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

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

Room temperature midinfrared electroluminescence from GaInAsSbP light emitting diodes. .

Room temperature electroluminescence in the midinfrared near 4 µm is reported from GaInAsSbP light emitting diodes grown on GaSb by liquid phase epitaxy. Comparison of the electro- and photoluminescence revealed that light is generated on the p side of the diode. The energy shift (24 meV) is consistent with band gap narrowing and recombination via band tail states due to the Zn doping (1×1018 cm−3) in the p layer of the structure. The temperature dependent behavior of the luminescence and the improved emission intensity was attributed to recombination from localized states arising from electrostatic potential fluctuations due to compositional inhomogeneities in these alloys

Evaluation of the two-photon absorption characteristics of GaSb/GaAs quantum rings

The optical parameters describing the sub-bandgap response of GaSb/GaAs quantum rings solar cells have been obtained from photocurrent measurements using a modulated pseudomonochromatic light source in combination with a second, continuous photo-filling source. By controlling the charge state of the quantum rings, the photoemission cross-sections describing the two-photon sub-bandgap transitions could be determined independently. Temperature dependent photo-response measurements also revealed that the barrier for thermal hole emission from the quantum rings is significantly below the quantum ring localisation energy. The temperature dependence of the sub-bandgap photo-response of the solar cell is also described in terms of the photo-and thermal-emission characteristics of the quantum rings. (C) 2014 AIP Publishing LLC

Low bandgap mid-infrared thermophotovoltaic arrays based on InAs

We demonstrate the first low bandgap thermophotovoltaic (TPV) arrays capable of operating with heat sources at temperatures as low as 345 °C, which is the lowest ever reported. The individual array elements are based on narrow band gap InAs/InAs0.61Sb0.13P0.26 photodiode structures. External power conversion efficiency was measured to be ∼3% from a single element at room temperature, using a black body at 950 °C. Both 25-element and 65-element arrays were fabricated and exhibited a TPV response at different source temperatures in the range 345–950 °C suitable for electricity generation from waste heat and other applications

Nanowires for Room-Temperature Mid-Infrared Emission

InAs-based nanowires hold a promise to offer transformational technologies for infrared photonic applications. Site-controlled InAs nanowire growth on low-cost Si substrates offers the practical integration advantages that silicon photonics benefits from. This includes the realisation of cheap photonic circuitries, light emitters and detectors that are otherwise expensive to realise with III/V material-based substrates. This chapter details the growth development of advanced faceted multi-quantum well structures within InAs nanowires using molecular beam epitaxy. We review the crystal structure for the faceted quantum wells along with an analysis of their optical emission characteristics which shows quantum confinement and localisation of the carriers on the quantum well nanostructure. This enables tuning of the emission wavelength and enhanced emission intensity up to the technologically important room-temperature operation point

Simulation of the enhanced infrared photoresponse of type-II GaSb/GaAs quantum ring solar cells

The extended photo-response of solar cells containing ten periods of GaSb/GaAs quantum rings imbedded in the p-i-n junction has been described using a single-band representation of the type-II quantum ring structure. By fitting the experimental data, the authors were able to deduce that the quantum rings are well represented by a Gaussian height distribution and a large valence band discontinuity. The simulated band of states is shown to be well matched to the photoluminescence analysis of the structure, with the inhomogeneous size distribution resulting in a band of hole states roughly 390 meV above the valence band