Review of: David D. Freidman’s
Law’s Order

Chapters:
4. What’s Wrong With the World, Part 2
8. Games, Bargains, Bluffs, and Other Really Hard stuff
9. As Much as Your Life is Worth

Abstract This book contains a different style of viewing not only the legal system through the eyes of an economist, but as some may take from it, different ways to perceive the interactions that are encountered daily in life. If there were only one human in the world, he/she could do as he/she pleased. As soon as there enter two, the questions of whose interests and exertions of those interests and how they interact with those of the others’ can cause results that were not always in the desired outcome of one or even both people. Therefore, how should these said interactions be handled? When is it necessary to bring laws into the dealings of any situation and to what degree? This book take on these questions and gives examples that can be interpreted in different ways to give a different view on how and why we may or may not need laws; while leaving enough room for the reader to make their own judgments.

Chapter 4: What’s Wrong With the World Part 2.
Nothing works Costs are produced by one person and borne by another. This simple statement is simply stating that costs’ are not made by only one person in any given situation. As in the example of the polluter and the person being affected by the pollution; there were choices on both parties to bear costs of being neighbors.
One may believe that the costs are highest for the person that is inhaling the toxic fumes, but why would a person buy property if this was a possibility once there? Others agree with that the company producing the pollution should be more responsible for the good of all and any negative externalities should be a cost that the company should have to bear. This is where a third party may come in to decipher the outcome. One way to handle this is to tax the polluter. Pigouvian taxes are levies on the market that are assumed to correct the not so efficient outcome that these negative externalities cause. Although this and many other scenarios to this nature are handled in this form no one truly comes out on top. There are still negative externalities that are at the least an annoyance to someone.
Another way thought to lessen the costs of these negative externalities is to enforce regulations. This makes a stead fast way to ensure that no one is being abused by costs that should not be taken on by them. However, depending on the persons knowledge of the system and how well the regulation fits into each scenario will sway its individual outcome. This is not to say that it does not help to keep situations fair to some extent, but the extent to which party thinks it is fair is another question.

Everything Works Another view that made changes in this area was that of Coase. He believed that as long as the parties could come to some kind of agreement and make some sort of contract in the interest of both, then there was no need for regulations or Pigouvian tax. There just must be a clear definition of the rights of each. This also must take into account that there is no transaction cost, which is not always the case. It has been argued in more recent years that this the overlooking of rents and alternative activities as a role in the theorem make it not as dependable as once thought to be. It seems that as long as it is not a “simple case” then this theorem is irrelevant to most extents.
The fact is that people do not own things, but they have the right with regard to things. Where the lines are drawn in the sand can be another issue. If one owns property, then how far up into the sky does he have those rights? Or how far down? All rights can be moved to those whom the issue takes the greatest value.
It All Depends (on transaction Cost) As in the case of pollution it is in the best interest of the person living downwind from the polluter to not be up coughing all night due to air quality, but what if there are many people being affected by the pollution? Then it becomes what is called a public good problem. In Los Angles there is a problem with pollution that affects many, but how can something with that many people involved be solved? This requires too many people to believe as strongly as the others involved and act accordingly. If not, then someone will either be getting a free-ride at the cost of the others involved or if enough people are not persuaded then negations may just break down and no desired outcome will have been reached. When the reports from the American Lund Association state the Los Angles is the most polluted city in the United States, not being concerned with this outcome seems irrational.
Coase Plus Pigou Is Too Much of a Good Thing Yet another way of handling the pollution problem is to combined the previous theories and charge the factories that pollute and fine for damages. If the factory sees that the costs of the fines are less than the actual cost that it would take to not pollute than it is obviously going to just pay the fines. However efficient, it is still wrong and that’s before even considering that this monies will be going to the EPA and not to those who are affected i.e. the landowner downwind. This must be changed so that the damages go to the landowners and the Pigou’s taxes are added together resulting in the factories having twice the incentive to control their pollution.
Coase, Meade, and Bees Bees cannot be controlled by any man and therefore give an example for those problems in the market for which there may not be a reasonable answer. As it was once thought, bee keepers’ reap benefits at the costs of nearby farmers in that their bees will receive nectar from the farms plants and return it to their keeper without the farmer receiving any benefits. However as with most creatures, bees do not want to work hard for their honey and deals between farmers and honey producer. This points out the fact that the Coasian approach to solve some externalities extends to many, but does not imply that it solves all such problems. Therefore pointing out the problem once ignored in that there is symmetry on both parties. Avoidance is only acceptable if the costs are low. Shedding light to the fact that in these questions that do not have a straight forward answer, they must be looked at in a case by case way and decisions may differ accordingly. General rules bring some predictable results referred to as bright line rules these are that have fallen into the standard way of handling similar cases. It is when the case has facts that are gray or fuzzy in that they may not be so distinct that they tough decisions must be evaluated and in this instance one may truly see the reasons for our laws.

Chapter 8: Games, Bargains, Bluffs, and Other Hard Stuff
Overview
The fact is that economics assume that people will act rationally in pursuing their objectives. There are two ways that this can be handled by the person and depending on which way it is approached depends on the difficulty level it will be analyzed at. If the person is looking at the rest of the world as mere objects then the objectives may be handled quite simply. If the person is looking at this more complexly then the person will be taking into consideration the fact that all others will also have their own objectives and that those people that may be encountered also know that this person has his own objectives to which could interfere with one another. Using the first of the two prior approaches an example can be what time to leave to avoid traffic. If a direct observation can be made that there will be less cars on the road at 2:30 p.m. than at 4:30 p.m. although these said cars will have drives in them, they are not of the initial thought process. It would make rational sense to leave at the earlier time if time and traffic volume are of one’s importance. Taking this automobile example to the seemingly harder of the two ways to approach matters can be shown if there is no stop sign at an intersection to which two cars are approaching at approximately the same time at right angles. The human factor must be taken into consideration foremost. Questions quickly arise that one is unsure whether to speed up, slow down, or stop to avoid collision. This analysis is also being questioned by that of the other oncoming driver.
More factors may also come into play as in any scenario like age. If the two drivers are teenage boys then this may become an old fashioned game of chicken and pride will become a foremost factor. This reasoning of what to do as one is trying to figure out what the other will do is considered to be Strategic Behavior. Invented by John Von Neumann called this action is called, “game theory.” It is a branch of mathematics that given rules to any particular game the most likely next move can be determined. This can be extended into so much more than games as one can view it daily in politics, diplomacy and so on, however as each makes his calculations and attempts to adapt to “win” the numbers will change accordingly and therefore this can only be used on case by case bases as each time players may adapt differently. There are an infinite number of conclusions that can be determined. Although the data can show many similar patterns in given situations it is not always purely accurate.
This strategic behavior is important to viewing the economic analysis of law. It is seen in many two-party interactions such as litigation, bargaining over contracts and so on. Although the author of this book believes that game theory is too simple and will require a breakthrough in its analysis before it can truly be considered, it is in the interest of many others to continue to see these patterns and continue to act accordingly. Poker players use this in their games to analysis their opponents and act accordingly and although Friedman is right in saying that the results will vary, it can also be looked at as taking the best chance to retrieve the desired outcome. Having some facts is better than having none.
Bilateral Monopoly If a person has an apple and another wants to buy this apple there is a bilateral monopoly situation. Once the owner of the apple has stated the price the other can accept and gain an apple or state a different price and attempt to gain the apple accordingly as now the owner has the opportunity to accept or reject the offer. An agreement may not be able to be made between these two and no transaction cost will be had. This is not a fixed-sum game. This theory can also be shown in child throwing a tantrum to get its way. As the costs will vary depending on many thing such as when and where the tantrum is occurring. The parent may give in to some of the requests as to save face. As other natural factors are not considered as the fight is occurring, the parent may not realize that this form of survival is hardwired into the child and if they give in to the parents demands to stop, the parent should consider them self lucky. Although no one truly wins in the matter there is a common ground met and the desired result of the tantrum ending is accomplished. How long this conclusion takes to occur is another story depending on the reaction of the parent. Yet another way to look at this form of monopoly is to consider the writings of Herman Kahn. He takes unfashionable topics such as thermonuclear war and come up with the idea for a Doomsday Machine. The idea is to have the United States bury a very dirty bomb far under the Rocky Mountains and to let it be known that it is there. If any other countries would like to attack the U.S. then this bomb will go off and kill everyone on earth. Although this is beyond extreme, if the other country believes that the scenario is true then they will be highly unlikely to test it. However, if they do choose to attack, no one wins and all other weapons could be scrapped. Unlike the theory of the author that the game theory is inefficient here, that is not all so true. As in any interaction feeling out and acting accordingly to ones opponent is also important here. If in the example of the Doomsday Bomb the other country tests is willing to test the U.S. to see if they are bluffing and they are then the power and next steps made drastically shift. Although the game theory is not a true representation for ever situation in can be used as a significant tool. Some are presenting theories that would further add on to this by adding the channel hypotheses to show a more in depth view on the way to find not so generalized analyze of these interactions.
The Prisoner’s Dilemma Just as seen in any cop versus criminal show on your local television station the detective is always trying to prove to the criminal that they have enough evidence to convict and that the criminal should just confess. This normally comes attached to the promise of a deal or ease of punishment for their cooperation. What if in this scenario there were two criminals in separate cells being interrogated for their accused crime? Let the games begin: as the funds for any office must be allocated, so are that in this situation. Therefore, the district attorney wants to keep their conviction rates up. With this budget taken into consideration it is in the best interest of the DA to make plea agreements in order to accomplish both desired outcomes. The DA can try to accomplish the maximum benefit for this by trying to pin the two criminals against each other. Although the details of the outcome will vary the main desires will be met. This is done by altering what is stated to each and attempting to maximize the end result: justice served. The results are up to the criminals themselves and can be shown in the following matrix. Criminal 2 | Confess | Say nothing | Criminal 1 | Confess | 2 years, 2 years | 3 months, 5 years | | Say nothing | 5 years, 3 months | 6 months, 6 months |

The reasoning for which each accused criminal will determine their logic will vary, but the logic is different when one can see all of the possible conclusions. If all convicts knew that by keeping their mouths shut they would do less time, no one would ever confess. It is the lack of knowledge combined with the fact that they have no idea if the other has taken the deal that makes the best drawn analysis for each to confess. Conclusion There are two clear conclusions that are drawn in this chapter. The first is that by applying theoretical analysis to real world problems is still a hard problem to decipher. The fact that this is difficult does not deter that it can be handled and that it is actually in the best interests of individual to try and use all available knowledge when making any decisions. The other is that rational players of a game in a payoff structure will betray each other. This only makes sense, however outliers will remain in this case. Overall there will always be people willing to gamble, bargain and bluff in all situations.

Chapter 9: As much as Your Life is Worth
The Problem Isn’t Multiplying by Infinity but Dividing by Zero The value of a life is that in which one considers it to be. If for all purposes one values their life and it is of infinite value then it should be protected as such. However, a life of avoiding all things that could interfere with this statement is preposterous. If a person offers another person a million dollars for their heart it will be denied. The price can be raised as much as they want, but the money is worth nothing to a corpse. If there was even a chance of living in this equation the chances of someone taking the chance will rise. If a man offers another a chance at a million dollars for one roll of a 100 sided dice and the chances greatly in his favor, but the loss would be great, say the man shoots him, the man may take the risk. This can be recognized in situations such as those who bungee jump or race fast cars. There is an overlaying shadow that something could happen. As picture of a recent accident in Zambia have been all over national news casts leading some to wonder if coming out with a story and life experience is worth the risk.
Back to Law The economic question here is how to value a life in that it is also a legal question. If there is a car accident and one person’s car is destroyed; the person at fault will have to pay the price to get a new car for the other. So what if they killed the person and not just the car? The answer has been that the family of the victim could sue for the damages resulting in the money that the deceased would have made minus the amount that they would have spent on them self. What if the life was treated just like the car? Taking into consideration Pigou’s analysis of externalities (without considering Coase) wanting to impose cost, but how would the price be set? Some jobs do this to set their wage premiums. If a trucking company expects a driver to drive a load of highly explosive dynamite instead of a truck full of feathers, the money paid may need to differ. This is not that of a perfect way to put a value on a life, but if it is excepted as a starting point it can be determined that more factors than that of just w age minus money spent on one’s self would have to be considered.
Optimal Deterrence, Optimal Insurance, and Never the Twain Shall Meet Although the previous analysis may help in reducing the risk at which one may take anthers life it still has problems that can arise. If a person has no one then the only thing he can buy is a tomb and therefore the money has technically been transferred to someone with no use for it. Although extreme this points out that tort serves at least two functions. The first as stated is that is deters actions that could cause injury to others. Another is to compensate the victims by insuring them. This is where the man who has no one can use his money while still alive by using his life insurance policy correctly. There is an entire industry that puts these values on lives. This industry provides potential torteasors with the right deterrence while assuming that they can reasonably estimate the value of life. No matter how inconceivable this allows the man with no one to have and use the money when it is of the most value to him\
A Perfect Information Fantasy and How to Get It If there were a way to make all persons pay for and except risks and vice-versa this would be nominal objective of tort liability; compensating victims at the expense of the tortfeasors. However if the cost of the risks that one is willing to take showed up in their premium it may not be as worth it to the company or the person. It can be argued that failure of common law either to permit claims based on the value of the victim’s life to himself or to treat tort claims as property is evidence against Posner’s thesis of the efficiency of the common law.
Damages for Injury What if the consequence is not death, but injury? What if the person is crippled? There are then three ways that this person is worse off. First there are the costs i.e. medical bills. Second, life is less fun than before the injury. Third, the value of money that could have been made in the future has been lessened. Although most of the math of this could be figured out to some degree by using the previous theories it is still not the main factor. What makes this worth more is that most would not give up the value of their current life for the money that would come from this event. The level of happiness is the true calculator in this problem and that is only up to the victim to decide that cost.
Conclusion
As this book shows ways to look at the law through the eyes of an economist, it opens up to more than just law. It reflects on the affluent reasoning behind why people make decisions that they make on a daily bases and what results will come from those decisions on a step-by-step analysis. Distinguishing to each of its readers that it takes many to make laws.

Notes 1. Zylicz, T. (2010). Goals and Principles of Environmental Policy. International Review OF Enviormental &Resource Economics, 3(4), 299-334. Doi: 10.1516/101.00000028

2. Graciela Kuechle (a, & Dirgo Rios, n.d.) The Coase theorem reconsidered: The role of alternative activities. International Review Of Law &Economics, doi:10.10/j.irle.2011.10.001

3. American Lung Association (2007, May 1). Los Angeles Most Polluted US City, According To American Lung Association Report. ScienceDaily. Retrieved January 16, 2012, from http://www.sciencedaily.com/releases/2007/05/070501081737.htm 4. Ostling, R., Wang, J., Chou, E. Y., & Camerer, C. F. (2011). Testing Game Theory in the Field: Swedish LUPI Lottery Games. American Economic Journal: Microeconomics, 3(3), 1-33. 5. Ingene, C. A., & Parry, M. E. (2007). Bilateral monopoly, identical distributors, and game-theoretic analyses of distribution channels. Journal Of The Academy Of Marketing Science, 35(4), 586-602. 6. Nick, T. (2012, January 9). Bungee jump accident drops woman into crocodile-infested waters (VIDEO); Australian woman survives bungee plunge into the Zambezi River. GlobalPost: Africa.