Introduction: property rules as remedies.

• Author: Sherwin, Emily
• Position: Property Rules, Liability Rules, and Inalienability: A Twenty-Five Year Retrospective

Twenty-five years ago Guido Calabresi and Douglas Melamed proposed that we might look at legal rights and duties in a new way.(1) Their insight was that in the process of assigning rights and duties, two distinct decisions must be made. First, who should hold the entitlement? That is, whose interest should be supported by law when interests conflict? Second, how should the entitlement be protected? The entitlement might be backed by a property rule, which promises state intervention to prevent involuntary transfers from the holder of the entitlement to others. Alternatively, it might be backed only by a liability rule, which requires those who would take or violate the entitlement to pay a price set by the state.

The choice between property rules and liability rules has important consequences for the process by which entitlements change hands. When an entitlement is protected by a property rule, it can only be acquired with the holder's consent, at the price he demands. When it is protected by a liability rule, it can be taken without consent, at the price fixed by the state.(2) Occasionally the state may choose instead to prohibit both voluntary and involuntary transfers -- to make the entitlement inalienable.(3)

After presenting this picture of legal rights and duties, Calabresi and Melamed outlined possible reasons for choosing one method of protecting entitlements over another. Central among these was the observation that while property rules promote an efficient process of exchange when transaction costs are low, liability rules are more likely to promote efficient exchanges when the costs of bargaining are prohibitively high.(4) This thought and the analytical framework on which it rests immediately caught the interest of the legal academy and have held it ever since.(5)

The essays collected here honor the twenty-fifth anniversary of Property Rules, Liability Rules, and Inalienability: One View of the Cathedral and continue the discussion this great article has generated. Richard Epstein makes the case for a legal regime in which property rules predominate and liability rules are reserved for cases of necessity and large-scale holdout problems subject to appropriate institutional safeguards. James Krier and Stewart Schwab explore generally, through the use of citation analysis, the continuing importance of The Cathedral to legal scholarship. Saul Levmore explains how the framework originally proposed by Calabresi and Melamed has been expanded to cover a larger range of remedies, including restitutionary combinations that could be used to force information from litigants. Carol Rose identifies the "shadow examples" that stand behind The Cathedral and some of its progeny, and uses these examples to point out differences among the traditional legal categories of tort, contract, and property.

Because these essays were prepared for a panel on remedies, I would like to add a comment on the remedial character of property rules and liability rules. The literature on property rules and liability rules proposes various criteria for choosing among remedies, but it is largely silent on the form in which these criteria should be cast.(6) In other words, should remedial decisions be governed by determinate rules or indeterminate standards?(7) In this Introduction, I point out that judicial practice strongly favors case-by-case decisionmaking under loosely defined standards, and I discuss some of the implications that follow.

In the area of criminal law, statutes identify a determinate core of entitlements protected by property rules.(8) But apart from crime, the great body of property rules are enforced by courts through equitable remedies such as injunctions and specific performance-remedies that historically have been surrounded by a cloud of judicial discretion.(9) The first doctrinal hurdle for the granting of an injunction is the ancient maxim that equitable relief is available only when damages are inadequate to provide full relief.(10) To some extent, cases in which damages are inadequate can be sorted into categories, but these have never been reduced to fixed rules and, if anything, the standard of adequacy has become vaguer and more fact@dependent over time.(11) Further, even when damages admittedly are inadequate, a collection of notoriously indeterminate equitable defenses may stand in the way of an injunction. An equitable remedy will be denied, for example, if the plaintiff has come to court with "unclean hands,"(12) or if it would impose a hardship on the defendant that is "disproportionate" to the benefit it confers on the plaintiff.(13) "Unclean hands" describes an indefinite class of shady conduct, while "disproportionate hardship" can only be identified by comparing the positions of particular individuals. Thus, in the most common cases...