Property Rules and Liability Rules: The Cathedral in Another Light

Ronald Coase\u27s essay on The Problem of Social Cost introduced the world to transaction costs, and the introduction laid the foundation for an ongoing cottage industry in law and economics. And of all the law-and-economics scholarship built on Coase\u27s insights, perhaps the most widely known and influential contribution has been Calabresi and Melamed\u27s discussion of what they called property rules and liability rules. \u27 Those rules and the methodology behind them are our subjects here. We have a number of objectives, the most basic of which is to provide a much needed primer for those students, scholars, and lawyers who are interested but not particularly fluent in the economic analysis of law. Like Coase before them, Calabresi and Melamed figure regularly in the work of the legal academy, but-again like Coase before them-their ideas are not understood as well as they should be, notwithstanding an excellent explanation by Professor Polinsky published some fifteen years ago. Since Polinsky\u27s contributions have been all too routinely ignored, we shall restate several of his central points emphatically. But we also take issue with parts of Polinsky\u27s analysis, and we aim, in any event, to extend his account, and the literature on property rules and liability rules generally, into previously undiscovered territory. In Parts I and II we set out first the background and next the conventional understanding of the four rules that figure in the work of Calabresi and Melamed. Then, in Part II, the centerpiece of our discussion, we shift from description to critique and from the familiar to the novel. We question some of the typical thinking about transaction costs, and about objective versus subjective accounts of reality (as in objective versus subjective damages). We consider the irony in the standard analysis of extortion and the paradox of Calabresi and Melamed\u27s so-called rule four of reverse damages. We present a way out of the paradox-namely reverse-reverse damages, or what we prefer to call the double reverse twist -and in the course of doing so introduce a best-chooser principle that adds a new element to the conventional methodology. We then use the best-chooser principle to show that much that seems strange in our account is in fact familiar, provided one thinks about legal institutions in a sufficiently systematic way. Throughout, we mean to be both constructive and critical, trying to enhance a useful method of legal analysis but at the same time questioning whether the method, rightly understood, entices its practitioners into a game not worth the candle. So there is a tension in our account. It is addressed in the Conclusion

The Cathedral\u27 at Twenty-Five: Citations and Impressions

It was twenty-five years ago that Guido Calabresi and Douglas Melamed published their article on property rules, liability rules, and inalienability\u27 Calabresi, then a law professor, later a dean, is now a federal judge. Melamed, formerly a student of Calabresi\u27s, is now a seasoned Washington attorney. Their article-which, thanks to its subtitle, we shall call The Cathedral-has had a remarkable influence on our own thinking, as we tried to show in a recent paper2 This is not the place to rehash what we said then, but a summary might be in order. First, we demonstrated that the conventional wisdom about liability (damage) rules, that judges should use them when transaction costs are high, is incorrect, because the costs of assessing damages might in fact be higher still; if they are, property (injunction) rules are superior; at least from the standpoint of efficiency Second, and relatedly, we identified problems of correlation and synergy that come into play as one tries to choose between damages and injunctive relief. Correlation problems arise because the same considerations that yield high transaction costs usually yield high assessment costs as well; synergy problems arise because the use of damage rules can inhibit the development of more effective bargaining practices. Third, we showed that Calabresi and Melamed\u27s celebrated Rule 4 (reverse damages) contains a paradox, which we went on to resolve by inventing reverse-reverse damages (the double reverse twist ). The trick of the double reverse twist relates to our fourth point, having to do with a best-chooser axiom which can be used to illuminate matters of institutional (not just judicial) design generally Finally, we suggested in conclusion the relationship of much of the foregoing to relevant literature in other disciplines

Property Rules and Liability Rules: The Cathedral in Another Light

Ronald Coase\u27s essay on The Problem of Social Cost introduced the world to transaction costs, and the introduction laid the foundation for an ongoing cottage industry in law and economics. And of all the law-and-economics scholarship built on Coase\u27s insights, perhaps the most widely known and influential contribution has been Calabresi and Melamed\u27s discussion of what they called property rules and liability rules. Those rules and the methodology behind them are our subjects here. We have a number of objectives, the most basic of which is to provide a much needed primer for those students, scholars, and lawyers who are interested but not particularly fluent in the economic analysis of law. Like Coase before them, Calabresi and Melamed figure regularly in the work of the legal academy, but—again like Coase before them—their ideas are not understood as well as they should be, notwithstanding an excellent explanation by Professor Polinsky published some fifteen years ago. Since Polinsky\u27s contributions have been all too routinely ignored, we shall restate several of his central points emphatically. But we also take issue with parts of Polinsky\u27s analysis, and we aim, in any event, to extend his account, and the literature on property rules and liability rules generally, into previously undiscovered territory. In Parts I and II we set out first the background and next the conventional understanding of the four rules that figure in the work of Calabresi and Melamed. Then, in Part III, the centerpiece of our discussion, we shift from description to critique and from the familiar to the novel. We question some of the typical thinking about transaction costs, and about objective versus subjective accounts of reality (as in objective versus subjective damages). We consider the irony in the standard analysis of extortion and the paradox of Calabresi and Melamed\u27s so-called rule four of reverse damages. We present a way out of the paradox—namely reverse-reverse damages, or what we prefer to call the double reverse twist —and in the course of doing so introduce a best-chooser principle that adds a new element to the conventional methodology. We then use the best-chooser principle to show that much that seems strange in our account is in fact familiar, provided one thinks about legal institutions in a sufficiently systematic way. Throughout, we mean to be both constructive and critical, trying to enhance a useful method of legal analysis but at the same time questioning whether the method, rightly understood, entices its practitioners into a game not worth the candle. So there is a tension in our account. It is addressed in the Conclusion

The Cathedral at Twenty-Five: Citations and Impressions

It was twenty-five years ago that Guido Calabresi and Douglas Melamed published their article on property rules, liability rules, and inalienability. Calabresi, then a law professor, later a dean, is now a federal judge. Melamed, formerly a student of Calabresi\u27s, is now a seasoned Washington attorney. Their article—which, thanks to its subtitle, we shall call The Cathedral—has had a remarkable influence on our own thinking, as we tried to show in a recent paper. This is not the place to rehash what we said then, but a summary might be in order. First, we demonstrated that the conventional wisdom about liability (damage) rules, that judges should use them when transaction costs are high, is incorrect, because the costs of assessing damages might in fact be higher still; if they are, property (injunction) rules are superior, at least from the standpoint of efficiency. Second, and relatedly, we identified problems of correlation and synergy that come into play as one tries to choose between damages and injunctive relief. Correlation problems arise because the same considerations that yield high transaction costs usually yield high assessment costs as well; synergy problems arise because the use of damage rules can inhibit the development of more effective bargaining practices. Third, we showed that Calabresi and Melamed\u27s celebrated Rule 4 (reverse damages) contains a paradox, which we went on to resolve by inventing reverse-reverse damages (the double reverse twist ). The trick of the double reverse twist relates to our fourth point, having to do with a best-chooser axiom which can be used to illuminate matters of institutional (not just judicial) design generally. Finally, we suggested in conclusion the relationship of much of the foregoing to relevant literature in other disciplines

Property Rules and Liability Rules: The Cathedral in Another Light

Ronald Coase\u27s essay on The Problem of Social Cost introduced the world to transaction costs, and the introduction laid the foundation for an ongoing cottage industry in law and economics. And of all the law-and-economics scholarship built on Coase\u27s insights, perhaps the most widely known and influential contribution has been Calabresi and Melamed\u27s discussion of what they called property rules and liability rules. Those rules and the methodology behind them are our subjects here. We have a number of objectives, the most basic of which is to provide a much needed primer for those students, scholars, and lawyers who are interested but not particularly fluent in the economic analysis of law. Like Coase before them, Calabresi and Melamed figure regularly in the work of the legal academy, but—again like Coase before them—their ideas are not understood as well as they should be, notwithstanding an excellent explanation by Professor Polinsky published some fifteen years ago. Since Polinsky\u27s contributions have been all too routinely ignored, we shall restate several of his central points emphatically. But we also take issue with parts of Polinsky\u27s analysis, and we aim, in any event, to extend his account, and the literature on property rules and liability rules generally, into previously undiscovered territory. In Parts I and II we set out first the background and next the conventional understanding of the four rules that figure in the work of Calabresi and Melamed. Then, in Part III, the centerpiece of our discussion, we shift from description to critique and from the familiar to the novel. We question some of the typical thinking about transaction costs, and about objective versus subjective accounts of reality (as in objective versus subjective damages). We consider the irony in the standard analysis of extortion and the paradox of Calabresi and Melamed\u27s so-called rule four of reverse damages. We present a way out of the paradox—namely reverse-reverse damages, or what we prefer to call the double reverse twist —and in the course of doing so introduce a best-chooser principle that adds a new element to the conventional methodology. We then use the best-chooser principle to show that much that seems strange in our account is in fact familiar, provided one thinks about legal institutions in a sufficiently systematic way. Throughout, we mean to be both constructive and critical, trying to enhance a useful method of legal analysis but at the same time questioning whether the method, rightly understood, entices its practitioners into a game not worth the candle. So there is a tension in our account. It is addressed in the Conclusion

The Cathedral\u27 at Twenty-Five: Citations and Impressions

It was twenty-five years ago that Guido Calabresi and Douglas Melamed published their article on property rules, liability rules, and inalienability\u27 Calabresi, then a law professor, later a dean, is now a federal judge. Melamed, formerly a student of Calabresi\u27s, is now a seasoned Washington attorney. Their article-which, thanks to its subtitle, we shall call The Cathedral-has had a remarkable influence on our own thinking, as we tried to show in a recent paper2 This is not the place to rehash what we said then, but a summary might be in order. First, we demonstrated that the conventional wisdom about liability (damage) rules, that judges should use them when transaction costs are high, is incorrect, because the costs of assessing damages might in fact be higher still; if they are, property (injunction) rules are superior; at least from the standpoint of efficiency Second, and relatedly, we identified problems of correlation and synergy that come into play as one tries to choose between damages and injunctive relief. Correlation problems arise because the same considerations that yield high transaction costs usually yield high assessment costs as well; synergy problems arise because the use of damage rules can inhibit the development of more effective bargaining practices. Third, we showed that Calabresi and Melamed\u27s celebrated Rule 4 (reverse damages) contains a paradox, which we went on to resolve by inventing reverse-reverse damages (the double reverse twist ). The trick of the double reverse twist relates to our fourth point, having to do with a best-chooser axiom which can be used to illuminate matters of institutional (not just judicial) design generally Finally, we suggested in conclusion the relationship of much of the foregoing to relevant literature in other disciplines

Photoluminescence studies of individual and few GaSb/GaAs quantum rings

We present optical studies of individual and few GaSb quantum rings embedded in a GaAs matrix. Contrary to expectation for type-II confinement, we measure rich spectra containing sharp lines. These lines originate from excitonic recombination and are observed to have resolution-limited full-width at half maximum of 200 µeV. The detail provided by these measurements allows the characteristic type-II blueshift, observed with increasing excitation power, to be studied at the level of individual nanostructures. These findings are in agreement with hole-charging being the origin of the observed blueshif