Comments on: Efficiency and Commerce for All

By: Sean

Sean — Wed, 17 Feb 2010 03:49:20 +0000

I misunderstood what the UCC did with assessing damages. I mistakenly thought you said the UCC limits recovery to objective values, not that it prevented suing for the object itself (where it can be returned).

Thanks, I guess I should take Secured Transactions or whatever class covers the UCC.

By: Quincy

Quincy — Tue, 16 Feb 2010 20:51:29 +0000

Sean, my criticism of the UCC provision is that it codifies the destruction of a legitimate property right in the interest of efficiency: instead of permitting the rightful owner to reclaim his property from the buyer, the UCC dictates that the rightful owner’s only legal remedy is to sue the repair shop for money. Prior to the UCC’s legal gymnastics, the rightful owner had a property right to a specific piece of property—the heirloom, wedding ring, etc. The UCC, however, transforms that right to a specific piece of property into a contract right to payment by the repair shop. It is this transformation that I object to. A just law, a law which protected property rights, would allow the rightful owner to reclaim his property from the buyer and the buyer would then be able to reclaim from the repair shop the money he paid for the goods. Notice that the just law also has the benefit of revealing the precise amount that the repair shop should pay to the buyer in damages: the price that the buyer paid for the item plus reasonable legal fees.

Now, you listed a number of (efficiency?) concerns that might arise if the law permitted the rightful owner to reclaim his item: calculating damages in the event that the item cannot be recovered, the buyer extorting the repair shop for the return of the item, whether the repair shop should have to recreate an item that was destroyed, and litigants making false claims about the item’s value. I don’t think that the extortion concern is valid, because under a just law the buyer would be obligated by law, and subject to criminal prosecution, if he refused to return the property to the rightful owner. Of course this does not resolve your other concerns.

But the UCC provision doesn’t resolve these concerns either. Under the UCC, the repair shop is still liable to the rightful owner under various legal theories: civil fraud, conversion, etc. The court must still determine the appropriate amount of damages. There is still the potential for the rightful owner to make false claims about the value of the property. And there is still the potential that if the repair shop were obliged to correct its mistake by re-creating the property that waste or some of the individual liberty concerns inherent in requiring specific performance might result.

In other words, protecting the rightful owner’s property right doesn’t cause the problems you are concerned about. The problems you have described are the result of the subjective vs objective value problem of economic analysis. In fact, the application of efficiency concerns in place of principles of justice aggravates the subjective vs objective value problem.

By: Sean

Sean — Mon, 15 Feb 2010 01:51:44 +0000

Iin this hypothetical, what if you can’t get the heirloom back? How much should damages be? And what if you can only get it back at a grossly inflated price, since the new owner knows they have the store over a barrel – how much should the store be force to pay for the heirloom? Now what if the heirloom was destroyed rather than sold – should the store owner be forced to recreate the item? Would that lead to opportunistic behavior from litigants (e.g. the ring had diamonds rather than zirconium – how can you double check)?

I wonder if these problems wouldn’t become almost intractable without some kind of market value equivalent damages. Recognizing only pecuniary damages doesn’t seem unreasonable, given other damages are so hard to assess and can/may/will lead to unscrupulous behavior. It is always crummy when something like this happens, but forcing individuals to bear their own risk with sentimental value strikes me as appropriate – especially when they can use their own judgment to pick a repair shop or whatever.

But you know my stance – promotion of efficiency can be a proper role for government, under certain conditions.