38 Pages Posted: 14 Feb 2002
In this paper I consider the twofold relationship between freedom of contract and entropy in property. Recent literature on property fragmentation suggests that property is subject to a fundamental law of entropy, leading towards increasing property fragmentation. After considering the legal responses to the problem of entropy, I revisit the above debate considering the relevance of freedom of contract to achieve optimal outcomes in a world of imperfect information and positive transaction costs. In such a context, I discern two analytically distinct ways in which freedom of contract contributes to minimizing the problems of entropy. I conclude that entropy is not an ontological problem, but is often the byproduct of the uncoordinated use of institutional and legal constraints on free contractual arrangements.
Suggested Citation: Suggested Citation
Parisi, Francesco, Freedom of Contract and the Laws of Entropy. Supreme Court Economic Review, Annual 2002, pp. 65-90; George Mason Law & Economics Research Paper No. 02-02. Available at SSRN: https://ssrn.com/abstract=300281 or http://dx.doi.org/10.2139/ssrn.300281