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Full-Text Articles in Law
Coasean Bargaining In Consumer Bankruptcy, Edward R. Morrison
Coasean Bargaining In Consumer Bankruptcy, Edward R. Morrison
Faculty Scholarship
During my first weeks as a graduate student in economics, a professor described the Coase Theorem as “nearly a tautology:” Assume a world in which bargaining is costless. If there are gains from trade, the Theorem tells us, the parties will trade. The initial assignment of property rights will not affect the final allocation because the parties will bargain (costlessly) to an efficient outcome. “How can that be a theorem?,” I remember thinking at the time.
Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith
Making Coasean Property More Coasean, Thomas W. Merrill, Henry E. Smith
Faculty Scholarship
In his pioneering work on transaction costs, Ronald Coase presupposed a picture of property as a bundle of government-prescribed use rights. Not only is this picture not essential to Coase’s purpose, but its limitations emerge when we apply Coase’s central insights to analyze the structure of property itself. This leads to the Coase corollary: in a world of zero transaction costs, the nature of property does not matter to allocative efficiency. However, as with the Coase theorem, the real implication is for our world of positive transaction costs: we need to subject the notion of property to a comparative institutional …
Incomplete Contracts And The Theory Of Contract Design, Robert E. Scott, George G. Triantis
Incomplete Contracts And The Theory Of Contract Design, Robert E. Scott, George G. Triantis
Faculty Scholarship
We are delighted to accept this invitation to write a short essay on the economic theory of incomplete contracts and to illuminate its current and potential impact on the legal analysis of contracts and contract law. Economic contract theory has made significant inroads in legal scholarship over the past fifteen years, and this is a good time to take stock of its strengths and weaknesses. Several recent publications in the Yale Law Journal have offered evaluations of the contributions of contract theory.' In this essay, we offer our opinion as to its future path in legal scholarship. In particular, we …
Taking Private Ordering Seriously, Avery W. Katz
Taking Private Ordering Seriously, Avery W. Katz
Faculty Scholarship
In recent years, the rules and practices of private groups have attracted substantial attention within the field of law and economics. In applications ranging from Robert Ellickson's seminal work on rancher/farmer relations in Shasta County, California, to Lisa Bernstein's investigation of extralegal contractual relations among wholesale diamond traders, to Robert Cooter's study of aboriginal customs in Papua New Guinea, to Robert Scott and Alan Schwartz's analysis of the rulemaking procedures of the American Law Institute, an increasing number of legal and economic scholars have shown how private systems of rules work to regulate economic relations among the communities that adopt …
Of Posin And Pigs, Of Coase And Cost, Of Profits Gained And Opportunities Lost, Stephen G. Marks
Of Posin And Pigs, Of Coase And Cost, Of Profits Gained And Opportunities Lost, Stephen G. Marks
Faculty Scholarship
In his article, "The Coase Theorem: If Pigs Could Fly," Professor Daniel Posin purports to demonstrate that the Coase Theorem fails because it incorrectly accounts for opportunity costs. This short paper will demonstrate that there is a mistake in the example Posin uses to prove his assertion. Although the mistake is a small one, it completely drives his result. In fact, after correcting the mistake, Posin's example corroborates, rather than refutes, the Coase Theorem.
Rethinking The Theory Of Legal Rights, Jules S. Coleman, Jody S. Kraus
Rethinking The Theory Of Legal Rights, Jules S. Coleman, Jody S. Kraus
Faculty Scholarship
In the economic approach to law, legal rights are designed, in part, to overcome the conditions under which markets fail. In correcting for market failure, economic analysis endorses two rules for assigning legal rights. The first specifies the allocation of rights under conditions of rational cooperation, full information and zero transaction costs. Provided that exchange is available and that obstacles to exercising it are insignificant, rational cooperators will negotiate around inefficiencies. Under these conditions, legal rights are not assigned in order to establish optimal levels of resource deployment directly; rather, they establish well-defined entitlements or negotiation points which create a …