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The Law and Economics of the Parable of the talents


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In the Parable of the Talents, neither the master nor any of the servants make any appeal to legal standards, but it seems improbable that there was no background set of rules against which the story played out. To the legal mind, the Parable thus raises some interesting questions: What was the relationship between the master and the servant? What were the servants’ duties? How do the likely answers to those questions map to modern relations, such as those of principal and agent? Curiously, however, there are almost no detailed analyses of these questions in Anglo-American legal scholarship.

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The Law and Economics of the Parable of the talents

  1. 1. THE LAW AND ECONOMICS OF THE PARABLE OF THE TALENTS Stephen M. Bainbridge William D. Warren Distinguished Professor of Law UCLA School of Law
  2. 2. The Parable Matthew Luke Servant A Given 5 talents Earned 5 more Given 1 gold coin Earned 10 more Servant B Given 2 talents Earned 2 more Given 1 gold coin Earned 5 more Servant C Given 1 talent Buried it/returned it Thrown into outer darkness Given 1 gold coin Wrapped it up and hid it Condemned
  3. 3. Why Parables  Jesus’ parables were effective as teaching tools precisely because his listeners “could readily identify with the roles people filled, work that they did, relations that were broken and restored, losses they sustained and happiness they experienced.”  Simon J. Kistemaker, Jesus As Story Teller: Literary Perspectives On the Parables, 16 Masters Seminary J. 49, 52 (2005).
  4. 4. Would Jesus (and hearers) have known relevant law?  Jesus likely was not poor prior to start of His ministry.  The income of carpenters and others in the construction trades in the relevant period typically was well above the subsistence level.  It is therefore likely that, prior to the beginning of his ministry, Jesus actively participated in economic life.  Likely, He would have had at least some familiarity with the commercial norms and legal standards of the day.
  5. 5. Servants or Slaves? • Opinion divided, but likely does not matter. • They were fiduciaries: • Given control over assets • Trusted to preserve and grow assets • Master vulnerable to misconduct • A fiduciary “exercises discretion with respect to a critical resource belonging to the beneficiary, whereas most contracting parties exercise discretion only with respect to their own performance under the contract.” • D. Gordon Smith, The Critical Resource Theory of Fiduciary Duty, 55 Vand. L. Rev. 1399, 1403 (2002).
  6. 6. Nature of fiduciary law in the Parable Proscriptive  Impose “standards of conduct that require the fiduciary to avoid acting, or to avoid situations where she might be tempted to act, other than in the interests of the beneficiary.”  Paul B. Miller, Multiple Loyalties and the Conflicted Fiduciary, 40 Queen’s L.J. 301, 304 (2014).  E.g., UK and Australia:  An agent’s sole fiduciary duty under their laws is that of undivided loyalty.  No duty to affirmatively benefit principal. Prescriptive  Impose affirmative duties, instructing the fiduciary what he must do.  E.g., USA and Canada  Proscriptive ban on conflicts of interest, for example.  Plus, an affirmative obligation on the agent’s part to affirmatively act in the best interests of the principal.
  7. 7. • Buried – Under Jewish law of period, regarded as best security against theft • In Parable, servant who buried talent thrown into outer darkness. • Wrapped • In Parable, servant who wrapped and hid coin merely has it taken away from him. Master clearly expected servants to not just preserve his wealth, as those who did so were punished. Instead, he expected them to affirmatively and productively invest the money for his benefit. Prescriptive What did Master Expect? Matthew Luke Inference re fiduciary duties in the Parable
  8. 8. 1st Century Palestine shifting from agrarian to commercial economy  Explains the reliance by the master on servants to conduct financial affairs.  “A non-commercial society, while it might have much use for servants,” after all, “would have little need of agents, empowered to represent the principal in business dealings with third persons."  Israel Herbert Levinthal, The Jewish Law of Agency, 13 Jewish Q. Rev. 117 (1922).  An emerging commercial society, however, would have needed servant- agents who could conduct trade on the master’s behalf.  Explains why the master expected his servants not only to preserve his assets but also to use them to earn more money.  But does not explain why the law would give that expectation effect.
  9. 9. Choosing between prescriptive and proscriptive  Many—most?—principals wish agents to do more than simply avoid conflicts; they may wish their agents to affirmatively act in specific ways.  A purely proscriptive approach suggests that an agent is invariably disloyal whenever he is conflicted.  Proscriptive systems rely on contract to specify affirmative duties.  As the Parable itself illustrates, however, it often will be impossible to identify ex ante what the agent ought to do.
  10. 10. Theological Point? Changing Commerce What About the Rewards? Exploring the differences in Matthean and Lukan sanctions Matthean version situated immediately before Parable of the Sheep and Goats Punishment may have been intended to reinforce the fate awaiting the goats Old rule preferring burying made sense when preserving value was critical (agrarian) Punishing burial makes sense when increasing wealth is goal (commercial society) In an agrarian economy, risk taking would be disfavored In commercial society, it would be favored • Apparent rule promotes risk taking by rewarding those who do so 10
  11. 11. The Severity of the Matthean Sanction Given all we have said to this point, it remains an open question whether this parable, even in its basic elements, goes back to Jesus. If anything like the canonical version does, we are left to wonder how Jesus told a story so obviously given from the vantage point of the elite and so sharply out of touch with the peasant perception of the world. • Richard L. Rohrbaugh, A Peasant Reading of the Parable of the Talents/Pounds: A Text of Terror?, 23 Biblical Theology Bull. 32, 37 (1993).  Breaches of fiduciary duty often met with harsh sanctions:  Especially where:  The amount entrusted to the agent is high.  1 talent = annual pay of ~27 Roman legionnaires  The principal’s ability to supervise and control the agent is low.  He was out of country in 1st Century AD  The discretion possessed by the agent is high.  Essentially no instructions.  On the other hand,  Duty here is prescriptive.  Minimal if any sanctions (see, e.g., business judgment rule).  Harsh sanctions usually reserved for self-dealing.