Education Moulds

Introduction

One of the most famous distinctions in contemporary legal theory was
made popular by Guido Calabresi & A. Douglas Melamed s famous
article, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral.
The core idea is simple.  Legal rules that create private causes of
actions (or claims for relief) can be sorted into two kinds.  Kind one
consists of rules that entitle the claimant to an injunction.  Kind two
consists of rules that entitle the claimant to damages.  The first kind
of rule is associated with property rights–hence, we can call the
first kind "property rules."  The second kind of rule is associated
with tort liability or contractual liability–hence, we can call the
second kind "liability rules.  The distinction between property rules
and liability rules is important, because injunctions and damages have
different effects on future behavior and on negotiated settlements to
claims.

This post in the Legal Theory Lexicon Series is aimed at law
students–especially first-year law students–with an interest in legal
theory.  As always, this is a very short introduction to a complex
topic.  I’ve provided references for further reading and a deeper
understanding.

Calabresi & Melamed’s Famous Formulation

"Another View of the Cathedral" is one of those articles that every
law student should read.  But to get us started, let’s quote the famous
passages from near the start of the article where the distinction
between property rules and liability rules is introduced:

An entitlement is protected by a property rule
to the extent that someone who wishes to remove the entitlement from
its holder must buy it from him in a voluntary transaction in which the
value of the entitlement is agreed upon by the seller. It is the form
of entitlement which gives rise to the least amount of state
intervention: once the original entitlement is decided upon, the state
does not try to decide its value.  It lets each of the parties say how
much the entitlement is worth to him, and gives the seller a veto if
the buyer does not offer enough. Property rules involve a collective
decision as to who is to be given an initial entitlement but not as to
the value of the entitlement.

Whenever someone may destroy the initial entitlement if he is
willing to pay an objectively determined value for it, an entitlement
is protected by a liability rule. This value may be what it is thought
the original holder of the entitlement would have sold it for. But the
holder’s complaint that he would have demanded more will not avail him
once the objectively determined value is set. Obviously, liability
rules involve an additional stage of state intervention: not only are
entitlements protected, but their transfer or destruction is allowed on
the basis of a value determined by some organ of the state rather than
by the parties themselves. An entitlement is inalienable to the extent
that its transfer is not permitted between a willing buyer and a
willing seller. The state intervenes not only to determine who is
initially entitled and to determine the compensation that must be paid
if the entitlement is taken or destroyed, but also to forbid its sale
under some or all circumstances. Inalienability rules are thus quite
different from property and liability rules. Unlike those rules, rules
of inalienability not only "protect" the entitlement; they may also be
viewed as limiting or regulating the grant of the entitlement itself.

There is a lot packed into this short package.  First, we get the basic distinction between enforcement by injunction and enforcement by liability for damages.  Second,
we get the distinction between rights that are alienable and those
which cannot be bought and sold and hence are "inalienable."  Third,
we get an argument that alienable rights that can be enforced by
injunctions require less state intervention than do inalienable rights
that are only enforceable by damage awards.  These three ideas were the
conceptual core of Calabresi and Melamed’s distinction between property
rules and liability rules.

Mixed Rules 

Even if you have never encountered the distinction between
property rules and liability rules before, you probably have already
thought to yourself that the world is not quite as black and white as
the distinction implies.  The same underlying "primary right"–such as
the right to security of property–may be enforced by both injunction
and damages and involve both alienable and inalienable aspects.  That
is, there are "mixed rules" as Calabresi and Melamed themselves noted:

It should be clear that most entitlements to
most goods are mixed. Taney’s house may be protected by a property rule
in situations where Marshall wishes to purchase it, by a liability rule
where the government decides to take it by eminent domain, and by a
rule of inalienability in situations where Taney is drunk or
incompetent.

Choosing Between Property Rules and Liability Rules 

Why should the law choose property rules for some situations and
liability rules for others?  That’s a very large and complex question.
Here are some of considerations that bear on an answer–recognizing
that these are only starting points:

The Possibility of Bargaining–It might
be argued that property rules are better suited to situations where the
parties can bargain over the transfer of rights.  So the possessory
interest in real estate or chattels might be protected by property
rights, because the transfer of possession is something over which the
parties can bargain.  An injunction against involuntary transfer forces
the parties to agree on terms for a voluntary transfer.  On the other
hand, it might be argued that liability rules are better suited to
situations in which bargaining is impossible (or to be more precise,
very costly).  For example, it would be difficult to bargain over an
automobile accident–the parties may be strangers, the accident is
unanticipated, and so forth.  In that situation, a damage award rather
than an injunction seems like the only feasible mechanism for
protecting the right.

Existence or Measurement of Damages–Sometimes it is very
difficult to measure damages.  For example, in copyright law, it may be
difficult to prove that my copying of portions of you book had the
consequence of hurting your sales.  (It’s possible my copying even
helped your sales.)  When damages either don’t exist or can’t be
measured, then liability rules may be ineffective.  But if the
copyright holder–to continue the example–has the right to an
injunction, this will force the infringer to pay for the right to
continue the infringing activity.

Administrative Costs–Liability rules require the system to
measure damages and that may be costly.  Evidence on the extent of
damages must be gathered, processed, and evaluated by a finder of
fact.  Property rules do not involve these costs.  This facto generally
favors property rules over liability rules.

Of
course, this is a partial and incomplete list.  But these examples
illustrate the kinds of considerations that might favor a property rule
or a liability rule as the solution to a particular legal problem.

Conclusion

The distinction between property rules and liability rules
is fundamental to private law.  As you study contracts, torts, and
property, it is very useful to ask yourself whether a particular legal
doctrine or cause of action involves a liability rule, a property rule,
or a mixed rule.  Once you have the answer to that question, the next
inquiry is "why?"  What justifications can be offered for the law’s
choice of a property rule over a liability rule, or vice versa.  If you
ask these questions systematically in your study of private law, you
will be well on your way to a deeper and more sophisticated
understanding of these building block subjects.

References

Ian Ayres & J.M.
Balkin, Legal Entitements as Auctions: Property Rules, Liability Rules,
and Beyond, 106 Yale L.J. 703 (1996).

Guido Calabresi & A. Douglas Melamed, Property Rules, Liability
Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev.
1089 (1972).

Louis Kaplow & Steven Shavell, Property Rules versus Liability Rules: An Economic Analysis, 109 Harv. L. Rev. 713 (1996).

(This entry was last revised on November 30, 2008.)

Source: Lawrence Solum

Terri L. Peretti (Santa Clara University) has posted Constructing Courts in Polarized Times on SSRN.  Here is the abstract:

This review of current research on the consequences of polarization for judicial selection seeks to direct it and our attention to a critical normative task: insuring that the selection process enables politically-responsible officials to construct representative courts. Two questions organize this analysis. The first addresses whether, despite polarization, courts can serve as a source of bipartisanship and moderation in the United States, as scholars like Rosen and Perry and Powe contend. The second question conditions the answer to the first and asks whether courts can be effectively directed in a politically polarized environment. Many recent assessments say "No," alleging that the current selection process is broken, characterized by bitter confirmation battles and appointments gridlock. However, these claims are frequently a historical and prone to hyperbole. Partisan polarization has not created a host of new problems for judicial selection. It has instead augmented and intensified pre-existing pressures on the judicial selection process, making perhaps too heavy a load the democratic task of constructing representative courts. We must be especially concerned with the potential for executive over-reaching, permitting presidents to appoint judges whose extreme views lack strong electoral support. Nonetheless, confirmation delay and the judicial filibuster are, in my view, signs of resilience in the judicial selection process; they represent logical and positive adaptations to pathological developments in our elective institutions like polarization.

Source: Lawrence Solum

Terri L. Peretti (Santa Clara University) has posted Constructing Courts in Polarized Times on SSRN.  Here is the abstract:

This review of current research on the consequences of polarization for judicial selection seeks to direct it and our attention to a critical normative task: insuring that the selection process enables politically-responsible officials to construct representative courts. Two questions organize this analysis. The first addresses whether, despite polarization, courts can serve as a source of bipartisanship and moderation in the United States, as scholars like Rosen and Perry and Powe contend. The second question conditions the answer to the first and asks whether courts can be effectively directed in a politically polarized environment. Many recent assessments say "No," alleging that the current selection process is broken, characterized by bitter confirmation battles and appointments gridlock. However, these claims are frequently a historical and prone to hyperbole. Partisan polarization has not created a host of new problems for judicial selection. It has instead augmented and intensified pre-existing pressures on the judicial selection process, making perhaps too heavy a load the democratic task of constructing representative courts. We must be especially concerned with the potential for executive over-reaching, permitting presidents to appoint judges whose extreme views lack strong electoral support. Nonetheless, confirmation delay and the judicial filibuster are, in my view, signs of resilience in the judicial selection process; they represent logical and positive adaptations to pathological developments in our elective institutions like polarization.

Source: Lawrence Solum

Eric M. Zolt and Richard M. Bird (UCLA School of Law and University of Toronto – Joseph L. Rotman School of Management) have posted Tax Policy in Emerging Countries (Environment and Planning C: Government and Policy, Vol. 26, pp. 73-86, 2008) on SSRN.  Here is the abstract:

We consider in this paper how emerging countries may in practice best design and develop tax policies, given the complex economic and political environments they face. After an overview of what tax systems look like around the world, we discuss the principal objectives that countries may attempt to achieve through tax policy. We conclude by considering the broad political economy context within which tax policy and development issues must be designed and implemented. Our aim is to set out some of the basic issues facing tax policy in emerging countries and to outline some key elements that should be considered in designing the best feasible tax structure for any particular country at a particular time.

Source: Lawrence Solum

Eric M. Zolt and Richard M. Bird (UCLA School of Law and University of Toronto – Joseph L. Rotman School of Management) have posted Tax Policy in Emerging Countries (Environment and Planning C: Government and Policy, Vol. 26, pp. 73-86, 2008) on SSRN.  Here is the abstract:

We consider in this paper how emerging countries may in practice best design and develop tax policies, given the complex economic and political environments they face. After an overview of what tax systems look like around the world, we discuss the principal objectives that countries may attempt to achieve through tax policy. We conclude by considering the broad political economy context within which tax policy and development issues must be designed and implemented. Our aim is to set out some of the basic issues facing tax policy in emerging countries and to outline some key elements that should be considered in designing the best feasible tax structure for any particular country at a particular time.

Source: Lawrence Solum

Robert G. Bone (Boston University School of Law) has posted Twombly, Pleading Rules, and the Regulation of Court Access
(Iowa Law Review, Vol. 94, 2009) on SSRN.  Here is the abstract:

In Bell Atlantic Corp. v. Twombly, the Supreme Court reconsidered Conley v. Gibson’s very liberal notice pleading standard and held that the plaintiff must allege enough to support a plausibility of wrongdoing. This Article considers the Twombly decision within the broader framework of court access regulation and sketches a normative roadmap for designing optimal pleading and merits-based case-screening rules. The Article begins with an analysis of Twombly itself. It argues, contrary to much criticism of the decision, that the Court’s plausibility standard represents only a modest departure from traditional notice pleading and that its interpretation of Rule 8(a)(2) is consistent with the text and history of the Rule and in line with the pragmatic vision of the original Federal Rule drafters. The Article then addresses the broader normative issues involved in regulating court access through stricter pleading and other case-screening devices. It argues that a pleading requirement along the lines of Twombly’s thin plausibility standard might be justified by a process-based theory of fairness as reason-giving, but that anything stronger must be evaluated on outcome-based grounds. Applying utilitarian and rights-based metrics of outcome quality, the Article then explores various methods of screening meritless suits. It highlights several issues that are often ignored or misunderstood, including the importance of carefully defining the undesirable lawsuits to be screened, correctly identifying the causes of the problem, and proceeding cautiously in the absence of empirical information by designing regulatory responses to fit the most probable causes. It argues that information asymmetry is likely to be a more important cause of meritless litigation than the commonly assumed cost asymmetry, and it outlines a hybrid approach to handle the information-asymmetry cases. The Article concludes by emphasizing the importance of using formal rulemaking or the legislative process to design case-screening rules and making those rules substance-specific rather than trans-substantive.

Learned and illuminating.  Highly recommended. Download it while its hot!

Source: Lawrence Solum

Susan Scafidi (Fordham Law School) has posted F.I.T.: Fashion as Information Technology (Syracuse Law Review, Vol. 59, p. 69, 2008) on SSRN.  Here is the abstract:

FIT: Fashion as Information Technology is one of a series of three short works on the relationship between intellectual property and fashion design. The first, a book chapter entitled simply Intellectual Property and Fashion Design, outlines the history of the issue with particular reference to the status of fashion design protection in the United States. The second, a long-term work in progress, focuses on the cultural and historical reasons for the limited degree of intellectual property extended in the past to certain categories of human creativity, including fashion design. This essay turns to the question of why-despite shifting cultural attitudes and other conditions-some tension still exists between creators and consumers of fashion, how information theory can contribute to an explanation for that tension, and what role law can play in its resolution. In addition, I explore these issues in a book forthcoming from Yale University Press and a blog, Counterfeit Chic, available at http://www.CounterfeitChic.com.

The goal of FIT is twofold: first, to redirect attention to the broader realm of information and communications technology, of which fashion is a foundational medium; and second, to analyze fashion as an information technology in order to better understand the industry’s desire for intellectual property protection, popular resistance to such protection, and the most efficacious balance between them in terms of creative expression. Beginning with Part I, FIT explores the broad concept of information and communications technology and its legal parameters. Turning specifically to the clothing and textile industry, Part II focuses on both the historical and cultural role of fashion in conveying information and the production mechanisms that are direct historical antecedents of more recently developed information technologies. Part III discusses the bi-level nature of clothing and accessories as information technology, simultaneously embodying the designer’s authorial voice and generating information on behalf of and about the wearer. Finally, Part IV identifies the dueling approaches to intellectual property law inherent in fashion’s dual information identity, points out the inadequacies and distorting effects of the legal status quo, and suggests a framework for resolution – narrowly tailored for a perfect fit.

Source: Lawrence Solum

Natasha Affolder (University of British Columbia – Faculty of Law) has posted Democratising or Demonising the World Heritage Convention?
(Victoria University of Wellington Law Review, Vol. 38, No. 2, p. 341, 200) on SSRN.  Here is the abstract:

In recent disputes surrounding mining projects in and around World Heritage sites, the legitimacy of the World Heritage Convention regime has been attacked for a host of democratic failings. These accusations of ‘democratic deficits’ originate from both opponents and supporters of the Convention regime. They challenge the compatibility of international processes with national law and institutions, raise questions of accountability and transparency, and revisit tensions between state sovereignty and common heritage. This paper traces these perceptions of democratic shortcomings in the Convention regime to certain misunderstandings of the Convention, to failed participatory processes at the national level, and to the challenges posed by vague and ill-defined treaty obligations. At the same time as it unveils democratic concerns about the evolving nature of the treaty regime, this paper challenges us to consider the democratic strengths of the Convention.

Source: Lawrence Solum

Tom Ginsburg (University of Chicago Law School) has posted Constitutional Afterlife: The Continuing Impact of Thailand’s Post-Political Constitution (International Journal of Constitutional Law, January 2009) on SSRN.  Here is the abstract

Thailand’s constitution of 1997 introduced profound changes into the country’s governance, creating a "postpolitical" democratic structure in which an intricate array of guardian institutions served to limit the role of elected politicians. Ultimately, the constitutional structure was undermined in a military coup against populist billionaire Thaksin Shinawatra, who had taken over many of the institutions designed to constrain political power. Nonetheless, the 1997 constitution appears to be having a significant afterlife, in that its institutional innovations have survived the enactment of a new Constitution and continue to constrain the political process. This article describes the Thai situation and speculates on the conditions for constitutional afterlife. Thailand’s continuing political crisis, alas, suggests that the particular institutional innovations of 1997 have not been sufficient to channel political contestation.

Source: Lawrence Solum

It is my custom to mark Thanksgiving on Legal Theory Blog by expressing appreciation and gratitude.  This year, I would like to express my deep gratitude to my parents, Pamela Byard Solum and Clayton Lawrence Solum.  Sadly, my father passed away a few years ago.  My mom who is 82 continues to teach and say patients in her practice as a psychotherapist.  As I write this, I am in the guest bedroom in her home in Whittier, California–just a few miles from where I grew up in Monterey Park.

Both my mother and father encouraged my somewhat eccentric teenage interest in the law–allowing me to take long bus rides so that I could study in the Los Angeles County Law Library.  They endulged endless trips to the late great Pickwick Bookshop in Hollywood and the still flourishing Vroman’s Bookstore in Padadena, and listened with astonishing patience as I shared my enthusiasm for tradeable pollution rights and constitutional federalism at the dinner table.

And thank you to the readers of Legal Theory Blog!

Source: Lawrence Solum