Law Commons^™

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.

Draft Of The Concept Of "Harm" In Copyright - 2013, Wendy J. Gordon

Scholarship Chronologically

This essay examines the tort of copyright infringement. It argues that the ideas of "harm" and "fault" already play a role in the tort’s functioning, and that an ideally reformulated version of the tort should perhaps give a more significant role to “harm.” The essay therefore examines what “harm” can or should mean, reviewing four candidates for cognizable harm in copyright law (rivalry-based losses, foregone fees, loss of exclusivity, and subjective distress) and canvassing three philosophical conceptions of “harm” (counterfactual, historical-worsening, and noncomparative). The essay identifies the appropriateness vel non of employing, in the copyright context, each harm-candidate and each …

Coase Minus The Coase Theorem--Some Problems With Chicago Transaction Cost Analysis, Pierre Schlag

Publications

In law as well as economics, the most well-known aspect of Coase's "The Problem of Social Cost," is the Coase Theorem. Over the decades, that particular notion has morphed into a crucial component of Chicago law and economics--namely, transaction cost analysis.

In this Article, I deliberately bracket the Coase Theorem to show that "The Problem of Social Cost" contains far more interesting and unsettling lessons--both for law as well as for economics. Indeed, while Coase's arguments clearly target the Pigouvian attempts to "improve on the market" through government correctives, there is, lurking in those arguments, a much more profound critique …

Stochastic Constraint, Neal K. Katyal

Georgetown Law Faculty Publications and Other Works

This essay reviews Power and Constraint: The Accountable Presidency After 9/11 by Jack Goldsmith (2012).

With The Terror Presidency, Professor Jack Goldsmith wrote, hands down, the very best analysis of the national security issues surrounding President George W. Bush's tenure. In Power and Constraint: The Accountable Presidency After 9/11, Goldsmith returns to the same set of problems, but adopts a different tack. He argues that the modern wartime Executive is constrained in new ways beyond the traditional system of checks and balances, and that these new constraints combine to create an effective system that checks executive power. Though …

Strategic Spillovers, Daniel B. Kelly

Journal Articles

The conventional problem with externalities is well known: Parties often generate harm as an unintended byproduct of using their property. This Article examines situations in which parties may generate harm purposely, in order to extract payments in exchange for desisting. Such “strategic spillovers” have received relatively little attention, but the problem is a perennial one. From the “livery stable scam” in Chicago to “pollution entrepreneurs” in China, parties may engage in externality-generating activities they otherwise would not have undertaken, or increase the level of harm given that they are engaging in such activities, to profit through bargaining or subsidies. This …

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 …

Of Coase, Calabresi, And Optimal Tax Liability, Kyle D. Logue, Joel Slemrod

Articles

The Article proceeds as follows. Part II offers a primer on the Coase Theorem, beginning with the classic case of neighbor externalizing on neighbor (farmer and rancher), and it explains the basic invariance propositions. Part III shifts the focus to Coasean situations involving buyers and sellers in a market or contractual relationship, buyers and sellers whose market interactions cause harm to third parties. Using supply-and-demand diagrams, we illustrate (in a new way) some of the most basic findings of the economic analysis of law, including both the Coasean invariance and efficiency propositions and the Calabresian least-cost avoider idea. Also in …

The Coase Theorem And Arthur Cecil Pigou, Herbert J. Hovenkamp

All Faculty Scholarship

In "The Problem of Social Cost" Ronald Coase was highly critical of the work of Cambridge University Economics Professor Arthur Cecil Pigou, presenting him as a radical government interventionist. In later work Coase's critique of Pigou became even more strident. In fact, however, Pigou's Economics of Welfare created the basic model and many of the tools that Coase's later work employed. Much of what we today characterize as the "Coase Theorem," including the relevance of transaction costs, externalities, and bilateral monopoly, was either stated or anticipated in Pigou's work. Further, Coase's extreme faith in private bargaining led him to fail …

Data Mining And Attention Consumption, Eric Goldman

Faculty Publications

This Essay challenges the prevailing hostility towards data mining and direct marketing. The Essay starts by defining data mining and shows that the only important step is how data is used, not its aggregation or sorting. The Essay then discusses one particular type of data use, the sending of direct marketing. The Essay establishes a model for calculating the private utility experienced by a direct marketing recipient. The model posits that utility is a function of the message's substantive content, the degree of attention consumed, and the recipient's reaction to receiving the message. The Essay concludes with some policy recommendations …

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 …

Remedies And The Psychology Of Ownership, Jeffrey J. Rachlinski, Forest Jourden

Cornell Law Faculty Publications

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 …

Blackmail And Transactional Structure - 1992, Wendy J. Gordon

Scholarship Chronologically

The Coase Theorem operates in a world where mistaken allocations can be cured by trade. But blackmail involves two areas where mistaken allocations are likely to be permanent: free speech and reputation.

Preliminary Notes On Blackmail Piece For University Of Pennsylvania - 1992, Wendy J. Gordon

Scholarship Chronologically

There are several potential insights whose interrelationship I'd like to explore. First, some allocation of rights are not likely to be transferable. Two of the major interests involved in blackmail--namely, reputation and free speech--are of this type. This may in itself help to explain some of the paradox of blackmail.

Post-Revolutionary Law And Economics:A Foreword To The Symposium, Anthony D'Amato

Faculty Working Papers

The Lanec (short for Law and Economics) movement of the 1970s hit the legal landscape like a nuclear device and permanently irradiated it. A couple of decades later, as we sift through the fallout, we are entitled to ask whether anything fundamental has changed. Every contributor to this Symposium seems to answer yes. Maybe they're like the book reviewer who believes deep in her heart that the book is worthless, but if she reveals it the editor will conclude that there is no point in printing her review. Let me put my own biases on the table. In general I …

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.

The Problem Of Transaction Costs, Pierre Schlag

Publications

No abstract provided.

Missing Pieces: A Cognitive Approach To Law, Pierre Schlag

Publications

No abstract provided.

A Coasean Experiment On Contract Presumptions, Stewart J. Schwab

Cornell Law Faculty Publications

Despite the theoretical importance of the Coase Theorem, scholars have given surprisingly little attention to verifying its predictions empirically. Supporters often accept the theorem as dogma, while armchair critics assail its assumptions. In an exciting series of recent articles, however, Elizabeth Hoffman and Matthew Spitzer have presented experimental evidence, as have others, that largely supports the Coasean prediction that bargainers will negotiate around inefficient property rights to reach a Pareto-optimal solution. The methodology has even gained sufficient attention to have its detractors.

The existing experiments analyze the results of bargains when one side has the power to impose unilaterally one …

Coase And The Courts: Economics For The Common Man, Barbara Ann White

All Faculty Scholarship

The arguments collectively known as the Coase Theorem criticize the judicial policy of requiring businesses to ‘internalize’ their external costs of production, i.e., pay for the social costs their production incurs such as environmental or noise pollution. Coase argues that the policy of internalization often leads to economic inefficiency rather than efficiency maximization, contrary to what Pigouvian economic analysis asserts. The right to be free of the external costs of production ought to be based, instead, on Coase’s total product rule: Courts should allocate rights according to what maximizes overall total production and thereby maximize social welfare.

Coasian analysis has …

The Brilliant, The Curious, And The Wrong, Pierre Schlag

Publications

No abstract provided.

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 …

The Politics Of The Coase Theorem And Its Relationship To Modern Legal Thought, Donald H. Gjerdingen

Articles by Maurer Faculty

No abstract provided.

The Coase Theorem And The Psychology Of Common-Law Thought, Donald H. Gjerdingen

Articles by Maurer Faculty

The Coase Theorem is a simple proposition-in the absence of transaction costs, a Pareto optimal result will occur regardless of the initial placement of legal liability. Despite this apparent simplicity, however, Coase's economic parable has provoked intense debate in the legal community. Why does the theorem grate on the hardened intuitions of so many lawyers? The thesis of this Article is that a connection exists between the adoption or rejection of a given school of legal thought and the use of certain psychological constructs. Specifically, this Article argues that the constructs underlying the Coase Theorem are incompatible with those underlying …

The Problem Of Social Cost Revisited, Donald H. Regan

Articles

SOME years ago, in a paper entitled "The Problem of Social Cost," Professor Ronald Coase asserted and argued for a proposition which has since acquired the convenient sobriquet "the Coase Theorem." The proposition is: That in a world of perfect competition, perfect information, and zero transaction costs, the allocation of resources in the economy will be efficient and will be unaffected by legal rules regarding the initial impact of costs resulting from externalities. Note that there are two claims being made, which it is well to separate for purposes of discussion. The first claim is that, under the conditions described, …