I do suspect there will be a serious revisiting of the idea of freedom of contract. But I do not think that it will be the leftist critique that cuts much ice. The left has often opposed freedom of contract on the grounds that contracting power is not equal. Unions, for example, may operate just like cartels in that they try to act as a monopoly supplier for their good or service (in this case, labour), but anti-competitive behaviour is OK if the victim is a corporate producer instead of an individual consumer (I could note the fact that, at the end of the day, it is still individual consumers who pay for the dead weight loss but that's another column). But at the root of the current crisis is credit being extended to poor individuals on terms that no one can say was too favourable to the corporate creditor. In fact, the terms were not favourable enough to those corporate creditors. Government policy that encouraged this flow of credit (including, but not limited to, mortgage deductibility) for no other discernible reason than creating more home owners (something that has no necessary relation with raising living standards) exacerbated the problem.
People can, and are, wagging the finger at the bankers. But the leftist critique has a hard time explaining how the bankers are to blame when it is the banks that are taking the hit and the borrowers who are washing their hands of unpaid debts. Sure, some banking executives made out like bandits, perversely, but in all of these cases it is not the borrower that was left holding the big but other capitalists, like the high rollers who put money into exposed hedge funds. The borrower is really only suffering because of the grief of the capitalists has "trickled down".
One can speak of "regulation", which is popularly conceived of as opposed to freedom of contract and therefore something on the "left" agenda, but in fact regulation is not necessarily left but anti-libertarian. Conservativism, as distinct from libertarianism, has always been suspicious of free wheeling capitalism. What conservatives approve of is competitiveness, something the left generally opposes (see my observations about labour supply cartels). A competitive character is a strong character. It is something in the blood. Freedom of contract, on the other hand, is an abstraction. And make no mistake, excessive abstraction is the root cause of the current crisis, when viewing from the most philosophical level.
A lot of regulations serve the leftist agenda of protecting favoured groups from competition. We do not need any more of that. But we could use more regulation that protects people from themselves. People have an inordinate capacity to create layers of abstraction that while theoretically designed to raise one's perspective from the concrete and immediate, often end up looping back to themselves in obscure ways such that one's perception is clouded by a false confidence. I have often preferred literature to formal philosophy because the former is more rooted (as an aside, I do not think the fact the Anglosphere is fertile ground to both analytical philosophy and exotic financial derivatives a coincidence). As novelist Joseph Conrad, very much a cultural conservative in temperament, wrote
Hang ideas! They are tramps, vagabonds, knocking at the back-door of your mind, each taking a little of your substance, each carrying away some crumb of that belief in a few simple notions you must cling to if you want to live decently and would like to die easy!
But it took two to tango here. Whereas the financiers blinded themselves via too much modeling and too little sense, the borrowers freely contracted with the bankers in order to satisfy their own consumption interests.
If I am getting too metaphysical here, it is because the continual search for an economic (or "abstract") explanation and/or solution is itself not going to be very satisfying if abstract models are themselves part of the problem. Economics does have a model for freedom of contract problems, namely, externalities (and externalities call for anti-libertarian policies). But this was not really a problem like a consumer and a producer freely contracting to dump the pollution associated with production on a third party. The categories are not so rigid. To a large degree, the third party here was the financiers themselves. It was the layers of abstraction that facilitated the inability (or unwillingness) to see that the music could stop and that it was themselves who could be left without a chair.
