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Property Rights And Liability Rules: The Ex Ante View Of The Cathedral, Lucian Arye Bebchuk
Property Rights And Liability Rules: The Ex Ante View Of The Cathedral, Lucian Arye Bebchuk
Michigan Law Review
This Article aims to contribute to the study of how the law should allocate and protect entitlements in the presence of externalities. In their classic article published thirty years ago, Calabresi and Melamed studied such questions and offered what they labeled "one view of the Cathedral." I seek to add to the inquiry started by Calabresi and Melamed by offering an ex ante perspective and analyzing how allocations of entitlements affect parties' ex ante actions and investments. Suppose that an upstream Factory would benefit from an activity that would pollute a river and harm an activity conducted by a downstream …
Optimal Delegation And Decoupling In The Design Of Liability Rules, Ian M. Ayres, Paul M. Goldbart
Optimal Delegation And Decoupling In The Design Of Liability Rules, Ian M. Ayres, Paul M. Goldbart
Michigan Law Review
Calabresi and Melamed began a scholarly revolution by showing that legal entitlements have two readily distinguishable forms of protection: property rules and liability rules. These two archetypal forms protect an entitlement holder's interest in markedly different ways - via deterrence or compensation. Property rules protect entitlements by trying to deter others from taking. Liability rules, on the other hand, protect entitlements not by deterring but by trying to compensate the victim of nonconsensual takings. Accordingly, the compensatory impetus behind liability rules focuses on the takee's welfare - making sure the sanction is sufficient to compensate the takee. The deterrent impetus …