The Cathedral at Twenty-Five: Citations and Impressions
28 Pages Posted: 23 Dec 2015
Date Written: 1997
It was twenty-five years ago that Guido Calabresi and Douglas Melamed published their article on property rules, liability rules, and inalienability. Calabresi, then a law professor, later a dean, is now a federal judge. Melamed, formerly a student of Calabresi's, is now a seasoned Washington attorney. Their article — which, thanks to its subtitle, we shall call The Cathedral — has had a remarkable influence on our own thinking, as we tried to show in a recent paper.
This is not the place to rehash what we said then, but a summary might be in order. First, we demonstrated that the conventional wisdom about liability (damage) rules, that judges should use them when transaction costs are high, is incorrect, because the costs of assessing damages might in fact be higher still; if they are, property (injunction) rules are superior, at least from the standpoint of efficiency. Second, and relatedly, we identified problems of correlation and synergy that come into play as one tries to choose between damages and injunctive relief. Correlation problems arise because the same considerations that yield high transaction costs usually yield high assessment costs as well; synergy problems arise because the use of damage rules can inhibit the development of more effective bargaining practices. Third, we showed that Calabresi and Melamed's celebrated Rule 4 (reverse damages) contains a paradox, which we went on to resolve by inventing reverse-reverse damages (the "double reverse twist"). The trick of the double reverse twist relates to our fourth point, having to do with a "best-chooser axiom" which can be used to illuminate matters of institutional (not just judicial) design generally. Finally, we suggested in conclusion the relationship of much of the foregoing to relevant literature in other disciplines.
Keywords: property rules, liability rules
Suggested Citation: Suggested Citation