2004-01-15 - 7:13 p.m.

This is chapter 1 of of my thesis. It is an introductory chapter with a general framework of normative ethics proposed by Shelly Kagan, and also an overview of contemporary social contract theories. I am sorry that I cannot include the footnotes here. If you are interested of the original version with footnotes, please contact me through email.

Normative Ethics and Contract Theories: An Introduction

This dissertation aims at examining the nature of our moral duties to other individuals based on T. M. Scanlon��s contractualist account of ��what we owe to each other��. Despite the fact that there are a number of other theories differing in various aspects from his view are also commonly called ��contractualist�� or ��contractarian��, Scanlon continues to use this name for his theory because he wants to emphasize its connection with Rousseau��s traditional idea of ��social contract��: the idea of a shared willingness to modify our private demands in order to find a basis of justification that others have reasons to accept. Before going deep into Scanlon��s own theory, I will first have a brief discussion on contract theories as a whole (as unified by the idea of a social contract) to provide a useful context in understanding Scanlon��s contractualism. Contract theories as a whole, which is usually classified as deontological, represent a genuine rival to other teleological theories such as consequentialism and egoism in moral philosophy. In this chapter, I will have an overview of contract theories by examining their basic structure and see how they differ among themselves. I will also go through some general critics on contract theories. Before the general discussion about contract theories starts, first and foremost, I would like to outline a framework of normative ethics which is proposed by Shelly Kagan. This will provide a useful context to understand the role of contract theories in normative ethics.

1.1 A Framework of Normative Ethics

Kagan��s picture of normative ethics can be summarized into two levels along the dimension of different evaluative focal points. Let me start by the factoral level. To make a particular moral judgment, we may start by identifying certain relevant factors that possess moral significance. A normative factor is a consideration that ��makes a given act have the particular status it does��. We can consider the Organ Transplant Case as an example:

��Imagine that there are five patients, each of whom will soon die unless they receive an appropriate transplanted organ: one needs a heart, two need kidneys, one needs a liver, and the fifth needs a new lung. Unfortunately, due to tissue incompatibilities, none of the five can act as donor for the others. But here is Chuck, who is in the hospital for some daily routine tests. The hospital computer reveals that the tissue is completely compatible with the five patients. You are a surgeon, and it now occurs to you that you could chop up Chuck and use his organs to save the five others. What should you do?��

In this case, we can identify several normative factors: the first is ��goodness of outcome��. In this case, we have to consider which act will have a better consequence. If goodness of consequence is simply defined as minimum loss of lives, then killing the innocent will produce a better consequence because it can help to save five other lives. The second factor that can be identified is ��harm to the innocent��. We have to consider the fact that killing the innocent will impose a serious and irreversible harm to the innocent. Does the harm done to the innocent constitute an absolute constraint in overriding the goodness of outcome? Or the harm only constitutes a relative constraint which may be outweighed by the goodness of the outcome until a certain threshold level? There can be different interpretations for this factor. A further factor that deserves consideration is ��responsibility and desert��. In deciding whether killing the innocent is wrong, should we also think about the fact that he is innocent and is not responsible for the dying of the five patients? Or, from another point of view, are the five dying patients deserted for the organs from the innocent? In deciding the moral status of killing or not killing the innocent, we have to consider and weigh against all different factors which are conflicting in this situation.

If we are given more empirical information, there may be a longer list of normatively significant factors which I cannot spell out all here. Yet Kagan��s point is obvious enough: there are a number of genuine and probably conflicting normative factors that may be relevant in particular cases and the moral status of a certain act�Xwhether it is morally required, permitted, or forbidden is determined by the interplay of these normative factors. Roughly speaking, the most common normative factors as suggested by Kagan include: goodness, harm, constraints, special obligations, duties to oneself, and rights. Here, two related questions are followed: (i) whether different normative factors can be reduced to and explained by a single and basic factor; and if not, (ii) how these different factors interact with one another. Different theories at the factoral level may identify different factors as normatively relevant in particular cases, and they may also assign different importance to different factors. For example, Consequentialist theories at the factoral level, even though they may have different conceptions of what can be considered as ��goodness��, all regard goodness of outcome as the only morally relevant factor. In the factoral level, consequentialism represents a simple theory of the right�Xan act is right if and only if it can produce the best consequence. Deontological theories, on the other hand, may hold that there are some duties or obligations that we cannot override even if overriding them may result in better consequences. These duties and obligations serve as constraints against overall consequentialist considerations.

Theories at the factoral level identify different importance to different factors, but they do not explain why these factors possess their normative significance at the first place. To justify the normative significance of different factors, we have to appeal to the deeper, more fundamental foundational level. It is the level from which those normative factors in the factoral level derive their normative significance. While normative factors in the factoral level determine the moral status of an act in specific situations, the recognition of a general foundation in the foundational level justifies the particular normative forces of these factors. Even if we agree that a certain factor, for example ��overall goodness��, does play a role in a certain occasion, we may still disagree on what actually explains its significance. What is the basis of the moral significance of different factors? This question is to be addressed in the foundational level. Kagan identifies two main streams of foundational theory: teleological and deontological. Teleological theories, including egoistic consequentialism and utilitarianism, if accepted at the foundational level, hold that the ultimate basis of the basic normative factors is to be explained in terms of the significance of some good or group of goods. For example, even if we accept the possibility of constraints in the factoral level, foundational teleologists would hold that the normative significance of these constraints is to be explained in terms of their contribution to general goodness. Deontological theories at the foundational level, on the other hand, do not have a unified claim except that they are all non-teleological in explaining the basis and justification of normative factors. Contract theory, together with universalizability theories, ideal-observer theories and reflection theories (such as theories of Thomas Nagel, Robert Nozick, and Samuel Scheffler) are all deontological at the foundational level.

It should be noted that while teleological theories at the factoral level hold that the only basic normative factor is the good�Xwhether the individual good (as in normative egoism) or the overall good (as in normative utilitarianism), and deontological theories accept the existence of normative factors capable of outweighing the good as constraints, they do not take any stand in what grounds and explains the moral significance of these factors. After all, a teleological theory at the foundational level can ground a deontological theory at the factoral level. It is also true that a deontological theory at the foundational level can ground a teleological theory at the factoral level. This point may become more apparent if we take into consideration of different evaluative focal points for foundational theories. Each foundational theory can be used to evaluate different focal points. So far I have been using act as the evaluative focal point in the above discussion, yet it is not impossible to have other subjects like rules, institutions, virtues and even motives as the evaluative focal point. A foundational theory using different evaluative focal points may yield very different normative theories at the factoral level. For example, foundational egoism which chooses act as its evaluative focal point will claim that ��a given agent��s act is morally right if and only if it has the best possible result for that agent��. This is rather implausible to many of us. However, if egoism chooses rules rather than act as the evaluative focal point, it may support, surprisingly, commonsense morality. It is so when conforming moral rules of commonsense morality in fact tends to promote individual��s self-interest empirically speaking. Moral rules in this sense possess intrinsic moral significance which is in turn derived from egoistic considerations. Foundational act egoism may also tell us to act according to moral rules of commonsense morality; however, it would merely treat these rules as rules of thumb indicating which act can promote the self-interest of the individual in normal circumstances, but not as rules possessing intrinsic moral significance.

Understanding contract theories within this context, we can see that contract theory as a normative theory in the factoral level does not necessarily derive its base from a contract-based foundation. A normative contract theory only claims that ��it is right to act according to agreed-upon rules��; the justification of these rules, however, may be grounded on the fact that these rules can promote egoistic interests or maximize overall goodness. For example, Mozi in ancient China (480 B.C.�X420 B.C.) holds a utilitarian theory in justifying a political theory of agreement. In this sense, the contract involved just play a heuristic role in identifying the right act but does not justify the right act itself. A contract theory is foundational only when it also claims that the act is right because it is agreed-upon by the contract. On the other hand, a foundational contract theory can also derive consequentialism as a normative theory at the factoral level. This can be done by arguing that the consequentialist formula: ��you should act so as to produce the best consequence�� is the one that is agreed-upon at the foundational level. The distinction between normative contract theories and foundational contract theories is parallel to the distinction between normative utilitarianism at the factoral level and philosophical utilitarianism at the foundational level. Bearing this important distinction in mind is important for the discussion in the following section.

1.2 Contract Theories: A Summary

Utilitarianism occupies a central place in contemporary moral philosophy, not only as a normative theory but also as a foundational theory. As claimed by Scanlon, ��utilitarianism derives much of its appeal from alleged difficulties about the foundations of rival views�Kthe appeal of contractualism as a foundational view has been under-rated.�� Indeed, as a foundational account of morality, contract theories do not receive much attention before John Rawls�� A Theory of Justice (Rawls 1971) was published. Yet to be fair, the depression of contract theories was not due to a short history of development. As far as I know, the origin of contract theories can be traced back to Plato��s Republic, where Glaucon claims that rules of justice constitute mutually agreeable limits on each people��s wills. In the seventeenth and eighteenth century, with Hobbes��s Leviathan, Locke��s Two Treatises of Government, and Rousseau��s The Social Contract, contract theories have emerged as a main stream of political theories. Hypothetical consent also plays an important role in Kant��s constructivism in his Groundwork of the Metaphysics of Morals. It is the first time the idea of an ��original contract�� is made use of as a foundational theory of morality. After Kant, however, partly because of the rise of utilitarianism and partly because of the attack of logical positivism, contract theories suffered a sharp decline as a moral and political theory. Logical positivism simply attacks all theories attempting to explain the foundations of morality. Moral philosophy is conceived as a trivial if not meaningless subject. On the other hand, for those who did not believe in logical positivism, utilitarianism remains as a more attractive candidate than contract theories in explaining the foundation of morality because it can provide more simple and straightforward answers to normative questions. Contract theories, in order to have further development, must defend itself against the attack of logical positivism and the competition of rival utilitarian theories.

Rawls�� employment of a hypothetical original position as the basis for his two principles of justice represents a revival of contract theories as a political and moral theory. Afterwards, different versions of contract theories were further developed by other philosophers including John Mackie, David Gauthier, Gilbert Harman, Jurgen Habermas and Scanlon. Among these theories, some just use the idea of a contract as a heuristic device in identifying moral notions like wrongness or justice while some proceed to the bolder claim that ��contract�� is the foundation of their theories. I will concentrate on the discussion of contract theory as a foundational theory here. The idea central to all foundational contract theories is the acknowledgment of agreement or consensus as the ultimate basis for normative factors. Even though they differ in details, they all agree that normative principles, including principles of moral justification and of political legitimacy, somehow derive their basis from something like a contract. This is a contract agreed upon by the contractors and at the same time binding upon the contractors. According to foundational contract theories, the justification of binding moral rules, legitimate moral acts or respectful moral sentiments are all derived from the fact that they are or they would be agreed upon by the contractors. The fact that the contract is binding because it is agreed upon by the contractors makes it a foundational theory. So far, a utilitarian can claim that we should act according to agreed-upon rules because of utilitarian calculations. In this case, the rules do not derive their normative basis from the idea of a contract but from the utilitarian idea that they can maximize overall utility if they are generally practiced. This is the main difference between a foundational contractualist and a foundational utilitarian who may both employ contractualism in the factoral level.

The basic structure of a contract theory can be summarized by asking two questions: (i) who is going to make the contract? And (ii) how the contract is reached? The first question concerns the characterization of the contractors, and the second ask for a description of the contracting situation. With a specification of these two components, two further questions can be asked, what terms would be agreed by these contractors in that contracting situation? And to what subject the contract is going to be applied? The first corresponds to the content of the theory, and since different contract theories differ in substantive details, I will not discuss their differences in content here. Rather, I will try to distinguish different versions of contract theories by examining how they answer the other three questions above in different ways. I will start with the last question�Xto what subject the contract is going to be applied.

To ask for the subject of a theory is to ask for its evaluative focal point. For example, a contract theory can use moral rules as its primary evaluative focal point and claims that moral rules are valid if they would be agreed by the contracting parties. In this sense, an act is evaluated indirectly by seeing whether it would be allowed by the agreed-upon rules. On the other hand, a contract theory can also use acts directly as its evaluative focal point: an act is morally permissible if it would be agreed upon by the contracting parties. Moral rules are then evaluated indirectly by seeing whether they can promote the agreed-upon acts. The former theory is known as a rule contract theory and the latter is known as an act contract theory. Obviously, it is possible for a contract theory to have another subject as its evaluative focal points. For example, Rawls��s theory of justice is a kind of institution contract theory, using social institutions as the subject of his theory. It is also possible to have virtues contract theory and motive contract theory. The former claims that inner traits, dispositions and sentiments of an individual agent are virtuous because they are agreed upon by characterized contractors, and the latter holds that motives for actions are justified because they are agreed-upon motives. Other focal points are then evaluated indirectly under the perspective of the primary evaluative focal point.

Apart from different evaluative focal points, contract theories also differ in terms of their characterization of the contractors. If a contract is binding on actual beings like us, does it necessarily mean that those contracting parties must be actual beings like us? Some contract theories do embrace this position, characterizing the contracting parties by ordinary and realistic qualities. Yet different theories may still disagree about what are the ordinary and realistic qualities of human beings. Some may claim that actual beings are motivated by self-interest solely while others may claim that they are also moved by altruistic considerations. What are the correct characteristics of actual beings depends on our understanding of the nature of human beings, and I think there is no simple answer for this question. Even if we can determine the ��correct�� characteristics of human beings, we still have to decide which of these characteristics are relevant in making the contract. Also, given actual beings are so different in terms of their conceptions of the good, their knowledge, their reasoning power and their cultural background, it is doubtful whether any agreement can be reached by actual beings without any idealization of their characteristics. Actual beings sometimes act and think irrationally, sometimes they decide without knowing the necessary information for correct judgments, and sometimes they even do not know what they actually want. Theoretically speaking, it is difficult to determine what principles would be agreed by actual beings.

Most contract theories therefore conceive the contractors in at least partially idealized terms. Some theories assume that these contractors are reasonable�Xreasonable in the sense that they are willing to find mutually acceptable principles; others assume that they are rational�Xrational in the sense that they are capable of logical reasoning and know the casual implications of and relations between different events; some are idealized in terms of the information they possess�Xthey may be well informed about the relevant empirical facts for making a contract, but they may be deprived of knowledge about their own status and identity. As far as idealization is involved, theories differ only in the degree of idealization. Some of them may hold that the parties involved are fairly idealized only�Xthey may be usually reasonable except rare cases, largely but imperfectly rational, not fully informed about the external world but not ignorant of their own identity. Other theories may idealize the contractors quite radically, claiming that they are always reasonable, perfectly rational and fully informed but ignorant of their own status. Some other theories may hold an intermediate position, having other combinations of these idealized items.

The variation of contract theories becomes larger if we take into considerations the possible motivations of the contractors. Are they psychological egoists moved by mutually disinterested rationality to find principles that can promote their self-interest? Are they moved by a concern to other people��s autonomy? Are they moved by the impartial goal of promoting general welfare? Or are they moved by a combination of these motivations? Again, different theories can be classified along the line of the realistic-idealistic distinction. A more realistic version of contract theory will claim that people in fact will be moved by very different motivations in making contract. A more idealistic one may claim that only a few or even one of these motivations are legitimate in negotiating a contract. As the motivations of contractors are quite influential in deciding the normative outcome of a contract theory, most important contract theories have developed their own distinctive accounts of motivation of the contractors.

There is a related question concerning the idealization of the contracting parties: should they be characterized as relevantly identical? For highly idealized versions of contract theories, the contracting parties may be idealized to a level that all of them become identical in terms of relevant characteristics. If all contractors are characterized in exactly the same way, unanimity in decision may easily be achieved because the decision of any one contractor is virtually the same as all the other contractors. Of course, not all idealized versions of contract theory need to characterize their contractors as identical. Even a theory that characterize contractors as always reasonable, perfectly rational and fully informed, it can hold that they are moved by very different motivations in deciding contract terms. It can also hold that some of the contractors are rational and informed, while some of them are not so rational and well informed. In this case, such a many-type contract theory still needs to answer the further question why and how the different contractors can agree upon some principles in the bargaining situation. It may still be a question in obtaining unanimity. In the case of single-type contract theory with identical contractors, it may be trivial to ask how those principles are agreed unanimously. However, a difficult question may arise: why is a contract agreed upon by these extremely idealistic contractors who are so different from us binding on actual beings like us? I will delay the discussion of this problem to the next section.

It should be especially emphasized that the realistic-idealistic distinction should not be confused with the actual-hypothetical distinction. The former distinction concerns the contractors making the contract and the later concerns the nature of the contract itself, depending on whether the contract was historically or factually made. Even though it is quite impossible to have an actual contract for highly idealistic contractors, it should be noted that it is possible to have a hypothetical contract for realistic or fairly idealistic contractors. We can imagine what would be agreed by the actual beings or beings with fairly idealized characteristics and make a hypothetical contract for them. In fact, many current contract theories employ this combination of realistic contractor and hypothetical contract. Even if a theory conceives the contractors in fairly realistic ways, it does not commit the theory to adopt an actual contract as the basis for justification.

The discussion of actual and hypothetical contracts brings us to the description of the contract situations. Different conceptions of the contracting situations may yield very different normative outcomes. Shall we conceive the contractors as actually engaging in a debate and finally agree upon some solutions? Or shall we just imagine a hypothetical negotiation between the contractors? An actual contract theory will appeal to what the contractors have actually agreed to, perhaps by investigating whether they have in fact signed up or done something that signifies a contract. A hypothetical contract theory will appeal to what the contractors, either realistic or idealized ones, would agree to if they are given the chance to do so. A hypothetical theory is therefore the one that would be agreed upon in ��appropriate�� circumstances. ��Appropriate�� here involves certain assumptions. In principle, an actual contract can be made in whatever circumstances, even when the contracting parties are not equal in bargaining power and some of them are simply forced to make the contract. Contrary to this, hypothetical contract theories will assume certain constraints in the contracting situations. For example, Rawls assumes all the contractors in the original position are free to make decisions and are all equal in status. Scanlon also guarantees separate and equal considerations for each individual in the hypothetical agreement among those contracting parties in his theory. Someone may argue that fairness and voluntariness are implicit in the idea of a contract, and it is unnecessary to state the specific contracting situation within a contract theory itself. However, as I have argued above, unless we have a circular definition of a ��contract��, contract made without assumptions in the contracting situation may involve morally irrelevant and morally undesirable factors. Assumptions for the contracting situation are therefore required for all contract theories, even for those which employ an actual contract in their theory.

There is another important distinction concerning the features of the contracting situation. Some of the contract theories are interactive in the sense that different contracting parties, even with a certain degree of idealization, still hold quite different opinions in the contracting situation, and the contract is ��agreed�� upon as a compromise or a negotiation. It is where the contractors earn the name of ��bargainers��. An important example of interactive contract theory is Gauthier��s contractarianism, whose contracting parties are bargaining against others for their own interests. Some of the theories are non-interactive, holding that after a certain degree of idealization, different parties may arrive at similar judgments among possible options, and the contract agreed upon is more like a consent or an agreement. A related issue arises here. For interactive contract theories, is unanimity required for an agreement? Some theories may hold that a majority agreement among the bargainers is sufficient for making a contract while some insist that a unanimous agreement is necessary. This gives rise to the distinction between unanimity contract theory and majority contract theory. The former claims that any binding contract must be the one that would be agreed upon by every bargainer, while the later claims that majority agreement among the bargainers would also be binding.

The last important characteristic concerning the contracting situation is whether the contract agreed upon is designed for everyone or only for some of us. This is the distinction between universalistic contract theories and relativist contract theories. So far, I have assumed that the contract derived from the contracting situation is universally agreed by all contractors and therefore binding on all contractors. Yet there is nothing implicit in the basic idea of contract theory per se that prevents different contracts to be agreed by and binding upon different groups of contractors. For example, we may have a separate contract for each society, allowing the possibility that different societies could reach different agreements, and so the agreements are binding only in that particular society. It is also possible to hold that the contract derived from the contracting situation is binding upon a group of contractors, while still including everyone among the contractors. Under this socially relativized version of contract theory, we have to ask whether we could all agree to one contract for the members of one society, while agreeing to another contract for the members of another society. Unrealistic as it seems, we may even have an individually relativized version of contract theory�Xa contract theory which allows the contractors to agree upon different contracts for different individuals.

It should now become apparent that the possible versions of contract theories far exceed our expectation. Different contract theories can be classified by their different evaluative focal points, their different characterizations of the contractors and the contracting situation, and whether it is universal or relative in scope. Use Rawls�� theory of justice as an example. The normative factor identified by this theory is justice�Xthe justice of the basic structure of a society, including the major political constitution and economic system. The primary evaluative focal point in this sense is social institution. For the contractors, they are conceived as ignorant about their own strengths and weaknesses, their social positions and status under the veil of ignorance so that they would not design principles favorable to their particular situations. They are moved by mutually disinterested rationality to find principles that are mutually acceptable. The contracting situation is signified by the original position, which is characterized as a hypothetical agreement in which the contracting parties are conceived as free and equal moral agents. For the scope of the theory, the two principles so derived are universal to all those who share the considered convictions in justifying the original position. With the above categorization, we can have a better sketch for the contours of each particular theory.

I have to add a last remark before I go on to the general critics on contract theories. I am not taking any stand on which are the better versions of contract theories. The plausibility of each theory depends on its own argument, and different combinations of contracting features may be suitable for different situations. I cannot evaluate the merits and weaknesses of each theory here; I will only have a general discussion about the critics of contract theories as a whole.

1.3 Contract Theories: Critics

Critics for contract theories in general are presented in the form of a dilemma: the contracts employed in contract theories are either actual or hypothetical, but both types of contract have its fatal weakness and therefore contract theories as a whole is not as plausible as it seems to. For actual contract theories, obviously, the main problem lies in the fact that we have never engaged in any agreement historically or actually, either in justifying our states, our moral systems or our social institutions. Even if the contract is agreed upon actually by our ancestors in the past, it is not sure why people today, who were not parties of that original contract, would be bound by arrangements to which they personally have never agreed. Moreover, actual contracts agreed in actual circumstances always involve morally irrelevant and morally undesirable features. Why is a contract binding if it is not agreed deliberately, rationally and voluntarily? Everyone would agree that we are not obligated to fulfill a promise when it is made at gunpoint or when we are deceived of certain essential information in making the contract. The mere fact that a contract is agreed upon does not necessarily mean that it contains morally binding terms.

These shortcomings move contract theories to two different directions. To answer the charge that actual contracts are factually unfounded, we can shift to an implicit version of contract theories. To answer the charge that actual contracts may contain morally undesirable features, we can move to adopt a hypothetical contract. I will start with the argument for an implicit version of contract theories. While rights and responsibilities are clearly defined and the acceptance of which are positively indicated (usually in terms of signing it) in explicit contracts, details of the contract terms are not fully spelled out in implicit contracts. Implicit contracts do not possess the open, concise and definite character of an explicit contract. It is argued that although no contract is made explicitly in actual circumstances to justify our states, moral systems or social institutions, we have implicitly agreed to these practices by continued participation in, and acceptance of benefits from, these practices. If an agent knowingly receives benefits from a mutually beneficial scheme and continues to participate in it, it signifies the agent has implicitly engaged in an agreement to that scheme. It is obviously ridiculous to claim that a diner can refuse to pay the restaurant after having a meal because he has not ��actually�� agreed to pay. Similarly, states, moral systems or social institutions could be justified if they are implicitly agreed by us in terms of a social contract.

Implicit contracts are still actual contracts although they are not explicitly acknowledged. They are also actually agreed by us, just having a more liberal conception of what can be counted as a valid agreement. For example, continued participation in a contract by abiding to its terms or knowingly and freely receiving benefits from a contract is claimed to signify an actual agreement to that contract. Sometimes, it is even argued that all explicit contract theories should best be understood as implicit contract theories. The interpretation of any agreement, even an explicit one, depends on conventions of interpretation, and it is simply impossible to make all the terms of a contract explicit. Moral debates can be understood as further implicit moral bargaining or as making explicit that which was already implicit in a moral agreement.

At least two problems can be identified for implicit contract theories. First, the basic assumption of implicit contract theories is that if contractors of the agreements are unsatisfied with an implicit contract, they can attempt to break it or re-negotiate it simply by discontinuing to participating in it or by refusing to accept its benefits. If they actually disagree to the contract, they could just stop engaging in the contract any more. This assumption is doubtful. Does it mean whenever I disagree with the policies of the state, I have to leave the country to signify my disagreement? Does it mean whenever there is an unjust law, civil disobedience is a must? Not explicitly disagree does not mean implicitly agree. Continued participation and acceptance of benefits is just an arbitrary standard for implicit agreement. The basic problem of implicit contract theories is that it is not clear what behaviors indicate an implicit consent to particular arrangements. If we have a low threshold for ��implicitly agreeing to a certain contract��, for example, as it is argued by John Locke that using public roads indicates an implicit consent to the government, then it is doubtful whether all the contractors actually know that they have engaged in a contract when they are doing so. It is also doubtful whether this kind of ��unconscious�� agreement does have strong moral force on us. If we have a high threshold for implicit agreement, perhaps by requiring the contractors to have a collective agreement expressively in a public forum, then it is not sure whether there can be any determined agreement at all. They may still suffer the charge that they are factually unfounded. When there is no consensus on what behaviors indicate an implicit agreement, implicit contract theories are not initially convincing.

Second, even if it is accepted that continued participation and receiving of benefits indicates an implicit agreement to a particular contract, it cannot avoid another problem of actual contract theories�Xthat it involves morally undesirable and morally irrelevant features in making the contract. Take political contract theories as an example. Sometimes people may implicitly ��agree�� to a political arrangement just because they cannot depart the country due to actual constraints (perhaps they are too poor or too weak to do so), or due to their ignorance of any better alternative political arrangements. In the former case, the contractors are forced to accept the contract just because they have no other better choices while in the later, they are deprived of certain important information about the contract. Therefore although they have ��agreed�� to the contract, perhaps implicitly by continued participation in and acceptance of benefits from the arrangement, the binding power of the contract could be challenged. It should be emphasized that implicit contracts, just like actual contracts, involve no idealization of the contracting situation. If it is the case, they cannot avoid the undesirable or irrelevant features in actual contracting situations.

If implicit contract theories are not satisfactory, we can move to a hypothetical version of contract theory. Hypothetical contract theories are particularly designed to deal with the problem concerning morally undesirable and morally irrelevant contracting situations of actual contracts. A hypothetical contract theory can remove these morally undesirable and irrelevant features by stipulating a more suitable contracting situation. It is even argued that justification can only come from what is agreed upon in an idealized contracting situation, but not what is agreed in an actual situation which may be unfair or compulsory. In this sense, hypothetical contracts are not just proxies for actual contracts; they bypass and override actual contracts.

However, it is not cost-free to employ an idealized contracting situation. Critics claim that idealization is illegitimate and arbitrary, and they are just begging the question of what is relevant in contracting situations. Certain features must be presupposed to define a ��suitable�� contracting situation. If not, we simply do not know when a binding contract is made. For example, a theory can define the suitable contracting situation as one that is fair and equal. ��Fairness�� and ��equality�� are all moral notions and it is claimed that as a foundational theory of morality, contract theories should not employ any moral notions as implicit assumption. These assumptions are not beyond question and it is illegitimate to take them for granted at the first place.

The force of this criticism depends on whether the contract theory employing these moral notions tries to explain all moral notions within a unified framework of a single contract. So far, if the theory does not claim to serve as the foundations for all moral notions, this criticism would miss the spot. Whether a theory is in fact guilty of circularity depends on whether there is any further, adequate and independent argument for those assumptions. A theory aiming at identifying the basis of a certain normative factor, say ��justice��, is not circular nor illegitimate if it draws ��justice�� from other normative notions like ��fairness�� or ��equality�� if we can justify these notions independently. The most important point is whether we have a shared ideal for deliberation about the contracting situation for that particular normative factor. Here, we can appeal to our considered convictions in reflective equilibrium in justifying what are the legitimate bargaining situations for different normative factors of different evaluative focal points. A hypothetical contract theory cannot be dismissed simply because it employs some assumptions that it cannot account for.

Even though it is not illegitimate to have presupposed moral assumptions, appeals to them may still invite the charge that hypothetical contracts are unnecessary or trivial. This criticism usually comes in the form of the Euthyphro dilemma: is something legitimate because it is agreed upon in the contracting situation, or is it agreed upon in the contracting situation because it is legitimate? On one hand, if deliberations in the contracting situation are not guided by substantive moral standards, then we may not be able to get any determinate agreement from the contract; and deliberations in the contract, if any, would be arbitrary because they are not supported by reasons. On the other hand, if deliberations in the contracting situation are guided by substantive moral standards, then it is these standards�Xnot the fact that the bargainers would agree to the contract�Xthat give the deliberations moral force. The contract is agreed upon because it is legitimate, not the other way round. Agreement in a contract can just serve as a heuristic device in identifying what is legitimate but cannot provide the foundation for it. Appeal to what is agreed upon is therefore unnecessary because what is legitimate could be justified directly by appealing to those substantive standards that guide the contractors�� choices. If this is true, contracts are just ad hoc devices; they cannot derive any moral force from themselves.

Two responses are available for hypothetical contract theories. First, the Euthyphro problem is a problem faced by all foundational theories but not solely by contract theories, and it does not pose an attack to those heuristic versions of contract theories. Second, whether agreements in contracts are trivial depends on whether the choices are determined directly by those substantive standards. Contract theories can argue that the idea of agreement is still basic in deriving moral force of the contract�Xwhat is legitimate is still because it would be agreed, and those standards just explain why the contracting situation could be agreed. So far, contract theories do not claim that what is legitimate is simply constituted by those substantive standards. They just claim that what is legitimate is determined by a contracting situation that employs these standards. We still have to appeal to what is agreed to in determining what is legitimate. For example, Rawls does not claim that justice is fairness but justice is derived from a fair procedure; and Scanlon holds that what is right or wrong is to be judged by principles derived from a reasonable situation, but not right or wrong is simply reasonable and unreasonable. Contracts are not trivial in this sense because they represent a legitimate stage where justification can be derived. Those substantive standards explain why the contract is a legitimate process for deriving normative principles but cannot explain in itself why the justification derived from the contract is legitimate. It is the fact that the contract is agreed upon that makes it legitimate. It may be argued that these standards are unwarranted; but as I have argued above, it is unwarranted only when there is no independent argument for these standards.

Hypothetical theories can do a better work than actual theories in stipulating a more suitable contracting situation. However, it is doubtful whether it can avoid another shortcoming of actual contract theories�Xthat they are factually unfounded. Hypothetical contracts are not actual contracts agreed by us as a matter of fact. It is normal to ask why, if hypothetical contracts are the ones that we have never actually entered into, we would have any obligations towards the contract. Ronald Dworkin has famously argued that you cannot reasonably argue that I should sell a valuable paintings to you for $100 on Wednesday, just because I would have agreed to sell it to you for $100 on Monday when I have not discovered the values of the paintings yet. It is claimed that we are only bound by what we have actually agreed to.

The challenge to the binding power of hypothetical contracts is fortified if hypothetical contracts are combined with not so realistically characterized contractors. If a contract is agreed by hypothetical beings so idealized and different from us, why we have any reason to respect the principles that they, the idealized persons in a hypothetical condition, would adopt? These idealized contractors may be in a better position to deliberate, but they cannot represent the real choices of actual beings like us. Their radical differences with us may render their choices irrelevant to us.

The charge that hypothetical contracts are not actually made assumes as if the real force of hypothetical contract theories derive from the importance of keeping promises. They just treat hypothetical contracts as poor substitutes for actual contracts when there is no alternative, just like appealing to what a dead person would agree to in distributing his assets when he had not specified his will before. However, as I have argued above, hypothetical contracts are not just second-best proxies for actual contracts. They represent genuinely better perspectives in deliberating legitimate moral principles. If we agree that legitimate principles should be derived from a legitimate position, then it is odd to suggest that such position should be one that is unfair, irrational, or full of prejudices, just like the one we face in actual situations. The real force of argument from a hypothetical contract does not lie on the fact that we have agreed, but on the fact that we would have agreed with good reasons. The principles derive from a legitimate contract represents what the contractors actually have reasons to accept, not only what they would have reason to accept if they were so and so. The fact that we would have agreed to do something under idealized situations therefore provides an independent argument and a prima facie reason for us to be bound by it.

The problem of irrelevance of idealized beings to us can also be reduced if contractors are characterized in a fairly realistic way. If contractors are characterized as relevantly similar to us, having our actual desires, motivations and conceptions of the good but just idealized in terms of their reasoning power and information, there is no reason to suspect their choice in representing our will. On the other hand, idealizations may be harmless in this way if we are aware of the differences between theoretical assumptions at hand and the actual situations. In applying idealized contract theories, we can always satisfactorily modify our judgments about actual persons like us by taking into account the differences between idealized beings and actual beings. This methodology is also practiced in scientific theories. Idealizations are not irrelevant as long as the contractors are not characterized as extremely different beings like us.

I conclude that contract theories, if carefully refined and seriously defended, could rebut most of their alleged critics and challenges. I hope I have presented the whole idea well in this chapter to provide a useful context for later chapters. As I have argued above, hypothetical contract theories are initially plausible as a foundational theory. With this background, I will go though Scanlon��s contractualist account of ��what we owe to each other��, examining its own plausibility and weaknesses in Chapter 2. I will then discuss the general challenge posed by contractualism towards consequentialism, especially utilitarianism, in Chapter 3. In the succeeding chapter, I will concentrate on how contractualism can provide a plausible motivational basis for ��what we owe to each other��. If my defense for Scanlon��s contractualism in these chapters is successful, a new picture on contract theories and normative ethics would in turn be drawn. This will be my focus of Chapter 5.

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