The Social Contract, Explained

On Saturday morning, March 16, 2013, Cypriots woke to news that their government had agreed to seize a percentage of every bank deposit in the country.^[1] Accounts were already frozen. The money people had earned and saved, trusted to the banking system, was being taken. Not through taxation, not through legal process. A levy announced overnight, accounts locked before anyone could react.

The initial proposal demanded 6.75% of insured deposits. Insured. The deposits the government had explicitly guaranteed were safe. One Cypriot teacher, interviewed during the crisis, asked the question everyone was thinking: "Should I be hopeful or worried?"

The Cypriot parliament rejected the measure unanimously. Banks remained closed for twelve days while politicians scrambled for alternatives. But the damage was done. The implicit agreement between citizens and their financial system had been revealed as conditional, its terms never clearly stated until the moment of violation.

Eurogroup President Jeroen Dijsselbloem called the approach a "template" for future crises.^[2] The message was clear: what happened in Cyprus could happen anywhere. Your deposits, your savings, your financial security exist at the pleasure of institutions that can change the rules overnight.

This is what social contract violation looks like when it stops being philosophy and becomes someone's empty bank account.

The social contract is the implicit agreement that makes society function. We follow certain rules, accept certain constraints, and in return receive protection, infrastructure, and the benefits of collective organization. The concept has occupied philosophers for centuries, each offering a different vision of what we've agreed to and why.

Thomas Hobbes argued that life without organized society is chaos, a war of all against all. We surrender freedom to authority in exchange for protection from each other. The social contract as necessary submission.

John Locke took a different view. We possess natural rights that exist before and independent of government. The purpose of the social contract is to protect those rights, not to grant them. When government violates the trust placed in it, Locke wrote in his Second Treatise, "the trust must necessarily be forfeited, and the power devolve into the hands of those that gave it."^[3]

Jean-Jacques Rousseau saw the social contract as a path to collective freedom. "Obedience to a law which we prescribe to ourselves is liberty," he wrote.^[4] The contract should express the general will of participants, not impose the preferences of the powerful.

These three visions describe different aspects of the same problem. Hobbes describes the reality of force. Locke describes the moral limits that should constrain it. Rousseau describes how participation could transform constraint into freedom. None of them solve the fundamental issue: traditional social contracts are implicit, imposed by birth, and revealed only when violated.

Take the libertarian critique seriously for a moment. You never signed anything. The terms of your citizenship were written by people long dead or currently in power. Your options are compliance or emigration, and emigration just moves you to a different imposed contract somewhere else.

The conventional response is that you implicitly consent by benefiting from society. You use the roads, you benefit from the contract. But this argument has a problem: benefit doesn't equal consent. A prisoner benefits from meals. That doesn't make imprisonment voluntary.

The issue with implicit contracts runs deeper than legitimacy questions. When terms go unstated, they can be changed without notice. The Cypriots who trusted their banks had entered an agreement they never saw, with conditions they never knew, violated by institutions they thought were protecting them. Implicit contracts are easier to break because there's nothing written down to point to.

Paradigm Shift International takes a different approach. Our social contract is explicit. You can read it. You sign it knowingly when you join, understanding what you're agreeing to and what you receive in return.

We already sign explicit agreements constantly. Every Terms of Service is technically a social contract. But ToS agreements are take-it-or-leave-it impositions written by corporate lawyers to protect corporations. PSI's contract is readable, negotiable, and designed to protect participants. You can actually influence the terms through governance rather than accepting whatever a legal department decided.

The contract functions as a foundation layer, the core agreement that binds everyone in the community. Groups within PSI can add additional terms for their specific contexts, but the foundation remains shared.

How does enforcement work without courts and police? Through reputation and economic consequence. Break the contract, lose standing in the community and access to its benefits. This is how trust networks have always functioned, from merchant guilds to professional associations. PSI adds transparency: you know the consequences before you sign.

When you join PSI, you read and sign an actual document. You know what you're agreeing to. You know what you receive. You know what happens if terms are violated.

You can view the current version of our social contract here.