Back To Coase:A Study Of The Source Of The Economics Of Law Theory

Economics of Law,not only legal thoughts and legal theories,but also an indispensable tool for the study of department law,has already been used in the practice of judicial judgment,especially in the part where how to deal with the right conflict is involved.In China,both the research in theory and practice have some degree of misunderstandings in the theory of Economics of Law,which is proposed by Ronald H.Coase,the founder of Economics of Law,in the Nature of the Firm,the Federal Communications Commission,and the Problem of Social Cost.Therefore,there is importance and necessity for the study of the source of the Economics of Law,combining the judicial practice in China.With the abandoning of subjectively moral judgment,Coase proposed reciprocal harm,used marginal utility theory and proposed Coase theorem which is a gifted theory.Coase theorem not only repudiated traditional Pigovian policy,but also laid the philosophical foundation for new Institutional Economics and Economics of Law,and generated general,marginal and substitutable way of research.In Coase theorem or even the whole Coase's thoughts,delimitation of property rights is the foundation.From the imaginary state with no transaction cost to the real world with transaction cost,with the limited resources and limitless competition,delimitation of property rights becomes an important way to define possessions,end arguments and restrain competition.That is Steven N.S.Cheung's incisive generalization:contract choice in limited condition,also a part of Coase's thoughts.Delimitation of property rights represents that resources turn into rights and the distribution of resources turns into the distribution of rights.That is not only a realization of complete connection of Jurisprudence and Economics,but also a vital step and indispensable phase to solve the compact of rights,and also a significant theoretical aspect for how to choose the rules and make arrangements for the institution.Within the different property rules the same resources can present different natures of property and different structures of property.Hence,for a certain unsolved case,it should be solved in the certain legal domain,not outside the domain or in other domain for legal rules and principles.For example,in solving the hard cases in act of company,we should first choose rules under the frame of act of company.It seems not appropriate to seek for foundation in civil law.It fits the principle that when ascertaining the sequence of application of law,people who use the traditional method of jurisprudence always claim that special law should take priority over common law.Therefore,when we come across the problem that how should we choose the proper rules to solve the dispute when the rules are not clear or even missing,we can take advantages from Coase's theory about resources turning into rights and distribution of resources turning into distribution of rights.In nuisance cases,it is common to restore to(reasonable)tolerance obligations or the theory of rights relativity.In fact,so-called tolerance obligations are realistic facts weighing a behavior's costs and profits.From this point of view,tolerance obligations are actually title another of lawful duties.Rights relativity is the substantive characteristics of rights.For the existence of transaction cost,rights relativity means to economize transaction cost.Jurisprudential circle regards it as the essence of rights relativity being contrary to rights that the realization of rights enslaved to the objective material and cultural condition,which is actually a problem about that the realization of the rights is enslaved to transaction cost.It seems not to catch the essence of the problem and not to be helpful for the solving of it to try to explain and solve related nuisance cases by the theory of rights relativity.From the aspect of law,delimitation of property rights/the choice of contracts is actually the problem of how to distribute conflicting rights.Coase's Economics of Law,by insisting maximization of the total social product,regards the institutional structure of production,i.e.the whole economic system as the object of study.In the economic system the change of any part of it would influence the whole system and leads to the increase of the transaction cost.Whether property rules change or not or how to change depends on the amount of transaction cost.Therefore,under the valid property rules,in order to protect the authority of the law,cultivate good legal emotion of the citizen,and avoid the dilemma of social Darwinism,prior rights should be protected.If the property rules are not clear or even missing,how to define property rights should consider transaction cost and other related facts.In addition,right allocation pattern structured by established property rules is the essential standard to judge whether the application of the legal rules is appropriate or not,especially in the condition that there are competitions with different rules.In recent years,the balance of interests theory introduced to China by scholars seems to have the potential to disseminate especially in the field of the hermeneutics of civil law.On the surface,it seems like that the balance of interests theory,one of the methodologies of jurisprudence,and Coase's choice of contrary in limited condition are two parallel and different legal theories.In fact,the balance of interests theory and choice of contract are both the forms of delimitation of property rights methods.The balance of interests theory tries to avoid begriffs jurisprudence and surpass the formalism of begriffs jurisprudence,and tries to change the inflexibility and rigidness if begriffs jurisprudence.However,the balance of interests theory which has subjective arbitrariness would unavoidably lead to judge's arbitrary judicature.In order to avoid the subjective arbitrariness of the balance of interests theory,some scholars proposed hierarchical structure of interest measurement of the specific interests of the litigant,group interests,institutional interests and public interests.But that hierarchical structure cannot be recognized because it lack for scientific standard,it has contradiction inside and it has vague notions.The balance interests theory is just the gathering of some credible judgments and thoughts of interests.Coase's Economics of Law defines property rights according to transaction cost,which is objective and authentic,fits human's nature of seeking for the maximized benefits in limited condition,and has the spirits of law of nature.By the delimitation of property rights we can divide market and government and find the boundary of market and government so that it provides theoretic foundation for how to properly deal with the relationship of market and government,it is good for the market to play a decisive role in the distribution of resources,and it involves the spirit of rule of law.