N., The Foundations of a Market Economy: Contract, Consent, Coercion (May 26, 2009). European View, Vol. 9, No. 1, pp. 29-37, June 2009, Available at SSRN: https://ssrn.com/abstract=1529863