(a book that wouldn't been good to read at age 14 or 15)

Further reading: Posner's Economic Analysis of the Law,

Ch 1 - Ex ante versus ex post. Static versus dynamic.

2 examples. Damage to a cow. A cave mouth is on someone's land, but the cave extends under many properties. (there might be a public right-of-way)

Accident.

Judge serves as an adjuster of last resort, producing an answer the parties agree to accept because it has the force of law, when they can't resolve informally. Look at other cases that seem similar. All the law can do is redistribute the suffering a bit. Basically a distributive exercise, about who should pay whom.

Ex ante perspective, it wouldn't undo the killing, but could stop future killings. That's equally good, isn't it. Or better than equally good. Not just undoing one of them. Effects might have on someone's incentives. Asks how everyone's incentives will be changed next time. "Policy" argument.

Might look ugly if you study the cases where the rule gets used... a rule that looks brutal and wasteful when invoked might actually be working by causing rareness.

You can't bring statements into court that were made during negotiations to settle the case ... it would discourage frank settlement negotiations next time, and we want them to occur.

How to increase the amount of value in the world, not how to divide it up once it exists (except insofar as dividing affects how much of it gets created in the first place.)

Ch 2 - The Idea of Efficiency

What sorts of incentives we want people to have.

Harsh in your case but it would make other lawyers more careful next time.

Expensive - One thing the law tries to do is keep the cost of such situations to a minimum. It penalizes people who make problems more expensive than they have to be. Whether a legal decision will create good incentives, try asking whether it will cause the parties, or people like them, to keep all the costs of their situations to a minimum.

A bunch of costs suddenly comes into existence (with an accident).

whether the animal's owner took reasonable care to prevent this sort of accident.

The accidents would have cost less than the measures.

still works most of the time, and then let accidents happen once in a while

did everything that was cost-justified

We don't make the rancher pay anything because there is nothing else we wanted the rancher to do.

on balance

We feel angry at people when they easily can prevent accidents but don't, not when they pass up the chance at prevention that would have been more trouble than the accident itself.

another variety of waste

things that people value go unused, or underused.

the law assigns rights of ownership - property rights. ownership gives incentive to get the most out of whatever it is that they own and to take care of it

We both want to make the sale. If we can't, the result can be considered waste, the waste is the size of the 'better-offness'

We want the cave to end up owned by whoever can make the most of it

holdout problem (economists call all such problems transaction costs)

Nobody advocates for waste. when it does occur you usually can view it as a departure from what the parties would have agreed on in advance if they could.

functions to keep everyone's total costs down

"Kaldor-Hicks" if it creates more benefits than costs overall

Pareto efficiency if nobody can be made better off without making someone else worse off

utilitarianism - increasing the total wealth of the group will usually mean increasing their welfare, but not necesarily. And increasing overlall wealth is usually considered an unsatisfying ultimate goal. The initial distribution of wealth may be unjust.

"Adoptive preferences" - not what they really want ... or their immediate preferences may not be in their own interests in the long run... may seem immoral and be entitled to no weight in public debate... paternalism... based on a better foundation than just giving people what they think they want.

appeal to a local 'if-then' that everyone is likely to find agreeable or at least valuable, even if everyone agrees that other things matter, too.

Just a possible means to other ends such as prosperity or liberty.

Ch 3 Thinking at the Margin

What will the marginal thief do? Or the bank in doubt about its policy. Should rapists be given as strict a sentence as murderers (decision about how far to go with the crime, additional price)? Three strikes laws. Maxed out. Punishment for murderers inside prisons? Miranda rights against talking, but those who remain silent are often guilty (against Miranda: creates bad incentives for substitutions by prosecutors.) . To restrict spending on political campaigns? Right to be not fired without cause. Waivers under 'duress' (imbalance of bargaining power, it was a 'contract of adhesion', although a waiver allows something that both sides would have liked, or react by paying doctors less and those doctors leave). Companies that pollute (external cost to the firm since the firm does not feel it, holding them liable might seem an improvement in efficiency but maybe it isn't because the firm can still pollute the air with impunity). Cricket fences. Tax on something. Wild animals (strict liability for damage even the first time, We want the full costs of the thing brought home to the people doing it, who are then left to judge for themselves whether to make substitutions.)

Pressure on the margins. Anxiety. Nobody is certain. The purpose is to get people to make substitutions.

On where you smoke,but not how much. Or on how much but not on what kind of cigarettes. Sometimes you can make substitutions between them: one can get wider if pressure is put on another.

Not all-or-nothing. Not total. But in incremental terms. Seeing behavior asa bunch of choices about when to do a little less along one dimension.

What substitutions a legal incentive might cause. The risk that the actual substitution one gets will be perverse and counter-productive. The best solution often involves little adjustments--and maybe adjustments of several margins, belonging to different people--rather than just a decision to do something or not to do it.

"Arguments about what the average person typically does aren't an effective reply to those who are trying to make a dent at the margin."

Preserving marginal deterrence--scaling penalties.

Tort. Liable for negligence. Or strictly liable, which means they pay no matter how careful they were.

Restrict spending on political campaigns. Less accountability because its not clear who is responsible for the ads. The government can try to suppress that margin, too, but then it starts gobbling up liberty. Regulating all those margins may have great costs, both in conventional expense and in lost freedoms.)

Settling for a second best change might actually do more harm than good, subsitituions might offset whatever the first change did. But in a world where we can only control some margins...

The application of second-best theory in our examples is just conjecture. The side effects can be hard to nail down.

Courts tend to be in a bad position to figure out what side effects would be... Better made by legislatures or agencies. They can gather more information than a judge usually is given by the parties.

Maybe most of the benefit of the 15 foot fence already is secured by the 10 foot version. Maybe the owners got it just right., They did the efficient thing.

One reason to avoid thinking about margins is that one can't do it well. It is possible to think about margins without using numbers. That's what courts usually do when they worry about incentives... it's all speculation... seems cost-justified... maybe it abandons concern with costs and benefits entirely in favor of some other type of analysis.

Adversarial process.

The neighbors likely don't want a marginal solution. They probalby consider themselves better off with the airport shut down. Likewise, the airport doesn't want to cut back its nighttime flights. Unless one of the sides comes to believe it is going to be made a loser by an all-or-nothing decision. Then it may suddenly become open to compromise and negotiation.

"Why do courts so routinely turn absolute language from the Constitution into tests that call for marginal thinking? Perhaps because a consitution has to address such a wide variety of situations over a long period of time. Marginal approaches leave room for easier adjustment in how a constitution is read when changes in the world call for it."

Ch 4. The Single Owner (sharing the cost)

The purpose of the rule isn't to make everyone pay who got a benefit. It's to get the captain to think the right way about what to jetison.

"We view these things in the aggregate. We decide whether there is waste by comparing the gains to everyone with the losses of everyone."

Imagine the ballpark and the neighboring houses had a single owner. Would he have built the fence?

Fair or efficient. An attractive feature of the sinlge-owner hypothetical is that if often can be used to capture both concerns.

"Hand formula" Compare the cost of the precaution with the cost of the accidents, but multiplied by the chance they would happen. ... But judges never have the numbers to calculate this rigorously. ...

A reasonable person with average values or one who values the interests of others on par with his or her own.

Uncomfortable to compare dollars with the agony of ... But people do it all the time, with respect to themselves, when they decide how carefuly to drive, how much to spend on safety features...

Oxen gores your goat on your land. Depends how much the ox was worth. Tort of conversion, the action used to recover when property has been stolen or destroyed. But you defend saying your apparent act of conversion was covered by your privelege to defend your own property the goat. You are committing waste by destroying something more valuable to save something less.

Ship is threatened by a storm. Courts say since your property is in peril you have a right to save it by seizing my property. The doctrine of necesity.

The dock was worth more. The legal rule causes you to internalize the costs of all these decisions. And there is also a doctrine of general average. The owners of what was saved have to chip in to make it up to the person whose goods were sacrificed.

The difference lies in whether you have to pay anything if you made the right decision. In the case of the deuling animals the answer is no, perhaps because it would rankle to make you pay when you take reasonalbe measures to defend your animals against intruders who have no right to be on your land.

"The single family hypothetical." Officer of a big corp. Major shareholder himself, owns a third, but he's still likely better off if he can steal some money from it. He gets all but suffers only a share. A true single owner wouldn't steal from himself, which sounds ridiculous.

Long run considerations can cut the other way. Might make it too tempting for one party to invade the rights of another and thus multiply the occasions. Create bad incentives. An efficient solution might be efficient only to a single case of it. In general, it may be the rule that keeps the total cost down by causing them to occur so rarely.

Here is another limit on the single-owner principle. When we make a contract we are gambling. If I started to demand lots more rubber, a court eventually might hold that I'm breaching the contract because the point of it wasn't to let me go wild in this way.

Doctine of mitigation of damages. If someone breaks a contract you gain the right to send a bill for damages, but the law requires that you make reasonable efforts to keep the size of the bill down.

Tax rates go up. No longer worthwhile to keep your current job. So you switch to something that pays less and focus on what you really like best, oil painting. Considerations of liberty. If the painter's leisure were treated as psychic income. We do not always expect people to act the way a single owner would. ... Who knows what a single owner would do? There are matters of taste that we prefer to leave to individuals to make for themselves.

Ch 24 - Framing effects

More likely to accept a smaller sure thing than gamble for a bigger gain, but more likely to gamble to lose more than accept a certain smaller loss.

25 - Anchoring

Any suggestion, any number, will provide comfort in a decided number and attract the decided number toward its value. Judges are not immune to irrational anchoring. A guideline, schedule, examples, or a cap on number may not help, because these can all influence the decided number higher.

Not all anchoring is irrational. Some is based on real belief of severity.

26 - Self-serving bias, and attribution error

When you are better off if something is true, you are more likely to believe it. Credit themselves for their successes and blame others for failures. What is fair and right is whatever serve's one's own interests.