Focus on Fairness, Efficiency, and the Law: Response. Efficiency and Equity: What Else Can Be Gained by Combining Coase and Rawls

Professors Swygert and Yanes seek to bring efficiency and equity to bear explicitly on the economic analysis of law by merging Rawlsean social contract philosophy into law and economics' basic premise, the Coase Theorem. We are in complete agreement with Swygert and Yanes that good legal policy should be concerned with both efficiency and equity, and we welcome their attempt to merge the two as a useful step in an important debate. Ultimately, though, we are unconvinced by their argument as it currently stands for two reasons. First, by focusing only on the way in which their approach might affect how the law regulates the exchange of goods or legal entitlements (i.e., contract law), the authors provide no explanation of how their approach could be used to determine the initial allocation of goods and legal entitlements (i.e., property law).

If legal policy is to take equity as seriously as efficiency, it is critical that equity be considered when legal entitlements are assigned, not merely when parties choose to trade their entitlements. Consequently, the omission of any discussion of how entitlements might be initially assigned under the authors' proposed theoretical framework is of critical importance.