HARVARD LAW REVIEW [Vol. 85: I089 of noise and silence can be viewed as no more than an instance of the well accepted proposition that what is a Pareto optimal, or economically efficient, solution varies with the starting distribu tion of wealth. Pareto optimality is optimal given a distribution of wealth, but different distributions of wealth imply their own Pareto optimal allocation of resources. All this suggests why distributions of wealth may affect a ty's choice of entitlements. It does not suggest why economic eficiency should affect the choice if any transaction costs. But no one makes an assumption of no transaction costs in practice. Like the physicist's assumption of no friction or Says law in macro-economics, the assumption of no transaction costs may be a useful starting point, a device which helps us see how, as different elements which may be termed transaction costs become important, the goal of economic effi ciency starts to prefer one allocation of entitlements over Since one of us has written at length on how in the presence of various types of transaction costs a society would go about deciding on a set of entitlements in the field of accident law, it is enough to say here: (i) that economic efficiency standing alone would dictate that set of entitlements which favors knowledge- able choices between social benefits and the social costs of obtain ing them, and between social costs and the social costs of avoiding them;(2) that this implies, in the absence of certainty as to whether a benefit is worth its costs to society, that the cost should be put on the party or activity best located to make such a cost benefit analysis;(3) that in particular contexts like accidents or pollution this suggests putting costs on the party or activity which 15 There should be no implication that a Pareto optimal solution is in some sense better than a non-Pareto optimal solution which results in a different wealth distribution. The implication is only that given the same wealth distribution Pareto optimal is in some meaningful sense preferable to non-Pareto optimal 16 See Demsetz, When Does the Rule of Liability Matter?, I J. LEGAL STUD 13, 25-28(I972); Stigler, The Law and Economics of Public Policy: A Plea to the Scholars, I J. LEGAL STUD. I, II-I2(I972) The trouble with a term like "no transaction costs, is that it covers a multi ude of market failures. The appropriate collective response, if the aim is to ap- proach Pareto optimality, will vary depending on what the actual impediments to ull bargaining are in any given cases. Occasionally the appropriate response may be to ignore the impediments. If the impediments are merely the administrative costs of establishing a market, it may be that doing nothing is preferable to at- tempting to correct for these costs because the administrative costs of collectiv action may be even greater. Similarly, if the impediments are due to a failure of the market to cause an accurate disclosure of freeloaders' preferences it may be that the collective can do no better 17 See CosTS 135-97. HeinOnline 85 Harv. L Rev. 1096 1971-1972HARVARD LAW REVIEW of noise and silence can be viewed as no more than an instance of the well accepted proposition that what is a Pareto optimal, or economically efficient, solution varies with the starting distribu￾tion of wealth. Pareto optimality is optimal given a distribution of wealth, but different distributions of wealth imply their own Pareto optimal allocation of resources."5 All this suggests why distributions of wealth may affect a society's choice of entitlements. It does not suggest why economic efficiency should affect the choice, if we assume an absence of any transaction costs. But no one makes an assumption of no transaction costs in practice. Like the physicist's assumption of no friction or Say's law in macro-economics, the assumption of no transaction costs may be a useful starting point, a device which helps us see how, as different elements which may be termed transaction costs become important, the goal of economic effi￾ciency starts to prefer one allocation of entitlements over another.'" Since one of us has written at length on how in the presence of various types of transaction costs a society would go about deciding on a set of entitlements in the field of accident law,'" it is enough to say here: (i) that economic efficiency standing alone would dictate that set of entitlements which favors knowledge￾able choices between social benefits and the social costs of obtain￾ing them, and between social costs and the social costs of avoiding them; (2) that this implies, in the absence of certainty as to whether a benefit is worth its costs to society, that the cost should be put on the party or activity best located to make such a cost￾benefit analysis; (3) that in particular contexts like accidents or pollution this suggests putting costs on the party or activity which 15 There should be no implication that a Pareto optimal solution is in some sense better than a non-Pareto optimal solution which results in a different wealth distribution. The implication is only that given the same wealth distribution Pareto optimal is in some meaningful sense preferable to non-Pareto optimal. 16 See Demsetz, When Does the Rule of Liability Matter?, i J. LEGAL STUD. 13, 25-28 (1972); Stigler, The Law and Economics of Public Policy: A Plea to the Scholars, i J. LEGAL STUD. 1, 11-12 (1972). The trouble with a term like "no transaction costs" is that it covers a multi￾tude of market failures. The appropriate collective response, if the aim is to ap￾proach Pareto optimality, will vary depending on what the actual impediments to full bargaining are in any given cases. Occasionally the appropriate response may be to ignore the impediments. If the impediments are merely the administrative costs of establishing a market, it may be that doing nothing is preferable to at￾tempting to correct for these costs because the administrative costs of collective action may be even greater. Similarly, if the impediments are due to a failure of the market to cause an accurate disclosure of freeloaders' preferences it may be that the collective can do no better. " See CosTs 135-97. io96 [Vol. 85=I89 HeinOnline -- 85 Harv. L. Rev. 1096 1971-1972