Why not debtors' prison?

[The Gold Standard]

There are more possible nuances that may matter.

It is possible to have a breach of contract where the aggrieved party is not worse off than he was before the contract, but lost the benefit of the bargain. For example, suppose I am selling widgets for 10% above my cost. You agree to buy some, then later back out BEFORE I have delivered them. I am not out of pocket any money but have lost the benefit of the bargain we made. And you gained nothing in the transaction. Under the common law of contracts, I would be entitled to recover the benefit of my bargain - my 10% - from you.

Now suppose I delivered the goods, you used them, and you never paid me. I am out of pocket 90% of the purchase price and did not gain the 10% benefit of the bargain. This time you gained by the transaction and I lost.

Yet a third possibility, we make a deal and I prepare to deliver a custom-monogramed widget to you. You refuse delivery and refuse to pay. I can't sell the mongramed widget to someone else so I am out my cost plus the markup I would have gotten. But you gained nothing in the transaction.

In which scenarios can you recover by force and how much? And why? (Libertarian law school exam)

Well, in the first scenario I wouldn't consider that a situation where you can recover by force. I doubt you really even have a claim if you weren't out any money yet ordering the widgets. Even so, most people wouldn't turn off a customer trying to recover that anyway I don't think.

The second one is a scenario like we were talking about with the tickets. You would be owed the agreed upon price, regardless if your markup was 10% or 1000%. If the intent all along was not to pay for the widgets then you can forcefully go get the money from them or property where the value adds up to that price (used widgets are worth less than new ones, so you would be entitled to more than just getting the widgets back). If some other situation came up and they couldn't pay, then maybe they have a performance bond like you mentioned or maybe an arbitrator would rule and place a lien on their property or something.

The third scenario I would think you would only have a claim to the cost of the widget and not the mark up, since they didn't benefit from the transaction either. You would have to have a solid agreement to purchase the item though. If you just ordered it hoping they would buy it then you don't have a claim to anything.

Regardless, to answer the OP, there is no scenario where you can lock someone in a cage in lieu of repayment.

[juleswin]

Huh, ya think?

This nation was founded with no debtors' prison being a basic principle. Why? Because it gets abused. How? Well, at the time, the slippery slope went like this: People get locked up because borrowing money they couldn't repay was considered fraudulent, then the lenders complained that this didn't help them recover their money, then those in debtors' prison were forced to work and the proceeds went to the lenders, then the lenders were motivated to make bad loans and put as many people as possible into debtors' prison, then people finally started asking how this system of slavery got started in the first place.

There's a garden path I won't be led down. I not only don't see the benefit (free men can pay their debts, men in prison can't unless it's forced labor a.k.a. slavery) but I do clearly see the risks. No thanks.



Fail. Are you arguing that those who are raped or murdered are 'asking for it'? Or do you seriously believe that a lender that negotiates a loan with someone has as little to do with his situation as someone who is a victim of random violence? Under your system, getting a loan wouldn't be illegal, not repaying it would be. So, you're not a criminal until you miss a payment. At what point do rape and murder go from being legal to being illegal? They don't. They're illegal from the moment the perp goes from impulse to action. Therefore, the comparison is a major failure of logic.

Take your propaganda down the hall.



And do they borrow by force? Or does someone willingly lend to them? Left and right? And how does everyone benefit? Because this makes getting credit easier? What about those people who never borrow? They do exist, you know.

+ rep

Excellent reply. The idea that society benefits from having debtors prison or any prison that requires outside funding is the most ridiculous thing I have heard in a while. I understand if someone see it as a necessary evil but to the vast majority of us, I say let the bankers and financial corporations pay for the debtors prison and let em add it into the cost of running their business and pass it down to their customers. Just as long as the idea of going to prison when the debt goes unpaid is plainly spelled out in the contract document.

Also, I do not want to be forced to pay for prisons for rapists and murders. I prefer a system of compensations and restitution instead of imprisonment and capital punishment.

[juleswin]

Collateral system still works for pay day loans.

+rep

[anaconda]

One good reason for not having debtor's prisons is that lending money has risk, as do all businesses. Using public resources to reduce entrepreneurial risk is just like bailing out the bankers. Many well intended projects involving moral and competent borrowers and lenders still ultimately fail. This is the nature of the free market. This is priced into the business model of the lender. I believe debtor prisons would exacerbate moral hazard.

[osan]

My prediction : people here will say because there's a system wide conspiracy to either bait stupid people into debt, or fraudulently force people into debt they'd never incur voluntarily. But hopefully people agree that if debts were voluntarily created, then prisons would be an appropriate punishment when debts can't be expected to be paid back (and bankruptcy discharging debts makes a mockery of responsibility)

http://www.nytimes.com/2012/09/26/op...ison.html?_r=0

You are apparently not familiar with the nature of business and risk. Voluntary engagement in business agreements, all business agreements carries with it risk. Risk should be entered into only after having been given its due consideration. Given that, any and all business ventures are prone to the risk of failure, often through no fault of the parties involved. This is par for the course and all parties to such agreements understand and accept this. When such endeavors fail "organically", no crime has occurred and therefore there exists no basis for charges, much less imprisonment.

Normal business risk, whether low or high, is fundamentally different from criminal activity such as fraud, which is​ a crime and should be addressed accordingly.

[Tpoints]

Good point acptulsa--isn't bankruptcy written into the Constitution? If the gov't/citizens want to change it, there should be a Constitutional amendment--don't recall one for the student loans exception.

Anyways, bankruptcy is now something pretty much only for the rich, it costs quite a bit to file for it since Bush II from what a friend told me.

I think it depends, I have a friend who told me she only had to pay $2000 (includes attorney flat fee and court filing fee). Her problem is probably less than $500K.

[Danan]

I see no reason why debtor's prison shouldn't be allowed as a consequence of a loan that can't be paid back. However, only if it's part of the original lending contract that both parties, the debtor as well as the creditor, signed. And I predict that this way of making contracts wouldn't be very likely to succeed on the free market.

Let's say there are three banks, A, B, and C. A loans out money to everybody without any consequence if the debtor goes bankrupt, with B you have to agree that the bank can seize your property for damages if you can't pay back and C only makes loans with you if agree to go to prison (funded by the bank) in case you default on your debt. What's morally wrong with having those options? Obviously bank A won't last very long, so be it. But B and C could compete on the market. I wouldn't loan money from C, knowing what could happen. But if others like to take that risk, go for it.

I don't see the benefit of the state being involved in the whole money lending business at all. None of what I described would necessarily need a state. But certainly a mininarchist state enforcing contracts and offering arbitration would be enough. No governmental regulation regarding debt default required at all.

[Tpoints]

I see no reason why debtor's prison shouldn't be allowed as a consequence of a loan that can't be paid back.

Thank you. I trust I didn't quote you out of context and I didn't delete the "but" part.

Can I ask, do you agree that the bankruptcy system, essentially is the state subsidizing to encourage, if not activity supporting debtors and hurting creditors?

[Tpoints]

How in the hell does someone in prison ever have a chance of paying off a debt?

Not a very well thought out question.

it's last resort, when you are convinced paying back on their own volition is impossible or not worth the wait.

[Tpoints]

Regardless, to answer the OP, there is no scenario where you can lock someone in a cage in lieu of repayment.

then how do we, or should we, ever punish and discourage fraudulent loans, or loans people purposely don't pay back even if they're able?