I had a debate yesterday. My opponent was pushing popular takes about how the state is no different from those contract jurisdictions of yours, and that obtaining a passport is like signing a contract. Where is the text of the contract? Right here, the body of laws. Much arguing followed, during which I formulated for myself why contracts are needed and how to view them.

A contract is merely a mutual promise. Promises are made, revised, disavowed, and broken; their violation may have certain consequences. The vast majority of contracts are not smart contracts. They cannot execute themselves; they must be executed by people. My interlocutor asks: if you ancaps reserve the right to break any contract in advance, and even explicitly state that you reserve the right to try to avoid harmful consequences of its breach—then why are contracts needed at all? How does a world with contracts differ from the state of nature, where nobody owes anyone anything?

Contracts are needed to make the world simpler, more predictable, and more understandable, providing the ability to make longer-term plans by relying on other people. But if a contract does not execute itself, then simply relying by default on the fact that it will be executed by other people is fraught with erroneous planning. And here there are two paths, both valid and not contradictory. One can invest in contract enforcement mechanisms. Or one can try to enter into contracts that the counterparty will want to fulfill.

For example, the traffic rule “in this area, it is customary to keep to the right side of the road” is a good rule. It is far better than its absence because it increases the predictability of traffic. It is cheap to follow, because what difference does it make which side you drive on; you can drive on the right. And it is expensive to ignore. There is no need to specifically enforce this rule; it is enough that everyone knows about it, and if they happen not to know, they quickly find out by observing the flow of traffic. And since those who love to stretch the truth tend to call the relationship between a citizen and the state a contract—implicitly concluded on the principle of a public offer—then this traffic rule is a good example of a healthy person’s social contract.

Now let’s imagine a situation. A person enters a certain territory. At the checkpoint, they are offered twelve volumes of rules of conduct on this territory—and a place to sign this contract, which will give them the right of entry. Since the person will not read these volumes, the procedure for them boils down to the following: you ask for a signature to let me in. Here is the signature, let me in. The contract on my part is fulfilled. And any further appeal to the contents of the sixth volume of the tomes gathering dust at the checkpoint will be perceived by them as lawlessness, and pointing out that you signed the contract will be perceived as mockery. Such contracts do not make the world simpler or more predictable. They are needed by self-proclaimed enforcers to have a reason to nitpick a violation, while the party who signed them for the right of entry will constantly violate them without any ulterior motive; therefore, one cannot rely on the existence of such-and-such a contract and people’s adherence to it in their planning. This means that under ancap, the natural emergence of a practice to accompany stay on a territory by imposing a voluminous code of rules is unlikely to take hold. More precisely, the maximum volume of rules acting on a territory will be proportional to the exclusivity of access to it and the ease of enforcement. An expensive, elite, closed club can afford complex norms of behavior. A public park cannot.

Of course, there are contracts where complexity is due to the complexity of the subject of the deal. For example, the merger of large joint-stock companies. But there, the contract is prepared by professionals from both sides, not provided by one party in a ready-made form without the right to make edits. So the complexity will be voluntary. And it is precisely this that will ensure the desire to fulfill everything exactly as written.

And finally, there are contracts where the subject of the deal is complex, but the text is standard. For example, a bank loan agreement. But for the bank’s client, this text essentially boils down to a short explication: you give me this much now, I give you this much monthly for this many years. As for what exactly should be done if something goes wrong—here, the presumption of the bank’s good faith applies. The client believes that the bank provides fair procedures for such scenarios and is not against following them specifically, because he did not think them through himself. But when it comes down to it, his opinion may change sharply. This is where the bank discovers that all these procedures, from the client’s point of view, are not sacred tablets. It is not a contract at all. These are the bank’s wish-lists. And the client has their own. And the more the bank insists on the observance of its wish-lists, the more dissatisfied the client will be, and the more costs he will try to create for the bank. Therefore, the more highly competitive the loan market will be under conditions of decentralized law, the more customer-oriented the contracts there will be.

The same applies to our ordinary life—most of the rules that others insist on observing are not contracts, but wish-lists. Some we respect, some we don’t, we resolve our conflicts ourselves—and it’s fine, we live. Quite peacefully and happily.