Blackmail

Suppose Adam sees Bob commit an act of infidelity. If Bob's spouse Cathy were told about this act, Cathy would be very upset and would likely divorce Bob, causing him pain and also economic damage from the divorce settlement.

Adam resolves to tell Cathy about Bob's philandering. But Bob learns of Adam's plan, and intercepts him. One of six things happens....

a. Bob tells Adam this was the first time, it was a mistake, the fling means nothing to him. Adam thinks it over, but decides it is not fair to keep this information from Cathy, so he tells her though Adam begs him not to tell.

b. Bob tells Adam this was the first time, it was a mistake, the fling means nothing to him. Adam thinks it over, is persuaded of Bob's truthfulness and genuine contrition, and decides not to tell Cathy after all.

c. Bob tells Adam this was the first time, it was a mistake, and Bob volunteers, without any mention from Adam, to contribute $10,000 to Adam's favorite charity, a homeless kitchen that is short of cash now because of the recession. Adam thinks it over and decides not to tell Cathy after all. Bob pays the money to the charity.

d. Bob tells Adam this was the first time, it was a mistake. Adam says, "You know, I have some friends at a homeless kitchen that really need money. If you contribute $10,000 to the homeless kitchen, I agree not to tell Cathy." Bob pays the money to the charity.

e. Bob tells Adam this was the first time, it was a mistake, and Bob will deposit $10,000 in Adam's bank account. Adam thinks it over and decides not to tell Cathy after all. Bob pays the money to Adam.

f. Bob tells Adam this was the first time, it was a mistake. Adam says, "You know, I could really some extra money; I'm a little short this month. If you $10,000 in my bank account, I agree not to tell Cathy." Bob pays the money to Adam's bank account.

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In all these examples, Bob is trying to obtain a service from Adam. Most people would say that either action A or action B are acceptable, because Adam has to use his judgment. There is nothing illegal about telling, or about not telling, Cathy.

Is C okay? After all, Bob is proposing to pay for a legal service from Adam; the only thing that is illegal is (perhaps) the act of paying, since the "not telling" is clearly legal.

But if C is okay, why isn't D okay also? In most negotiations, it is not immoral to make a counteroffer, so long as the other party is not coerced to accept it.

What about D and E? Does it matter that Adam, rather than a charity, is to receive the money in exchange for providing a legal service?

Some background....
"Blackmail as a Victimless Crime," by Walter Block and Robert W. McGee. 1999. Bracton Law Journal, Vol. 31, pp. 24-48. PDF file.
"The Logic of the Argument in Behalf of Legalizing Blackmail," by Walter Block. 2001. Bracton Law Journal, Vol. 33, pp. 56-80. PDF file.
"Externalities, Extortion, and Efficiency," by George Daly and J. Fred Giertz. American Economic Review, Dec. 1975.