From: Dan Fabulich (daniel.fabulich@yale.edu)
Date: Mon Sep 07 1998 - 13:35:02 MDT
Ken Meyering wrote:
>Question:
>
>Assuming a libertarian online marketplace, governed by the
>hippocratic oath (http://www.wh.com/cmem/codes/hippocraticoath.htm),
>what is the best structure for handling liability?
>
>For example, someone orders a bag of marbles and some LSD. They take
>the LSD, then put the marbles into their mouths, fall asleep,
>suffocate and die. Is the website that provided the marbles and LSD
>responsible for the death?
>
>Do members of the online free market release the vendors of all
>liability, before membership in the "sacred marketplace"?
>
>Does the online marketplace provide CBT, automated diagnostics, and
>drug interaction warnings with each wholesale shipment of
>pharmaceuticals? Do they maintain case records of customers? Hmmm?
David Friedman is discussing questions like these in a book that he's
writing, called _Why Is Law?_. Interesting stuff. He's webbing the
chapters as he's writing them; you might want to take a look at:
Under the "Why Is Law?" link.
In this particular case, placing all of the liability on the buyer gives
the buyer a great incentive not to do something stupid (like taking LSD and
holding marbles in one's mouth), but perhaps not infinitely great. If the
buyer's desire to do such a silly thing outweighed the value the buyer
placed on his/her own life, then the buyer *should* have taken LSD and
marbles together. Since we imagine that the buyer is in the best (if not
the perfect) position to evaluate the value of his/her own life, it would
be most efficient to place all liability on the buyer, which should
maximize economic value in this case.
In contrast, by placing liability on the seller, the *seller* must
determine whether or not it would be worthwhile to sell the LSD/marbles.
Since the seller's only criterion is profits, the seller must try to guess
how valuable the court will guess the buyer's life is, and use this guess
to renegotiate his/her prices. The very act of introducing a court in this
case results in inefficiency; the fallibility of the court's evaluation of
the buyer's life results in situations when the seller will set his price
inefficiently high or inefficiently low.
This is not an argument for universal "caveat emptor," but reflects the
advantages of caveat emptor in this case.
-TODAY IS A GOOD DAY TO LIVE-
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