If there is one article that nearly every legal scholar is familiar with, that article would have to be Guido Calabresi & A. Douglas Melamed’s Property Rules, Liability Rules, and Inalienability: One View of the Cathedral. It was in that Article that the famous distinction between property rules (i.e., entitlements that can only be purchased in voluntary transactions) and liability rules (i.e., entitlements that can be infringed by simply paying the value of the entitlement as determined by a court) was first put forward. This idea has had a tremendous impact both within and outside the legal academy, its framework having been incorporated into numerous judicial opinions. When one thinks about this Article, one tends to think about law and economics, and how courts that have internalized this approach frequently employ such thinking to choose the most efficient rule when deciding how to protect entitlements in important areas of private law like contract, tort, and property law. What one ordinarily does not think about, however, is racial inequality, which is the focus of a new and interesting Article recently published by Yotam Kaplan in the Maryland Law Review.
The main point of Kaplan’s Article is as simple as it is powerful: because judges are tasked with the burden of choosing between protecting a party’s entitlement with a property rule or a liability rule, and because bias inevitably creeps in whenever humans make decisions, a judge’s decision must necessarily be biased as well. In the author’s own words: “Under a property rule, a right holder is allowed to determine the value of their entitlement; under a liability rule, the power to determine the value of the entitlement is taken from the right holder and given to an objective state organ. Once we recognize that state organs are not objective, but racially biased, it is clear that the move from a property rule to a liability rule is not a neutral one.” (Pp. 483-84.)
For this reason, a judge’s decision to protect an entitlement with a liability rule not only “amounts to the appropriation of the holder’s ability to determine the value of their right” (a fair point, to be sure, but one that was recognized by Calabresi and Melamed in their original Article) but, more perniciously, will be made by “a biased state organ, who is likely to undervalue the right” when it comes to racial minorities (P. 484). The Article points to specific data supporting the fact that judges and jurors tend to undervalue (1) the future earnings of racial minorities, often reinforcing the racial wage gap that already exist as a byproduct of historical and systemic racial discrimination (P. 517), (2) the home values of racial minorities, where “Black homeowners are about twice as likely as white homeowners to have their homes appraised lower than the actual selling price” (P. 509), and even (3) the pain and suffering experienced by racial minorities, presumably on the ground that Blacks experience less pain than their white counterparts from similar injuries (Pp. 513-14), thereby leading to lower compensation when liability rule protection is chosen by a judge instead of property rule protection.
In short, the author makes a convincing argument that, at the very least, judges should consider accounting for their biases by putting a thumb on the property rule side of the scale when choosing between property and liability rules. But even if a judge believed that they were truly unbiased (a dubious proposition in itself) and were really concerned about choosing the most efficient rule, the author makes a compelling argument that judges should still be forced to pick the rule that best ensures that wrongdoers who would infringe on another’s entitlements internalize the full costs of their behavior. At the very least, this would mean that if liability rule protection were chosen, the wrongdoer should have to pay for the full cost of their harmful activities, rather than costs that are systematically undervalued due to racial bias, as the latter would distort economic incentives and allow wrongdoers to continue to engage in economically-inefficient behavior (i.e., behavior in which their victims were not fully compensated).
Of course, there is much more in this Article than can be captured by this short summary, but I can heartily recommend it to anyone interested in law and economics or critical race theory in general, or to anyone who teaches property rules and liability rules in any of their classes (which, I imagine, is a not insignificant portion of the legal academy). I know I will be discussing this Article in both my Remedies and Jurisprudence classes this Spring and look forward to excellent class discussions around these themes!
