An amazing first exchange at the Becker-Posner-Blog. Two questions: Is there another Federal Judge who blogs? And is there another Nobel Prize winner who blogs?
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Not sure if there is another (non-anonymous) federal judge blogger out there, but Howard Bashman’s Twenty Questions feature is a close substitute. And then there’s “A Criminal Waste of Space,” by California appellate justice William Bedsworth.
Does the wife of a Nobel prize winner count?
http://betsydevine.weblogger.com/
Betsy Devine is the wife of Frank Wilczek. They are now in Sweden “…drinking metaphorical lingonberry juice. All day long.” to attend the Nobel Prize ceremony.
no larry, those are the first… which makes you the first (to help with the firsts)! yipee for the record books and the significant advancement of… firsts!
Since Fred brought it up, Frank Wilczek’s daughter also has a blog. She’s updating sporadically lately, but the back entires are enthralling.
Wow, so far the Becker-Posner blog is rather lacking. Posner attempts to setttle the question of preventive war by using basic utility theory, ignoring the difficulty of enumerating and estimating all relevant costs, likelihood of events, etc. To summarize his post, “Economics says that preventive war can be justified in some basic, easy-to-compute circumstances!” Well, duh.
Becker’s post is slightly better, saying, “We can’t use traditional strategies against terrorists — the stakes are much higher than even nuclear war!” Very well and nice. But I was hoping for something slightly more insightful.
And is it even fair to call this a blog at this point? It could be more accurately described as a weekly column with comments and trackbacks. I believe spontaneity and personality to be major components of blogs, or at least good ones.
The outlook appears bleak, but I’ll wait for a few more posts before I ignore their feed.
Hi, there is a bit of a debate going on about the identity of the Becker-Posner Blog authors, cf Crooked Timber. As the domain seems to be, according to WHOIS, registered to you, maybe you could enlighten the debate over at CT or with a quick reply here. Thanks.
WHOIS record for becker-posner-blog.com
LESSIG, LAWRENCE **
(LL9305)
559 Nathan Abbott Way
Stanford, CA 94305
US
Phone: 650-736-0999
Fax: 123 123 1234
Domain Name: BECKER-POSNER-BLOG.COM
Administrative Contact , Technical Contact :
LESSIG, LAWRENCE **
(LL9305)
[email protected]
559 Nathan Abbott Way
Stanford, CA 94305
US
Phone: 650-736-0999
Fax: 123 123 1234
Record expires on 17-Oct-2007
Record created on 17-Oct-2004
Database last updated on 17-Oct-2004
Becker is not a Nobel Prize winner. He received the “The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel”. Not too shabby for an economist but utterly unrelated to Alfred Nobel or the endowment he created to further peace and science.
Good question how you establish the authenticity in this space, but the fact is that I volunteered to register the site and have it set up and help with basic administration.
Well the Economic’s prize is usually referred to as a “Nobel Prize” as well, and is part of the same basic organization.
See http://nobelprize.org/ for more information. In particular, the complete list of all winners is at http://nobelprize.org/search/all_laureates_c.html
I think that there are at least a few of the past winners who have bloglike websites. Kofi Anan and the UN for example have a very active website, which includes periodically updated comments and press conference transcripts from Kofi Anan. Not exactly a blog, but not dissimilar either.
Perhaps someone can pipe this list into Technorati and start finding others?
Shannon
This might be the website for a recent Peace Prize winner (perhaps someone can translate it to confirm):
http://viva-ebadi.persianblog.com/
Shannon
Ok, maybe you can explain it. How do you quantify human costs? Really. What’s the deal with this law and economics business? Reading Posner’s first substantive post, I’m absolutely horrified by his casual reductionist example of an easy-to-calculate cost-benefit-analysis for the business of — in Rush Limbaugh’s immortal words — “killing people and breaking things.”
You seem to understand these “law and economics” “ideas.” Do you know how Posner’s presuming to quantify human life and war??
(I think we need to get Jon Hanson to start a blog!)
The good doctor and Posner are not off to a good start. Economics is easily the worst tool for studying large scale social behavior. It amazes me that he managed to talk about modern war without discussing the consequences of imperfect information. If we all had perfect information and equal position in the world – we wouldn’t have wars.
I’d expect it this from Gary Becker. He tried to analyze family intereactions assuming they were rational actors. Yeah, family members behaving rationally. Sure it makes a point about the mechanics of cooperation, but how much does it explain the whole picture?
Even if you could compare human life on a balance sheet (and that is a big if) how could you possibly have accurate enough information to frame pre-emptive war as a classical econ problem. You can’t; We didn’t. Worse, it makes another country bear the cost of inaccurate information and inferior bargaining position. Refering to Becker’s post – this is precisely why we punish inchoate crimes. We can’t bring people back to life.
Social problems can be explained only in the very simplist terms by economics. Posner and Becker should take a cue from Hayek (discussed in their first post). A top down approach to economic ordering leads to totalitarianism. In this case, reducing geopolitcs to a simple economic equation ignores the complexity that makes markets work, and governs world politics as well. Geo-politics a binary choice on a negative curve – not bloody likely.
In sum: I’m really disappointed. I want to hear about IP, anti-trust, contracts, and any of the other million of so issues that economics CAN illuminate. I’m sorry, but economic (capitalsit?) justifications of essentially moral and social behavior should be left to Ayn Rand.
I only take one mathematical proof when wagering human life – each person is both equal to and greater than the sum total of every other person. It makes comparison impossible.
So, Lessig, if you’re listening, kidly give them a nudge for me. I like what they do, but this issue isn’t it. Or at least make them read some Douglass C. North first. We are talking about a set of choices which is not only contrained by the institution of world politics, but the institution also alters how we weigh the alternatives, making completely rational choice in the moment effectively impossible.
Rob Rickner – 3L (I took time out of studying for exams to write this, that’s how strongly I feel)
Here’s Jimmy Carter’s weblog from his trip to Africa early last year. I think Carter’s about as Nobel as they come.
While many judgements are based on rules of thumb, judges try to hide that by explaining a rational basis for the decision. For instance, the law recognizes that some corporations may abuse their limited liability, and judges go through a lengthy discussion about the topic every time they choose to pierce the corporate veil, but the actual decision is usually based on whether the company kept records, not on whether the company acted dishonestly.
Posner’s post looks like a continuation of that kind of thinking. He’s started the first part of the judgement (“pre-emptive war can be justified, even in cases where the intelligence turns out to be bad”), but he hasn’t yet got to the sticky part, and I don’t think he ever will. I don’t think he’ll ever say if this war is justified, or what rules of thumb we should use to judge other pre-emptive actions.
Posner has tried to bring political partisans together in the past (most notably with commentary on Bush v. Gore), and I think that’s his plan here. He’s spent a lifetime doing this, so it’s not all that surprising. But, unless he’s planning on running for office someday, he has nothing to lose by actually showing his personality on the blog once in a while. Perhaps a former Posner clerk, who’s already offered technical support, can give him some pointers.
I know little about Posner, and less about Becker. All I can say would be based on the rule of thumb that economists know people make decisions based on more than monetary values, but monetary values are the easiest to determine and write about.
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A reply to Max Lybbert: I’m almost positive that Posner is not refering to the business judgment in his posting. The BJR is designed to keep corporate board members from becoming risk averse and missing opportunities. Completely different theory: while technically still economic, the BJR is designed to prevent wasting resources and slowing the economy. Posner is arguing for using a very simple cost benefit analysis to justify (or at least decide when to go about) starting a war – a situation where risk aversion is probably a good thing.
Moreover – Axelrod’s theory on cooperation at least suggests that the best way to continue the ideal outcome (peace) the most possible times is to only return what is done to you (tit for tat). (and if you follow to his next book, forgive generously in situations with imperfect information) This theory explains that Posner’s little anecdote about WWII (hindsight is 20/20) could have been inpiration for France (and allies in Britain) to return in kind. It wouldn’t have been pre-emptive: Germany struck first.
Posner’s Rhine idea only works because we know the results of the alternate outcome. However, in a pre-emptive war we do not know when we’re helping and when we’re pointlessly starting skirmishes. If everyone returns in kind, as is usually in their best interests to do, we’ve got a lot more wars than we would have otherwise.
Obviously if the likelyhood of attack is nearly 100% then striking the first blow makes sense. The question is how far you can get from that certainty before you’re taking an unneeded risk. Taking imperfect information (my last post) and game theory into account, I do not think Posner has made a case that using a simple cost benefit analysis really tells us when pre-emptive war is going to have a better longterm outcome.
My point is – if this was a discussion on antitrust, my feeble knowledge of game theory and microeconomics would leave me useless. These two heavy hitters should be able to go a dozen paragraphs without some punk 3rd year lawstudent poking holes in their logical foundations. Their second post just doesn’t live up to what I think they can do.
Rob,
The problem with Posner et al isn’t in their “logical foundations.” It’s in their basic philosophical outlook. They are looking at a war as if it is some kind of discrete quantifiable “event” which can be surgically achieved, whose effects can be measured, and which can then be closed up in a little box and put away with the other toys.
They simply don’t get it. War is not something which is amenable to economic analysis.
(Also, as I argue in my own blog (shameless plug!), the whole application of economic reasoning to things like war, especially preemptive war based on speculation about your enemy’s motives, is utterly bankrupt as a matter of sustainable sound policy because there’s no way to subsequently verify the judgments that went into the decision and hold the leaders accountable for the future)
In light of Rehnquist’s health, I’ve gotta wonder whether Posner’s angling for a promotion. How else to explain this shameless foreign policy pandering.
Who wants to bet there’ll be a Posner blogpost about how torture and holding prisoners without trial can be efficient and rational before long? Anyone? Anyone?
To Paul Gowder: I agree. However, not only is economic analysis borderline offensive whenever you’re talking about human life, but it also just doesn’t work very well. Once again I’ll go back to Doug North – the less dollars and cents have to do with a choice the more ‘other’ aspects are taken into account by the actors. War isn’t about money. It is about power, leads to money, but all in all is not profitable. I’m saying that if they discussed a primarily economic issue, laymen (like myself) would have far more trouble finding errors and omissions. Posner did just write a book on national security, maybe I should read it before snapping again.
I’d expect this from Becker, although I can’t follow his calculus, so I can’t be sure. I guess I thought Posner would be more grounded. After-all, some of his best decisions (I’m thinking of a shopping mall) use economics to point out why the judiciary is not equiped to make certain damages calculations. Really, I should stop arguing because his blog has been the most fun I’ve had all week.
Rob: Posner has good decisions? I don’t recall any shopping mall decision, but I’ve been consciously avoiding his stuff for a couple years (I don’t really NEED high blood pressure). Got a cite? (Am I forgetting something obvious?)
As for Becker’s post, it is actively self-contradictory. Juxtapose the following two quotes:
A:
“Retaliation may be slow and difficult if terrorists are widely dispersed so that it is hard to generate sufficiently severe reprisals to discourage their attacks. Rogue governments also are more capable of using these weapons surreptitiously, so that it might be many obstacles to determining who was responsible if they chose not to admit their responsibility. It is already difficult to know which groups are responsible for terrorist acts except when they brag about them.”
B:
“The only really effective approach is to stop them before they engage in their attacks. This is accomplished by tracking them down and imprisoning or killing them based on evidence that they intend to engage in suicidal attacks. Those planning such acts can also be punished on the basis of intent.”
Waitasecond. we can’t track them down or punish them after an attack, but we suddenly, as if by magic, have the ability to track them down and punish them before an attack? How does this work? It should be easier to track down terrorists after an attack when there’s actual evidence, no?
He admits this. “Admittedly, the evidence is usually more imperfect when trying to prevent attacks than when responding to attacks. ” However, he doesn’t seem to be aware that this fact undercuts his premise about the inadequacy of retaliation.
Moreover, his argument is totally disconnected from reality to the extent he references Iraq in the same paragraph as “willing to use weapons of mass destruction.” My god. He’s dredging up the WMD thing again! Hasn’t this been refuted enough? How much more does it need?
To Paul Gowder: First Year contracts textbook had a great case where Posner used Coase to effectively argue that damages shouldn’t be determined by the court because the parties themselves were better equiped to determine the value of the rights in dispute. The facts circled around a shopping mall owner who got himself into 2 contracts with conflicting use clauses. It was really an elegant case. The groups can low enough transaction costs and the value of the right in dispute was far too complicated for the court to determine. So it was assigned in a manner where the value could be found through bargaining.
When talking law and econ – shopping mall good, social problems bad. Have you read any of the law and economics explanations of criminal behavior? Jeez. Posner writes some fantastic opinions when it comes to problems that fit well with his theoretical outlook. Of course, for all I know it was written by Lessig when he clerked…
Too bad Law and Economics isn’t content to stay inside
the areas where dollar signs predominate. These days they are enjoying great popularity due to their usefulness as apologists for the neo-cons. (Witness Epstein’s speech at AEI)
Non-intellectuals can reject much of Posner’s rhetoric because they have not had the basic human qualities of intuition, inspiration, and empathy drilled out of them by years of grad school. I wish more people could see the horrified looks that come onto the faces of my professors and fellow law students when I speak out in opposition to the assumptions in a sanctified Posner opinion. When quizzed, some students say they like Posner’s opinions because they are logical and easy to read. They also say the same thing about Scalia.
The rigid hierarchies and overwhelming focus on “getting the grade” in American law schools exert tremendous pressure on students to blindly accept the authority that comes down to them from higher levels of hallowedness. Time pressure discourages questioning, and those students who do try and fight the system often run up against the horrifying realization that grades and authority apologetics DO matter.
So for these and other reasons that involve my personal politics, I find it hard to welcome Posner to blog-land. I guess it takes different strokes… perhaps he will embrace the spirit of the medium and be open to critique?
Maybe next we should try and get Duncan Kennedy to blog?
Or maybe I AM the only 1L out there with nostalgia for the CLS movement in which I never got a chance to participate.
I lot of people have written since I was last here. Let’s keep this short.
Rob, I know that Posner wasn’t writing about corporate law in any form. I used corporate veil piercing as an example of how judges make decisions based on rules of thumb. It’s a pretty clear concept — the judge decides whether a corporation was dishonest based on the corporation’s recordkeeping. It would make more sense to me to make that decision based on the corporation’s business actions. Poor recordkeeping may be a symptom of dishonesty, but it’s also a symptom of disorganization.
My point was that judgements generally start with a far-reaching theoretical discussion, followed by a review of the facts presented in court, followed by a ruling based on a rule of thumb instead of theory or fact. Consider the Oracle/Peoplesoft antitrust ruling. The first 50 pages or so discuss antitrust theory in general, the next 50 discuss the testimony presented in court, and the ruling is based on how Peoplesoft and Oracle advertise their products.
Posner’s post just feels like the beginning of a judicial opinion. I would like to see the part where he discusses specific facts (if he doesn’t want to touch a hot potato like Iraq he could discuss Israel’s pre-emptive start of the Six Day War). If he wanted to write it, I would be interested in the part where he says “I would determine if a pre-emptive war is justified based on …”
Regarding the use of money to measure the decision to go to war, I can’t help but
notice that it was part of Kerry’s platform. It’s also a major theme in Fahrenheit 9/11, since Michael Moore just knows where that money can be better spent. It may seem impersonal, but it’s a common way to determine political action.
For instance, over 3,000 businesspeople died on 9/11, and I can’t remember the potential pricetag of rebuilding the WTC (or the damage the attack did to the economy). If we could have prevented the attack and the related costs and casualties with a $5 billion pre-emptive strike, should we have done so? What if the pre-emptive strike would cost $50 billion, and lead to 500 dead soldiers?
If it bothers you to think like this, can you suggest a better way to make a decision like this? What should I consider when voting for President? My emotions? A deliberate cost-benefit analysis? Party affiliation? Something else?
Paul wrote (after quoting the original post):
It’s actually very hard to find terrorists before an attack, but since the MO now involves suicide in some way, finding people after the attack is much harder, and usually involves catching small fry. Remember the Cole? The people in the raft that blew up were all dead, so tracking them wasn’t going to go anywhere. Instead investigators had to find the apartment that served as a base of operations, and hope to find leads from there (such as who gave them the raft, where they were trained, etc.).
If you catch them before the attack (or simply attack the terrorist organization that is planning attacks) you get the added benefits of not getting attacked.
Max:
My problem with that preemptive concept is that it hands over too much power to the people who are doing the preempting. This is so because the shot “terrorists” ordinarily do not confess. So how do we know whether the preemptive president is telling us the truth? How can we ever punish him for lying?
It’s easier in some instances, admittedly. We know al qaeda is and was a threat to the U.S., so the war in Afghanistan was easy to justify. But we knew that because al qaeda had already attacked. It was unquestionably rational and correct, having direct evidence of the malicious intent and ability of that group, to use military force to root them out.
Iraq, on the other hand… who knows? We won’t, now. Ever. We have no way to ever determine if George W. Bush was telling the truth or lying to us about the risk that Saddam posed.
Doesn’t that mean we’ve given GWB a whole lot of power? He can invade a country, on the basis of undisclosed evidence, and we NEVER get to say “I told you so, they weren’t a threat.” (shameless plug again, this is another facet of the whole accountability thing in my own blog)
There’s a science that works a lot better than economics in making public policy function well. Behavioral psychology. And I can’t help but think that Skinner would have a conniption fit at the way our government is currently run, where there is absolutely no feedback loop for poor policies. We have lost the power to condition our leaders. We’ve surrendered it to unaccountable policy justifications.
How can we run a democracy this way? People at the voting booth have absolutely no basis for deciding whether they want the current regime to continue or change, because they aren’t permitted the information to evaluate that regime?
Corey:
Take heart, you’re not alone.
Good things are being said about the American Constitution Society as an answer to the Federalist Society. You might consider joining them.
The crits, I think, have always suffered from the absence of an easy-to-understand and seemingly rational worldview. If you put their Derrida up against the simplistic swill of Posner’s “lets assume the risk of an attack to be 5” — the “logical and easy to read” thing you mention really hits the heart of it.
It’s not clear how those of us who think law and economics is bloody stupid answer this, except by shouting “HELLOOOOOO! IT’S NOT THAT SIMPLE!!!” over and over and over again until someone gets it. (“It’s not just the economy, stupid.”)
We really have to completely change the terms of the debate.
Heyyyyy… Corey… want to try an experiment?
Print out a big poster of some great work of art. The Mona Lisa, perhaps, or Monet’s Waterlillies (actually, his Rouen Cathedral stuff is better).
The next time someone in class mentions some disgustingly low value for human life, raise your hand, unroll the poster, and hold it up. Say nothing.
Better yet, read Shakespeare’s 152nd sonnet (“In loving thee thou know’st I am forsworn”). Or perhaps go for the more modern angle and bring a little tape recorder, play anything from the Stardust album by John Coltrane.
That would make the point in your classes quite nicely. “So you think humanity can be reduced to dollars, do you? Take this!”
Max: I undestand your point about using a rule of thumb. The rule of thumb Posner is using is probably “Crime and Punishment” by Gary Becker. I’m almost sure that essay is what Becker is using. I’ll stick to my guns – I do not think that Posner is using even a small amount of corporate law as a reference point for this essay.
I’m not psychic, but he’s posting on a blog with a man who made is career establishing the link between economics and human behavior in social situations. Corporate law is founded on various agency theories that fall in a whole different part of economic theory.
Yes, I get your point about judges using other areas of law to help them when they can’t quite figure out what to do. However, even if he is doing that here – it seems very unlikely that he’s using veil peircing to do it. Your emphasis on business proceedures led me to believe you were discussing the Business Judgment Rule.
Having read the abstract – the problem with ignoring social policy in favor a much easier analysis into the business’s record keeping procedures (specific facts) is quite different from what Posner is doing here. Posner is assuming a socially beneficial outcome by ignoring facts (like the practical problems with war). The focus is entirely different – the veil piercing article is worried that social outcomes are being ignored; Posner’s article is only focusing on social outcomes (albeit very one sided). Veil Piercing cases do not ignore the facts assuming a simple cost benefit analysis will always produce a socially optimal result.
As to how I would do better in the analysis – use another discipline. Aside from game theory – war is usually left up to Political Science, Sociology, etc. I have not been convinced how adding his brand of economic analysis adds anything significant over the other disciplines. It is fabulous discussion fodder. I hope that was true aim.
To Corey: I understand your frustration with CLS (or the lack thereof). CLS has done some damage in the world of intellectual property. The role of symbols in society and trademark laws really do nicely together. I suggest ‘The Cultural Life of Intellectual Properties’ by Rosemary Coombe. Like ‘No Logo’ for lawyers…
I personally want to see the Sociology of Economics come into law as a counterpoint to Law and Economics. Social values and institutions restrain choices and effect how people weigh them. Think about it in Contract Law. We assume everyone was roughly equal information and the ability to balance the facts accurately, but how true is that? (studies show: not very) It’ll get you further than trying your chops at Shakespeare during class. You’ll have to go to graduate school (in liberal arts) to pull those shenanigans.
Rob:
It’ll get you further than trying your chops at Shakespeare during class. You’ll have to go to graduate school (in liberal arts) to pull those shenanigans.
I think it really depends on what law school Corey goes too, as well as who the prof is. I can think of several profs at HLS who would probably dispense an “A” on the spot for this kind of behavior. 🙂
(although, admittedly, with one exception, they’re not the sort who would be inclined to indulge in this L&E tripe in class. The L&E lot are usually rather more anal-retentive, in my opinion. Which is odd, given the looseness of their “reasoning.”)
How about Keats? Oooh… better! Better! Blake! C’mon Corey. Read The Tyger in rebuttal to some L&E bullshit. “What immortal hand or eye, Dare frame thy fearful symmetry!” Can you really tell me that doesn’t refute all ideas of monetizing life in one sentence? Man. I wish I’d thought of that while I was in school. C’mon Corey! There’s (not-so old) leftie lawyers trying to live vicariously through you! You know you wanna. All the cool 1Ls are disrupting their L&E classes…
Rob: I used corporate law as an illustration only because I read the veil piercing article recently, and I considered it a good example of judges ruling based on rules of thumb. Posner’s article has nothing to do with business law. In fact, my point was that Posner’s post sounded like the first part of the standard three-part judicial opinion. The first part is a theoretical discussion, the second is a discussion of the facts on the case, and the thirs is supposed to be a decision based on the first two. Instead, the third part is usually a decision based on a rule of thumb.
Paul:
We do know. Let me give a quick summary:
Was it right to go to war? That’s a question that Posner left unanswered.
I’ll have to look into behavioral psychology. It sounds interesting. My interest in economics was piqued only when I learned about behavioral economics (and institutional economics), which happens to be the school of economics most used by judges in the first part of their three-part opinions.
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Don’t worry, I disrupt class to the full extent possible. My prof is cool for a L&E geek though, he includes Kennedy materials and encourages spirited debate. (Not that we get much, I do think that wireless internet is the last nail in the coffin for the traditional socratic dialogue.) About the only thing that seems to be out of bounds is taking Posner’s name in vain.
The behavioral economics stuff is interesting, some results from game theory have proved quite useful in undermining such fun statements as “fairness has no content” which folks like Posner are known to utter. I read an interesting article in the BU Review about Ultimatum Games (where one person is asked to divide a pot of money and the other gets to decide if they both keep the shares chosen or neither does.) The results tend to show that (big suprise) actual humans do actually act according to notions of fairness and empathy.
But I should be brushing up on my anti-Coase arguments FOR compulsory terms for Friday’s final. Thanks for the words
of encouragement…
Oh, and I am at Indiana (Bloomington), my undergrad major was Electrical Engineering so 4.0 wasn’t an option. Harvard admissions formula 27B-6 states: High LSAT plus
B+ average undergrad = intellectually lazy. Not a problem
if they want to keep tech-savvy people OUT of their school.
But Indiana is great, students actually collaborate with each
other in exam prep! I just wish it were farther away from the dark shadow of U Chicago.
Max: What’s the evidence for all these things you recite about Iraq? Especially #2, 3, 6, 7 and 8. Source?
Corey: Good luck on exams. Coase? Coase is living evidence for the fact that the nobel prize in economics is like the pulitzer prize in kindergarten readers. The Coase theorem, if it means anything (which is doubtful), means that socially necessary expenses, in the absence of transaction costs, will be paid one way or another, and it really doesn’t matter who pays them. However, the ideas of what constitutes a “transaction cost” seem to be terribly constricted. For example, is one party’s lack of wealth a transaction cost?
Plus Coase fails the basic criticism of L&E that the figures going into the calculation are usually unknowable.
Incidentally, Eliot Siptzer just announced for NY governor. Yay!
My source is the Duelfer Report. The key findings document is what I relied on.
Max: haven’t read the Duelfer thing yet. First impression is “yea, I trust a report prepared by the CIA… just like I trust fire insurance sold by the mafia.”
Speaking of the mafia…. hey Corey…
The Coase Theorem in a Nutshell:
I have a mortar.
You have a house.
It is costless for us to negotiate.
It is UTTERLY MEANINGLESS whether I have the legal duty to not use the mortar to blow up your house, or the legal right to do so at my will.
Assume I get $50 of pleasure from using the mortar to blow up your house.
Assume you get $2000 of displeasure from my using the mortar to blow up your house.
It is perfectly efficient for the legal system to assign me the house-up-blowing right, and for you to pay me anything between $51 and $1999 not to blow up your house.
My name? Corleone. Vito Corleone. Pleased to meet you. I have great respect for Mr. Coase.
(Of course, if you can’t afford to pay, or if I’m a hardball negotiator… well, those are just transaction costs! We assume those away!)
I have to admit that the CIA’s 2002 report was deeply flawed. I can’t make you believe the 2004 report is any better, although it doesn’t rely on speculation the way the CIA did in 2002.
Now that Paul has discredited the Coase Theorem, I propose that we make all negotiation illegal. The government is in a better position to determine fair prices for everything. Sure, some people will be paid less, some goods will cost more, and unemployment will go up — but extortion will be illegal.
Or have I misrepresented Paul’s position? Didn’t Paul misrepresent the Coase Theorem by overlooking the part of the Theorem that states “when two parties can negotiate effectively”? If one of the parties is under duress, that party cannot negotiate effectively.
No, I don’t think Paul wants price and wage controls. I don’t think he truly believes Coase condoned extortion, either. I could be wrong, though.
Max: I stand by my comment. The coase theorem specifically and directly claims that, absent transaction costs, the distribution of legal rights is utterly irrelevant to the overall “efficiency” of the resulting actions, because the party who suffers more can always pay the other party to change their behavior.
In tort law, this argument is totally common, and practically considered banal now! You can’t throw a brick on some faculties without hitting someone “economist“ mid-discourse on how it makes no difference whether the negligent actor has to take care or whether the victim instead has to pay, since the efficient result will happen either way in zero-transaction cost land.
There is absolutely no principled distinction to be drawn between negligence in tort law and extortion in criminal law.
Simply replace “take care” with “refrain from blowing up your house” in any tort law-based L&E argument.
“Duress” is an extremely fuzzy term. What does duress mean? Lesseee…
I have a mortar, you don’t. That’s duress. You just said so (implicitly).
How about…
I have a productive farm, you don’t? After all, you can use your monopoly to inflict duress on me.
I have the resources to get economies of scale, you don’t?
Any inequality can be re-mapped as duress. On the other hand, any form of duress can be re-mapped as a simple inequality which can be resolved by negotiation in a “free market.”
Which raises the question… what in gods name IS a transaction cost?
It seems like “anything which makes this coase nonsense sound incorrect and/or inhumane” = “a transaction cost which we don’t have to consider because we called it a transaction cost”
Isn’t that a wonderful, delightful, almost orgasmically delicious tautology? “I am king of the world, but traitors don’t acknowledge me!” “You’re not king.” “You’re a traitor.” “Nobody thinks you’re king.” “Is it my fault that everyone is a traitor?”
Two parties can never negotiate effectively. One will always be richer, or stronger, or cuter, or more skilled, or have a mortar, or have a monopoly on the needed good, or have corporate limited liability, or have simply refrained from getting drunk the night before and hence devoid of a hangover.
From which we can conclude that the coase theorem has no practical application.
From which we can conclude that the coase theorem is, to put it delicately, so much crap that you could use it to fertilize every rice paddy in japan.
I agree the coase theorem is crap for the reasons you say.
But, the more one thinks about it, the more one realizes that if Coase is crap, then all of Capitalism is crap, and then you have to be a marxist, or just seriously conflicted and inconsistant. Either way its like a social disease, eventually people just don’t want to talk to you. Especially when L&E justifies their prejudices and their prosperity so well.
I personally have no problem with wage and price controls, or wealth redistribution, forced or otherwise, but I think I am fairly hardcore in the minority on that. The L&E people like to point out that to attack a single unfair result (lets say the Batsakis case in a lot of contracts casebooks), you have to be willing to drop the whole liberalism thing entirely. To which I say… OK.
An ironic thing about L&E is they love to quote Aristotle’s Nicomachean Ethics to show how rooted in Western Tradition their self-justifications are. But if you actually read Book 5, Aristotle keeps talking about this funny thing called a “fair price”. Its like how Chomsky points out in the U of Chicago commemorative scholarly edition of Adam Smith’s “Wealth of Nations”, in the index under Division of Labor, they did not include page 473 where Adam Smith says that division of labor is horrible and will lead to governments having to intervene to stop it from destroying people. Think that was
accidental?
Well, Paul, my understanding of the Coase Theorem comes from a UCLA law professor’s summary:
Since I asked for The Firm, The Market, and the Law for Christmas, I haven’t actually read the Coase Theorem from Coase. So, I asked Google, and the results don’t seem to have anything to do with deciding prices for things. Instead, the general belief among Google’s indexed websites is that the Coase Theorem states that when both parties can negotiate effectively, the initial allocation of rights doesn’t matter. In Bainbridge’s post, he discusses some of the literature about how Coase’s Theorem breaks down under high transaction costs. My favorite deals with a group of California ranchers who decided to negotiate disputes among themselves because “the approved” method for handling disputes was too expensive. Since both parties could negotiate effectively, the final deicisions can be expected to be fair because of the Coase Theorem.
Regarding duress, I’ll go ahead and follow the general belief that duress includes threats of violence or danger. It’s quite a bit more than market pressure.
I guess to clear things up, I need to recognize that many negotiations will involve prices. Then again, negotiations may involve non-cash issues (such as putting up with an inconvenient noise).
If I can shop at any grocery store, then I can “negotiate” for the store that has the best prices and shortest lines based on my criteria. That, to me, is an application of Coase’s Theorem.
Oooh… the firebug train example. I LOVE the firebug train example. The firebug train example practically completes the reductio ad absurdum for me! Because, really… do you want to live in a world where it makes no difference who gets the right in this example? Lets think about this for a moment. Those who support that interpretation of the coase theorem (which I think is an accurate interpretation) think that it is utterly unnecessary to hold a railroad company liable if its sparks set fire to neighborhing property. The reasoning behind that is that if the fire is more harmful to the neighboring property than the failure to prevent sparks is beneficial, and negotiation is costless, the property owners will just pay the train company to prevent the sparks.
How is that different from extortion? “I’m undertaking an activity I get some benefit (even if only emotional) from. It hurts you a lot. Pay me to stop.”
“Duress” is an utterly content-free term. How is it duress to say “pay me or I’ll blow up your house with this mortar” but not duress to say “pay me or I’ll keep running my firebug train through your wheat field?” What element of the definitions of duress that you linked permits a distinction to be made between those two scenarios?
My point is that there is no meaningful difference, for coase purposes, between the train that shoots sparks and my mortar. In each case, my activity, which brings me some utility (even if only malicious pleasure) causes property damage to some party. In each case, absent transaction costs, the person suffering the property damage can pay to stop it.
The only, Only, ONLY meaningful difference between the sparking train’s property damage and my mortar’s property damage is that one is negligent and the other is intentional. That difference is irrelevant, however, because the coase theorem does not distinguish between negligence and intent! (It is also irrelevant that the train causes economic benefit to the tortfeasor, whereas the mortar only causes emotional/cathartic benefit to the tortfeasor. Utility is utility.)
Moreover, I agree with you that duress, as commonly understood, means physical force. However, the definition of the coase theorem you cite does not say “in the absence of physical force.” The definition you cite says “when the parties can bargain successfully.” (Which is a weakish shorthand for “absent transaction costs,” but it’ll do.)
So I ask you: Do you think that having a mortar pointed at your house means you can’t bargain successfully? If so, do you think that having a firebug train driven past your fields also means you can’t bargain successfully? What is the possible difference between the two? Why should we call one “extortion” and the other “negligence” and treat the two differently?
Well, Paul, I have to admit that the post Bainbridge linked to bothered me because it did sound rather like “if the farmer doesn’t like it, he can not only pay for the spark arrestor, but also pay an incentive to the train company to install that arrestor.” It didn’t take long to recognize that farmers aren’t really in a position to negotiate effectively with train companies (train companies probably have so many trains that it would be prohibitively expensive for farmers to foot the bill of installing spark arrestors and paying an incentive).
That simply shoots down the particular example that everyone likes to use. However, if both parties can truly negotiate, it makes sense that the two parties will come to a fair agreement.
I may have taken Coase differently than others, but when I learned the Theorem, I understood it as a reason that the law should make sure that both sides in particular cases can negotiate effectively. On Lessig’s pet project of copyright reform, it seems that one side has been able to define the negotiations, and that the other hasn’t had a chance to do its part so that a fair agreement can be hammered out.
For some reason, I originally applied the issue to minimum wage laws. The minimum wage is meant to be the least anybody can be legally paid for anything. However, in some cases (a 14-year-old babysitter, perhaps), it would seem fair to pay less than the minimum wage, and for some jobs the minimum wage is ridiculously low for anyone. However, the government seems to believe that it’s definition of fair is somehow better than what we would get if each person could determine their own minimum wage. I know, it sounds like an idea asking for exploitation, but there are still jobs that pay two or three times the mandated minimum wage, and don’t require any special schooling. Why? Because both parties have negotiated a higher, fair, wage.
After thinking for the last few minutes, I have to realize that if I understand the Coase Theorem to mean something different from what everyone else understands it to mean, then I’m likely mistaken.
And I can think of several counter-arguments to what everyone else understands Coase to mean. For instance, real estate property rights are supposed to go “up into heaven.” Property owners tried to sue airlines for trespassing back in the early days, and the initial allocation of rights definitely had an impact on the fairness of the solution (for the record, courts determined that no trespass occured if the property owners really weren’t going to use that part of the airspace above their property).
So, while I won’t defend the Coase Theorem until I get to read it as Coase wrote it, I will defend the “small-L libertarian” concept that problems that can be solved with private ordering (negotians, contracts, etc.) should be. Problems that can’t be solved via contract and private agreements, then, should be solved through special laws.
I don’t care what labels people use to describe my philosophical leanings, but I don’t consider myself a true libertarian (large or small-L). In this case I happen to agree with classical libertarians.
Sure, “free market negotiation” makes more sense as applied to contract than to tort. However, the “legal economists” generally try hardest to apply it to tort. The firebug train thing, sadly, is something that most L&E people wouldn’t even blink at. I think Coase was originally talking about tort.
However, in support of the minimum wage, I’d like to refer you back to your totally correct statement that “farmers aren’t really in a position to negotiate effectively with train companies.”
I think that many workers, especially in poor economies and right-to-work states, aren’t really in a position to negotiate with their employers. Unions (the source of most of your “jobs that pay two or three times the mandated minimum wage, and don’t require any special schooling”) help, but not much. Many workers — especially those doing the dirtiest, hardest jobs, are vulnerable to employer overreaching.
The easiest example: migrant farm workers. I spent a couple years in rural Oregon representing migrant farm workers (despite not speaking Spanish, oy! long story). I have well-founded knowledge of their experience. Much of it can be characterized by fear. They do back-breaking (literally! imagine being stooped over during all daylight hours picking berries!) work that no American would do, for a pittance. Many take whatever they’re offered to provide for their families. They life in dramatic fear, because of the power their employers have over them — some real, and some imaginary but persuasive (i.e. the fear that “la migra” the INS will get called. Not by their employers!). They don’t have access to the general employment market because of language and, often, immigration status barriers. There are usually many more workers than jobs.
They have no negotiating leverage whatsoever! If the employers could get away with it, they would pay them a quarter an hour. Sometimes they don’t pay them at all! (Then someone in the job I had hopefully finds out and sues.)
That’s an extreme case, but the bargaining disparity there is clearly even more dramatic than that between the arsonist railroad and the farmers. The disparity in other categories of employment (fast food? textiles?!) isn’t much better.
Well, Paul, I am familiar with migrant workers, as I grew up in Riverside California and am currently in rural North Carolina. And I have to agree that illegal immigrants are routinely taken advantage of.
My main point about the minimum wage is that the federal government isn’t likely to make the right choice about a “one size fits all” minimally-fair wage. However, as I point out at the end of this post, the current system is better than the alternative. Perhaps I should have made that clearer than I originally did.
It is true that high school students working for a little pocket money probably aren’t all that good at negotiating, but then again, they aren’t forced to take any jobs, so it’s safe to assume that they will only take jobs that are “fair” in their mind. Even without a federally-mandated minimum wage.
OTOH, workers who fear some kind of reprisal, such as workers who really should be retired or who lack documentation, simply won’t negotiate regardless of their skills. And, yes, a lot of negotiation only occurs through unions.
And it’s a long shot to expect a “minimum wage for people who otherwise can’t negotiate.” So we have a minimum wage, and people who can negotiate move up from there. I don’t oppose the minimum wage, per se, but I think it only applies in some cases because the alternative is much worse. Repeal the minimum wage and the number of people exploited will be far larger than the number of unemployed workers today who would be willing to work for less than minimum wage because of their unique circumstances.
(Me): “Perhaps I should have made that clearer than I originally did.”
(Me, originally): “The government seems to believe that it’s definition of fair is somehow better than what we would get if each person could determine their own minimum wage. I know, it sounds like an idea asking for exploitation, but there are still jobs that pay two or three times the mandated minimum wage, and don’t require any special schooling. Why? Because both parties have negotiated a higher, fair, wage.”
OK, I didn’t make it clear at all. In fact, I originally wrote without thinking about undocumented workers, or others not in a position to negotiate effectively. I was thinking about the large number of people who can’t negotiate at a bargaining table could, but can “negotiate” through looking for new jobs.
So, I guess I’ll have to admit that I changed my mind between writing the two posts, because Paul did bring up points that I had ignroed.
Paul,
I’m going to back you up in your simple statement of Coase’s theorem as a justification for extortion. That’s what it sounds like to me too.
I still don’t see why law and economics is thought to be particularly libertarian, and that the alternative to Posner/Coase/etc. is government intervention. If, as in the libertarian conception, the purpose of government is to protect individual rights, isn’t Coase-approved extortion anti-libertarian? Why do we have to jump from there to being for a minimum wage and other government interventions into the economy?
Well, after losing out on my understanding of Coase, I think I’ll handle Jessica’s question. Just like conservatives, liberals and so-called “progressives”, libertarians come in all different shades. Some are out-and-out anarchists, and some just want a less-intrusive government. The economic guys you’re talking about happen to be at the point on the spectrum that they prefer negotiated solutuions to gevernment solutions unless there are very compelling reasons to get government involved.
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