Complexity and the Cathedral: Making Law and Economics More Calabresian

European Journal of Law and Economics

23 Pages Posted: 26 Feb 2019

Date Written: February 12, 2019

Abstract

This article argues that the Calabresi and Melamed’s “Cathedral” framework of property rules, liability rules, and inalienability rules needs to be extended using the tools of complex systems theory in order to capture important institutional features of the law. As an applied field, law and economics looks to law in choosing the appropriate analytical tools from economics – something that Calabresi has identified (in strong form) as law and economics as opposed to economic analysis of law. Recognizing law as a complex system requires a rethinking of some Realist-inspired assumptions that underpin economically inspired analysis of law. These assumptions include a preference for narrow, concrete concepts and a skepticism about traditional doctrines and baselines – and ultimately Legal Realism’s extreme nominalism and the strong bundle of rights picture of property. The article shows how the Calabresi & Melamed (C&M) exhibits gaps that can be addressed by systems theory; these include narrow entitlements to engage in specific activities, liability rules that allow an affected party to buy out an activity (Rule 4), opportunistic behavior by parties that destabilizes liability rules, and the role of equity as an institutional response. Extending the C&M framework to treat it as a system helps prevent the C&M framework from flattening the law out. If we supplement the C&M framework to take account of law as a system, we can bring it closer to Calabresian law and economics.

Keywords: Property Rules, Liability Rules, Economic Analysis of Law, Law and Economics, Property, Complex Systems, Equity

JEL Classification: A12, K11, K13

Suggested Citation

Smith, Henry E., Complexity and the Cathedral: Making Law and Economics More Calabresian (February 12, 2019). European Journal of Law and Economics. Available at SSRN: https://ssrn.com/abstract=3333265 or http://dx.doi.org/10.2139/ssrn.3333265

Henry E. Smith (Contact Author)

Harvard Law School ( email )

1575 Massachusetts
Hauser 406
Cambridge, MA 02138
United States

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