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Altruism in Law and Economics


William M. Landes


University of Chicago Law School; National Bureau of Economic Research (NBER)

Richard A. Posner


University of Chicago Law School; National Bureau of Economic Research (NBER)

November 1977

NBER Working Paper No. w0217

Abstract:     
A classic example of external benefits is the rescue of the person or property of strangers in high transaction cost settings. To illustrate, A sees a flowerpot about to fall on B's (a stranger's) head; if he shouts, B will be saved. A thus has in his power to confer a considerable benefit on B. The standard economic reaction to a situation in which there are substantial potential external benefits and high transaction costs is to propose legal intervention. In the example given, this would mean either giving A a right to a reward or punishing A if he fails to save B. Either method, we show, is costly and may result in misallocative effects. These objections to using the law to internalize the external benefits of rescue would be much less imposing were it not for altruism, a factor ignored in most discussion of externalities. Altruism may be an inexpensive substitute for costly legal methods of internalizing external benefits, though this depends on the degree of altruism, the costs of rescue, and the benefits to the rescuee. Although the general legal rule is not to reward the rescuer (nor to impose liability), the law recognizes the fragility of altruism and entitles the rescuer to a reward in certain instances. These include rewards to professional rescuers on land (normally a physician) and to rescuers at sea. In both instances the costs of rescue are likely to be sufficiently high to discourage rescue unless the rescuer anticipates compensation.

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Date posted: February 15, 2001  

Suggested Citation

Landes, William M. and Posner, Richard A., Altruism in Law and Economics (November 1977). NBER Working Paper No. w0217. Available at SSRN: http://ssrn.com/abstract=260406

Contact Information

William M. Landes (Contact Author)
University of Chicago Law School ( email )
1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9606 (Phone)
773-702-0356 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Richard A. Posner
University of Chicago Law School ( email )
1111 E. 60th St.
LBQ 611
Chicago, IL 60637
United States
773-702-9608 (Phone)
773-702-0730 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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