(UPDATE:  At the outset, two views a bit different, though not completely different, from mine.  View 1 and View 2)

I have written some things about the “discrimination” problem in Indiana, and the reaction of many people.

Like this.  And this.

But I wanted to take a more serious, and comprehensive, perspective here.  Some preliminaries.

First, there is a fundamental freedom of association, both the choice of whom to associate with, and also with whom not to associate.  Acting as a private person, this right is at the core of civil liberties, both in politics and in economic contracts.

Second, a clear, venerable, and useful common law doctrine is the “implied contract” associated with being open for business.  This is is in the realm not of private individual, but of a commercial enterprise.  I advertise prices and goods/services, and when someone makes a valid offer I have substantial–not absolute, but substantial–obligations to honor the offer implied by my being “open for business.”  For me not to act on the advertised terms is a kind of “bait and switch,” bordering on fraud.  So, for example, if I open a pizza restaurant with prices, sizes, and toppings I am obliged to provide such pizza and such toppings at such prices.  If I present a bill where all my prices are arbitrarily doubled, that would violate the contract implied by my posted prices.  There are limits on this: I may run out of toppings, or one topping, I may find that my oven breaks and I can’t cook pizza that night, etc.  Further, I might have the right, under some circumstances, to refuse service to someone who is very drunk, very noisy, or might otherwise prevent other customers from enjoying their pizza.  (UPDATE:  Though one could argue that restaurants are not either “common carriers” or “public accommodations,” though that distinction matters for statutes, as referenced here...)

Third, many services of a more individuated, personal nature are not implied contracts.  If I am an attorney, for example, I may interview a potential client and decide that I do not want to take the case.  And I would have substantial latitude in making such a choice.  If I am a catering business, then if someone comes in and asks me to prepare a contract I might decide, after talking to the person, that I would not want to work with that person and decline to offer a contract.  Note that the fact that I run a catering business does not imply a contract, because the service is individuated, and quite different from a sign posting prices for pizza and toppings.

Here is the Indiana law, or what was the Indiana law.  An excerpt:

Sec. 8. (a)…a governmental entity may not substantially burden a person’s exercise of religion, even if the burden results from a rule of general applicability.

(b) A governmental entity may substantially burden a person’s exercise of religion only if the governmental entity demonstrates that application of the burden to the person:

(1) is in furtherance of a compelling governmental interest; and

(2) is the least restrictive means of furthering that compelling governmental interest.

Sec. 9. A person whose exercise of religion has been substantially burdened, or is likely to be substantially burdened, by a violation of this chapter may assert the violation or impending violation as a claim or defense in a judicial or administrative proceeding, regardless of whether the state or any other governmental entity is a party to the proceeding.

So, a person can make choices based on religious beliefs, even if that belief would violate a “general application” of what otherwise would be a common law obligation to provide service.  And if a person is sued for violating a generally applicable rule, religious belief is a valid defense.  It is not true that the freedom to associate must be subordinated to “public interest” needs, unless that need is very substantial.  So, this claim is absurd.  There are other places to get weddings catered, and pizza is not medical care.  (Though the comparison of gay folks to Nazis seems a little clumsy).

Now, my own view:

I.  It would be wrong to have signs that limit the implied contract associated with offers to do business.  So if a pizza restaurant had prices and toppings listed, but also had a sign that said “No Gays Will Be Served” or “Jews Will Be Charged Double” that cannot be a protected right of association, even if it’s true that the person is a Baptist and thinks gays are evil, or even if the person honestly thinks Jews are evil.  It’s not clear to me that anyone proposed that this would be an application of the Indiana law, mind you, but I would not concede that such things could be protected.

II.  It would not be wrong for a caterer to decide not to extend a contract for the kind of individuated service implied an agreement to cater a wedding, or to photograph a wedding.  Those are much more personal and individual contracts, and no one should be compelled against his/her will to perform such services.  No reason need be given.

III.  The Indiana law is trying to take this out of “Don’t ask, don’t tell” territory into an area where a reason could be given.  “I’m sorry, but I do not support the idea of gay marriage, and I would not be comfortable in catering/photographing your wedding.”  Oddly, the person would also have to document, potentially, that this belief has explicitly religious rather than other foundations.  This is odd because one could imagine an atheist who also happens to oppose, for whatever reason, gay marriage.  It might appear that this would not be a protected assertion of the right to free association, in Indiana.  Only religious reasons are protected.

IV.  That shows you why the Indiana law is so controversial.  But to be fair what Indiana was trying to do is to say that at least religious reasons are valid defenses.  In fact the atheist might well be allowed to decline to associate with clients, but the case would have to be argued on its merits rather than referring to the explicit religious exemption.

V.  So, in particular, the pizza restaurant should already have been protected against being obliged to cater (though not against simply selling, and delivering, if those are normally advertised general services) a same-sex wedding, or in fact any wedding.  Catering is more like an attorney choosing to take (or not) a case than a grocery selling canned goods.  But I object to the “religious exemption,” which is arbitrary, unnecessary, and discriminates against atheists.  The old distinction should apply:  you can’t discriminate in general contract offers, and you have discretion in personal contract offers.  In general offers you need a real reason, based on harm to your business or other customers, and in individuated contracts you don’t need a reason, because it’s up to you.

VI.  Finally, and purely as an obiter dictum, I find it bizarre that so many opponents of the law thoughtlessly assert their universal right to refuse to do business based on their dislike of something.  After all, the question is whether A can refuse to do business with B because of something A does not like about B.  For some reason, if B is gay, and that makes A unwilling to enter into an individuated, personal contract with B, that is illegal discrimination.  But if C then refuses to do business with A, that is somehow acceptable, and even noble.  If C’s beliefs can justify a boycott of A, then A’s beliefs can justify a boycott of B.  We can’t be in the business of judging whether people’s reasons are good enough.  The freedom of association is not contingent on “if I have good reasons.”

Boycotts by opponents to the Indiana law are baldly asserting the very right they want to deny to the people of Indiana. More fundamentally, the same right–freedom of association–that allows gay marriage (which I strongly support) also protects people who don’t want to cater that wedding.  In other words, this.

(NOTE:  UPDATED 11 am 4-5-15 to correct typos and infelicities)

(NOTE:  A response from David Henderson, over at EconLib…)