- Research Handbooks in Law and Economics series
Edited by Alon Harel and Keith N. Hylton
Chapter 3: Some Notes on Property Rules, Liability Rules, and Criminal Law
3 Some notes on property rules, liability rules, and criminal law Keith N. Hylton 1. INTRODUCTION Property rules prohibit conduct and liability rules internalize costs.1 Using this distinction, criminal law can be described as a set of property rules. The law aims to prohibit offensive activity altogether rather than regulate it to some optimal level. In other words, criminal law assumes that there is no “optimal level” of offensive activities such as fraud, rape, and robbery. In view of this, one should expect the property-liability rules framework set out in Calabresi and Melamed (1972) to point the way toward a robust positive theory of criminal law. Posner (1985) applies the property rule theory to explain criminal law at a high level of detail. No other article has attempted such a complete survey of the criminal law grounded in positive theory.2 The value of the property-liability rules framework has come under attack in recent years. Kaplow and Shavell (1996) present perhaps the most troubling critique. They argue that property rules and liability rules are equivalent, in low transaction cost settings, in terms of their welfare implications.3 The reason is that takings will not be observed under either property rules or liability rules.4 I refer to this below as the Indifference Proposition. In this chapter I re-examine the Indifference Proposition. I have argued before that even on its owns terms the Indifference Proposition does not imply that property rules and liability rules are equivalent in their welfare implications, and that the Indifference...
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