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. \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

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

Surveillance, discretion and governance in automated welfare:The case of the German ALLEGRO System

Several scholarly studies and journalistic investigations have found that automated decision-making in welfare systems burdens claimants by forecasting their behaviour, targeting them for sanctions and surveillance and punishing them without revealing the underlying mechanisms driving such decisions. This article develops an analytical framework combining three areas of concern regarding automation: how it might introduce surveillance and social sorting, how it can entail the loss of human discretion, and how it requires new systems of governance and due process. This framework steers investigations into whether and how automated decision-making welfare systems introduce new harms and burdens for claimants. A case study on automation processes in Germany’s unemployment benefit service’s IT system ALLEGRO applies this approach and finds that this system does allow for broad human discretion and avoids some forms of surveillance, such as risk-assessments from historic data, though it nevertheless increases surveillance of claimants through sharing data with external agencies. The developed framework also suggests that concerns raised in one area – whether loss of human discretion, surveillance, or lack of due process – can be mitigated by attending to the other two areas and urges researchers and policy-makers to attend to the mitigating or reinforcing factors of each concern

Continuous Self-Similarity and SS-Duality

We study the spherically symmetric collapse of the axion/dilaton system coupled to gravity. We show numerically that the critical solution at the threshold of black hole formation is continuously self-similar. Numerical and analytical arguments both demonstrate that the mass scaling away from criticality has a critical exponent of $\gamma = 0.264$.Comment: 17 pages, harvmac, six figures uuencoded in separate fil

A neural based intelligent flight control system for the NASA F-15 flight research aircraft

A flight control concept that can identify aircraft stability properties and continually optimize the aircraft flying qualities has been developed by McDonnell Aircraft Company under a contract with the NASA-Dryden Flight Research Facility. This flight concept, termed the Intelligent Flight Control System, utilizes Neural Network technology to identify the host aircraft stability and control properties during flight, and use this information to design on-line the control system feedback gains to provide continuous optimum flight response. This self-repairing capability can provide high performance flight maneuvering response throughout large flight envelopes, such as needed for the National Aerospace Plane. Moreover, achieving this response early in the vehicle's development schedule will save cost

Observation of a subgap density of states in superconductor-normal metal bilayers in the Cooper limit

We present transport and tunneling measurements of Pb-Ag bilayers with thicknesses, $d_{Pb}$ and $d_{Ag}$, that are much less than the superconducting coherence length. The transition temperature, $T_c$, and energy gap, $\Delta$, in the tunneling Density of States (DOS) decrease exponentially with $d_{Ag}$ at fixed $d_{Pb}$. Simultaneously, a DOS that increases linearly from the Fermi energy grows and fills nearly 40% of the gap as $T_c$ is 1/10 of $T_c$ of bulk Pb. This behavior suggests that a growing fraction of quasiparticles decouple from the superconductor as $T_c$ goes to 0. The linear dependence is consistent with the quasiparticles becoming trapped on integrable trajectories in the metal layer.Comment: 5 pages and 4 figures. This version is just the same as the old version except that we try to cut the unnecessary white space in the figures and make the whole paper look more compac