Legal Process

15 Decemnber: Review Session

• Boomer
  The court is really deciding two things. First, it looks like a shift from a market determination of relative impact analysis (i.e., trespass = automatic injunction means the market decides the relative merits of the land uses). So instead of an automatic injunction, there's a judicial determination of relative impact before an injunction is issued. The dissent wants to take on the whole valley's problems, though, but the court appears to be leaving them to the political process.

  We have observed law, and we have decisions being made underneath. Prior to the case, this looks like a straight-up trespass case. Under that plan, relative impact is decided by negotiation, but as numbers increase that's hard. So the court says OK, we'll make that decision, but we're limiting things to individual cases.

  We're trying to make sense of observed law by understanding the institutional choices underlying it.

• What explains participation? It's a function of the costs of participation and the benefits of participation; that's what those products liability boxes were about: the benefits of participation. Who is going to litigate (upper right) and who is going to receive the signal (lower left). In the context of torts, anyhow.
• The difference between an administrative agency and a legislature as forms of political institutions.
  The legislature works well if you have an active majority. The administrative agency can work well if you have a dormant majority. See, e.g., the oil spill discussion, though: high-stakes players can capture administrative agencies.

  But the political process isn't monolithic, even if we're just talking about one of those alternatives: there's local vs. state-wide, or state vs. federal.

• Jurisdiction-limiting statutes: do the courts find the results perverse, or are they happy about the work being taken off their plates. These trigger mini-Korematsus, in other words.
• Constitution-making: who decides who decides who decides. But we have our constitution already.
• The "Supply Side" means the capacity of the courts (e.g.) for doing review. The demand side has to do with malfunction (e.g., political).
• Characterizing market malfunctions: there's the Boomer negotiation problem, but then you've got a gamut of other possible problems. The biggest is imperfect information or understanding. Then there are externalities (i.e., effects that fall on third parties). And the third classic form is monopolies.

  Whether something is internal or external is a function of participation. The Coase Theorem is really a statement about externalities: if transactions are costless then they will always solve the problems. The fact that they are not costless is the source of the problems.

  The issues for market malfunction are transaction costs and benefits, speaking generally. It's non-zero transaction costs that make smoke in the atmosphere an externality, in other words.

• VA Board of Pharmacy: how come the courts stepped in?
  This looks like a pretty severe instance of minoritarian bias (here, creating a cartel to keep prices artificially high). But this is sort of common-- the question isn't where the malfunction came from, since this isn't an unknown phenomenon. The question is how come the court got into it. And the answer is that they had available to them a means of dealing with only one small corner of the cartel issue: the advertising/speech piece.

  Someone had to convince the court that they weren't dragging in all of economic due process, but once that was done, the court can reach the reasonable conclusion.

• Minoritarian bias is harder to combat on the federal level. Dormant majorities are a function of low stakes and the costs of getting involved. And stakes are more dissipated, and the issues more complex, the higher the jurisdiction. There's more news coverage, maybe, at the national level. You're more likely to have minoritarian bias at the higher levels and majoritarian bias at the lower levels.

17 December

• Boomer involves the same institutional choice at two different levels of numbers and complexity. Carolene is two different choices (should the market or the political process control, and then should the courts step in to fix a defective regulation) at the same level of numbers and complexity.
• Contracts cases rarely involve the political process, although there might be a choice between several markets (i.e., at the time the contract was signed, or in the present).
• In theory, negligence and absolute liability should produce the same signals.
• In Configuration 1, you might not get any government action (because who is going to petition them to act), but if you do get government action, at least they're not subject to a distorted view because of one side lobbying them. So, in that situation, a court might ask, "why should we impose complex tort liability if it won't produce any actual safety?" The tort system is good for compensation/insurance in this scenario, but not for safety, and this means damages will be arranged different.
• Even in configuration 1, there can be signals being sent (e.g., absolute liability for rear-ending accidents). Not because the potential injurer reads the signal, but because liability insurers do, and they issue rates based on experience. Configuration 1 doesn't mean no message can get through-- it just means that in order to get through, the message had better be pretty simple.
• Why do we even have tort liability for auto accidents? Because we assume some people won't insure. Still, if we're not concerned about sending a safety message, we can simplify damages a lot.