A unified theory of justice: The integration of fairness into efficiency

Washington Law Review

Volumn 73, Issue 2, 1998, Pages 249-327

  Swygert, Michael I ^a,b,c   Yanes, Katherine Earle ^a,d  

^a STETSON UNIVERSITY   (United States)

^b VALPARAISO UNIVERSITY   (United States)

^c YALE UNIVERSITY   (United States)

^d WILLIAMS COLLEGE   (United States)

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[No Author keywords available]

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EID: 0345777603     PISSN: 00430617     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (540)

1. See, e.g., Nicholas Mercuro & Steven G. Medema, Economics and the Law: From Posner to Post-Modernism 60 (1997) ("The concept of efficiency as justice is what many of the critics of the Chicago approach to law and economics find so troubling."); id. at 80 ("[Others] argue that legal-economic policy should [have a] concern for both allocative and distributional impacts, as well as a continuing concern (or justice and fairness.") (citation omitted). Mercuro and Medema write: [An] issue is whether efficiency should play any role at all in the determination of what constitutes justice. This has become the arena of one of the most widespread arguments regarding the Law and Economics movement Whereas Posner, for example, has argued eloquently that efficiency is moral and comports with the dictates of justice, others are equally adamant in their views that the use of the efficiency criterion in making law is antithetical to the idea that law should reflect some sense of justice.
2. Id. at 186; see also James Boyd White, Economics and Law: Two Cultures in Tension, 54 Tenn. L. Rev. 161, 198 (1987) (arguing that language of economics needs to be "integrated with . . . the rest of our culture").
3. Law is "instrumental" in that it is a means to an end rather than an end in itself. Ronald Dworkin argues that the consequences of legal decisions are critical to legal theory, that law is a social phenomenon wherein "it matters . . . how judges decide cases." Ronald Dworkin, Law's Empire 3 (1986). Competing jurisprudential theories share a common characteristic of attempting to explain how the law can work for just ends. Id. at 408-09.
4. Postmodern jurisprudence refers to the legal literature of the latter decades of the twentieth century that has departed from the century's mainstream perspectives - those predominately rational, positivistic, and natural law traditions that assert foundational truths, neutral principles, and transcendental values. These perspectives have been replaced, it is claimed, by "a more pluralistic, contextual, and nonessential explanation of law and legal decisionmaking developed for a multicultural society." Gary Minda, Postmodern Legal Movements: Law and Jurisprudence at Century's End 2 (1995). Minda discusses five postmodern legal movements: law and economics, critical legal studies, feminist legal theory, law and literature, and critical race theory. Id. at 83-185. In addition to presenting an overview of these five postmodern jurisprudential movements, his book includes a brief discussion of construction theory as relating to social norms and meanings. Id. at 120-21. One of the characteristics of postmodernism is that its theorists distrust "all attempts to create large-scale, totalising theories in order to explain social phenomena."
5. Costas Douzinas et al., Postmodern Jurisprudence: The Law of the Text in the Texts of Law at x (1991).
6. For other discussions of postmodern legal theory, see John Lukas, The End of the Twentieth Century and the End of the Modern Age (1993),
7. Neil Duxbury, Faith in Reason: The Process Tradition in American Jurisprudence, 15 Cardozo L. Rev. 601 (1993),
8. Nancey Murphy & James Wm. McClendon, Jr., Distinguishing Modern and Postmodern Theologies, 5 Mod. Theology 191 (1989),
9. Dennis Patterson, Postmodernism/Feminism/Law, 77 Cornell L. Rev. 254 (1992),
10. and Peter C. Schanck, Understanding Postmodern Thought and Its Implications for Statutory Interpretation, 65 S. Cal. L. Rev. 2505 (1992).
11. The law and economics movement has had many central theorists over the last three-and-a-half decades. For a few of the most important, see Kenneth Arrow, Social Choice and Individual Values (2d ed., Yale U. Press 1976) (1951),
12. David W. Barnes & Lynn A. Stout, Cases and Materials on Law and Economics (1992),
13. Gary S. Becker, The Economic Approach to Human Behavior (1976),
14. Guido Calabresi, The Costs of Accidents: A Legal and Economic Analysis (1970),
15. R.H. Coase, The Firm, the Market, and the Law (1988) [hereinafter Coase, The Firm, the Market, and the Law],
16. Robert Cooler & Thomas Ulen, Law and Economics (2d ed. 1997),
17. Anthony T. Kronman & Richard A. Posner, The Economics of Contract Law (1979),
18. Robin Paul Malloy, Law and Economics: A Comparative Approach to Theory and Practice (1990),
19. Mercuro & Medema, supra note 1, A. Mitchell Polinsky, An Introduction to Law and Economics (1983),
20. Richard A. Posner, Economic Analysis of Law (4th ed. 1992) [hereinafter Posner, Economic Analysis of Law],
21. Richard A. Posner, The Economics of Justice (1981) [hereinafter Posner, Economics of Justice],
22. Steven Shavell, Economic Analysis of Accident Law (1987),
23. Gary S. Becker, Nobel Lecture: The Economic Way of Looking at Behavior, 101 J. Pol. Econ. 385 (1993) [hereinafter Becker, Nobel Lecture],
24. Guido Calabresi, Some Thoughts on Risk Distribution and the Law of Torts, 70 Yale L.J. 499 (1961),
25. R.H. Coase, The Problem of Social Cost, 3 J.L. & Econ. I (1960) [hereinafter Coase, Social Cost],
26. Frank H. Easterbrook, Ways of Criticizing the Court, 95 Harv. L. Rev. 802 (1982),
27. Charles J. Goetz & Robert E. Scott, Principles of Relational Contracts, 67 Va. L. Rev. 1089 (1981),
28. Edmund W. Kitch, The Intellectual Foundations of Law and Economics, 33 J. Legal Educ. 184 (1983),
29. Lewis A. Kornhauser, The Great Image of Authority, 36 Stan. L. Rev. 349 (1984),
30. and Susan Rose-Ackerman, Progressive Law and Economics - And the New Administrative Law, 98 Yale L.J. 341 (1988).
31. For an excellent discussion of critical legal studies evolution, see Mark Tushnet, Critical Legal Studies: A Political History, 100 Yale L.J. 1515 (1991).
32. Well-known critical legal studies publications include: Morton Horwitz, The Transformation of American Law: 1780-1860 (1977);
33. Duncan Kennedy, Legal Education and the Reproduction of Hierarchy: A Polemic Against the System (1983);
34. Roberto Mangabelra Unger, The Critical Legal Studies Movement (1983);
35. J.M., Deconstructive Practice and Legal Theory, 96 Yale L.J. 743 (1987);
36. J.M., Transcendental Deconstruction, Transcendent Justice, 92 Mich. L. Rev. 1131 (1994);
37. Clare Dalton, An Essay on the Deconstruction of Contract Doctrine, 94 Yale L.J. 997 (1985);
38. Gerald E. Frug, The Ideology of Bureaucracy in American Law, 97 Harv. L. Rev. 1276 (1984);
39. Peter Gabel & Joy M. Feinman, Contract Law as Ideology, in The Politics of Law: A Progressive Critique 172 (David Kairys ed., 1982) [hereinafter The Politics of Law];
40. Peter Gabel, The Phenomenology of Rights-Consciousness and the Pact of the Withdrawn Selves, 62 Tex. L. Rev. 1563 (1984);
41. Mark G. Kelman, Trashing, 36 Stan. L. Rev. 293 (1984);
42. Duncan Kennedy, Form and Substance in Private Law Adjudication, 89 Harv. L. Rev. 1685 (1976);
43. Duncan Kennedy, The Structure of Blackstone's Commentaries, 28 Buff. L. Rev. 205 (1979);
44. Gary Peller, The Metaphysics of American Law, 73 Cal. L. Rev. 1151 (1985).
45. For overviews of the critical legal studies movement, see Andrew Altman, Critical Legal Studies: A Liberal Critique (1990),
46. and Mark Kelman, A Guide to Critical Legal Studies (1987).
47. For a bibliography of critical legal scholarship through 1983, see Duncan Kennedy & Karl E. Klare, A Bibliography of Critical Legal Studies, 94 Yale L.J. 461 (1984).
48. The publication in 1973 of University of Michigan Professor James White's The Legal Imagination, it is claimed, was the beginning of the postmodern law and literature movement. See Minda, supra note 3, at 149. White's project has been described as an attempt to demonstrate that the study of literature involved interpretative processes similar to ones used in the law. Id.;
49. see also James Boyd White, Justice as Translation: An Essay in Cultural and Legal Criticism (1990);
50. James B. White, The Legal Imagination: Studies in the Nature of Legal Thought and Expression (1973).
51. Other major contributions to the law and literature movement include: Richard H. Weisberg, The Failure of the Word: The Protagonist as Lawyer in Modern Fiction (1984);
52. Richard Weisberg, Poethics and Other Strategies of Law and Literature (1992);
53. Jane B. Baron & Julia Epstein, Is Law Narrative?, 45 Buff. L. Rev. 141 (1997);
54. Daniel A. Farber & Suzanna Sherry, Telling Stories out of School: An Essay on Legal Narratives, 45 Stan. L. Rev. 807 (1993);
55. Stanley Fish, Working on the Chain Gang: Interpretation in Law and Literature, 60 Tex. L. Rev. 551 (1982);
56. Sanford Levinson, Law as Literature, 60 Tex. L. Rev. 373 (1982);
57. and Ian Ward, Law and Literature, 4 Law & Critique 43 (1993).
58. For a bibliography of critical race scholarship through 1992, see Richard Delgado & Jean Stefancic, Critical Race Theory: An Annotated Bibliography, 79 Va. L. Rev. 461 (1993).
59. See also Robin D. Barnes, Race Consciousness: The Thematic Content of Racial Distinctiveness in Critical Race Scholarship, 103 Harv. L. Rev. 1864 (1990);
60. Kimberlé Williams Crenshaw, Race, Reform, and Retrenchment: Transformation and Legitimation in Antidiscrimination Law, 101 Harv. L. Rev. 1331 (1988);
61. Jerome McCristal Culp, Jr., Toward a Black Legal Scholarship: Race and Original Understandings, 1991 Duke L.J. 39;
62. Peggy C. Davis, Law as Microaggression, 98 Yale L.J. 1559 (1989).
63. The feminist literature is voluminous and often at odds within its paradigms. Among the well-known works are: Mary Joe Frug, Postmodern Legal Feminism (1992);
64. Carol Gilligan, In a Different Voice: Psychological Theory and Women's Development (1982);
65. Lucinda M. Finley, Choice and Freedom: Elusive Issues in the Search for Gender Justice, 96 Yale L.J. 914 (1987);
66. Catherine A. MacKinnon, Feminism, Marxism, Method, and the State: Toward Feminist Jurisprudence, 8 Signs 635 (1983);
67. Martha Minow, The Supreme Court, 1986 Term - Forward: Justice Engendered, 101 Harv. L. Rev. 10 (1987);
68. Susan Moller Okin, Sexual Difference, Feminism, and the Law, 16 Law & Soc. Inquiry 553 (1991);
69. Margaret Jane Radin, The Pragmatist and the Feminist, 63 S. Cal. L. Rev. 1699 (1990);
70. Deborah L. Rhode, The "No-Problem" Problem: Feminist Challenges and Cultural Change, 100 Yale L.J. 1731 (1991);
71. Ann C. Scales, Towards a Feminist Jurisprudence, 56 Ind. L.J. 375 (1981);
72. Robin West, Jurisprudence and Gender, 55 U. Chi. L. Rev. 1 (1988);
73. Joan C. Williams, Deconstructing Gender, 87 Mich. L. Rev. 797 (1989);
74. Joan Williams, Gender Wars: Selfless Women in the Republic of Choice, 66 N.Y.U. L. Rev. 1559 (1991).
75. See, e.g., F.H. Buckley, Three Theories of Substantive Fairness, 19 Hofstra L. Rev. 33 (1990);
76. Elizabeth Hoffman & Matthew L. Spitzer, The Coase Theorem: Some Experimental Tests, 25 J.L. & Econ. 73 (1982) [hereinafter Hoffman & Spitzer, The Coase Theorem];
77. Elizabeth Hoffman & Matthew L. Spitzer, Entitlements, Rights, and Fairness: An Experimental Examination of Subjects' Concepts of Distributive Justice, 14 J. Legal Stud. 259 (1985) [hereinafter Hoffman & Spitzer, An Experimental Examination];
78. Richard H. McAdams, Relative Preferences, 102 Yale L.J. 1 (1992);
79. Frank I. Michelman, Norms and Normativity in the Economic Theory of Law, 62 Minn. L. Rev. 1015 (1978);
80. Cass R. Sunstein, Behavioral Analysis of Law, U. Chi. L. Rev. (forthcoming), available in Chicago Working Paper in Law & Economics No. 46 (visited Feb. 7, 1998), 〈http://www.law. uchicago.edu/Publications/Working/index.html〉;
81. Cass R. Sunstein, Social Norms and Social Roles, 96 Colum. L. Rev. 903 (1996) [hereinafter Sunstein, Social Norms].
82. Harold J. Berman has written that "[contemporary American jurisprudence is in great need of its own historical roots in the jurisprudence of the past." Letter from Harold J. Berman, Woodruff Professor of Law, Emory University School of Law, to Michael I. Swygert, Professor of Law, Stetson College of Law (July 25, 1997) (on file with Washington Law Review). Berman perceives the conflict between justice as efficiency and justice as fairness as the contemporary battle between a political view of law (efficiency) and a moral theory (fairness). Id.
83. "A second meaning of justice, perhaps the most common, is - efficiency." Posner, Economic Analysis of Law, supra note 4, at 27.
84. Posner adds that "there is more to notions of justice than a concern for efficiency." Id. In his 1981 book, The Economics of Justice, he wrote: "I have tried to develop a moral theory that . . . holds that the criterion for judging whether acts and institutions are just or good is whether they maximize the wealth of society." Posner, Economics of Justice, supra note 4, at 115. We read Posner's 1992 statements as "backing down" a little from his earlier strong efficiency-as-justice thesis of 1981.
85. James Boyd White, for example, has asserted that a person's motives and values are not exogenous to justice as presumed under a claimed normative theory of law and economics. James Boyd White, Law as Rhetoric, Rhetoric as Law: The Arts of Cultural and Communal Life, 52 U. Chi. L. Rev. 684, 698 (1985);
86. see also Robin West, Authority, Autonomy, and Choice: The Role of Consent in the Moral and Political Visions of Franz Kafka and Richard Posner, 99 Harv. L. Rev. 384 (1985). For a survey of the variety of propositions advanced by critical legal studies scholars, see Minda, supra note 3, at 106-27.
87. One commentator describing critical legal studies has written that the law "cannot be more than a smokescreen concealing the efforts of the stronger to prey on the weaker." James Gordley, The Philosophical Origins of Modern Contract Doctrine 231 (1991);
88. see also Amitai Etzioni, The Spirit of Community: Rights, Responsibilities, and the Communitarian Agenda (1993);
89. Mary Ann Glendon, Rights Talk: The Impoverishment of Political Discourse (1991);
90. Christina Hoff Sommers, Who Stole Feminism? How Women Have Betrayed Women (1994);
91. Peter Gabel, The Phenomenology of Rights-Consciousness and the Pact of the Withdrawn Selves, 62 Tex. L. Rev. 1563 (1984);
92. Mark Tushnet, An Essay on Rights, 62 Tex. L. Rev. 1363 (1984).
93. But see Cass R. Sunstein, Rights and Their Critics, 70 Notre Dame L. Rev. 727 (1995).
94. See infra notes 30-31 and accompanying text.
95. See, e.g., Derrick Bell, And We Are Not Saved: The Elusive Quest for Racial Justice 140 (1987); Finley, supra note 8;
96. Duncan Kennedy, A Cultural Pluralist Case for Affirmative Action in Legal Academia, 1990 Duke L.J. 705;
97. Randall L. Kennedy, Racial Critiques of Legal Academia, 102 Harv. L. Rev. 1745 (1989);
98. Mari J. Matsuda, Affirmative Action and Legal Knowledge: Planting Seeds in Plowed-Up Ground, 11 Harv. Women's L.J. 1 (1988);
99. Mari J. Matsuda, Looking to the Bottom: Critical Legal Studies and Reparations, 22 Harv. C.R.-C.L. L. Rev. 323 (1987);
100. Martha Minow, Not Only for Myself: Identity, Politics, and Law, 75 Or. L. Rev. 647 (1996);
101. Gary Peller, Race Consciousness, 1990 Duke L.J. 758.
102. For arguments against affirmative action or group rights, see, for example, Stephen L. Carter, Reflections of an Affirmative Action Baby (1991),
103. Thomas Sowell, Civil Rights: Rhetoric or Reality? (1984),
104. and Shelby Steele, The Content of Our Character 111-65 (1990).
105. See infra Part III.A.
106. Franz Kafka, The Trial (Alfred A. Knopf, Inc. 1956) (1937).
107. See, e.g., Ronald Dworkin, Law as Interpretation, 60 Tex. L. Rev. 527 (1982);
108. Linda R. Hirshman, Brontë, Bloom, and Bork: An Essay on the Moral Education of Judges, 137 U. Pa. L. Rev. 177 (1988);
109. Richard H. Weisberg, Three Lessons from Law and Literature, 27 Loy. L.A. L. Rev. 285 (1993).
110. "Judge Richard Posner claims that the application of economic analysis to legal issues may be 'the most important development in legal thought in the last quarter century,'" notes Jonathan R. Macey, in The Pervasive Influence of Economic Analysis on Legal Decisionmaking, 17 Harv. J.L. & Pub. Pol'y 107 (1994)
111. (quoting Posner, Economic Analysis of Law, supra note 4, at xix).
112. In contrast, see Susan Moller Okin's article, Reason and Feeling in Thinking About Justice, 99 Ethics 229 (1989),
113. discussing John Rawls's A Theory of Justice (1971). Okin writes that Rawls "has been the inspiration, in one way or another, for much of contemporary moral and political theory . . . , [a theory based] on empathy and concern for others." Okin, supra, at 246.
114. As Richard Posner has noted, "The most aggressive version [of law and economics] argues that economics not only explains the rules and institutions of the legal system but also provides the ethically soundest guide to improving the system." Posner, Economic Analysis of Law, supra note 4, at 25 (emphasis added).
115. See, e.g., Gilligan, supra note 8; Nel Noddings, Caring: A Feminine Approach to Ethics & Moral Education (1984);
116. Gertrude Nunner-Winkler, Two Moralities? A Critical Discussion of an Ethic of Care and Responsibility Versus an Ethic of Rights and Justice, in Morality, Moral Behavior, and Moral Development 348 (William M. Kurtines & Jacob L. Gewirtz eds., 1984); Okin, supra note 19, at 229-49.
117. "[T]he difference between various [postmodern] writers and thinkers is . . . the extent to which they take critical cognizance of the predicaments and paradoxes of their current intellectual situation." Minda, supra note 3, at 4.
118. "[T]he exercise of empathetic imagination lacks normative significance." Richard A. Posner, Overcoming Law 381 (1995).
119. The incompatibility of justice as a caring or empathetic perspective and as a rights-oriented construct is said to be "an ancient theme." Judith Areen, A Need for Caring, 86 Mich. L. Rev. 1067, 1076-77 (1988).
120. Ronald Dworkin has pointed out that contrasting jurisprudential arguments have real meaning: "Any practical legal argument, no matter how detailed and limited, assumes the kind of abstract foundation jurisprudence offers, and when rival foundations compete, a legal argument assumes one and rejects others." Dworkin, supra note 2, at 90. The battles between various views of legal formalism versus views of legal realism are the central theme of Posner's The Problems of Jurisprudence. Posner writes that the masculine extreme outlook of law is legal positivism, while natural law reflects an extreme perspective of feminist jurisprudence.
121. Richard A. Posner, The Problems of Jurisprudence 404-05 (1990). He notes, however, that the "ethic of care" realm is "not a female preserve," but that many of the influential male voices in the law have typified the ethic of care perspective, including Benjamin Cardozo and Justice William Brennan. Id. at 407. He might have added William O. Douglas and Earl Warren. James Gordley has attacked the polarities of fairness and efficiency, asserting that "any viable theory of contract will have to take the fairness of a contract into account," while acknowledging that "there is no agreement [yet] as to how to do so." Gordley, supra note 13, at 230.
122. A commentator noted: [O]ur legal system should continue to reflect a complex mixture of not only our aspirations for an efficient economic system, but also our moral and political values. The life of the law should continue to be informed not only by economic logic, but social experience - even if it is complex experience. Eric W. Orts, Simple Rules and the Perils of Reductionist Legal Thought, 75 B.U. L. Rev. 1441, 1479 (1995)
123. (reviewing Richard A. Epstein's Simple Rules for a Complex World (1995));
124. see also M. Mitchell Waldrop, Complexity: The Emerging Science at the Edge of Order and Chaos 38 (1992) ("[Y]ou have to look at the world as it is, not as some elegant theory says it ought to be.") (quoting Stanford University Economics Professor Victor Norman).
125. An elegant expression of the "one-world view" has been provided by Michael J. Trebilcock in The Limits of Freedom of Contract (1993): Both as individuals and as a community, we do not operate within a one-value view of the world. . . . For economists to claim that they are interested only in maximizing the total value of social resources, without being concerned about how gains in the value of social resources are to be distributed . . . or while ignoring the impact of economic change on the lives of individuals or on the integrity or viability of long-standing communities, reflects a highly impoverished view of the world. Alternatively, theorists committed only to concepts of distributive justice, who proceed in their analysis by inviting us to assume a given stock of wealth, or a given increase in the stock of wealth, and then asking what a just distribution of that wealth might entail, are largely engaging in idle chatter as long as the wealth creation function is simply assumed. . . . Similarly, communitarians who stress values of solidarity and interconnectedness and discount values of individual autonomy and freedom risk pushing this perspective to an extreme, where communitarian values become exclusionary, authoritarian, or repressive. Id. at 248 (citation omitted).
126. See discussion infra Parts II.A, III.D.
127. For a compilation of Cease's writings applicable to law and economics, see Coase, The Firm, the Market, and the Law, supra note 4.
128. See John Rawls, Political Liberalism (1993) [hereinafter Rawls, Political Liberalism]; Rawls, supra note 19;
129. John Rawls, The Priority of Right and Ideas of Good, 17 Phil. & Pub. Aff. 251 (1988).
130. For a detailed analysis of Rawls's philosophical theories, see Thomas W. Pogge, Realizing Rawls (1989);
131. see also Peter F. Lake, Liberalism Within the Limits of the Reasonable Alone: Developments of John Rawls's Political Philosophy, Its Political Positivism, and the Limits on Its Applicability, 19 Vt. L. Rev. 603, 612 (1995) (noting that Rawls was intuitionist who acknowledged "that many moral decisions rest on rational and reasonable arguments . . . but that at some point(s), reference must be made back to a plurality of principles with no basis in justification other than 'they seem most nearly right'").
132. See Wesley J. Liebeler & Armen Alchian, Constitutional Baselines by Virtual Contract: A General Theory and Its Application to Regulatory Takings, 3 Sup. Ct. Econ. Rev. 153 (1994).
133. See, e.g., Lynne N. Henderson, Legality and Empathy, 85 Mich. L. Rev. 1574 (1987).
134. See, e.g., Hoffman & Spitzer, The Coase Theorem, supra note 9;
135. Hoffman & Spitzer, An Experimental Examination, supra note 9.
136. See, e.g., Buckley, supra note 9.
137. See infra Part IV.D.
138. Coase, Social Cost, supra note 4, at 15.
139. See infra Part II.
140. See infra Part II.B.
141. See infra Part II.B. The total output is the net increase in the total value of all the preferences desired by the parties.
142. See infra Part II.B.
143. See Richard Craswell, Contract Remedies, Renegotiation, and the Theory of Efficient Breach, 61 S. Cal. L. Rev. 630 (1988).
144. See infra Part III.
145. Rawls, supra note 19.
146. See Thomas Hobbes, Leviathan, Parts I and II (Bobbs-Merrill 1958) (1651) [hereinafter Hobbes, Leviathan];
147. Thomas Hobbes, Human Nature, in The Elements of Law: Natural and Politic (Ferdinand Tönnies ed., 2d ed. 1969) (1649).
148. Many regard the latter as one of Hobbes's best works. See, e.g., R.S. Peters, Thomas Hobbes, in 4 The Encyclopedia of Philosophy 31 (Paul Edwards ed., 1967).
149. See John Locke, An Essay Concerning Human Understanding (Peter Nidditch ed., Clarendon Press 1990) (1689);
150. John Locke, Two Treatises of Government (Peter Laslett ed., Cambridge Univ. Press 1960) (1690) [hereinafter Locke, Two Treatises] (especially An Essay Concerning the True Original, Extent, and End of Civil Government).
151. See Jean Jacques Rousseau, The Social Contract or Principles of Political Right (Henry J. Tozer trans., Swan Sonnenschein & Co. 1895) (1762).
152. Rawls, supra note 19, at 136-42.
153. Id. at 17-22, 118; see also infra Part III.D.2.
154. Okin, supra note 19, at 243-49.
155. See discussion of "constructive empathy" infra Part IV.A.
156. See infra notes 301-06 and accompanying text.
157. See infra notes 305-06 and accompanying text.
158. Each theorist assumes there would be zero transaction costs in his respective consensus model, Coase expressly so, and Rawls by implication, because Rawls does not discuss the costs of the parties' learning of their eligibility to participate in or the costs of gaining needed information to operate in the original position.
159. See infra Part II.C.
160. The concept of initial entitlements is explained infra notes 81-85 and accompanying text.
161. For a discussion of some of the suggestions theorists have made as to how lawmakers may emulate the "Coasean" result, see infra Part II.C.
162. See, e.g., Williams v. Walker-Thomas Furniture Co., 198 A.2d 914 (D.C. 1964).
163. It often turns out that a contract, due to a variety of circumstances, becomes a "losing" one for one or more of the parties, meaning that the expected marginal gain in utility does not occur.
164. By "surplus utility," in this Article, we refer to the total combined net increase in marginal utility resulting from a transaction that is shared in whatever proportion by both parties to a transaction.
165. See infra Part IV.B.
166. See infra Part IV.C.
167. R.H. Coase, The Firm, the Market, and the Law, in The Firm, the Market, and the Law, supra note 4, at 9.
168. Friedrich Kessler, Contracts of Adhesion - Some Thoughts About Freedom of Contract, 43 Colum. L. Rev. 629 (1943).
169. According to Kessler, the phrase "contract of adhesion" was first used by Patterson in his 1919 Harvard Law Review article, The Delivery of a Life Insurance Policy. Kessler, supra, at 632 n.11;
170. see also Todd D. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv. L. Rev. 1173 (1983). Rakoff lists seven characteristics of a contract of adhesion: (1) The document whose legal validity is at issue is a printed form that contains many terms and clearly purports to be a contract. (2) The form has been drafted by, or on behalf of, one party to the transaction. (3) The drafting party participates in numerous transactions of the type represented by the form and enters into these transactions as a matter of routine. (4) The form is presented to the adhering party with the representation that, except perhaps for a few identified items (such as the price term), the drafting party will enter into the transaction only on the terms contained in the document. This representation may be explicit or may be implicit in the situation, but it is understood by the adherent. (5) After the parties have dickered over whatever terms are open to bargaining, the document is signed by the adherent. (6) The adhering party enters into few transactions of the type represented by the form-few, at least, in comparison with the drafting party. (7) The principal obligation of the adhering party in the transaction considered as a whole is the payment of money. Id. at 1177 (citations omitted).
171. Kessler referred to "take it or leave it" in French as "à prendre ou à laisser." Kessler, supra note 60, at 632; see also Melvin Aron Eisenberg, The Bargain Principle and Its Limits, 95 Harv. L. Rev. 741 (1982). "[M]any contracts are made in markets that are highly imperfect." Id. at 750. "[A] new paradigmatic principle - unconscionability - has emerged. This principle explains and justifies the limits that should be placed upon the bargain principle on the basis of the quality of a bargain." Id. at 799. Failing to place limits on the bargain principle, Eisenberg concluded, will involve "greater costs to the system of justice" than placing such limits. Id. at 801.
172. For example, Professor Stewart Schwab has pointed out to us that when going to a chain grocery outlet to purchase a box of cereal, the customer has no power to bargain individually with the store owner over the price or contents of the box. Yet, a competitive larger market exists for cereal, and the lack of the individual's effective bargaining power resulting in a "take it or leave it" option does not render the sale an "unfair" bargain. Letter from Stewart J. Schwab, Professor of Law, Cornell Law School, to Michael I. Swygert, Professor of Law, Stetson College of Law (June 25, 1997) (on file with Washington Law Review).
173. See infra Part IV.C.
174. The term "hidden identity" is explained infra Part IV.C.
175. See infra Part IV.C.
176. See infra Part IV.A.
177. See infra notes 281-306 and accompanying text.
178. The "maximin" utility is the combined net increase in utility where the worst-off or weaker bargainer's benefits would be maximized, but at the cost of a lower marginal net increase in benefits for the stronger party. Rawls, Posner claims, preferred a set of arrangements that maximized the position of the worst off. Posner, Economic Analysis of Law, supra note 4, at 461.
179. The "maximized total utility" (in contrast with the "maximin") is the total combined net increase in utility that is possible within a situation. Id. at 462. The maximum increase in benefits may result in a 50/50 split between two parties to a bargain or, in theory, it could result in a 99/1 split, or anything in between, so long as whatever split there is results in the largest combined increase in total utility - the largest pie versus the larger slice notion.
180. Coase, Social Cost, supra note 4, at 15.
181. A negative externality is a divergence between the private cost of an activity and the social cost of that activity. If such a divergence occurs, and there is no government or market action to correct it, then the harmful activity, or the good that is produced by the harmful activity, will tend to be over-produced relative to its value to society. This misallocation of resources occurs because the cost structure faced by the producer does not reflect the true cost of production. Some examples of this that Coase uses are a smoky factory, a cattle rancher whose cattle stray onto the neighboring farmer's land, and a noisy confectioner next to a doctor's office. Coase, Social Cost, supra note 4, passim.
182. Reuben A. Kessel, Transfused Blood, Serum Hepatitis, and the Coase Theorem, 17 J.L. & Econ. 265 (1974).
183. Stanley M. Besen et al., Copyright Liability for Cable Television: Compulsory Licensing and the Coase Theorem, 21 J.L. & Econ. 67 (1978).
184. Robert P. Merges, Of Property Rules, Coase, and Intellectual Property, 94 Colum. L. Rev. 2655 (1994).
185. J. Gregory Sidak, To Declare War, 41 Duke L.J. 27 (1991).
186. Daniel Q. Posin, The Coase Theorem: Through a Glass Darkly, 61 Tenn. L. Rev. 797, 806 n.40
187. (citing Institute for Sci. Info., Inc., Social Sciences Citation Index,
188. and Fred R. Shapiro, The Most-Cited Law Review Articles, 73 Cal. L. Rev. 1540, 1546 (1985)).
189. George J. Stigler, The Theory of Price 113 (1966).
190. Coase credits Stigler with being the first person to call the ideas in The Problem of Social Cost "The Coase Theorem."
191. R.H. Coase, Notes on the Problem of Social Cost, in The Firm, the Market, and the Law, supra note 4, at 157.
192. Richard O. Zerbe, The Problem of Social Cost in Retrospect, in 2 Research in Law and Economics 83 (Richard O. Zerbe ed., 1980).
193. Robert Cooter, The Cost of Coase, 11 J. Legal Stud. 1, 4 (1982).
194. Joseph Farrell, Information and the Coase Theorem, 1 Econ. Persp. 113, 113 (1987).
195. Pareto efficiency is defined as reaching a state of optimality at which it is not possible for the parties to make a trade that would make one party better off without making another party worse off. Posner, Economic Analysis of Law, supra note 4, at 13. This is a stronger form of efficiency than Kaldor-Hicks efficiency, which calls a transaction efficient if it increases total welfare, that is, if the benefit from the transaction is enough greater than the harm from it that any harmed parties could be compensated by parties made better off, whether or not the harmed parties actually are compensated. Id. at 14. Kaldor-Hicks efficiency has a broader scope than Pareto efficiency. If a transaction is Pareto efficient, then it increases total welfare and it makes all parties to it better off. In contrast, if a transaction is Kaldor-Hicks efficient, it increases total welfare, but it does not necessarily make all parties to it better off. A transaction that is Kaldor-Hicks efficient increases total welfare enough that all parties could be compensated to make them better off, but Kaldor-Hicks efficiency does not require that they actually are compensated. To illustrate the difference between Kaldor-Hicks and Pareto efficiency, we can go back to the farmer-rancher example. Let us say having one more head of cattle in his herd makes the rancher $10 better off. That additional head does $15 worth of damage to the farmer's crops. Now, compare two possible resolutions to this situation. First, the farmer could make a bargain with the rancher to pay the rancher $12 if the rancher refrains from adding one more head of cattle to his herd. Second, the farmer could seek an injunction. A court could determine that the farmer has an entitlement to have his land be free from trespassing livestock and grant the injunction. In either of these cases, total welfare is increased by five dollars, so the result in both cases is Kaldor-Hicks efficient. However, only the first resolution is Pareto efficient. The rancher is two dollars better off and the farmer three dollars better off than if they had not entered into this bargain. In the second situation, the farmer is $15 better off, and the rancher is $10 worse off than if the injunction had not been granted. Another way to look at this is to say that all of the parties affected would voluntarily enter into a transaction if it is Pareto efficient. However, if a transaction is only Kaldor-Hicks efficient, there will be some parties that would not enter into the transaction voluntarily. The transaction would have to be imposed by the government or the courts.
196. Coase, Social Cost, supra note 4, at 6-8. The word "entitlement," as used in discussing the Coase Theorem, can mean anything from the right to pollute to the right to refuse to sell one's property. See infra notes 114-16 and accompanying text.
197. Coase, Social Cost, supra note 4, at 3. This is just a restatement of one of the fundamental principles of the economics of perfect competition, which is that firms will produce up to the point at which marginal costs equal marginal revenue.
198. Id. at 7.
199. See Adam Gifford, Jr. & Courtenay C. Stone, Externalities, Liability, and the Coase Theorem: A Mathematical Analysis, 11 W. Econ. J. 260 (1973) (explicating mathematics behind this argument);
200. M.T. Maloney, Note, The Coase Theorem and Long-Run Industry Equilibrium, 17 Q. Rev. Econ. & Bus. 113 (graphically representing this argument).
201. Coase, supra note 59, at 13.
202. Id. at 14.
203. For this reason, this Part will rely on Hoffman and Spitzer's categorization of these assumptions.
204. Hoffman & Spitzer, The Coase Theorem, supra note 9, at 73. The assumption of perfect knowledge requires that all parties understand the costs and benefits of a decision, both to themselves and to other parties. "[It] means that consumers know the price charged by each producer. Providers of inputs (laborers and owners of capital) know how much each producer will pay for the resources they provide. Producers know the technology used by their competitors."
205. Mark Seidenfeld, Microeconomic Predicates to Law and Economics 35 (1996).
206. Herbert Hovenkamp, Marginal Utility and the Coase Theorem, 75 Cornell L. Rev. 783, 789 (1990).
207. See, e.g., Posner, Economic Analysis of Law, supra note 4, at 11.
208. Marginal costs represent the change in total cost with each unit of production. See id. at 8. The assumption that the firm supply curve is the upward-sloping portion of its marginal cost curve is a corollary of the assumption that the level of production at which profits are maximized, and therefore at which firms will produce, will be the level at which the marginal cost of producing the final unit is the same as the marginal revenue associated with that unit. See Seidenfield, supra note 88, at 29.
209. For a more mathematically oriented description of the economics of competitive markets, see Allan C. DeSerpa, The Pure Economics of the Coase Theorem, 18 E. Econ. J. 287 (1992).
210. See Pierre Schlag, The Problem of Transaction Costs, 62 S. Cal. L. Rev. 1661, 1673-76 (1989).
211. A free-rider problem exists when the provider of a good or service is unable to capture all of the value of that good or service because she is unable to exclude people from receiving the benefits of it. This can be a problem with the provision of positive externalities, or "public goods," and with the reduction of negative externalities. An example of this is pollution reduction. If a large group of property owners must negotiate with a polluting factory to reduce the amount of pollution, each property owner will have an incentive to understate how much she is willing to pay for the reduction in pollution, on the assumption that "[i]f I refuse to contribute my fair share of the purchase price, others, who care more deeply about pollution than I do, will make up the difference." Posner, Economic Analysis of Law, supra note 4, at 63. This may result in the parties not being able to reach an agreement, even if the reduction in pollution is valued more highly than the cost to achieve it. Id.
212. A "holdout" problem may exist when there is a large number of parties on the side to be compensated. Parties may have an incentive to overstate the value they place on the right being purchased in order to gain a larger portion of the compensation. If enough of the parties do this, the price for the entitlement will be too high, and the parties will be unable to reach an agreement, even though the side attempting to purchase the right values it more highly than the side to be compensated. Id. at 62-63.
213. A bilateral monopoly exists when both of the parties must negotiate with each other, if they are to negotiate at all. An example of this would be an "employee . . . trained in a set of techniques unique to his particular employer, while his employer pays the training bill." Herbert Hovenkamp, Rationality in Law & Economics, 60 Geo. Wash. L. Rev. 293, 308 (1992). In such a case, "[t]he employer is willing to pay a premium to retain an employee who is already trained; the employee is worth more only to . . . his current employer." Id. Bilateral monopoly may lead to strategic behavior, on the part of both the employer and employee, that raises the costs of negotiation dramatically: for example, a strike that shuts down a plant or a firm that provides income for both the employer and employee.
214. Schlag, supra note 93, at 1673.
215. Id.
216. Id. at 1674.
217. Id. at 1675 (quoting Peter G. Toumanoff, A Positive Analysis of Market Failure, 37 Kyklos 529, 531 (1984)).
218. Id. (citing E.J. Mishan, The Postwar Literature on Externalities: An Interpretive Essay, 9 J. Econ. Lit. 1, 16 (1971)).
219. Id. (quoting Guido Calabresi, Transaction Costs, Resource Allocation, and Liability Rules - A Comment, 11 J.L. & Econ. 67, 68 n.5 (1968)).
220. Id. (quoting Carl J. Dahlman, The Problem of Externality, 22 J.L. & Econ. 141, 148 (1979)).
221. Harold Demsetz, The Cost of Transacting, 82 Q.J. Econ. 33, 50 (1968).
222. Id.
223. Oliver E. Williamson, Transaction-Cost Economics: The Governance of Contractual Relations, 22 J.L. & Econ. 233, 261 (1979).
224. Posner, Economic Analysis of Law, supra note 4, at 51.
225. See supra notes 81-85 and accompanying text.
226. Coase, supra note 77, at 173.
227. Becker, Nobel Lecture, supra note 4, at 386;
228. see also Jon Elsten, More Than Enough, 64 U. Chi. L. Rev. 749, 761 (1997) (book review) (stating that "the concept of rationality is subjective through and through").
229. Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972).
230. Id. at 1090-92.
231. Id. at 1090.
232. Id. at 1092.
233. Id.
234. Ian Ayres & Eric Talley, Solomonic Bargaining: Dividing a Legal Entitlement to Facilitate Coasean Trade, 104 Yale L.J. 1027, 1037 (1995).
235. Calabresi & Melamed, supra note 111, at 1092.
236. U.S. Const. amend. V.
237. Ayres & Talley, supra note 116, at 1037.
238. Calabresi & Melamed, supra note 111, at 1092.
239. Id. at 1112-13.
240. Id. at 1093.
241. Id.
242. It has been pointed out that "the Coasean world" is not an appropriate title to give to the world in which the assumptions underlying the Coase Theorem are true, since "[t]he 'Coasean world' is not only not Coase's world but, ironically, is more like the world of the economic theoretists that Coase has attacked." Robert C. Ellickson, The Case for Coase and Against Coaseanism, 99 Yale L.J. 611, 611 (1989). However, the phrase is a convenient appellation to give to the world described by the Coase Theorem and is often so used.
243. Coase, supra note 59, at 15.
244. Id.
245. See supra notes 81-85 and accompanying text.
246. Coase, supra note 77, at 175; Posner, Economic Analysis of Law, supra note 4, at 52;
247. Cento G. Veljanovski, The Coase Theorem - The Says Law of Welfare Economics?, 53 Econ. Rec. 535, 539 (1977).
248. Coase, supra note 59, at 15.
249. Coase, Social Cost, supra note 4, at 18.
250. Id. at 44.
251. Farrell, supra note 80, at 125.
252. Id.
253. Id.
254. George Daly, The Coase Theorem: Assumptions, Applications, and Ambiguities, 12 Econ. Inquiry 203, 208-09 (1974). Another approach to the situation in which transaction costs are low is that taken by Stewart Schwab.
255. See Stewart Schwab, Coase Defends Coase: Why Lawyers Listen and Economists Do Not, 87 Mich. L. Rev. 1171, 1195 (1989)
256. (reviewing Coase, The Firm, the Market, and the Law, supra note 4). Schwab points out that if transaction costs are low, "The law has no reason to award entitlements to those willing and able to pay the most for it because, under zero transaction costs, the needy or deserving holders of the entitlement can trade it without any efficiency loss to those willing and able to pay more." Id. Schwab restates this as what he calls "The Distributive Corollary of the Coase Theorem: With zero transaction costs, initial entitlements cannot be justified on efficiency grounds, and so should be awarded on the basis of need or desert." Id.
257. Farrell, supra note 80, at 124.
258. Id.
259. Craswell, supra note 38, at 633.
260. See supra notes 104-06 and accompanying text.
261. Craswell, supra note 38, at 632.
262. Ayres & Talley, supra note 116, at 1029-30.
263. Id. at 1030.
264. Id.
265. Id.
266. Id. at 1072.
267. See id.
268. Calabresi & Melamed, supra note 111, at 1119; Mishan, supra note 101, at 23.
269. Mishan, supra note 101, at 23; Alan Randall, Market Solutions to Externality Problems: Theory and Practice, 54 Am. J. Agric. Econ. 175, 178 (1972).
270. Randall, supra note 148, at 178.
271. Id.
272. Craswell, supra note 38, at 633; Posner, Economic Analysis of Law, supra note 4, at 93.
273. Craswell, supra note 38, at 633.
274. Id.
275. Id.
276. See supra Part II.B.5 (discussing distinctions between liability and property rules).
277. Calabresi & Melamed, supra note 111, at 1118.
278. Id.
279. Id.
280. Posner, Economic Analysis of Law, supra note 4, at 63; Calabresi & Melamed, supra note 111, at 1107;
281. Harold Demsetz, When Does the Rule of Liability Matter?, 1 J. Legal Stud. 13, 26-27 (1972).
282. Posner, Economic Analysis of Law, supra note 4, at 63.
283. Calabresi & Melamed, supra note 111, at 1106-07; Posner, Economic Analysis of Law, supra note 4, at 62-63.
284. See, e.g., Guido Calabresi, The Decision for Accidents: An Approach to Nonfault Allocation of Costs, 78 Harv. L. Rev. 713 (1965);
285. Donald H. Regan, The Problem of Social Cost Revisited, 15 J.L. & Econ. 427 (1972);
286. William Schulze & Ralph C. D'Arge, The Coase Proposition. Information Constraints, and Long-Run Equilibrium, 64 Am. Econ. Rev. 763 (1974). Calabresi later rethought his position and argued that the liability rule would not, after all, affect the long-run allocation of resources. Guido Calabresi, supra note 102, at 67.
287. Posin, supra note 76, at 832-44. Posin also attempted to disprove the Coase Theorem in a previous article: Daniel Q. Posin, The Coase Theorem: If Pigs Could Fly, 37 Wayne L. Rev. 89 (1990). That article was widely criticized, and Posin himself later admitted that it was wrong because it failed to consider opportunity cost. Posin, supra note 76, at 799-801.
288. Regan, supra note 162, at 433; David L. Shapiro, A Note on Rent and the Coase Theorem, 7 J. Econ. Theory 125 (1974);
289. Stanislaw Wellisz, On External Diseconomies and the Government-Assisted Invisible Hand, 31 Economica 345, 351 (1964). The economic rent that an activity creates "consists of the difference between what a factor of production earns in a given activity and what it could earn in the best alternative
290. See, e.g., A. Mitchell Polinsky, Economic Analysis As a Potentially Defective Product: A Buyer's Guide to Posner's Economic Analysis of Law, 87 Harv. L. Rev. 1655, 1675-76 (1974);
291. David A. Starrett, Fundamental Non-Convexities in the Theory of Externalities, 4 J. Econ. Theory 180 (1972);
292. Kenneth R. Vogel, The Coase Theorem and California Animal Trespass Law, 16 J. Legal Stud. 149, 154-60 (1987).
293. See Regan, supra note 162, at 429-30.
294. Mark Kelman, Consumption Theory, Production Theory, and Ideology in the Coase Theorem, 52 S. Cal. L. Rev. 669, 678-95 (1979).
295. See, e.g., George Daly & J. Fred Giertz, Externalities, Extortion, and Efficiency, 65 Am. Econ. Rev. 997 (1975).
296. See, e.g., Ronald H. Coase, The 1987 McCorkle Lecture: Blackmail, 74 Va. L. Rev. 655, 671 (1988);
297. Robert D. Cooter, How the Law Circumvents Starrett's Nonconvexity, 22 J. Econ. Theory 499 (1980); Demsetz, supra note 159, at 19; Hovenkamp, supra note 89, at 789-93;
298. Steven G. Medema, Through a Glass Darkly or Just Wearing Dark Glasses? Posin, Coase, and the Coase Theorem, 62 Tenn. L. Rev. 1041 (1995);
299. G. Warren Nutter, The Coase Theorem on Social Cost: A Footnote, 11 J.L. & Econ. 503 (1968);
300. Matthew Spitzer & Elizabeth Hoffman, A Reply to Consumption Theory, Production Theory, and Ideology in the Coase Theorem, 53 S. Cal. L. Rev. 1187 (1980); Zerbe, supra note 78, at 89.
301. Construction theory concerns the ways that social meanings are constructed and changed. See, e.g., Lawrence Lessig, The Regulation of Social Meaning, 62 U. Chi. L. Rev. 943, 949-51 (1995).
302. According to this school of thought, "Human reality is not provided at birth by the physical universe, but rather must be fashioned by individuals out of the culture into which they are born." Id. at 949 n.19 (quoting David Kertner, Ritual, Politics, and Power 3-4 (1988));
303. see also Peter L. Berger & Thomas Luckmann, The Social Construction of Reality: A Treatise in the Sociology of Knowledge (1966);
304. Jon Elster, The Cement of Society: A Study of Social Order (1989);
305. Symposium, Law, Economics, & Norms, 144 U. Pa. L. Rev. 1643 (1996).
306. See Sunstein, Social Norms, supra note 9, at 945 (noting that "[w]hen people appear to behave irrationally, in the sense that they violate predictions based on economic assumptions, it is often because social norms are at work").
307. id. at 914. Sunstein points out: [T]here are socials norms about nearly every aspect of human behavior. There are norms about littering, dating, smoking, singing, when to stand, when to sit, when to show anger, when, how, and with whom to express affection, when to talk, when to listen, when to discuss personal matters, when to use contractions, when (and with respect to what) to purchase insurance. Id. "The persistent urge to conform to social norms has been demonstrated in a good deal of work in social psychology." Id. at 915 n.41.
308. Id. at 945.
309. Id. at 942.
310. Cass R. Sunstein, Free Markets and Social Justice 249 (1997). For example, "[o]ne study found that people would demand about five times as much to allow destruction of trees in a park as they would pay to prevent the destruction of those same trees." Id.
311. See, e.g., Charles Fried, Right and Wrong 81-107 (1978);
312. Duncan Kennedy, Cost-Benefit Analysis of Entitlement Problems: A Critique, 33 Stan. L. Rev. 387 (1981);
313. Laurence H. Tribe, Technology Assessment and the Fourth Discontinuity: The Limits of Instrumental Rationality, 46 S. Cal. L. Rev. 617 (1973).
314. See Fried, supra note 176, at 81-107.
315. Id. at 93.
316. See id. at 94.
317. Id. at 93.
318. Id. at 93-94.
319. Id. at 94.
320. Id. at 96.
321. Id.
322. Id.
323. Id.
324. Id. at 97.
325. Id. at 104.
326. Id.
327. Id. at 105.
328. Kennedy, supra note 176.
329. See id. at 388.
330. Id.
331. Id. at 415.
332. Id. at 419.
333. See Tribe, supra note 176, at 655-60.
334. Id. at 656.
335. Id. at 655.
336. Id. at 656.
337. Id.
338. Id. at 659.
339. Charles M. Haar & Daniel William Fessier, The Wrong Side of the Tracks: A Revolutionary Rediscovery of the Common Law Tradition of Fairness in the Struggle Against Inequality 15(1986).
340. Jerold S. Auerbach, Justice Without Law? 143 (1983).
341. See, e.g., H. Haywood Burns, Law and Race in America, in The Politics of Law, supra note 5, at 89;
342. Nadine Taub & Elizabeth M. Schneider, Perspectives on Women's Subordination and the Rule of Law, in The Politics of Law, supra note 5, at 117.
343. See Matthew 7:12 (King James) (citing Jesus as stating that "all things whatsoever you would that men should do to you, do you even so to them"); Luke 6:31 (King James) (quoting Jesus as stating that "as ye would that men should do to you, do ye also to them likewise"). Twenty years before Jesus, Rabbi Hillel put the same proposition in the negative. 7 The Interpreter's Bible 329 (1951).
344. Some earlier Latin translations of the Bible also cast Jesus' version of this so-called "Golden Rule" in the negative. Hobbes, Leviathan, supra note 41, at 110.
345. The Golden Rule has been taught in positive or negative form by Lao-tzu, Confucius, and Plato. 7 The Interpreter's Bible, supra, at 329.
346. Compare Kant's categorical imperative that justice requires the keeping of promises because one must only act by those rules that one could will to become universal law," see S. Körner, Kant 136-37 (1955), with the law and economics' efficient-breach-of-contract thesis, which sanctions the failure to keep promises when the Pareto-efficient result would occur consequent to a breach,
347. as explained in Posner, Economic Analysis of Law, supra note 4, at 118-20; see also Polinsky, supra note 4, at 31-38.
348. The current literature on empathy finds its modern emphasis especially in the writings of psychologist Carol Gilligan. See, e.g., Gilligan, supra note 8. In In a Different Voice, Gilligan argues that women, more than men, see obligations as emerging from the needs of others rather than from imposed notions of impartial procedures and substantive rights. Id. at 5-23;
349. see also Joyce E. McConnell, Relational and Liberal Feminism: The "Ethic of Care," Fetal Personhood and Autonomy, 99 W. Va. L. Rev. 291 (1996).
350. Carol Gilligan, Moral Orientation and Moral Development, in Women and Moral Theory 19 (Eva Feder Kittay & Diana T. Meyers eds., 1987). Gilligan argues that both justice (defined as a male orientation) and care (a female orientation) are significant: Theoretically, the distinction between justice and care cuts across the familiar divisions between thinking and feeling, egoism and altruism, theoretical and practical reasoning. It calls attention to the fact that all human relationships, public and private, can be characterized both in terms of equality and in terms of attachment, and that both inequality and detachment constitute grounds for moral concern. Since everyone is vulnerable both to oppression and to abandonment, two moral visions - one of justice and one of care - recur in human experience. The moral injunctions, not to act unfairly to others, and not to turn away from someone in need, capture these different concerns. Id. at 20. In response to Gilligan, Judith Areen has written that the potential incompatibility between a caring or empathetic perspective and the traditional rights-oriented perspective "is an ancient theme," citing Sophocles's dialogue as an example. Areen, supra note 23, at 1076-77. Margaret Jane Radin has opined that a "feminist middle way" would incline human beings both to be caring and to seek justice. Radin, supra note 8, at 1718.
351. Gilligan, supra note 208, at 20-24.
352. Areen, supra note 23, at 1075.
353. Id.
354. Id.
355. Id.
356. Id. at 1076.
357. Id.
358. Id. at 1078-82.
359. Id. at 1076.
360. Id. (citing Alisdaire MacIntyre, After Virtue: A Study in Moral Theology (2d ed. 1984)).
361. Rational choice theorists criticize what is claimed to be the modern sociologist's view that people are "pawns of social forces." See, e.g., Robert H. Frank, The Strategic Role of the Emotions, 5 Rationality & Soc'y 160 (1993)
362. (responding to James Coleman's 1990 book, Foundations of Social Theory).
363. "[T]he understanding gained through projective empathy is both rational and emotional." Cynthia V. Ward, A Kinder, Gentler Liberalism? Visions of Empathy in Feminist and Communitarian Literature, 61 U. Chi. L. Rev. 929, 938 (1994) (emphasis added); see also Henderson, supra note 29, at 1576 ("Empathy is a form of understanding, a phenomenon that encompasses affect as well as cognition . . . . [It is not] 'intuition.'").
364. Richard Posner has suggested that a theory of distributive justice based on maximizing the benefits for the worst-off members of society would be "compatible with on the one hand out-and-out socialism and on the other hand laissez-faire capitalism." Posner, Economic Analysis of Law, supra note 4, at 462-63.
365. Adam Smith, The Wealth of Nations (Kathryn Sutherland ed., Oxford Univ. Press 1993) (1776).
366. Henderson, supra note 29, at 1579.
367. Lynne Henderson, The Dialogue of Heart and Head, 10 Cardozo L. Rev. 123, 132 (1988).
368. Among several able attempts to define empathy as it relates to law are: Areen, supra note 23; Susan Bandes, Empathy, Narrative, and Victim Impact Statements, 63 U. Chi. L. Rev. 361 (1996); Henderson, supra note 29, at 1578-87;
369. Toni M. Massaro, Empathy, Legal Storytelling, and the Rule of Law: New Words, Old Wounds, 87 Mich. L. Rev. 2099 (1989); Okin, supra note 19; Ward, supra note 220.
370. Bandes, supra note 225, at 379. Bandes quotes from the literature of psychoanalysis to describe empathy as being primarily a value-free, mental capacity to understand the position of another, including that person's emotions. Id. at 373 n.51, 380 (citing in support Michael Franz Basch, Empathetic Understanding: A Review of the Concept and Some Theoretical Considerations, 31 J. Am. Psychoanalytic Ass'n 101, 119 (1983)).
371. Ward, supra note 220, at 934 (citing David Woodruff Smith, The Circle of Acquaintance: Perception, Consciousness, and Empathy 112 (1989)).
372. Id.
373. Henderson, supra note 29.
374. Id. at 1649.
375. 347 U.S. 483 (1954).
376. 410 U.S. 113 (1973).
377. Henderson, supra note 29, at 1574. "[T]he Court [in Roe v. Wade and in Doe v. Bolton] has arguably failed to see the pain, despair, and stigma of women with 'unwanted' pregnancies and 'unwanted' children." Id. at 1620. "Stories can shock them [academics, judges, and lawyers] back into sensation, into life as it is versus how we talk about it." Massaro, supra note 225, at 2105.
378. Henderson, supra note 29, at 1574-75.
379. Id. at 1576. Henderson notes that the U.S. Supreme Court's decision in Brown v. Board of Education "came from an understanding that segregation, no matter how it is rationalized, caused human beings pain." Id. at 1650.
380. "[T]he ideological structures of legal discourse and cognition block affective and phenomenological argument: The 'normal' discourse of law disallows the language and emotion of experience." Id. at 1575. Henderson describes normal discourse about law as being "impoverished," lacking input of the full range of human experience. Id. at 1574-75.
381. Empathy, Henderson notes, essentially does not consist of one's emotional response to a situation, but rather the perception one obtains of the emotion or experience of another. Id. at 1651. However, anger, impatience, sympathy, rectitude, hatred, and love do act as psychological stimuli. See Jerome Frank, Law and the Modern Mind 108-26 (Anchor Books ed., Doubleday & Co., Inc. 1963) (1930). On the other hand, some argue that emotions should have minimal influence. See, for example, Ronald Dworkin's description of his mythical judge "Hercules" who decides cases by rationally applying principles of integrity. Dworkin, supra note 2, at 244-66.
382. A common expression may serve to highlight Henderson's point, at least as we understand it - the expression "how would I feel if I were you?" In commenting on empathy, Louis Welcher has written: "It is much easier for us to inflict an injustice on others than it is for us to inflict an injustice on ourselves." Louis E. Wolcher, What We Do Not Doubt: A Critical Legal Perspective, 46 Hastings L.J. 1783, 1836 (1995).
383. Bowers v. Hardwick, 478 U.S. 186 (1986); Roe v. Wade, 410 U.S. 113 (1973); Shapiro v. Thompson, 394 U.S. 618 (1969); Brown v. Board of Educ., 347 U.S. 483 (1954).
384. Henderson defines the process of empathy phenomenologically as three possible and distinct situations: first, feeling the emotions of another; second, understanding the experience or situation of another, both affectively and cognitively; and third, the possible action that may result by experiencing the situation of another. Henderson, supra note 29, at 1579.
385. Posner, Economics of Justice, supra note 4, at 122-23 n.7
386. (citing Adam Smith, The Theory of Moral Sentiments (reprint ed. 1969) (1759), and
387. Ronald H. Coase, Adam Smith's View of Man, 19 J.L. & Econ. 529 (1976)).
388. According to Peter Laslett, the origins of social contract theory as well as natural law can be found in the Roman Stoicism of Cicero and in the system of Roman law. Peter Laslett, The Social Contract, in 7 The Encyclopedia of Philosophy, supra note 41, at 467. Laslett was a Cambridge University (Trinity College) don who authored several books on John Locke, Robert Filmer, and social contract theory. 1 id. at xxxiv.
389. Hobbes, Leviathan, supra note 41. Rawls, however, suggests that Hobbes may not have advanced a true social contract deriving from a consensus. See Rawls, supra note 19, at 11 n.4.
390. See J.W. Gough, The Social Contract (2d ed. 1957);
391. Locke, Two Treatises, supra note 42;
392. C.B. Macpherson, The Political Theory of Possessive Individualism: Hobbes to Locke (1962);
393. Social Contract: Essays by Locke, Hume, and Rousseau (Sir Ernest Barker ed., 1948);
394. Howard Warrender, The Political Philosophy of Hobbes: His Theory of Obligation (1957). Otto Gierke, a German, also has been a major contributor to social contract theory.
395. See Otto Gierke, Natural Law and the Theory of Society 1500-1800 (Ernest Barker trans., Cambridge Univ. Press 1934) (1913).
396. Besides Immanuel Kant, another significant contractarian in the natural law tradition is Geoffrey Russell Grice, who authored The Grounds of Moral Judgement (1967).
397. "Social contract is the name given to a group of related and overlapping concepts and traditions in political theory . . . . [I]t has at its center an extremely simple conceptual model, . . . that the collectivity is an agreement between the individuals who make it up." Laslett, supra note 242, at 465.
398. The idea of "the state of nature," that is, what we are like, before the molding of our minds and personalities through socialization, culture, and language, beneath all of our indoctrination and education, is an idea that philosophers have considered since Protagoras, Plato, and Lucretius. Robert C. Solomon, A Passion for Justice: Emotions and the Origins of the Social Contract 57 (1990). Although Thomas Hobbes characterized life in the state of nature to be "solitary, poor, nasty, brutish and short," a literal "war of all against all," Jean-Jacques Rousseau, 100 years later, viewed the state of nature as one where people were naturally happy and secure. Id. at 58;
399. see also Sir Ernest Barker, Introduction to Social Contract: Essays by Locke, Hume, and Rousseau, supra note 244, at vii-xliv; id. at xix (contrasting Hobbsean state of nature as one in which each person does whatever he or she pleases without regard to interest of others with Locke's view that certain natural rights, such as to property, exist and restrain freedom of action even in a priori natural state).
400. Hobbes wrote: The Right of Nature, . . . [the] jus naturals, is the liberty each man has to use his own power, as he will himself, for the preservation of his own nature - that is to say, of his own life - and consequently of doing anything which, in his own judgment and reason, he shall conceive to be the aptest means thereunto." Hobbes, Leviathan, supra note 41, at 109.
401. Id. at 107. Hobbes described securing one's survival at any cost in the state of nature to be the jus naturale, or "right of nature," in contrast to the lex naturalis, the law of nature discoverable through reason which binds one to seek and follow peace. Id. at 109-10.
402. In discussing the "beginning of political societies," Locke commented that people by nature are free, equal, and independent, but that "by consenting with others to make one body politic under one government," they become obligated to everyone within that society to submit to the determination of the majority and to be bound by such determinations. John Locke, An Essay Concerning the True Original, Extent and End of Civil Government, in The Second Treatise on Civil Government (1690),
403. reprinted in Social Contract: Essays by Locke, Hume, and Rousseau, supra note 244, at 3, 56-57.
404. Contractarian theories of social order are typically described in normative terms, due in part to the theological notions of the sanctity of covenants, in part to natural law concepts of universal obligations, in part to moral philosophy, particularly the categorical imperative of Immanuel Kant, and in part to the social significance of the institution of the promise in creating trust. David Hume, for example, wrote that "all contracts and promises ought carefully to be fulfilled, in order to secure mutual trust and confidence" among people in their common pursuits. David Hume, An Enquiry Concerning the Principles of Morals 28 (J.B. Schneewind ed., Hackett Pub. Co., 3d prtg. 1987) (1751). Trust as the result of any promise or consensus allows us to serve each other's purposes and to cooperate without fear of reprisal.
405. See Charles Fried, Contract as Promise: A Theory of Contractual Obligation 8-12 (1981). Trust is an important social norm that in turn can contribute to efficient resolutions. See infra note 331 and accompanying text.
406. See Rawls, supra note 19; Rawls, Political Liberalism, supra note 27. For a partial bibliography of Rawls's works published between 1972 and 1989 relating to his theory of justice, see Pogge, supra note 27, at xi.
407. Rawls's critics have been numerous. See, e.g., Robert Nozick, Anarchy, State, and Utopia ch. 7 (1974) (offering alternative theory of justice, "the entitlement theory");
408. see also J.W. Harris, Legal Philosophies 269-70 (1980).
409. It has been said that, unlike Rawls, Nozick has a strong preference for liberty over equality. Heidi Li Feldman, Libertarianism with a Twist, 94 Mich. L. Rev. 1883, 1889 (1996)
410. (citing Thomas Nagel, Libertarianism Without Foundations, 85 Yale L.J. 136, 136-38 (1975),
411. reprinted in Thomas Nagel, Other Minds: Critical Essays. 1969-1994, at 137, 139 (1995)).
412. Another critic, Richard Posner, has attacked Rawls's theory of distributive justice. See Posner, Economic Analysis of Law, supra note 4, at 461-63. Posner claims that Rawls's theory is compatible with both socialism and laissez-faire capitalism. Id.
413. In A Theory of Justice, Rawls had asserted that his thesis was part of a rational decision theory, but in his later book, Political Liberalism, he modified his view and claimed that the principles of justice do not result primarily from rationality, but rather from intuition. Rawls, Political Liberalism, supra note 27, at 53 n.7; see also Lake, supra note 27.
414. Rawls, supra note 19, at 4.
415. Id. at 4-5.
416. Id. at 5.
417. Id. at 11.
418. Id. (emphasis added).
419. Id.
420. Id. at 142-43.
421. Id. at 143.
422. Id. at 146.
423. Id. at 11-12, 242-45.
424. Id. at 12.
425. Id. at 17-22.
426. See supra notes 70-87 and accompanying text.
427. Rawls, supra note 19, at 530-41; see also Jon Elster, Envy in Social Life, in Strategy and Choice 49, 75 (Richard J. Zeckhauser ed., 1991) (observing that "[t]he tendency to feel a pang of envy at another's fortune is universal");
428. Richard H. McAdams, Relative Preferences, 102 Yale L.J. 1, 14 (1992) (noting that "[e]nvy creates the conventional problem of an externality or third-party effect").
429. Rawls, supra note 19, at 144. In his later book, Political Liberalism, Rawls expands his discussion of rationality by noting that rational agents are not limited to means-ends reasoning, but that persons "may balance their final ends by their significance for their plan of life as a whole. . . . . Nor are rational agents as such solely self-interested: that is, their interests are not always interests in benefits to themselves." Rawls, Political Liberalism, supra note 27, at 50-51. Rawls makes a distinction between what is reasonable and what is rational. To be reasonable is to agree to abide by norms of cooperation applicable to all, where to be rational is an individual's use of one's powers of judgment and deliberation in seeking one's own ends and interests. Id. at 48-50. Rawls also indicated that his theory of justice was not, as he had earlier claimed, a theory of rational decision, but rather an intuitive one. Id. at 53 n.7. Attacks on the assumption of rational self-maximizing choice have been numerous. One critic has suggested that the maximizing assumption can have serious effects: "[R]eal human beings are neither perfectly rational nor perfectly predictable. . . . In nonlinear systems - and the economy is most certainly nonlinear - chaos theory tells you that the slightest uncertainty in your knowledge of initial conditions will often grow inexorably. After a while, your predictions are nonsense."
430. M. Mitchell Waldrop, Complexity, The Emerging Science at the Edge of Order and Chaos 142 (1992).
431. Rawls, supra note 19, at 136-42.
432. Id. at 19.
433. Id. at 136-42.
434. Id. at 137.
435. Id. at 12, 137.
436. Id. at 137-38.
437. Id. at 139.
438. See Liebeler & Alchian, supra note 28 and accompanying text.
439. Id. at 160.
440. Id. at 174-76.
441. See David Gauthier, Moral Dealing: Contract Ethics, and Reason 130-37 (1990);
442. David Gauthier, Morals by Agreement 190-230 (1986).
443. Liebeler & Alchian, supra note 28, at 188.
444. Id. at 159.
445. Id. at 180. See supra text accompanying notes 81-85.
446. Id. at 157 ("Assets are specialized if their value is interdependent - if the value of each depends on what is done by or with the other . . . ."); see id. at 157-60.
447. Id. at 174-76.
448. See supra note 80 and accompanying text.
449. See supra Part II.A.
450. Posner, Economic Analysis of Law, supra note 4, at 461.
451. Id.; see also Herbert Hovenkamp, The Limits of Preference-Based Legal Policy, 89 Nw. U. L. Rev. 4, 73 (1994).
452. David N. Hyman, Economics 549 (2d ed. 1992).
453. Seidenfield, supra note 88, at 69-70.
454. Id. at 70.
455. Id.; Richard G. Lipsey et al., Economics 164 (9th ed. 1990).
456. Lipsey et al., supra note 292, at 164; see also Polinsky, supra note 4, at 51.
457. Lipsey et al., supra note 292, at 164; Seidenfield, supra note 88, at 71.
458. See Hyman, supra note 289, at 549; Lipsey et al., supra note 292, at 165; Polinsky, supra note 4, at 53; Seidenfield, supra note 88, at 71.
459. The preferences of the risk averse can be more closely examined by looking at both positive and negative risks. Polinsky refers to positive risk as a "beneficial risk." Polinsky, supra note 4, at 55. For example, most people prefer the certainty of a regular salary from an employer to the possibility of making more money, but facing higher risk, working for themselves. With respect to a beneficial risk, a risk averse person might prefer the certainty of receiving $40,000 to a 50% chance of receiving $100,000 and a 50% chance of receiving nothing. The expected outcome of the first possibility is $40,000, and of the second possibility is $50,000, but the risk averse person (depending, of course, on the degree of risk averseness) will be willing to settle for less in order to avoid risk. This happens regularly in the settlement of lawsuits.
460. Posner, Economic Analysis of Law, supra note 4, at 12;
461. see also Charles J. Goetz, Cases and Materials on Law and Economics 82-84 (1984); Seidenfield, supra note 88, at 72.
462. Seidenfield, supra note 88, at 72.
463. Id. at 73.
464. Posner, Economic Analysis of Law, supra note 4, at 462.
465. See Posner, Economic Analysis of Law, supra note 4, at 462-63; Hovenkamp, supra note 288, at 73.
466. Posner, Economic Analysis of Law, supra note 4, at 461.
467. Id.
468. Id. at 462.
469. See supra notes 220, 225-26 and accompanying text.
470. Okin, supra note 19, at 246.
471. See, e.g., Richard Epstein, Unconscionability: A Critical Reappraisal, 18 J.L. & Econ. 293 (1975).
472. See supra note 2.
473. See Sunstein, Social Norms, supra note 9, at 944. Sunstein explains this phenomenon: When two people are to divide an amount given them . . . the offeror . . . feels shame given prevailing norms - that he is demonstrating that he is a greedy and even horrible person - if he offers a penny or a dollar from a sum of (say) $200. . . . For his part, the offeree feels mistreated - treated in a contemptuous way - if a small or token amount is suggested. The social meaning of the statement, "How about five cents for you?" is contempt; the social meaning of responding, "Great!" is a willingness to be dishonored. Id. (citations omitted).
474. See Buckley, supra note 9, at 54. Buckley states: Fairness norms may be strongly felt, with bargainers willing to bear a personal loss to punish another party for unfairness. In ultimatum games, for example, one party (the "controller") divides up a fixed amount of money and the other must accept or reject his share. If he rejects it, neither party receives anything. Although it might seem rational for the second player to accept any offer, a substantial portion of such parties are willing to reject unequal, positive offers. Id. (citing Selten, The Equity Principle in Economic Behavior, in Decision Theory and Social Ethics, Issues in Social Choice 289 (H. Gottinger & W. Leinfeller eds., 1978),
475. and Kahneman et al., Fairness and the Assumptions of Economics, 59 J. Bus. S285 (1986)). Psychologist Robert Frank makes an interesting point regarding a person who is perceived by others as disliking unfair bargains: "[A] person who is known to 'dislike' an unfair bargain can credibly threaten to walk away from one, even when it is in her narrow interest to accept it. By virtue of being known to have this preference she becomes a more effective negotiator."
476. Robert H. Frank, Passions Within Reasons: The Strategic Role of the Emotions 5 (1988).
477. Hoffman & Spitzer, The Coase Theorem, supra note 9, at 84.
478. Id.
479. Id. at 82-91.
480. Id.
481. Id. at 86.
482. Id. at 91. Almost all of the groups that did not reach the efficient decision were three-person groups in which there were two decisionmakers and in which the parties were not given information about the payoffs to the other parties. Id.
483. Id. at 93.
484. Hoffman & Spitzer, An Experimental Examination, supra note 9, at 259.
485. Id. at 260. In an experiment that followed their original article, Hoffman and Spitzer tried to determine what caused this unexpected result Id. at 260-61. They used essentially the same set-up as in their first experiment, except that they used only two-person groups, and they determined which party would be the decisionmaker in some cases with a coin flip and in other cases by picking the party who won a simple skill game. Id. In half of each of these cases, the groups were told that the decisionmaker had "earned" the position, and the others were told that the decisionmaker was "designated." Id. at 267-72. Again, about 90% of the groups chose the number that maximized the group's total payout. Id. at 275. Hoffman and Spitzer found that both the way in which the controlling party is picked and what label is put on that decision made a significant difference in the outcome. Id. at 280. In the groups that picked a decisionmaker by a game and were told that the position was earned, 68% of the time the decisionmaker received "at least his individual maximum." Id. at 275. Of the groups told instead that the position of decisionmaker was designated, 61% divided the payout evenly between the parties, leaving the decisionmaker with a less-than-optimal total payout. Id.
486. Sunstein, Social Norms, supra note 9, at 904.
487. Id.
488. Id.
489. Id. at 904-05.
490. See Buckley, supra note 9, at 48-59.
491. Id. at 48.
492. Id. at 49 n.63 (quoting D. Lax & J. Sebenius, The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain 38 (1986)).
493. Id. at 48-49.
494. Id. at 49.
495. Id. at 59-60.
496. Id. at 62.
497. See Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (1995);
498. Russell Hardin, Trusting Persons, Trusting Institutions, in Strategy and Choice 185-209 (Richard J. Zeckhauser ed., 1991).
499. Drafting to the max occurs when a party having grossly superior bargaining power uses that power to exact an agreement that limits, to the extent the law permits, the stronger party's own liabilities under the "agreement" while maximizing its legal rights should the weaker party default, and where, in addition, the events of default are defined unilaterally by the stronger party.
500. Consider, for example, a contract for the sale of goods, in which the seller uses a dragnet, cross-collateral clause along with a disclaimer of all warranties provision.
501. This is an assumption somewhat at odds with modern construction theory concerning social norms and meanings. See supra notes 170-75 and accompanying text. An awareness of social norms that impede efficient bargains is important, particularly to highlight classes of bargaining that might be made more efficient and/or more fair by emulation of the bargain that would be reached under the unified model. However, the assumption is crucial to ensuring that the hypothetical bargain the parties reach will be efficient. To modify this assumption to reflect the social norms that affect people's willingness to enter into bargains would both complicate the model enormously and prevent it from resulting in all efficient bargains being reached.
502. 350 F.2d 445 (D.C. Cir. 1965).
503. Id. at 447.
504. Arthur Allen Leff, Unconscionability and the Emperor's New Clause, 115 U. Pa. L. Rev. 485, 552 (1967).
505. Williams v. Walker-Thomas Furniture, 198 A.2d 914, 916 (D.C. 1964).
506. See Epstein, supra note 307, at 307 (observing that "[t]he 'add-on' [cross collateral] clause allows both parties to benefit from the reduction in costs in the setting up of a security arrangement"); see id. at 306-08.
507. See 16 C.F.R. § 444.2(a)(3) (1997).
508. 20 Mass. (3 Pick.) 207 (1825).
509. Id. at 208-09.
510. Id. at 209.
511. Id.
512. 168 So. 196 (Ala. Ct. App. 1935).
513. Id. at 196-97.
514. Id.
515. Id. at 198.
516. See Restatement (Second) of Contracts § 86 (1979).
517. "'Quasi contract' is a useful term for describing a ground for recovering money in an action at common law, when the claim is not based either on principles of tort law or on a true contract but instead seeks redress for unjust enrichment" E. Allan Farnsworth & William F. Young, Cases and Materials on Contracts 77 n.c (5th ed. 1995).
518. 104 S.W. 164 (Ark. 1907).
519. Id. at 165.
520. Id. at 166.
521. Id.
522. This scenario will be analyzed more fully in a subsequent article.
523. "A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise." Restatement (Second) of Contracts § 90 (1979) (emphasis added).
524. 382 P.2d 109 (Okla. 1962).
525. Id. at 112.
526. The diminution in value in this case was calculated as the difference in value between the property before the mining had taken place and the value of the land after the mining had been completed. Id. at 114.
527. Id. at 112-14.
528. 257 N.E.2d 870 (N.Y. 1970).
529. Id. at 871.
530. Id. at 873 n.*.
531. Id. at 873.
532. See, for example, Whalen v. Union Bag & Paper Co., 101 N.E. 805 (N.Y. 1913), where the court reinstated an injunction against a pulp mill's operation in favor of a downstream riparian owner when the mill cost in excess of one million dollars and the riparian owner's economic loss was "small." Id. at 805.
533. Coase, Social Cost, supra note 4.
534. Boomer, 257 N.E.2d at 873 n.*.
535. Id. at 874-75 (awarding what court called "permanent damages" to landowners).
536. See Eisenberg, supra note 61, at 746-47 (arguing that terms of contract made under conditions of perfect competition have strong claim to both fairness and efficiency).
537. See supra notes 309-20 and accompanying text.
538. Such as in "contracts of rescue," for example, as described by Buckley, who provides the following example: Anthony is an adventurous millionaire, whose travels have taken him to a remote desert. There his car breaks down, and he finds himself alone and very hungry. After a few days of wandering on foot, he comes across Conrad, a mercenary innkeeper. After questioning Anthony about his wealth, Conrad agrees to give Anthony food and lodging, and to help him return to civilization. In return, he demands all of Anthony's wealth. "Think about it for a few days," he tells Anthony. Buckley, supra note 9, at 41. For a discussion of such "contracts of rescue" from an economic perspective, see also William M. Landes & Richard A. Posner, Salvors, Finders, Good Samaritans, and Other Rescuers: An Economic Study of Law and Altruism, 7 J. Legal Stud. 83 (1978).
539. See supra note 69.
540. See supra notes 68, 302.