The Legal Analyst: A Toolkit for Thinking about the Law

By Ward Farnsworth | Go to book overview

4 The Single Owner

We have seen that a lot of legal rules make sense when viewed as ways to discourage waste. At first this might seem to raise a question about why the rules are needed, for who wants waste, and who needs a rule to keep from creating it? The answer is that nobody wants waste—so long as whatever is wasted belongs to them. But people often create waste for others in the course of creating gains for themselves. Suppose that an accident occurs because the defendant skips some precaution: he doesn’t put a fence around his ballpark, so balls sometimes break the windows of the neighboring houses. The owner gains by omitting the fence; he saves some money. The neighbors have a different experience of the situation: broken windows. Looking at the situation from the outside in, we can call it a waste if the gains from skipping the fence are smaller than the losses from the smashed windows. We view these things in the aggregate; we decide whether there is waste by comparing the gains to everyone with the losses to everyone. The challenge is to get the ballpark’s owner to think that way, too. That is what the law accomplishes if it holds the owner liable for the broken windows. We make the costs experienced by the neighbors costs to him; to say it more technically, we force him to internalize the cost of omitting the fence. If he weren’t held liable for the broken windows, he wouldn’t worry about breaking them, which we then could call an external cost, or externality—a cost of his behavior that isn’t brought home to him. Try thinking of that as the point of many legal rules, and of holding people liable for expenses they create: the purpose is to bring home to them the full costs of their choices rather than letting them foist the costs onto other people they don’t care about.

There is a nice tool for thinking about this type of situation. It is known generally as the single owner. The word “single” doesn’t refer to marital status; it means sole. The idea is to picture all the interests at stake in a case having just one owner, and to ask what that single owner of them would do. Think again of the problem involving the ballpark. It arises only because the owner of the ballpark is different and separate from his neighbors, and so doesn’t take their losses as seriously as he takes his own gains. We treated it as obvious that he should have installed the fence,

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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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