The value of a contract

For a few months now, I have developed an interest in the work of Dan Ariely, a behavioral economist from Duke.   His work has many applications in the world of teaching.   In his this most recent blog post- Ariely talks about the value of the handshake.    Union members, on the other hand, often harp on the importance of the contract.   We can't work during lunch.   We can't be required to come at this time or that time.  Or from the other perspective, I can't believe so and so left before the duty day ended. I think we'd all be better off if things were settled with a handshake.    I once read that one of the least happiest professionals is the attorney.   They bill by the hour- or rather, the 6 minute.   Constantly reminded of the market value of their work- their happiness is drained.  


I suppose many see the handshake as something straight out of Utopia.  But as the Montgomery County Council- and the state of Maryland begin their budget decisions- they will most likely remind all teachers not of the handshake- but of the written contract.   I suppose we'll have to wait see what the result will be.   From Ariely's post:

All contracts deal with the direct aspects of the expected exchange and with unexpected consequences. Incomplete contracts lay out the general parameters of the exchange (the part that we shake hands over), while the unexpected consequences are covered by social norms governing what is appropriate and what is not. The social norms are what can motivate me to work with you, and what would establish goodwill in resolving problems that might arise.


As for complete contracts, they too specify the parameters of an exchange, but they don’t imply the same adherence to social norms. If something is left out, or if circumstances change, there’s no default to goodwill—it’s happy hunting season for all. When we use complete contracts as a basis for working together, we take away flexibility, reasonableness, and understanding and replace them with a narrow definition of expectations. That can be costly.