Economists and lawyers know that almost every contract is incomplete. Contracts routinely omit or leave undefined important terms, and they rarely anticipate every circumstance that might frustrate performance. The reason is simple: It makes little sense to spend $1,000 drafting a provision that has an expected value of only $100. Parties therefore leave lower-value contingencies unaddressed. Yet economists who analyze contracts have focused on a related but distinct issue: the many events for which one might want to account in a contract which cannot be verified by external authorities (eg, courts). If performance terms cannot be verified, it would appear meaningless to include them in a contract … (more)
[Henry A Thompson, Truth on the Market, 10 September 2026]
Leave a Reply