Objective Value of Contracts

My thoughts on value are that it is grounded in some power of the valuable thing. Value is a species of the good with reference particularly to dependent rational animals. Now something is either good in itself or good for something else. The good is what all things desire and all things desire their own perfection. The virtues are things that are good in themselves, because they are the perfection of the person himself.

Economic goods in contrast are external things that are not desired for themselves but for some other purpose. As external things they cannot be the perfection of the self. This is why I have tended to suppose that they are good because of their power to achieve some further good or end. This focus on powers is what brings me to value of contracts.

Contracts in general imposes some obligation on the persons involved. This imposition of an obligation is a certain moral power. As Zippy notes, this is a sort of authority that binds another in some way, in particular to the terms of the contract.

This moral power is the power in which the objective value of contracts is grounded. A forward contract for a chainsaw in one year is valuable because it grants the bearer the moral power to obligate the other party to provide the chainsaw at the agreed upon price at the agreed upon time.

As we saw before, the value of the chainsaw is derived from its productive capacity, that is its power to produce something other than itself which is valuable. The moral power of a contract of exchange derives its value from the valuable things involved in the exchange. As with a defective chainsaw, the contract may be defective in some way such as counter-party risk and this makes the contract intrinsically less valuable.

More can be said about the different powers that come from a contract, because the terms affect both parties, that is each may have both rights and obligations in the terms proceeding from different moral powers and authority under the contract. But that will have to wait until next time.

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