The Rules of the Game and the Morality of Efficient Breach

Abstract

Moralists have long criticized the theory of efficient breach for its advocacy of promise breaking. But a fully developed theory of efficient breach has an internal morality of its own. It argues that sophisticated parties contract for efficient breach, which in the long run maximizes everyone’s welfare. And the theory marks some breaches — those that are opportunistic, obstructive, or otherwise inefficient — as wrongs that the law should deter, as transgressions that should not be priced but punished. That internal morality, however, does not excuse the theory from moral scrutiny. An extended comparison to Jean Renoir’s 1939 film, La Règle du Jeu (“The Rules of the Game”), illustrates what more sophisticated moral criticisms of the theory might look like. Renoir’s film depicts a society in which marital infidelity is a transgression that is tolerated, but only when done according to society’s rules. Renoir’s attitude toward that society suggests that moral critics of the efficient breach theory should focus not on its celebration of efficient breach, but on the value of the sort of moral community it imagines and on the theory’s effect on parties who are not playing the efficient breach game, whether because they do not understand its rules or because they seek a different type of obligation. The comparison to the film also highlights the theory’s own narrative elements, which both add to its persuasive power and, once identified, mark out its limits.

JEL Classification: K12