1646 IOWA LAW REVIEW [Vol. 97:1645
Peremptory challenges offer a unique application for the Coase
Theorem.1 Taken in isolation from the rest of the litigation sequence, jury
selection is distinct in its complete absence of negotiation between the
parties, despite their physical presence together in the courtroom during
voir dire. Every other component of American trials includes the
opportunity for parties to negotiate either a settlement for the dispute or a
stipulation regarding some item,2 such as the introduction of particular
evidence or testimony. In contrast, the rituals for jury selection evolved in a
way that excludes interchange between the parties. The procedures could
have developed differently, of course, as we can imagine a world where the
attorneys engage in “trading” exclusions of their least desirable jurors.
Nevertheless, for historical reasons shrouded in medieval history,3 we have
no trading, or transacting, between the litigators. In Coasian terms, jury
selection and peremptory challenges are an instance of maximum
transaction costs, and a rare instance where transaction costs peak despite
the face-to-face proximity of two parties.4
The Coase Theorem posits roughly that legal rules or rights matter least
where parties have the most opportunity to negotiate; conversely, rules and
rights matter more when parties have less opportunity to bargain around the
laws. This is my paraphrasing; Coase himself did not provide a one-sentence
version of his argument in his original article, and he attributed the moniker
“Coase Theorem” to the economist George Joseph Stigler.5 Transaction
costs are the economist’s moniker for describing or measuring the obstacles
to trades, or more properly, to negotiations. Thus, where transaction costs
are at their peak, legal rules or assignments of rights have their greatest
import. When such costs are low and the parties can readily negotiate, legal
1. See R. H. Coase, The Problem of Social Cost, 3 J.L. & ECON. 1 (1960). Coase’s article
helped launch the law-and-economics movement in the legal academy; citations to it ha ve
become ubiquitous in the academic literature. For an excellent overview of the subsequent
literature and Coase’s reaction to the impact of his article, see Daniel A. Farber, Parody
Lost/Pragmatism Regained: The Ironic History of the Coase Theorem, 83 VA. L. REV. 397 (1997).
2. See Robert J. Rhee, A Price Theory of Legal Bargaining: An Inquiry into the Selection of
Settlement and Litigation Under Uncertainty, 56 EMORY L.J. 619 (2006).
3. See SANDRA DAY O’CONNOR, THE MAJESTY OF THE LAW: REFLECTIONS OF A SUPREM E
COURT JUSTICE 215–17 (Craig Joyce ed., 2003); Elaine A. Carlson, Batson, J.E.B., and Beyo nd:
The Paradoxical Quest for Reasoned Peremptory Strikes in the Jury Selection Process, 46 BAYLOR L. REV.
947, 951–56 (1994).
4. To this author’s knowledge, Coase himself never discussed ju ry selection, even though
his writings discuss many cases and verdicts.
5. See R.H. COASE, THE FIRM, THE MARKET, AND THE LAW 157 (1988). Farber’s summary
of the Theorem reads: “According to the Coase Theorem, assuming that transaction costs don’t
prevent contracting around legal rules, the legal rules don’t matter—or more precisely, the
parties will always bargain their way to an economically efficient outcome, regardless of the
legal rule. Bargaining washes out legal rules, in other words.” Farber, supra note 1, at 401