I. Introduction
American legal scholarship is unique in that it follows one rule, which I have not seen so strictly demanded or upheld in European legal scholarship. An American paper must have a clear thesis, which should be able to be formulated in a single, simple sentence. For European readers, this may seem a little odd, especially since doctoral students in Europe are not required to state any thesis. They write about what they think is an important and interesting legal topic. Scholars review a large body of literature, compare different jurisdictions, analyze case law, and, of course, develop many recommendations and suggestions along the way, but they rarely make any single claim.
I find the American model better, simply because it allows the author to stay focused, avoid a Faulknerian stream of consciousness, and be more precise. Additionally, it allows the legal system in general to develop, build on previous scholarship, and progress. On the other hand, understanding this characteristic of American legal scholarship is important for interpreting the text. Sometimes, many people find it difficult to read American scholarship because the text is too vague and seems to be going nowhere. With the central thesis in mind though, comprehending the legal texts becomes easier. We need to be able to understand what the central claim is that the author is trying to make, what evidence (including case law) supports the claim, and how the author presents their arguments.
Lastly, I would like to clarify that I don’t mean to claim that ALL American scholarship has a clear central thesis, nor do I contend that all GOOD American scholarship has it. This trend seems to be quite recent, and we find older papers to be more disorganized, even those we consider classics. It seems that academia has come to the conclusion that brief, precise, and to-the-point scholarship is much better than sloppy scholarship; that clear text is better than text filled with legalese and unnecessary textual complications. One may wonder when the judiciary will realize this simple truth. It does have a great tradition of concise legal argumentation, as older cases seem to be much more thorough and informative in their legal analysis than the lengthy court opinions of today.
In any case, with this introduction, I would like to first discuss the famous paper by Guido Calabresi and Douglas Melamed, commonly referred to as “The Cathedral,” which is one of the American classics.
II. Thesis
In compliance with the American legal tradition, let’s first try to articulate the main thesis of the paper to set the stage for the following analysis. At the same time, I would like to provide a brief explanation of why I think this particular formulation of the thesis is more appropriate for the paper. There are no black-and-white rules here, and people may debate which part of the analysis is more fundamental to the paper and which one is secondary. This is how my thesis looks:
“Authors propose a unified framework for legal analysis, integrating Property and Torts through the concept of “entitlements” protected by property, liability, or inalienability rules, to address complex legal and economic issues more effectively, including pollution and criminal sanctions.”
The first part of this is the “proposition” part. The paper proposes a new way of thinking about the rights of individuals, and the ways we grant those rights and then enforce them. The framework is unified because it allows us to analyze legal questions from different perspectives, going beyond the traditional limitations that confine such analysis within the boundaries of specific fields of law. The authors begin the paper by stating that “only rarely are property and torts approached from a unified perspective.”
The second part of the thesis is that the authors propose the notion of “entitlements” as a way of executing this new unified legal analysis. Entitlements are similar to rights, as the name suggests. The authors propose that these entitlements can be protected by property, liability, or inalienability rules. In the first paragraph of the paper, they state, “by articulating a concept of ‘entitlements’ which are protected by property, liability, or inalienability rules, we present one framework for such an approach.”
The third aspect of the thesis is the introduction of efficiency. After articulating the concept of entitlements, the legal system needs to decide how to allocate those entitlements. Here, the authors introduce three main considerations: (1) economic efficiency, (2) distributional goals, and (3) other justice considerations. Each will be discussed separately below.
Finally, I decided to specifically mention pollution and criminal cases in the thesis because the authors used them as illustrations of how the proposed framework of unified legal analysis may work in different fields of law.
III. Why is the Notion of Entitlement Important?
The authors begin by pointing out that the very first question the legal system must address is the question of entitlements. This is important for having a system that decides access to different goods based on law and merit, as opposed to force (i.e., “might makes right”). Enforcement of these rights is only the second step, a logical continuation of the existence of entitlements. But, the mere existence of them, of course, would not guarantee anything. Thus, state intervention becomes inevitable.
IV. How Can These Entitlements Be Protected?
The authors propose three categories of rules that can be used to protect and enforce entitlements: (1) property rules, (2) liability rules, and (3) inalienability rules. Here, we should reiterate the point the authors made: “the categories are not, of course, absolutely distinct; but the categorization is useful since it reveals some of the reasons which lead us to protect certain entitlements in certain ways.” The authors acknowledge that one piece of property may be protected by a mixture of entitlements in different situations. This is, of course, known from traditional property systems: there are rules that grant title to property, rules that allow expropriation of the same property for an objective price, and rules that make certain transfers of that property illegal.
IV.1. Property Rules
Property rule protection resembles the traditional concept of property. It means the owner decides whether to sell the entitlement and at what price. No one can force the owner of an entitlement protected by property rules to give it up, unless the owner agrees to do so. This happens when the legal system decides that the owner of the entitlement is better positioned to assess its value. However, to be fair in the criticism, it seems a little odd that the authors take conventional notions of property rights and separate them from the object itself, only to reintroduce the concept in a different framework — property rules. By separating entitlements and property rules, the authors seem to be stripping the property object of its legal status and further dividing traditional property rights into three categories, which may seem arbitrary to some. What could be the main reason for such a division? One possible answer may come from another passage in the paper, where the authors discuss the inappropriateness of penalizing a thief by forcing them to only pay for the objective value of the property, instead of subjecting them to more severe consequences (i.e., ‘punishment’): “for us to charge the thief with a penalty equal to an objectively determined value of the property stolen would be to convert all property rule entitlements into liability rule entitlements.” Therefore, we may argue that this framework of dividing property rules into further entitlements and property rules allows for the easier deprivation of property.
IV.2. Liability Rules
Liability rule protection means an entitlement can be destroyed by paying an objective price. Therefore, instead of prohibiting the destruction of the entitlement with property rules, we ‘allow’ the destruction but subject the wrongdoer to liability. This method is justified when society does not trust the holder of the entitlement to make ‘good’ judgments about its transfer and the conditions of that transfer, including the price. In reality, though, the liability rule converts traditional property into a more ‘lease’ or ‘license’-type of good, which can be revoked with ‘proper’ compensation. It should be no coincidence that the authors discuss the ‘hold-out’ problem as a primary reason for using liability rules. Therefore, the main reason to protect something by a liability rule instead of a property rule seems to be to make it easier for the entitlement to be transferred.
IV.3. Inalienability Rules
Finally, some entitlements are of such a nature that they should be protected by prohibiting their transfer (i.e., making them inalienable). The rationale for inalienability, like property and liability rules, is often tied to distributional goals. These are the cases where society finds it difficult to trust the holder of the entitlement to make necessary calculations regarding the entitlement, including with respect to its value. The only efficient way to protect the entitlement is to control who possesses it. This can be done by making the entitlement inalienable, and potentially destroying it once the holder of the entitlement dies.
Inalienability may be employed when a transaction could create significant externalities. For example, in the case of pollution, where widespread harm is inflicted on many neighbors and the cost of compensation would be high, barring the transactions over the entitlement can be more efficient than managing its consequences. This is especially true when the number of potential victims is large, making it impractical for them to negotiate effectively. Inalienability is also used when external costs, such as moral harms, cannot be monetized or objectively measured. For instance, with issues like slavery or kidney sales, the state's inability to properly assess and monetize these harms makes prohibiting such transactions the only viable solution to prevent significant societal costs.
There are also two other reasons for making entitlements inalienable: self-paternalism and true paternalism. Self-paternalism occurs when individuals or a society restrict their own future actions out of concern that, in the heat of the moment, they may make decisions they later regret. This aligns with Pareto efficiency, as the legal system anticipates that making certain decisions early on will benefit society in the long run, preventing hasty or harmful choices. An example of this is the adoption of a bill of rights, which preempts future actions to protect individual rights.
In contrast, true paternalism occurs when one party restricts another's freedom for their own perceived benefit, believing they know what is best for them. For example, a legal system that prohibits certain transactions, like selling babies or exculpatory clauses, is engaging in true paternalism. In such cases, the state seeks to redistribute wealth and benefits among groups in society, directly influencing who gains or loses economically by prohibiting these exchanges.
V. What Are the Considerations for Granting Entitlements?
The authors propose considerations and reasons to explain how entitlements should be set. They categorize these considerations into three main areas: (1) economic efficiency, (2) distributional preferences, and (3) other justice considerations.
V.1. Economic Efficiency
The paper comes from the traditional ‘economic analysis’ school. It has all the characteristics of this approach, including illustrious examples of A going to B scenarios, accompanied by ‘let’s assume’ setups. Therefore, it should be no surprise that the very first consideration the authors propose in understanding how to allocate entitlements is to evaluate how economically efficient such an analysis is. The authors claim that “perhaps the simplest reason for a particular entitlement is to minimize the administrative costs of enforcement.” However, this should not be understood as yet another reiteration of the rule of the jungle — that the mightier should win — since administrative and enforcement costs may be minimized by letting the parties battle it out among themselves. Other considerations must also be taken into account to fully effectuate the positive impact of reducing administrative expenses.
Economic efficiency is a larger notion than administrative efficiency, which includes the costs of enforcement. Economic efficiency strives to achieve Pareto optimality. Pareto optimality, like many concepts in economic analysis, has as many definitions as there are people discussing it. However, the authors propose the following definition: “economic efficiency asks that we choose the set of entitlements which would lead to that allocation of resources which could not be improved in the sense that a further change would not so improve the condition of those who gained by it that they could compensate those who lost from it and still be better off than before.”
To achieve Pareto optimality, one must take into account the realities of life. The authors seem skeptical of the notion that assumptions of the absence of transaction costs make Pareto optimality effective, irrespective of the initial position of the parties, most notably their wealth. The authors counter this position by pointing out that in order for these assumptions to work as proposed, we need to have a very broad definition of them “as involving both perfect knowledge and the absence of any impediments or costs of negotiating.” Since no such world exists, the authors conclude that the initial allocation of resources does affect the subsequent economic efficiency of the measures taken. In the case of a dispute between neighbors over noise, the authors note that “Marshall's willingness to pay for silence may depend on his wealth.”
Therefore, the authors argue that in deciding on the granting of entitlements, we need to understand the initial conditions and follow the logic. The first step is to determine which method of granting entitlements is more economically efficient, as judged by their costs and benefits to society. If we cannot identify with certainty these costs and benefits, it would be better to delegate this decision-making to the actor who is best positioned to make this call. In specific cases of pollution and accidents, costs should be allocated to the actor who is best positioned to cheaply avoid them. If we cannot identify such an actor, then we need to find the actor who can negotiate the cheapest solution to the problem on the market. Finally, in a world with imperfect markets, the legal system may attempt to substitute the market system with ‘collective fiat’ to achieve Pareto optimality.
V.2. Distributional Goals
Economic efficiency is not the only goal; wealth distribution is also important. Distributional goals can be categorized into at least two areas – money and goods. All societies have different distributional goals, whether motivated by caste preferences or other factors, such as incentivizing producers over consumers based on economic and efficiency considerations. Entitlement affects equality. While perfect equality is impossible, societies must choose entitlements based on various criteria, often considering how to promote the desired wealth distribution. Societies may also grant entitlements to ensure access to essential goods like education or bodily integrity. The choice between making these entitlements alienable or inalienable depends on whether society believes it knows better than individuals what benefits them and the collective welfare.
V.3. Other Justice Reasons
Other justice reasons include all considerations that do not fall within economic efficiency and distributional goals. This third category is important because economic efficiency and distributional goals do not completely explain all reasons for granting entitlements. The authors mention two considerations that come to mind: (1) the relative worthiness of each group, and (2) the consistency of choices. In this context, “relative worthiness” refers to the perceived value or moral justification for favoring one individual's preference (e.g., noise or silence) over the other, while “consistency” pertains to how the choice of entitlement aligns with or fits into the broader system of entitlements in society. However, justice considerations do not only mean “moral” considerations, as “moral” considerations are characteristic of efficiency and distributional goals as well.
VI. Specific Cases
VI.1. Pollution
As explained at the beginning of this review, the authors specifically discuss two areas of law — pollution and criminal cases — to demonstrate how their proposed new framework of legal analysis works in practice. In pollution cases, the authors outline three basic rules that have been traditionally employed by commentators and courts to analyze these situations. However, the authors suggest a fourth way of analyzing the problem, as demonstrated in the table below.
Rule | Entitlement Holder | Entitlement Description | Protection Mechanism | Action Required to Alter the Entitlement |
1 | Marshall | Entitlement to be free from pollution | Property Rule | Taney can pollute only if Marshall consents. |
2 | Marshall | Entitlement to be free from pollution | Liability Rule | Taney can pollute but must compensate Marshall. |
3 | Taney | Entitlement to pollute | Property Rule | Marshall can stop pollution only by paying Taney at Taney’s price. |
4 | Taney | Entitlement to pollute | Liability Rule | Marshall can stop pollution by compensating Taney with an objectively determined amount. |
The authors argue that the fourth rule is crucial because it enables economic efficiency regardless of the initial allocation of the entitlement. Unlike the third rule, where Taney (the polluter) can set an excessive price, the fourth rule avoids 'holdout' problems by setting the compensation objectively. This ensures fairness and prevents inefficiencies caused by strategic demands. While the fixed price limits direct negotiation over the amount, it shifts the focus to whether stopping pollution or allowing it to continue is mutually beneficial within the constraints of a fair and balanced valuation. The fourth rule helps fix mistakes in how rights are assigned and ensures better results by reducing unfair tactics.
VII. Crimes
The authors also briefly explore the application of their framework of entitlements and protection rules in the context of criminal sanctions for crimes against property and bodily integrity. They examine why criminal sanctions are imposed for offenses like theft or violations of bodily integrity, rather than simply requiring the wrongdoer to pay compensation. Imposing compensation alone would convert property entitlements into liability entitlements, which society finds unacceptable. This is because objective valuations often fail to accurately capture the true value of the property or the harm caused to the victim. In such cases, the legal system’s reliance on criminal sanctions serves a deterrent function, preventing individuals from unilaterally converting property rules into liability rules without consent.
VIII. Auto Accidents
Another interesting angle of this analysis is the difference between criminal cases and civil cases (e.g., car accidents). We protect people from criminal actions through property rules, rather than liability rules, as explained above. But why don’t we do the same for car accidents, where we allow parties to claim compensation for their harm? The reasoning is that the perpetrator (e.g., the thief or rapist) usually knows in advance what they are going to do and who they will harm. In these situations, the criminal could, in theory, negotiate with the victim before committing the crime, for example, by reaching an agreement to compensate the victim for what is taken. However, society doesn't want to allow such private agreements, as the goal is not just to compensate the victim, but also to uphold societal norms and prevent the crime in the first place.
In contrast, in the case of an auto accident, the driver doesn't have the opportunity to negotiate with the potential victim before the accident happens. The victim of an accident is often unknown to the driver, and the accident itself is usually an unintended event. Therefore, the system uses liability rules (such as insurance or compensation) rather than criminal sanctions. The goal here is to allocate the costs of the accident efficiently, allowing for negotiation and compensation after the fact, rather than punishing the driver criminally before the harm occurs. However, this last part of the analysis seems to deal with the notion of blame, which is also present in car accidents as it is in criminal cases. The argument about the possibility of negotiation does not seem very persuasive.
IX. Conclusion
The Cathedral is an influential paper in American legal tradition. It has influenced policy and case law extensively. This is a new way of understanding the legal framework and evaluating when to grant rights and entitlements, and how to allocate risk and responsibilities that serve important societal goals. The authors acknowledge the limitations of model building, such as oversimplifying complex legal relationships and forcing situations into predefined categories. However, these models offer significant benefits by helping to identify underlying relationships and alternative solutions that might be missed by an ad hoc approach. The framework has provided insights and, thus, despite its limitations, it is a valuable tool for understanding legal issues.
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