parent nodes: air and light | Breach of Duty | Calabresi corollary | Coase Theorem | Damages | Defense of Property | Fontainebleau Hotel v 45-25 | liability rule | Negligence Torts | nuisance | permanent damages | property rule | Rule 4 | Rule 5 | Spur v Del E Webb | standard of care
Calabresi corollary
Generally, the higher transaction costs are in a market for an entitlement, the more socially efficient a liability rule will be compared to a property rule. However, social efficiency does not imply a collectively desired distribution of entitlements.
Inalienability rules may be socially efficient where paternalism, self-paternalism, or moralism is highly preferred. Likewise, criminal sanctions and punitive damages may be more efficient to deter conversion of property rules into liability rules.
Examples of high transaction costs that encourage liability rules are:- markets in which the costs do not fall on least cost avoiders
- "establishing the value of an initial entitlement by negotiation is so great that even though a transfer of the entitlement would benefit all concerned, such a transfer will not occur."
- owners and potential buyers may both be induced to hide their true preferences
- Holdouts may impair combining entitlements from multiple owners
- some entitlements may be difficult or unseemly to objectively value.
-existing technology is inadequate to allow defendant to decrease the risk or magnitude of loss (see Boomer v Atlantic Cement in permanent damages)
Types of possible rules:
property rule-ex. an injunction with possible bargaining
-partial injunctions (ex. prohibiting activity at night if P is losing sleep)
-refusing an injunction or damages, allowing a nuisance-maker to continue his activities (so that the parties could settle, the nuisance-maker could buy up affected properties, etc.)
liability rule
Inalienability rules
Rule 4 solutions: P gets an injunction against D, but pays D damages
Rule 5 solutions
permanent damages
See nuisance, Coase Theorem
See also Farnsworth, "A Glimpse Inside the Cathedral" (Farnsworth p. 752) (study of twenty thousand nuisance cases showed no post-judgment bargaining, attributed to parties' mutual acrimony)
See also Epstein, "The Social Consequences of Common-Law Rules" (tort rules may not make much difference for either efficiency or redistribution because of the relative greater power of statute, the effect of procedure, information costs to judges deciding rules about their effects, and the limited usefulness of damages for distributing deterrence)
12 page(s) referring to Calabresi corollary
Spur v Del E Webb
Rule 4
Rule 5
Coase Theorem
permanent damages
standard of care
liability rule
Damages
Breach of Duty
nuisance
property rule
Fontainebleau Hotel v 45-25
11 page(s) referred to by Calabresi corollary
Coase Theorem
Inalienability rules
Rule 4
Rule 5
injunction
least cost avoider
liability rule
nuisance
permanent damages
property rule
transaction costs