The Future of Law and Economics by Calabresi Guido

The Future of Law and Economics by Calabresi Guido

Author:Calabresi, Guido
Language: eng
Format: epub
ISBN: 9780300216264
Publisher: Yale University Press


C.

But this is not all that a real-world look at the categories described in “The Cathedral” article tells us. That article also described shifts in entitlements that were excluded from the market or from liability rule–based exchanges. These command-determined entitlement shifts were called inalienability rules. Yet, early on, in what is still as good an article as anyone has written about “The Cathedral” and is, in my terminology, a paradigmatic example of Law and Economics scholarship, Susan Rose-Ackerman wrote that what “The Cathedral” called inalienability was, in fact, many different rules.28 Entitlements might be, for example, given, but not sold; sold, but not destroyed; destroyed, but neither sold nor transferred by gift; and so forth. In that early article, Rose-Ackerman, in effect, pointed out that what “The Cathedral” had assumed to be a pure and simple command regime was immensely nuanced and much more complicated. By looking at the actual world, she was doing to inalienability what here, and in “A Broader View of the Cathedral,” I am currently doing with respect to the liability rule.29

She there asserted, as I do now, that in the world of law the relationship between markets and command is extraordinarily complex. The canonical but inadequate view of the liability rule may have treated that rule as being a modified market. However, not only modified markets and modified command structures exist; the two, in fact, meld into each other, such that clear lines as to which approach dominates may be very hard to draw in a given instance.

Why is it difficult to distinguish these different uses of the liability rule? There are, I think, at least two reasons, both of which bring us back to comments and analyses that Coase proffered in “The Nature of the Firm.”30 First, as Coase noted in that still amazingly seminal article, the command structures represented by firms might be employed not only where, and because, they were cheaper than markets, but also because people liked command structures. In other words, Coase saw already back then what I noted earlier in my discussion of altruism—namely, that there are goods that are both ends and means.31 And, interestingly, Coase (in his Socialist youth) saw command structures as such a good. It is not hard to see in the writings of many great libertarians an equivalent view of markets.32

Arguments can and should be made with respect to the use of command structures and market structures based on their relative efficiency as means, that is, based on their relative capacity to get us results. But such an analysis is incomplete, for it leaves out why some would want to use a market or a command structure even when it is less efficient, more costly, than some alternative. It fails to consider that some people like markets, while others like command, and that this preference is in their utility functions. As Coase saw, and mentioned in passing, we may not be able fully to explain the existence of firms without understanding that fact. Earlier in this book, I said the same thing with respect to the persistence of not-for-profit institutions.



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