Questions on "The Problem of Social Cost
Questions on “The Problem of Social Cost
Reminder:Short Paper You are arguing a case before Judge Posner.Write a brief argument for one side based on law and economics arguments.Any case past or present will do,provided it is not covered in either my book or Posner's Economic Analysis of Law,which I will put on reserve so you can check
Reminder: Short Paper • You are arguing a case before Judge Posner. Write a brief argument for one side based on law and economics arguments. Any case past or present will do, provided it is not covered in either my book or Posner’s Economic Analysis of Law, which I will put on reserve so you can check
Review of "The Problem of Social Cost
Review of “The Problem of Social Cost
"Externalities"are Jointly Caused
“Externalities” are Jointly Caused
Price Theory Framework Cost of inputs=their value in the best alternative use Price of outputs=their value to those who buy them
Price Theory Framework • Cost of inputs=their value in the best alternative use • Price of outputs=their value to those who buy them
Farmer and Rancher .The outcome does not depend on who is liable ●And is efficient Provided transaction costs are zero
Farmer and Rancher •The outcome does not depend on who is liable •And is efficient •Provided transaction costs are zero
With zero transaction costs,it never pays to leave money on the table. With non-zero transactions costs,it pays to leave money on the table if the amount of the money is less than the cost of picking it up
With zero transaction costs, it never pays to leave money on the table. With non-zero transactions costs, it pays to leave money on the table if the amount of the money is less than the cost of picking it up
More Cases,the Same Logic Confectioner vs Doctor Bleaching Coconut Matting Blocking the draft of a chimney ·Jolly Angler Brewing
More Cases, the Same Logic • Blocking the draft of a chimney • Bleaching Coconut Matting • Confectioner vs Doctor • Jolly Angler Brewing
Judge's Basis for Deciding the Case May Seem Irrelevant to the Economist But It may be designed to give a predictable rule Or be a proxy for relevant considerations
Judge’s Basis for Deciding the Case May Seem Irrelevant to the Economist But •It may be designed to give a predictable rule •Or be a proxy for relevant considerations
Two Alternative Approaches 。Two alternatives: Court find least cost avoider each time Or court or legislature makes rules Designed to usually make the lower cost avoider liable The first alternative can give results better fitted to cases,but .. Reduces certainty,raises litigation costs,makes transactions harder This is an extreme version of the "rule vs standard"issue Speed limit or a law against dangerous driving
Two Alternative Approaches • Two alternatives: • Court find least cost avoider each time • Or court or legislature makes rules • Designed to usually make the lower cost avoider liable • The first alternative can give results better fitted to cases, but … • Reduces certainty, raises litigation costs, makes transactions harder • This is an extreme version of the “rule vs standard” issue Speed limit or a law against dangerous driving