PROTECTING ENTITLEMENTS I097 can most cheaply avoid them;(4) that in the absence of certainty as to who that party or activity is, the costs should be put on the party or activity which can with the lowest transaction costs act in the market to correct an error in entitlements by inducing the party who can avoid social costs most cheaply to do so; 1and (5 that since we are in an area where by hypothesis markets do not work perfectly - there are transaction costs-a decision will often have to be made on whether market transactions or collec tive fiat is most likely to bring us closer to the Pareto optimal re- sult the "perfect"market would reach. Complex though this summary may suggest the entitlement choice to be, in practice the criteria it represents will frequently indicate which allocations of entitlements are most likely to lead to optimal market judgments between having an extra car or taking a train, getting an extra cabbage and spending less time working in the hot sun, and having more widgets and breathing the pollution that widget production implies. Economic efficiency is not, however, the sole reason which induces a society to select a 1B In The Costs of Accidents, the criteria here summarized are discussed at length and broken down into subcriteria which deal with the avoidance of dif- erent types of externalization and with the finding of the "best briber Su detailed analysis is necessary to the application of the criteria to any specific are of law. At the level of generality of this article it did not seem to us necessary. 19 In accident law this election takes the form of a choice between general or market deterrence and specific deterrence, in which the permitted level and manner of accident causing activities is determined collectively. For example, society may decide to grant an entitlement to drive and an entitlement to be compensated for accidents resulting from driving, and allow decisions by individual parties to deter- mine the level and manner of driving. But a greater degree of specific deterrence could be achieved by selecting a different set of initial entitlements in order te accord with a collective cost-benefit analysis-by, for example, prohibiting cars of more than a certain horsepower. The primary disadvantage of specific deterrence, as compared with general de- terrence, is that it requires the central decisionmaker not only to determine the costs of any given activity, but also to measure its benefits, in order to determine the optimum level of activity. It is exceedingly difficult and exceedingly costly for ny centralized decisionmaker to be fully informed of the costs and benefits of a wide range of activities. The irony is that collective fiat functions best in a world of costless perfect information; yet in a world of costless transactions, including costless information, the optimum allocation would be reached by market trans- actions, and the need to consider the alternative of collective fiat would not arise One could, however, view the irony conversely, and say that the market works best under assumptions of perfect knowledge where collective fat would work perfectly, rendering the market unnecessary. The fact that both market and co lective determinations face difficulties in achieving the Pareto optimal result which perfect knowledge and no transaction costs would permit does not mean that the same difficulties are always as great for the two approaches. Thus, there are many situations in which we can assume fairly confidently that the market will do better than a collective decider, and there are situations where we can assume the oppo- site to be true. See CosTs HeinOnline 85 Harv. L Rev. 10971971-1972PROTECTING ENTITLEMENTS can most cheaply avoid them; (4) that in the absence of certainty as to who that party or activity is, the costs should be put on the party or activity which can with the lowest transaction costs act in the market to correct an error in entitlements by inducing the party who can avoid social costs most cheaply to do so; " and (5) that since we are in an area where by hypothesis markets do not work perfectly - there are transaction costs - a decision will often have to be made on whether market transactions or collec￾tive fiat is most likely to bring us closer to the Pareto optimal re￾sult the "perfect" market would reach. 9 Complex though this summary may suggest the entitlement choice to be, in practice the criteria it represents will frequently indicate which allocations of entitlements are most likely to lead to optimal market judgments between having an extra car or taking a train, getting an extra cabbage and spending less time working in the hot sun, and having more widgets and breathing the pollution that widget production implies. Economic efficiency is not, however, the sole reason which induces a society to select a "I In The Costs of Accidents, the criteria here summarized are discussed at length and broken down into subcriteria which deal with the avoidance of dif￾ferent types of externalization and with the finding of the "best briber." Such detailed analysis is necessary to the application of the criteria to any specific area of law. At the level of generality of this article it did not seem to us necessary. 11 In accident law this election takes the form of a choice between general or market deterrence and specific deterrence, in which the permitted level and manner of accident causing activities is determined collectively. For example, society may decide to grant an entitlement to drive and an entitlement to be compensated for accidents resulting from driving, and allow decisions by individual parties to deter￾mine the level and manner of driving. But a greater degree of specific deterrence could be achieved by selecting a different set of initial entitlements in order to accord with a collective cost-benefit analysis -by, for example, prohibiting cars of more than a certain horsepower. The primary disadvantage of specific deterrence, as compared with general de￾terrence, is that it requires the central decisionmaker not only to determine the costs of any given activity, but also to measure its benefits, in order to determine the optimum level of activity. It is exceedingly difficult and exceedingly costly for any centralized decisionmaker to be fully informed of the costs and benefits of a wide range of activities. The irony is that collective fiat functions best in a world of costless perfect information; yet in a world of costless transactions, including costless information, the optimum allocation would be reached by market trans￾actions, and the need to consider the alternative of collective fiat would not arise. One could, however, view the irony conversely, and say that the market works best under assumptions of perfect knowledge where collective fiat would work perfectly, rendering the market unnecessary. The fact that both market and col￾lective determinations face difficulties in achieving the Pareto optimal result which perfect knowledge and no transaction costs would permit does not mean that the same difficulties are always as great for the two approaches. Thus, there are many situations in which we can assume fairly confidently that the market will do better than a collective decider, and there are situations where we can assume the oppo￾site to be true. See CosTs 103-13. 1972] 1097 HeinOnline -- 85 Harv. L. Rev. 1097 1971-1972