318 Chapter 13
ContractualCompetencyDrownsin an Oceanof Lies
Whileanarchistlibertarianspat themselveson the backfor theirputativedefenseof
private-enterpriseeconomics,theyneglectto notethatthe ruleof law—whichunderpins
free-marketactivity—cannotsustainitselfexceptunderthe fulfillmentof specificcondi-
tions.Oneof theseconditionsis thatthe legalenvironmentrecognizescivilsuitsthat
financiallypenalizeindividualswhodisseminatelife-destroyinglies.Theexample of
trademarkinfringementhighlightsthis point.Theentirebasisof competitivecapitalism
functioningproperlyis thatyoucan identifypoorservicewitha poorbrand,andgood
servicewitha goodbrand.Whena companydoeswell,yourewardit withrepeatbusi-
ness.Whena companyservesyoupoorly,youshunit. Supposethe ZyberPharmaceuti-
calsbrandearnsa greatreputationamongHIVpatientsfor providingthemdrugsthat
effectivelypreservetheirlives.ThenI, decidingto profitoff of Zyber’s reputationparasiti-
cally,sell sugarpillsin packagesfeaturingZyber’s brandnameandlogo.I do thisto
fosterthe impressionthatI am sellinggenuineHIVpillsapprovedby Zyber’s ownin-
spectionteam.This,too, is a formof identitytheft—ratherthanfor me to givethe false
impressionthatI am someotherbankdepositor,I hereinsteadconveythe falseimpres-
sionthatmy productsare Zyber’s. Doingthat,I can unscrupulouslyprofitfromthat
company’s decades-longrecordof providingsolidservice.Supposelibertariansopposed
to libellaw ran the government,and refusedto crackdownon theseand otherknockoffs.
Thiswoulddestroythe veryfoundationof the free market.Consumerswouldno longer
be ableto rewardgoodbrandsfinanciallyandboycottbadbrands.Theinferiorbrands
can simplystealthe logosand namesof the goodbrands.
ThiswoulddestroyZyber,its reputation,and the incomethat it otherwisewouldhave
rightfullyaccrued.WereHIVpatientsto recognizethat Zyberdid not authorizethe faulty
pills,the patients’ inabilityto distinguishreal Zyberpillsfromknockoffswouldstill teach
themto avoidanythingbearingthe Zyberlabel.Thiscan sendshockwavesthroughout
the entiresupplychain,as distributors,wholesalers,andretailersare just as capableof
purchasingcounterfeitsunknowingly.Trademark-infringingpartiescoulddestroyevery
reputablebrandif theyfacedno prosecution.ShouldZyberspendmillionsof dollarsto
createnewlogosandbrandnamesfor itself,andto redesignits products’ packaging
accordingly,counterfeiterswill swipethosenewsymbolsand brandnamesas well.Inas-
muchas the saleof knockoffsgoesunpunished,qualitybrandnamesbecomemeaning-
less.This,in turn,erasesthe benefitsof competingbusinessesundercapitalism—if you
cannotrecognizea businessby its brandname,thenyou cannotrecognizeany large-scale
transnationalbusinessas such,eliminatingyourabilityto remainloyalto qualitycompa-
niesand to avoidtheirineptrivals.
An anarchistlibertarianmayconcedethatthe HIVpatientsmayhavelegalrecourse
againstthe trademark-stealer.But,to a consistentfree-marketersuchas me, that doesnot
go far enough.In thisexample,Zyberis obviouslya victim.Whena counterfeiterlies
aboutZyberin orderto defraudZyber’s potentialcustomers,the victimsincludenot
merelythe customerswhoare directlydeceived,but also the companythat facesfinancial
harmfromthe deception.The sameprincipleappliesto Roycirculatingdevastatinglies
aboutWally.Libertariansput so muchof theirconfidencein contractlaw.But the veracity
of contractlaw,as such,basesitselfuponthe assurancethatgoodfaithgoesintothe
signingof mostcontracts.As youmayrecall, BookOne explainsthe importanceof
contractualgoodfaith.Goodfaith, in the contextof contractlaw,is not the epistemological
faithcriticizedin BookOne.Peoplecan reliablyset up contractswithone anotheron the
basisthattheyhavethe contractualcompetencydiscussedin thischapter.Contractual
competencyis contingentuponthe factthat,thoughsomepeoplemaytell relatively
harmlesswhitelies to eachother,a contract-makercan be reasonablyassuredby law