Contracts are essential to the functioning of modern societies. Oliver Hart's and Bengt Holmström's research sheds light on how contracts help us deal with conflicting interests.\r
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Contracts help us to be cooperative and trusting when we may otherwise be disobliging and distrusting. As employees, we have employment contracts. As borrowers, we have credit contracts. As accident prone owners of valuable property, we have insurance contracts. Some contracts fill less than a page,\r
while others run over hundreds of pages.
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