Freedom of Contract and the Laws of Entropy

38 Pages Posted: 14 Feb 2002

See all articles by Francesco Parisi

Francesco Parisi

University of Minnesota - Law School; University of Bologna


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

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: or

Francesco Parisi (Contact Author)

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100

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