Can agreements between people—whether written, spoken, or simply understood—form the foundation for what we call ethics?
If you’ve ever haggled over the price of an item, you’ve experienced negotiation firsthand. No “right” price existed until you and the seller created one together. What if, in the same way, the rules of ethics emerge from agreements—contracts—between people?
Imagine Ed and Brad. Ed agrees not to hit Brad, and Brad agrees not to hit Ed. If both accept this, hitting is wrong; but if they instead agree to box, then hitting isn’t wrong in that context. Ethics, it seems, can depend entirely on the agreements people make.
This lesson explores contract theory—the idea that ethical rules are shaped not by consequences, principles, or virtues, but by actual or hypothetical agreements between human beings. We investigate the thinking of Thomas Hobbes, the originator of modern social contract theory, and discover how John Rawls’s concept of the original position reshapes our understanding of justice.
An ethical theory in which morality is based on actual or hypothetical agreements—or contracts—between people.
The word “contract” can refer to much more than paperwork—verbal promises, handshakes, and even unspoken understandings count! In ethics, theorists often work with hypothetical contracts to model fairness.
But contract theory doesn’t mean just any contract is ethical. People might make unfair or exploitative contracts. That’s why most contract theorists focus on the agreements people would make if they were thinking rationally, free from bias or coercion. Ethics, then, depends on the best contracts people could make with one another—ones that maximize fairness and mutual benefit.
Game theory and rational-choice models help contract theorists predict how people would behave in different negotiation scenarios. By modeling incentives, risks, and payoffs, these fields clarify how ethical agreements might emerge in real life—and why some contracts are more stable or fair than others.
Reflect: Can you think of an everyday situation where an unspoken agreement—rather than a written rule—shapes how people behave?
This approach keeps ethics grounded in real-world experiences. It doesn’t make unrealistic demands, because people routinely negotiate basic rules for getting along. But what happens when there’s no agreement? To answer, we turn to Thomas Hobbes.
A hypothetical condition described by Hobbes where no social contracts exist and everyone acts solely in their own interest, leading to chaos and insecurity.
Thomas Hobbes, a 17th-century English philosopher, wrote Leviathan, which laid out one of the first nonreligious attempts to explain ethics. In Hobbes’s view, before contracts, humans lived in a “state of nature”—a world without trust, rules, or security.
The life of a human being in the state of nature would be “solitary, poor, nasty, brutish, and short.”
Without contracts, everyone is stuck in a competitive struggle—unable to trust others, constantly at risk of losing possessions, even fearing for their lives. The fundamental problem isn’t just the lack of contracts, but the inability to rely on others to keep their word.
How would your daily life change if you couldn’t trust anyone to keep their promises?
Think about online marketplaces. Platforms like eBay build systems of reputation and feedback to help strangers trust each other—essentially creating “contracts” that make trade possible.
Hobbes’s analysis connects with the concept of the prisoner’s dilemma from game theory—a scenario where rational individuals, acting in their own interest, end up with worse outcomes than if they cooperated.
People naturally cooperate and trust each other, even without rules or agreements.
Without agreements or contracts, trust breaks down and everyone acts in their own self-interest, often leading to conflict and poor outcomes.
Social scientists spot prisoner’s dilemmas in countless settings—from arms races between countries, to merging traffic, to price wars between businesses. Whenever people would benefit from cooperation but can’t trust others to cooperate, the dilemma appears.
Negotiation and conflict resolution experts use game theory concepts to design better contracts and agreements—whether in business, diplomacy, or everyday life.
Game theory formalizes dilemmas like this: Each player chooses between cooperation and betrayal, and the payoffs depend on both choices. The paradox is that, while mutual cooperation yields the best group outcome, rational self-interest leads everyone to betray—creating a worse future for all.
Spot a prisoner’s dilemma in your own life: Are there times when cooperating would help everyone, but people choose not to because they can’t trust others?
Think of a situation where you and another person agreed (explicitly or implicitly) on how to behave. Was it fair? How did it shape your actions?
What is contract theory?
Tap to revealAn ethical theory where morality is based on agreements—actual or hypothetical—between people.
What does Hobbes mean by “state of nature”?
Tap to revealA hypothetical world without social contracts or ethical rules, where everyone acts in self-interest, leading to chaos.
What is a prisoner’s dilemma?
Tap to revealA scenario in game theory where individuals acting in self-interest end up worse off than if they cooperated.
Imagine a society with no written laws or explicit agreements. What kinds of problems might arise, and how could people start to build trust and cooperation?
According to Hobbes, what makes the “state of nature” so dangerous?
Contract theory shows that ethics can be grounded in the agreements—explicit or implicit—that people make with each other, rather than in abstract principles or consequences.
The absence of trust and enforceable agreements leads to conflict and instability—a lesson illustrated by Hobbes’s state of nature and the prisoner’s dilemma.
Explore contract theory your way—visualize, discuss, or creatively express what ethical agreements mean to you.
Create a visual map showing how Ed and Brad’s agreement shapes their ethical rules. Use arrows or boxes to illustrate how different contexts (haggling, boxing) change what’s considered ‘wrong’ or ‘right’ based on their contract.
With a partner or group, debate whether rules should always be based on actual agreements or if some ethical principles should stand regardless. Reference Hobbes or Rawls to argue your point.
Write a short story or script about two people forming an unusual ethical contract. Show how their agreement shapes their actions and what others see as ethical or unethical in their context.
How do agreements between people shape what is considered ethical in everyday situations? Consider Ed and Brad’s example, and Hobbes’s or Rawls’s theories—what happens when the contract changes, and does this mean morality can shift? Reflect on whether ethics should always rely on such agreements.
If morality can shift with every new agreement, can societies ever achieve universal ethical standards—or are ethics always in negotiation?