Document Type

Article

Publication Title

Valparaiso University Law Review

Abstract

During its twelve-year history, the Monsanto Lecture has become a major outlet for torts scholarship in the United States. Professor Ayres's current contribution to this series - Protecting Property with Puts - continues in that worthy tradition by bringing his economic acumen to the tricky question of finding the optimal legal regime to redress wrongs to property. In this lecture, he continues his recent elaboration on the path-breaking article of Guido Calabresi and A. Douglas Melamed, Property Rules, Liability Rules and Inalienability: One View of the Cathedral, which itself was the object of an enormous outpouring of scholarship on the twenty-fifth anniversary of its publication. One recent trend in that literature is to explain how the original insights of Calabresi and Melamed can be better understood by resorting to the standard tools of financial economics: hence the reference to puts- an option that gives its holder the right to sell an entitlement at a fixed price-which thus protects the holder against a downturn in price. A put is often understood in opposition to a call- an option that gives its holder the right to buy an entitlement at a fixed price-and thus allows the purchaser to take advantage of an upturn in the market. The metaphor of puts and calls has been pursued eagerly by a number of writers on the subject, whose work Ayres seeks to consolidate and extend. If Ayres is to be believed, I am the one voice that holds out against this apparent integration of legal theory and financial economics. In the course of elaborating on his own views, Professor Ayres has taken me to task for my recent contribution to this topic, in which I defended the dominance of property remedies except in circumstances of necessity. I am therefore most appreciative to the editors of the Valparaiso University Law Review for offering me the opportunity to respond briefly to some of Professor Ayres's criticisms and to elaborate on my own skepticism about the current vogue. This brief Comment is organized as follows. In Section II, I comment on what I have termed the "subversive" organization of rights and remedies first proposed by Calabresi and Melamed in 1972. In Section III, I comment on what I think to be the weaknesses of the efforts of Professor Ayres and others to use financial economics to extend and elaborate on the basic two-by-two matrix of Calabresi and Melamed. In Section IV, I comment on Ayres's specific examples of put options in connection with conversion, confusion, encroachment, and holdover tenant situations. A brief conclusion follows.

First Page

833

Volume

32

Publication Date

1998

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