George L. Priest

The Selection of Disputes for Litigation

THIS paper addresses the relationship between litigated disputes and disputes settled before or during litigation. The specification of this relationship is important for the analysis both of the legal system and of the influence of the legal system on society. Virtually all systematic knowledge of the legal system derives from studies of appellate cases. Appellate cases, of course, provide the most direct view of doctrinal developments in the law. Few scholars today, however, are content to study doctrinal developments alone without regard to the broader influence of legal rules on social affairs. Appellate cases may tell us which disputes courts find troublesome and which they find easy to decide. But this doctrinal information discloses very little about how legal rules affect the behavior of those subject to them or affect the generation of legal disputes themselves. If all legal disputes, or even a random sample of these disputes, were tried to judgment and then appealed, the inference from legal rules to social behavior would be straightforward. The facts of appellate cases

The Government, the Market, and the Problem of Catastrophic Loss

This article addresses the comparative advantage of the government to the private property/casualty insurance industry for the provision of insurance coverage for catastrophic losses. That the government can play an important role as an insurer of societal losses has been a central public policy principle since at least the New Deal. In addition, our government typically automatically provides forms of specific relief following unusually severe or unexpected disasters, which itself can be viewed as a form of ex post insurance. This article argues that, for systemic reasons, the government is much less effective than the private property/casualty insurance market in providing coverage of losses generally, but especially of losses in contexts of catastrophes.

The Invention of Enterprise Liability: A Critical History of the Intellectual Foundations of Modern Tort Law

SINCE 1960, our modern civil liability regime has experienced a conceptual revolution that is among the most dramatic ever witnessed in the Anglo-American legal system. Legal rules that had been entrenched for decades, and the attitudes and presuppositions that supported them, were suddenly repudiated and replaced by rules and presuppositions radically different. The dimensions of this revolution in the law are comparable only with those of Realism and Brown v. Board of Education. In the 1920s, recovery for injuries resulting from product use was chiefly determined by contract law, which allowed the specific purchaser of the product, because in privity of contract with the product seller, to recover according to the terms of the express product warranty or of the

Breach and Remedy for the Tender of Nonconforming Goods under the Uniform Commercial Code: An Economic Approach

Article 2 of the Uniform Commercial Code gives a buyer the right to rescission or damages when goods tendered by the seller do not conform to the contract of sale. In this Article, Professor Priest discusses the origins and text of the Codes nonconforming tender provisions and analyzes the likely effect of the Codes choices of remedy on the economic efficiency of sales. He then examines case law under the Code and concludes that courts, often despite the letter of the statute, have interpreted and applied the nonconforming tender provisions in a manner consistent with minimization of costs.

Government Insurance versus Market Insurance

This paper compares the provision of insurance by the government to provision by private firms in the market. The topic is one that has been much addressed in the proceedings of this Association. It was the subject of the First Annual Lecture of the Geneva Association by Kenneth J. Arrow (Arrow, 1978). Arrow’s defense and advocacy of government-provided insurance constituted much of the work for which he was awarded the Nobel Prize on the economics of uncertainty. More recently, it was the subject of the 15th Annual Lecture by Tony Atkinson (Atkinson, 1991), the 17th, by Assar Lindbeck (Lindbeck, 1994), and the 18th, by Pierre Pestieau (Pestieau, 1994), and formed the major underlying issue of the 19th Lecture by Richard Zeckhauser (Zeckhauser, 1996) and the 21st by Howard Kunreuther (Kunreuther, 1997). And, of course, this topic has been the subject of multiple individual articles in the Geneva Papers (see, for example, Faure, 1998; Meyer, 1996). My approach to the topic, however, is somewhat different. What I hope to do here is to examine critically the basic foundational assumptions that have served to justify governmental provision of insurance by comparison with our understanding of market insurance, and then more carefully to compare the operation of governmental insurance regimes to the operation of private market regimes. There is a sophisticated economic justification for the provision of insurance services by the government. An important feature of the justification is that the government – the state – is able to provide insurance in contexts in which a private market for insurance is unavailable. It is an empirical fact that, in most contexts in which governments provide insurance, private market insurance is or becomes unavailable. This empirical fact, however, has meant that there have been no ready contexts in which to compare government versus market insurance operations. As a consequence, in the long history of discussion of government insurance, comparisons with the private insurance market have been neglected. This paper is a first attempt to remedy that neglect.

Procedural Versus Substantive Controls of Mass Tort Class Actions

Class certification in a mass tort case confers extraordinary negotiating power even where the underlying claim is meritless. This power stems from the prospect that claims of a large‐numbered class might reach a jury that might render a large aggregate judgment under our vastly looser tort law standards. The power is so extreme that all mass tort claims certified as classes appear to settle, rather than litigate to judgment. Recommendations for class action reform have been solely procedural since Rule 23 has been implemented without substantive review of the underlying claim. This article shows that recent reform efforts in fact attempt to impose substantive controls on mass tort class actions through procedural means, efforts that necessarily will remain inadequate. The various problems attending mass tort class actions can only be effectively addressed if courts are given power to substantively review the underlying merits of a claim prior to class certification.

Valuing Health Care: Improving Productivity and Quality

This report addresses a deceptively simple question: How can the productivity of American health care be substantially improved? Productivity, in lay terms, is the ratio of output to inputs. A more colloquial rendition of the question might be: how can we get a lot more bang for our health care buck?By design, we have brought together a varied assortment of ideas and suggestions, illustrating the messy, grab-bag nature that effective changes often need to take. Yet our proposals do fall (albeit with some overlap) into four broad categories, which structure the recommendations section of this report.Harnessing information: how systematically gathering and sharing data can unlock knowledge that produces systematically better choices. The key here is to incentivize a new corps of data entrepreneurs to collect and analyze existing medical data to discover and then disseminate the use of new therapies.Improving research: encouraging more collaboration across institutions and funding more translational research (aimed at “translating” basic scientific discoveries into medicines and therapies). Legal and regulatory reform: modernizing medical malpractice systems, removing counter-productive restrictions on health insurance premiums, and streamlining new drug approvals.Empowering patients: there are large benefits of giving more power to the people who matter most — patients — to make informed decisions about their own care.The ideas here are not new, though many of them are familiar only to the cognoscenti. To the contrary, we have sought ideas that have showed promise in the field, and then attempted to set them in a context that exploits the adjacent possible.If this report can focus more minds in the health policy community and general public on finding and implementing those changes, in everything from clinical practices to regulatory structures, it will have succeeded.From the Kauffman Task Force on Cost-Effective Health Care Innovation.

Law and Economic Distress: Sangamon County, Illinois, 1837-1844

THIs essay attempts to analyze the impact in one county of Illinois of the depression which began in 1837 and continued into the mid-1840s, and to examine the effects of some of the laws enacted by the Illinois legislature as relief measures. The study employs simple statistical techniques to analyze records of judgments and executions issued in Sangamon County, Illinois during that period. Historians have not ignored the depression and the relief laws, but their accounts are impressionistic and incomplete. Part I considers these historical accounts and presents a brief description of the relief laws. Part II discusses the plausibility of inferences about economic conditions from court records and Part III presents and analyzes the data. Part IV discusses the general problem of retrospective legislation aimed at redistributing wealth.

Ronald Coase, Firms and Markets

Abstract This paper will attempt to explain how Coase, from his earliest important paper, “The Nature of the Firm,” transformed his interest from firm organization, determined by transaction costs, to the influence of firm choices and individual choices – collectively, the market – on the allocation of resources, including on the efforts of governmental organizations to allocate resources. Over time, less interested in firm organization, Coase directed his work to showing how the market would invariably dominate the government with respect to the allocation of resources, limited by transaction costs. The paper will attempt to show, however, in contrast to widespread views, that there is little link between Coase’s focus on transaction costs in “The Nature of the Firm” and his subsequent attention to those costs in “The Problem of Social Cost.” The paper will include anecdotal support: I was a student of Mr. Coase for many years.

Rethinking the Economic Basis of the Standard Oil Refining Monopoly: Dominance Against Competing Cartels

The success of the Standard Oil monopoly is not well understood. Standard Oil first developed a monopoly over the refining of crude oil, though later extended its control to gathering pipelines, later still to trunk pipelines (from the western Oil Regions to East Coast ports) and, even later, expanded operations to include oil production (drilling) and retail sales at the time the Supreme Court ordered its dissolution 100 years ago, in 1911. Though there are several journalistic exposes of Standard Oil - Henry Demerest Lloyd and Ida Tarbell - as well as business histories - none very explanatory - the currently dominant theory of Standard Oil’s success is by Elizabeth Granitz and Benjamin Klein who assert that Standard Oil was chosen by oil shippers, the railroads, to police a railroad cartel. According to Granitz and Klein, the railroads split with Standard Oil the profits from cartelization of the crude and refined oil industry. This paper challenges that explanation, claiming that there were attempts to cartelize at all levels of the oil industry - producers, gathering pipelines, refiners, and the railroads. There are good economic reasons that explain why Standard Oil, a refiner and at the remote western location of Cleveland, secured a monopoly as against the producers and the railroads.