The Legal Analyst: A Toolkit for Thinking about the Law

By Ward Farnsworth | Go to book overview

1 Ex Ante and Ex Post

A thief walks into a bank, puts a gun to the head of one of the customers, and announces that he will shoot unless the teller hands over all the money in the drawer. The teller does nothing. The thief shoots the customer, runs off, and never is seen again. The customer dies of his injuries, and his estate brings a lawsuit against the bank, complaining that the teller should have given the money—it was only $5,000, let us imagine—to the thief. What should the court say?

There are two quite different ways to think about this question. The first looks at the case like this: it is a dispute between the bank and the estate of one of its customers. They’ve come to court because they haven’t been able to resolve their differences informally; the judge serves as an adjuster of last resort, producing an answer the parties agree to accept because it has the force of law. One of them will walk away a winner; the question is who. We find the answer by looking back at what happened and asking whether justice requires that the bank pay damages to the plaintiff. Did the bank do anything wrong? If the teller’s refusal saved the bank some money, would it be fair for the bank to pay nothing to the party who was injured as a result (or, more precisely, to his estate)? Can the bank bear the economic burden of the customer’s death more easily than his kin? We might consult our sense of fairness. And it might be possible to draw analogies to this case from others that seem similar—perhaps cases where a customer slipped on a puddle left behind by the bank’s janitor, or where a bank was held liable because one of its tellers tipped off a thief that a customer soon would leave the bank with a great deal of money. We could try to decide this case like others that sort of resemble it.

That much is, again, a first way of looking at the case. But now here is a second one: what happened that day at the bank is unfortunate but of secondary interest at this point; it’s over, and nothing a court says can change what happened. Money can be moved from one person to another now, or punishments inflicted, but these are just rearrangements, and they are too late to be of any serious consequence. What’s appalling about the day at the bank (or any crime or accident) is the waste of it:

-3-

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The Legal Analyst: A Toolkit for Thinking about the Law
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface vii
  • Acknowledgments xi
  • Part I - Incentives 1
  • 1 - Ex Ante and Ex Post 3
  • 2 - The Idea of Efficiency 13
  • 3 - Thinking at the Margin 24
  • 4 - The Single Owner 37
  • 5 - The Least Cost Avoider 47
  • 6 - Administrative Cost 57
  • 7 - Rents 66
  • 8 - The Coase Theorem 75
  • Part II - Trust, Cooperation, and Other Problems for Multiple Players 85
  • 9 - Agency with Eric Posner 87
  • 10 - The Prisoner's Dilemma 100
  • 11 - Public Goods 109
  • 12 - The Stag Hunt 117
  • 13 - Chicken 126
  • 14 - Cascades 136
  • 15 - Voting Paradoxes 144
  • 16 - Suppressed Markets with Saul Levmore 152
  • Part III - Jurisprudence 161
  • 17 - Rules and Standards 163
  • 18 - Slippery Slopes with Eugene Volokh 172
  • 19 - Acoustic Separation 182
  • 20 - Property Rules and Liability Rules 188
  • 21 - Baselines 198
  • Part IV - Psychology 207
  • 22 - Willingness to Pay and Willingness to Accept- The Endowment Effect and Kindred Ideas 209
  • 23 - Hindsight Bias 218
  • 24 - Framing Effects 224
  • 25 - Anchoring 230
  • 26 - Self-Serving Bias, with a Note on Attribution Error 237
  • Part V - Problems of Proof 247
  • 27 - Acoustic Separation 249
  • 28 - Standards of Proof 257
  • 29 - The Product Rule 273
  • 30 - The Base Rate 281
  • 31 - Value and Markets 294
  • Notes 305
  • Author Index 329
  • Subject Index 335
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