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Concepts in Law and EconomicsA Guide for the Curious$
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Jim Leitzel

Print publication date: 2015

Print ISBN-13: 9780190213978

Published to Oxford Scholarship Online: September 2015

DOI: 10.1093/acprof:oso/9780190213978.001.0001

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Humanity’s Crooked Timber

Humanity’s Crooked Timber

Chapter:
(p.126) 6 Humanity’s Crooked Timber
Source:
Concepts in Law and Economics
Author(s):

Jim Leitzel

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190213978.003.0006

People cannot be counted upon to make all of their decisions in a fully rational manner—and sometimes the law should take the possibility of such lapses into account. For instance, contracts that appear to be wildly unfair need not be enforced by a court, under the doctrine of “unconscionability.” The Coase Theorem itself, one of the mainstays of Law and Economics analysis, presents a less optimistic picture in the face of “endowment effects,” where mere ownership of an asset raises the owner’s valuation of the asset. (Ironically, excessive optimism is a common departure from full rationality.) We might need to rethink the proper location of the Parthenon Marbles, the best way to compensate kidney donors, and desirable paths to re-legalizing currently illegal drugs, when rationality shortfalls are rife. Happiness and efficiency are not equivalent, so there will be situations when efficient laws do not promote hedonic well-being.

Keywords:   unconscionability, endowment effect, Coase Theorem, Parthenon Marbles, drugs, kidneys, happiness

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