Tuesday, January 06, 2004

New Law Review Articles

Here are two new law review articles on subjects that I find interesting -- welfare economics and property theory. And they are both on hot topics -- the worthiness of redistributive liability rules, and the anti-commons form of property.
Why Kaplow and Shavell's 'Double-Distortion Argument' Articles
Are Wrong


According to an argument that economists denominate the
Double-Distortion Argument, transaction-cost considerations
aside, in an otherwise-Pareto-perfect world, it will be
less-economically-inefficient to redistribute income between
earned-income classes by adjusting taxes on earned income than
by sacrificing economic efficiency by adjusting liability-rules
and damage-rules to make legal outcomes depend on the earned
income of the defendant relative to the earned income of the
plaintiff or by making the price an individual has to pay for
some government-provided good or service depend on the
relationship between his earned income and average earned income
in the society in question. The conclusion of this argument
reflects the fact that, in an otherwise Pareto-perfect world,
both the type of legal-rule adjustment and the type of
government-pricing policy in question (1) will distort the
profitability of labor-leisure choices to the same extent that
it would be distorted by the "distributionally-equivalent" tax
policy and (2) will in addition distort the profitability of
another kind of choice (for example, in the case of an
accident-law adjustment, potential-injurer and potential-victim
avoidance-choices and, in the case of the government-pricing
policy, potential-buyer purchasing choices).

Kaplow and Shavell (KS) make two sets of claims that relate to
this Double-Distortion Argument. The first is the following,
highly-qualified pair of claims: if

(1) one is trying to redistribute resources from the richer to
the poorer or between or among classes that are defined by their
members' "richness" ("poorness") - put more negatively, one is
trying to effectuate a redistribution that is not favored
because it instantiates what KS refer to as "an entitlement to
payment based on desert,"

(2) one has the option of doing so to the extent desired
through tax policy,

(3) transaction-cost considerations can be ignored or do not
favor the conclusion that the legal-rule adjustments needed to
effectuate the desired redistribution will be more economically
efficient than the tax policies needed to do so, and

(4) other Pareto imperfections do not make the relevant
legal-rule adjustments economically efficient (for example, by
offsetting the extra distortion the relevant legal-rule
adjustment generates),


it will always be (A) not only economically efficient but also
morally desirable (B) for any public decisionmaker to reject
choices that would redistribute income from the richer to the
poorer by making liability and damages decisions depend on the
defendant's richness relative to the plaintiff's in ways that
would generate an extra distortion even if it were desirable to
redistribute income from the richer to the poorer. Kaplow and
Shavell's second set of claims is that each of the four
qualifications that their first set of claims contains can be
ignored - i.e., is empirically insignificant.

This article explains why each element of both sets of Kaplow
and Shavell's claims is wrong. First, it argues that Kaplow and
Shavell's highly-qualified set of claims is wrong because it
assumes incorrectly that the greater economic efficiency of a
choice guarantees its moral superiority and because it ignores
the difference between the authorization of "legislators" and
"adjudicators." Then, it argues that even if Kaplow and
Shavell's highly-qualified set of claims were correct, that fact
would not justify their ultimate conclusion that no government
decisionmaker should ever make a non-tax-policy decision that
would sacrifice economic efficiency in an
otherwise-Pareto-perfect world for distributional purposes
because none of the qualifications Kaplow and Shavell's
qualified claims contain can in fact be ignored. More
specifically, the article demonstrates that only one of Kaplow
and Shavell's arguments to the contrary can bear scrutiny and
that the only correct (though inchoate) argument they make for
ignoring a qualification (an argument about the role of judges
in our type of democracy) undermines their assertion that
another qualification is unimportant.

Common Interest Tragedies
Northwestern University Law Review, Vol. 98, 2004

University of Texas School of Law

This paper engages one of the fastest-growing topics in property
theory, the anticommons. The anticommons idea originated in
Frank Michelman's description of a regulatory regime in which
nobody could use a particular resource without the permission of
everyone else. Michael Heller's subsequent construction of a
category of "anticommons property" corresponding to recognizable
resource problems sparked a surge of scholarly interest in the
notion. The anticommons template has now been applied in many
property contexts, from patents to land use. However, some of
the key criteria scholars have offered for identifying an
anticommons and distinguishing it from an ordinary commons
collapse upon scrutiny. The fragility of the existing boundaries
between commons and anticommons points to a larger question that
takes center stage here: How might the universe of common and
interdependent resource problems be most usefully carved up?

In addressing that question, the paper makes three
contributions. First, it develops a functional taxonomy for
categorizing common interest tragedies. This taxonomy breaks
tragedies into categories at the macro level based on the
pattern of strategic interaction they embody, and further
differentiates among tragedies at the micro level based on the
shape of the production function for the resulting surplus or
deficit. Second, the paper explores underappreciated connections
between types of resource-related dilemmas, and highlights the
choices that often must be made between two potential tragedies
in complex, interdependent settings. Third, the paper shows how
the taxonomy developed here offers access to analytic tools for
making such choices. The approach taken here is therefore
designed to provide greater analytical traction on resource
allocation problems, as well as to advance dialogue in this area
of property theory.


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