no third solution

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Category Archives: Legalese

What Would Coase Do?

August 16th, 2007

A U.S. District Judge upheld as constitutional a Michigan law requiring oceangoing vessels to sanitize their ballast tanks in order to prevent the spread of certain “invasive species, including round gobies and zebra mussels.”

I won’t pretend to know anything about maritime affairs, the logistics of sanitizing a million gallons of ballast, or commercial law especially with regards to open waterways, etc. I’m also not a specialist in ConLaw, either. But based on my limited understanding of the document and its application, it doesn’t seem like this is an undue restriction of interstate commerce. Although perhaps it is: consider a similar scenario where the State of California outlawed late-model, out-of-state vehicles (which do not meet its emissions standards) from entering the People’s Republic? But I digress.

This headline caught my eye today because, on its face, the case is nearly identical, qualitatively, to Coase’s examination (pp 13) of the farmer and the train, which passes his property on a nearby track, occasionally dropping burning embers which could potentially destroy his crop. (Incidentally, it’s also an examination of Pigou taxes.) Should the railway pay to install preventative measures on the trains? Or is this the farmer’s responsibility? Should the State pay to sanitize these tanks? Or is this the shipping companies’ responsibility?

We learn from Coase is that these problems are far more likely where property rights are poorly defined, and there are perhaps few better examples than the vast, inland seas which comprise the largely “public” waterways of the Great Lakes. Do I think there’s probably a better way to solve these problems than the adversarial manner of escalating court cases and duelling lawyers? Almost certainly. Do I want to propose the solution? Not really. I just think it’s interesting when I come across a real-life example like this.

Central Planners Yield to the Market

July 24th, 2007

It took Massachusetts 30 years to realize that when theory dictates your central planning will fail; your central planning is destined to fail. Thirty years during which anyone unfortunate to live in the State had to deal with an overly regulated insurance “market.”

According to InsuranceNewsNet ($$$), insurance regulators in Massachusetts have decided to take a giant step out of the stone-age, after Governor Patrick described the automobile insurance market in the State as “ailing.” Previously, the State of Massachusetts, through its regulatory arm, bullied insurers into writing auto policies – under threat of revoking their licenses to write other lines of business. Insurers were essentially forced out of the State altogether – and in theory this would’ve probably affected those insurers who were writing riskier lines – which then creates a problem of adverse selection.

Just how bad is it? Well, only “19 insurers currently write auto business in Massachusetts, while another 35 have left the state since 1990.” State Farm – by far the nation’s largest automobile insurer (about 20% nationally) has a paltry 0.42% share in MA. State Farm writes no new business in MA, and only services policyholders who’ve had to relocate. Now, compare this to any other state, where there are generally 50+ insurers writing policies, where consumers have the choice between a low-cost, direct insurer like eSurance, or a more expensive, full-service insurer with a local agent like State Farm, and everything inbetween.
Says the article:

Massachusetts’ 30-year-old “fixed-and-established” system of centralized private-passenger automobile insurance rate-making will come to an end next year, following a pair of rulings by Insurance Commissioner Nonnie S. Burnes to gradually phase out the system in favor what Burnes is calling “managed competition.”

Nonnie Burnes, the State’s Insurance Commissioner, intends to allow “insurers to propose individual premium levels that take into account such factors as driving record, the frequency and severity of at-fault accidents, and traffic violations,” a novel idea, indeed. This new-fangled method is otherwise known as, among other things, “risk-rating” and is (outside of Massachusetts) widely understood and practiced by Actuaries in all lines of insurance. And it has been, for quite some time.

Bravo. Welcome to the 19th century.

Florida Man Acquitted for Self-Defense

July 10th, 2007

Three men in an SUV with a baseball bat and the intention to “rough up” a Mr. Norman Broden found out the hard way that Broden was fortunate enough to have a handgun, and confident enough in his actions to defend his own life.

Then he was put on trial for murder, despite the presence of a stand-your-ground statute.

The Florida law authorizes the use of defensive force by anyone “who is not engaged in an unlawful activity and who is attacked in any other place where he or she has a right to be.” Furthermore, under the law, such a person “has no duty to retreat and has the right to stand his or her ground and meet force with force, including deadly force if he or she reasonably believes it is necessary to do so to prevent death or great bodily harm to himself or herself or another or to prevent the commission of a forcible felony.” The statute also grants civil and criminal immunity to anyone found to have had such a reasonable belief.

The prosecutor in the case, Craig Williams indicated that he “pursued the charges because he thought a jury needed to decide the case,” despite his own misgivings about taking Mr. Norman Broden to trial. “[H]e privately wondered how he would have behaved in the same situation.” I’ve helped a friend in law school with a paper or two, I’ve had some work experience with property law, and I took one class in Business Law & Relations back in 2002. I’m no lawyer. But isn’t it pretty well settled that juries do not decide matters of law – only matters of fact?

When Borden was acquitted, [Williams] was almost relieved. Williams conceded after the trial. “It was pretty clear what the right thing to do was here.”

Wait – almost? Are you kidding me? You were merely almost relieved that a man you put on trial for murder, who otherwise might’ve been pavement-pizza, was acquitted of murder because he had the wherewithal to defend his fucking life?

Three cheers for justice?

no third solution

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