Another example to follow up on Caleb's point. Many people today laugh at the old fashioned idea that one's word is one's bond. But it used to be true, and it was highly efficient — it allowed people to count on their agreements, plan for the future, and build trust among businesses as well as individuals. Then the notion of "efficiency" started getting out of hand. First came the idea that the person who was wronged didn't have a right to receive what he was promised; instead he would only get what the judge assumed was a monetary equivalent (monetary damages instead of specific performance). Well, the problem with that is that it leads people to calculate whether it is worth it for them to breach; lawyers now even have a "theory of efficient breach" — sometimes it makes more economic sense to renege and pay the damages, in the short term. Over the long term people stop trusting one another, hire more lawyers to put more and more in writing, and only deal in terms of monetary values defined in market terms (forget all the intangibles, including insights into possible value that used to be the stuff of entrepreneurship). Economic relations get soggy, and we all are poorer for it.
