TheCrime/TortPuzzleWehavetwolegalsystemstodoessentiallythesamejobYoudosomethingbad,thelegalsystemintervenes,somethingbadhappenstoyouAreasonnottodobadthingsOne,tort,treatsoffensesasoffensesagainstthevictimOne,criminal,treatsoffensesasoffensesagainstthestateThisraisesthreequestionsIsthereagoodreasontohaveboth?Wouldwebebetteroffwithonlyone?Isthereagoodreasontosortoffensesaswedo?Isthereagoodreasontobundlelegalrulesaswedo?ShouldWeAbolishtheCriminalLaw?ImagineapuretortsystemProblemsThevictimmaynothavetheresourcestoprosecute.SomeoffensescausediffuseinjuryOffendersmaybejudgementproofOnecouldhavelegalrulesmakingthatlesslikelyThestatecouldpaythefineandimprisontheoffender—stillmostlytortPotentialvictimscouldcommitinadvancetobuydeterrence,asin18thc.EnglandThefineforacrimeisboththepunishmentforthecriminalandtherewardforthevictimWewanttheoptimalprobability/punishmentpairButsettingthepunishmentsetstheprobability,sinceitdeterminesthepayofftocatchinghimWecannotseparatelycontroltwofunctionswithonevariableThefancysolution,usingprofitmaximizationforanadditionalconstraint,isanarticleonmywebpageThesimpleansweristhattheidenticalproblemexistsforordinarytortlawSortingOffensesDoweallocateoffensescorrectlytothetwosystem?TortlawforoffenseswhereweknowwhodiditLandes/PosnerargumentThateliminatestheprobability/punishmentproblemforcatchingtheoffenderButthechanceofwinningatortsuitdependsonhowmuchyouarewillingtospendJudgementproofargumentIfitishardtocatchtheoffender,weneedabigfinetoprovideadequatedeterrenceWhichtheoffendermaynotbeabletopayAndcatchinghimisexpensive,sowealsoneedabigfinetomakeitworthdoingOntheotherhand,tortsaremorelikelythancrimestobeanonymousvictimAndthetortsweseelitigatedaretheoneseasytodetectBundlingLegalRulesThesamepersoncontrolsprosecutionandcollectsfinesThatmakessense,sinceotherwisethecontrollertakesabribetodropthecaseButitcreatesanopportunityforfraudulentprosecutionMoreefficientpunishmentsgowithalowerstandardofproofMakessense,sinceerrorshavelowersocialcost,but…AnefficientpunishmentisanincentiveforfraudulentprosecutionWhichiseasierwithalowerstandardofproofBurglary,TrafficAccidents,andIncentivesTreatingsomethingasatortreducesthevictim’sincentivetoavoiditSowheretheactcreatesanetcost,makeitacrimeinsteadForinstancetrafficaccidentsWheresomethingisatransferIfthevictimisfullycompensated,noneedforanincentiveforhimtopreventitItwillonlyhappenwhenthegaintotheoffenderisgreaterthanthecostSoburglaryshouldbeatortThepointbeingthatweareoptimizingonmanymarginsAndpickingoneletsyouargueforaconclusion,ignoringtheothersWhichmeansthatwhatevertherule,youmaybeableto“prove”itisefficientIstheCommonLawEfficient?Theaprioricase—shouldweexpectittobe?ArgumentforjudgesdoingitdeliberatelyIncreasingthesizeofthepieistheonegoodthingjudgescando,sotheytrytodoitButthatassumestheyknowenougheconomicsAnditassumestheyarenotaimingatjusticeinsteadPerhapstheyare,andthereissomereasonwhywhatisefficientisseenasjust?InvisiblehandargumentIfthelawisinefficient,partieshaveanincentivetotrytoworkarounditOrtolitigateinthehopeofchangingitEventuallythelawchangesButchangingthelawfacesapublicgoodproblemIfbeneficiariesofaninefficientlegalruleareaconcentratedinterestgroupAndlosersdispersedinterestgroupThebeneficiariesmayraisemoretolitigateforitthantheloserstolitigateagainstConsider,forinstance,anagencylitigatingforrulesitlikesagainstdispersedlosersTheCasefromtheEvidencePropertyrulesvsliabilityrulesThelegalsystemmostlygetsthatright,but…MostlydoingittheotherwayisnotjustinefficientbutobviouslyunworkableOthergeneralpatternsseemtofitthetheoryTherighttogrowcropsonlandisbundledwiththerighttowalkonitInolongerownmypropertyuptotheheavensTortlawasaPigouviantaxNegligenceasasolutiontothejointcausationproblemPosneroffersvariousdetailedrulesthathearguesfitStrictliabilityforultrahazardousactivitiesBecauseactivitylevel(keepingapetlion)isanimportantvariableThemostreliableprecautionisnottoEggshellskullruleBecausethepotentialtortfeasorfacesanaveragecostoftakingtheactionThatreflectsthelowprobability/highcostoutcomeThealternativeistopaynothingwhenthereisnoinjury,onlyanaveragewhenthereisTheCaseAgainstOrgansalesareillegal(Butprobablystatutorylaw).DittoadoptionmktNofreedomofcontractforproductliabilityGuaranteesaregenerallyenforceableButwaiversarenotOrbreach—penaltyclausesarenotenforceableAlthoughapenaltyclauseisjustavoluntarilyagreedtopropertyruleAndpropertyrulesarepartofcommonlawThecommonlawtreatsthevalueoflifeaszerointortiousdeathcasesSinceyourclaimdieswithyouSoaninefficientlylowincentivenottotakeriskswithotherpeople’slivesTortclaimsarenotmarketable.IftheywereThatwouldsolvetheproblemofnotbeingabletoaffordalawyerAndofnotknowingwhatlawyerwoulddoagoodjobAndprovideasuperiorsubstituteforclassactionsTheCaseforIgnoranceEconomicargumentsarecomplicatedMycrime/tortchapterrantheargumentthroughsevenroundsThisiswhyyoucouldhaveapuretortsystemThisiswhyitwouldn’tworkThisishowthatproblemwouldbedealtwithThis…Onceyouknowthelegalrule,youcanusuallyfindsomeargumentthatitisefficientComingtothenuisanceAgoodrule,becauseitischeapertomoveahousingdevelopmentorpigfarmbeforeitisbuiltAbadrule,becausemypigfarmgivesmecontroloverlandthatwilllaterbewantedforhousingSoIhavearentseekingargumenttobuildthepigfarmnowwhereyouwillwanttobuildhousinglaterTheHimalayanphotographerandtheEggshellSkullTheeconomiclogicoftwoproblemsisthesameThelegalanswerisdifferentAndeachtimePosnerconcludesthatthelegalansweriscorrectConclusion:ThejuryisstilloutThereissomeevidencethatthecommonlawtendstowardsefficientrulesButalsoevidenceagainstAndarguments,butnotcompellingones,forwhywemightexpectittoWhethertheConjectureisCorrectorNotConsiderwhatwehavedonesofar.Startwithonebehavioralassumption(rationality)Oneconjectureabouttheorganizingprinciple:EfficiencyEndwithAwayofseeingalllaw,assolutionstoacommonsetofproblemsAwayofapplyingthesamesetofideasacrosslegaltopics:Riskallocation--contractandtort.ExAnte/ExPostTortandcriminallawofhighwaysExplainingwhyattemptsarecriminalExternalities,incentives,doublecausationproblem,transactioncostsPollutionregulationDefiningpropertyrightsinlandCommonlawofnuisanceTortlaw--autoaccidents.Productliability.ContractdamagerulesAndiftheLawIsn’tEfficientPerhapsitshouldbeInsofaraslegalruleseithercannotredistributeOrarealessefficientwaythandirecttaxandtransfer(QuangNg’sargument)AndinsofaraswehavenoadequatetheoryofjusticeItmaymakesensetotrytodesignthelawtomaximizethesizeofthepieEvenifoneviewseconomicefficiencyasonlyonedesirablegoalItisworthknowingwhenachangeinlegalrulesincreasesordecreasesitSoasonlytodecreaseitwhenthereissomeotheradvantagethatoutweighsthatcostAndtoincreaseitwhendoingsodoesnothavecostsinothervaluesAndeconomicanalysis,asdevelopedinresponsetothePosnerConjectureTellsushowtodosoSowhetherornottheconjecturewastrue,itwasusefulAlternativeSolutionstotheProblemofLawFeudLaw:DecentralizedandprivatelyenforcedDictatorship:SomeonetellseveryonewhattodoandmakesthemdoitDecentralizeddecisionsunderstateenforcedlegalrulesOursystem,whichyouhavebeenstudyingAndmostofthisbookisaboutFeudLawLawbyprivateviolenceandthreatsofviolenceIfyouwrongmeIthreatentoharmyouunlessyoucompensatemeAformofdecentralizedprivatelawenforcementTowork,itneedstosolvefourproblemsMakemythreatmorebelievableifyoureallydidwrongme:somewaythatRightmakesmightInIceland,thecourtsystemAmongtheRomanichal,asmallcommunity,myfriendsonlysupportmeiftheythinkIamjustifiedGivemeanincentivetocarryoutmythreat,evenifdoingsoiscostlyThemanwhowrongedmemayfightback,evenkillme,ifItrytoharmhimInternalincentives,feelingsofvengefulness—ahardwiredcommitmentstrategyExternalincentives—statusandreputationThereissomewayinwhichpeoplewithfewresourcesgettheirrightsenforcedIntheIcelandiccase,transferabletortclaimsInSomalia,membershipinadiyapayinggroupThereisamechanismforterminatingfeudIfbothsidesbelievetheyareintheright,bothhaveanincentivenottogiveinArbitrationbysomeonetrustedandpowerfulisonecommonsolutiontothatproblemFeudlawisarguablywhatmostsystemswerebuiltoverAnglo-AmericancommonlawgrewoutofAnglo-SaxonlawWhichwasIcelandiclawplusakingWhoclaimedthatsomeoffenseswereagainsthimaswellasthevictimBecausetheyviolatedtheking’speaceIslamiclawcontainsJinayat,Acaseforkillingorinjuringisprivatelyprosecuted,privatelysettledBythevictimorhisheirsInJewishlaw,executionisby“theavengerofblood”Theheirofthevictim,whoinafeudsystemwouldhavepursuedfeudAndcan,undersomecircumstances,killakillernotsentencedtoexecutionwithoutpenaltyInearlyRomanlawTheftwastreatedasatort,thevictimplayedalargeroleinenforcementAntheLawoftheTwelveTablesseemstoassumesomeselfenforcementFeudLawStillExistsDeFactoConsiderIPpatentconflictsApplecouldsueSamsungonwhattheyknowisaweakcaseThecourtmightgetitwrong,givethemdamagesAndwhilethecaseisgoing,peoplewillbereluctanttobuySamsungphonesButSamsungcouldalsosueAppleonaweakcaseThethreatofretaliationisareasonnottosueunlessyouexpecttowinThinkofthecourtasthewayrightmakesmightinthatsystemThatdoesn’tworkforNPC’s,akapatenttrollsTheyarenotpracticingtheirpatents,socannotbecountersuedSohaveabelievablethreatevenwhentheircaseisweakBigcompanieshavecommitmentstrategies—payingoffonetrollencouragesothersSmallcompaniesarenotrepeatplayersConsideralotofillegalviolenceWekilledamemberofyourgangbecauseyoukilledoneofoursIshothimbecauseIfoundhiminbedwithmywifeAndmanylessextremeexamplesDictatorshipThedirectcentralizedsolutionProblemsThedictatordoesn’tknowenoughtofindthebestsolutionBecausetheinformationisdecentralized—youknowyourtastesandabilitiesAndbecauseitistoomuchinformationforanypersonorcomputertohandleThinkaboutallthelittlethingsyouknowaboutthingsrelevanttosolvingitIncludingeverythingyoudoEastGermanysupposedlyusedhalfthepopulationtospyonallthepopulationAndthatwouldhavereportedatinyfractionoftheinformationabouteachpersonAllofwhichheknowsandcanactonThedictatorhastomakeyoudothingsIcanmovemyarmbywillingitYoucanmovemyarmonlybymoreindirectandcostlymechanismsSoyourcontrollingmeismorecostlythanmecontrollingmeWhatincentivedoesthedictatorhavetoserveusinsteadofhimself?ThetheoryofthefirmislargelyabouttheseissuesonasmallerscaleOurSysteminBriefProperty,Contract,TortandCrimePrivatepropertyrequiresDefinitionofwhatitisthatisownedWayofknowingwhoownsitandhowownershipisacquiredMechanismsforenforcing,settlingdisputesGeneralizedfromrealpropertytomuchelseHencepropertylaw,includingIPImportantthatpropertycanbetransferredSometimesincomplicatedexchangesWeneedcontractsspecifyingtermsoftransferMechanismstosettledisputesovertheirimplicationsHencecontractlawRulescanbeviolated,soweneedMechanismstomakeitinpeople’sinterestnottoviolatetherulesWaysofsettlingdisputesoverwhethertheywereviolatedAndtheconsequencesthereofTortlaw,criminallaw,courtsandprocedureHowtoGetEfficientRulesStartwithprivatepropertyandtrade,butTheworlddoesn’tbreakupintowhollyseparatepiecesMyuseofmystuffeffectsyou:ExternalitiesSolutions?Directregulation--“dothat”Liabilityrule--payforcostsyouimposeButcostsarejointlycausedSoalternativelywecanTreatrightsasproperty,tobedefinedandthentransactedoverWorkswellwheretransactioncostsarelowButoftentheyarenotDonothing Putupwithsomeinefficiencies,becauseThecostofdealingwiththemismorethanitisworthOtherPiecesoftheAnswerNotjustthecontrolofexternalitiesbutDefiningwhatrightsOwnershipimpliesAndwhohasthemHowtoenforcerightsExpostorexanteLiabilityvspropertyrulesOptimalpunishmenttoenforcepropertyrulesToConstructEfficientLawChooseanappropriatecombinationofpropertyandliabilityrulesTakingaccountofthecostsofbothIntransactions,enforcementanderrorsDefineandbundlepropertyrightsinawaythatminimizescostsOfdefininganddefendingthemAndtransactingoverthem.EnforcethewholebySomemixofpublicandprivateactionUnderasuitablesetofrulesofproofandliability.ThroughouttheprojectconsidertheincentivesofallpartiesIncludingvictims,offenders,enforcers,judges,legislators,…AlsotransactioncostsAndtheproblemofusingdispersedandimperfectinformation.Wherepossible,createinstitutionsthatmakeitinsomeone’sinteresttousesuchinformationtogeneratetheappropriaterules.WhatWe(andeveryoneelse)LeftOutEveniftheanalysisisright,wedon'thavethedataActuallycalculatingoptimalpunishmentsWouldrequireinformationOnsupplycurvesofoffensesDamagedoneCostofpunishmentandenforcementCostoftransactionsWhichwedon'thaveConsiderrailroads,sparks,cloverandspaghettiSoweendupwithqualitativeconclusionsatbestWhatRemainsfortheNextGeneration(You?)toDoApplicationoftheapproachtoenforcementsideMyefficientpunishmentstuff—civilforfeitureandsimilarissuesEvidenceontheincentivesandbehaviorofelectedprosecutorsApplyingthethe