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Altruism in Law and Economics

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  • Landes, William M
  • Posner, Richard A

Abstract

A classic example of external benefits is the rescue of the person or property of strangers in high transaction cost settings. To illustrate, A sees a flowerpot about to fall on B's (a stranger's) head; if he shouts, B will be saved. A thus has in his power to confer a considerable benefit on B. The standard economic reaction to a situation in which there are substantial potential external benefits and high transaction costs is to propose legal intervention. In the example given, this would mean either giving A a right to a reward or punishing A if he fails to save B. Either method, we show, is costly and may result in misallocative effects. These objections to using the law to internalize the external benefits of rescue would be much less imposing were it not for altruism, a factor ignored in most discussion of externalities. Altruism may be an inexpensive substitute for costly legal methods of internalizing external benefits, though this depends on the degree of altruism, the costs of rescue, and the benefits to the rescuee. Although the general legal rule is not to reward the rescuer (nor to impose liability), the law recognizes the fragility of altruism and entitles the rescuer to a reward in certain instances. These include rewards to professional rescuers on land (normally a physician) and to rescuers at sea. In both instances the costs of rescue are likely to be sufficiently high to discourage rescue unless the rescuer anticipates compensation.
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Suggested Citation

  • Landes, William M & Posner, Richard A, 1978. "Altruism in Law and Economics," American Economic Review, American Economic Association, vol. 68(2), pages 417-421, May.
  • Handle: RePEc:aea:aecrev:v:68:y:1978:i:2:p:417-21
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    Cited by:

    1. Jock R. Anderson, 1982. "Agricultural Economics, Interdependence And Uncertainty," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 26(2), pages 89-97, August.
    2. Farukh, Razi & Kerkhof, Anna & Loebbing, Jonas, 2020. "Inefficiency and Regulation in Credence Goods Markets with Altruistic Experts," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224590, Verein für Socialpolitik / German Economic Association.
    3. Philippe Fontaine, 2000. "Making use of the past: theorists and historians on the economics of altruism," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 7(3), pages 407-422.
    4. Sophie Harnay & Alain Marciano, 2009. "Should I help my neighbor? Self-interest, altruism and economic analyses of rescue laws," European Journal of Law and Economics, Springer, vol. 28(2), pages 103-131, October.
    5. Alain Marciano, 2010. "Calabresi, "law and economics" and the Coase theorem," ICER Working Papers 26-2010, ICER - International Centre for Economic Research.

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