have/havenot2

Law and Economics Paper #7

A rough survey of prevailing Philippine jurisprudence shows that consonant with Galanter and Albiston’s postulates, the haves have indeed come ahead. Of course, the law and trends in legislation serve to equalize the status of the parties appearing in court. In some instances even, the Supreme Court has shown a preference to the have nots, brushing aside procedural rules in favor of greater substantive justice, bandying about the saying “those who have less in life, must have more in law.”

The case of Oposa v. Factoran comes to mind in analyzing the competition between the repeat players (often, but not always, the haves) and one time litigants. In this case, the issue to be resolved existed between a class of people representing the future generation and huge lumber firms backed up by politically powerful players. In ruling for the have nots (the class representing the future generation), one would think that the lumber firms would sustain great losses as a result. It is interesting to note that while being victors in this case, the Court said that to attain relief, one must implead each and every lumber company granted a license to operate. To litigate and implead each and every lumber company would require a lot of resources. To a have not, resources are scarce. Despite this seemingly false victory, the after effects of the decision can be seen to influence future policy considerations. And this, is precisely what the future generation might have wanted in the end.

In the other case of Fortich v. Corona, the industrialists/ rich landowner won over the farmer-beneficiaries of agricultural land under the Comprehensive Agrarian Reform Law. Here, a second motion for reconsideration, a prohibited pleading, was entertained by the court, which ruled in favor of the landowner. In this case, however, it is obvious that external factors such a judicial bias come into operation. Moreover, Supreme Court decisions involving CARL are not always resolved in favor of landowners.

Do the have nots really have more in law? In terms of quick individual impact reliefs, perhaps, it is possible for have nots to come out ahead, if they are in the right. Jurisprudence however, does not reflect settlements made before a case is even commenced. To pursue a case and use all remedies accorded by law to a litigant still requires a lot of resources only the haves have.

haves/havenots

Law and Economics Paper #6

Virtually every aspect of life as we know it, is a struggle between the haves and the have nots. Justice, often characterized as blind and impartial offers a promise to the have nots --- that despite the disparity in economic status, the have nots may still be able to defend their rights through the courts of law, a place where it is possible to get ahead of the competition even with scarce economic resources.

Although the disposition of justice merely involves the application of laws crafted to ensure fairness and equity, extraneous factors come into play as well. Albiston, in her article “ The Rule of Law and the Litigation Process: The Paradox of Losing By Winning,” explores these factors in relation to the federal employment statutes and Family and Medical Leave Act. I agree with Albiston when she said that some forms of winning claims are, in the bigger scheme of things, losses to the one-shot players (employees) than to the party (repeat-players, or often, employers) who ends up paying the claim.

Out of court settlements or cases settled in the arbitration level are highly encouraged by the courts and the law. Hence, in our legal system, we have conciliatory measures in the barangay level, mediation level, pre-trial level (referral to commissioner) and even during and after the trial proper. Settling cases even before a full blown trial proves to be an efficient way of minimizing the use of resources (expending time, money, emotional and physical efforts). In the long run, however, a quick settlement at the arbitration level serves to bind only the parties concerned and does not in any way enrich jurisprudence. As a result, one-time players (usually the “have nots” are not able to generate enough muster backed by jurisprudence in order to support future claims by members of the same class.

What Albiston proposes, is that the haves are masterminds of a plot to ensure that jurisprudence would always end up in their favor and if there exists a possibility that a decision would affect future business or dealings, the haves would more likely settle, even if it involves the payment of a big claim. Although the postulate has shades of a conspiracy theory, it is a rational explanation of behavior through an economic perspective. Indeed, it would be more efficient if repeat players strategize to ensure wins in every court case, in order to avoid harmful jurisprudential precedents. It is unfortunate, however, that strategy does not really enter a one-time player's mind since, for have nots, immediate relief is the economic.

unnecessary precautions

Law and Economics Paper #5

Is it really better to be safe than sorry? The Precautionary Principle presupposes that there is lack of sufficient information to form a rational basis for avoiding risks. Hence, even if the probability of an unfavorable outcome for a certain event is low, the high level of impact of this event necessitates aggressive means of caution or avoidance.

The flaw in this Principle would be the very premise it operates on: lack of sufficient information. Information on all ramifications of a new experiment could be costly and hence, government policy dictates the application of the precautionary principle. I agree with Sunstein when he said in his paper that the precautionary principle is basically useless. Aside from hindering growth, the precautionary principle also disseminates incorrect information. The decision to avoid all risks is basically anchored on the whims of policy makers. Hence, an aggressive campaign against harmful emissions may not necessarily do away with other environmental problems.

Although the precautionary principle's aim is to avoid all risks with high impact, such avoidance of risks is made without looking at the bigger picture. Take cybercrime for instance. The impact of someone hacking into the Department of National Defense mainframe could have deleterious consequences for the whole nation. Does this possibility necessitate a government movement for denial of internet service from the rest of the world? Another example would be the sudden popularity of canola oil over its local counterpart, coconut oil over a decade ago. It was thought that coconut oil was high in cholesterol and harmful to health. It was only a couple of years ago when numerous studies conducted proved that coconut oil was healthier than canola and that the risks attached to canola oil (from canola being mostly genetically modified to be pest resistant) were higher.

From an economic point of view, the precautionary principle is far from being efficient. It makes no sense to totally prohibit an action for the mere low probability of the happening of a high impact event when benefits from this action grossly outweigh the disadvantages. Human behavior is more averse to the possibility of loss than to that of gain. But then, if the gain involves the creation of a means to prevent present losses or inefficiencies, would it not be better to take the risk? Even if the government applies the precautionary principle to some fields, it totally turns a blind eye to others. Hence, the low probability of a high impact unwanted event still exists, but is not seen. What happens then if the unwanted event happens?

A better option would be to encourage a new field (formerly subsumed under the precautionary principle) and if there are any fears surrounding its implementation, to create safeguards or countermeasures in case that 1% probability of an unwanted event happening does indeed happen. This would be a better option that just throwing darts while blindfolded.

89,468,677

Law and Economics Paper #4

There are an estimated 89,468,677 persons living in the Philippines as of July 2006. A person living in the city interacts with more than a hundred people. Each person comes from a different background, has different values, morals and pattern of thinking. Let us assume that each person is rational. When spheres of existence collide, the game starts, or at least the Game Theory’s application begins. Let’s take a common form of interaction--- one which results in injury. Prevention of injury is one of the aims of tort law, another aim is sufficient recompense for such injury caused. But then, who is liable to pay? Can this liability be shared? What is considered as sufficient recompense?

In the Philippines, contract law is more popular than tort law, where causes of action sometimes fall short of mentioning claims based on tort. Aside from actual or compensatory damages, court awards to the injured are primarily based on standards set by jurisprudence. What then would be the effect of these standards on the behavior of the potential tortfeasor and potential victim?

It is difficult to predict how an individual would react to injury and how he translates his suffering in monetary terms. The task, if left to the court does not become any easier. Hospital bills, receipts for medicine and proof of monthly income help quantify the damage done. It’s interesting to note, however, that wrongful conduct resulting in injury proves to have more expensive consequences than wrongful conduct resulting in death. Taking the above factors in consideration, a tortfeasor may end up paying millions for the monthly medical expenses of the injured whereas the going rate for the loss of life is pegged at around P 60,000 only.

In the situation above, clearly, on the part of the tortfeasor/injurer, it would be more efficient to make sure that the injured dies for such a result would be less expensive. What incentive does the potential tortfeasor have to exercise due care and more importantly to refrain from throwing all moral conduct to the wind? On the other side of the coin, would the possibility of being compensated for injury serve as an incentive for the potential injured to be cautious and try avoiding injury?

Again, the parties are assumed to be rational. Rationality dictates that an ideal situation or strategy would involve no injury and no expense. Hence, Bus Operators would make sure that brakes aren’t defective and that the drivers are briefed regarding road safety. Pedestrians, on their part, would use the overpass or the pedestrian lane. In a situation where both parties fail to observe the due amount of care to avoid liability, again, quantifying the same in terms of damages or resulting decrease in liability, cannot be culled from some sort of formula. The judge, it is clear, should not only use standards previously set, but also consider economic principles advanced by Cooter and Ulen.

"Who's been painting my roses red? WHO'S BEEN PAINTING MY ROSES RED? Who dares to taint With vulgar paint The royal flower bed? For painting my roses red Someone will lose his head."

- The Queen in Lewis Carroll’s Alice in Wonderland

sitting bull

Law and Economics Paper #3

Back in college, I remember watching a couple of documentaries about indigenous people and how they were driven out of the land that they had always occupied. To our forefathers, land was not something that could be owned. In a sense, land was classified according to function --- grounds for hunting, for washing laundry, milling rice, holding town meetings, etc. It was the westerners who brought the concept of “owning” land to our shores. Then ensued a long history of land grabbing, claiming and exploitation. It was then when we were made aware that land was something within the commerce of man. But that was not the only instance wherein we discovered something capable of appropriation. Intangibles such as stocks, copyrights, patents soon entered the realm of commerce. The concept of property is being revolutionized --- from corporeal phone lines made of copper wire and rubber to binary packets streaming through phone lines enabling Voice-Over-Internet-Protocol (VoIP).* If property rights can be asserted over something so… intangible (after all, the virtual world is composed of 1’s and 0’s), perhaps it’s only a matter of time when air too, can be within the commerce of man.

We have come a long way from defining property as something that could be grasped with one’s hands. Our laws are patterned with that in mind. In fact, more and more laws are being crafted to address increasing breakthroughs in technology that might further redefine property rights. In our haste to keep up with the changing times, I can’t help but wonder if we are slowly losing focus on the traditional meaning of property. It all began with the Regalian Doctrine. That was the rug pulled out from under our ancestors’ feet. It must have been refreshing to find out that land can be traded in exchange for food and clothing. But then again, it must have been a rude awakening to be told that the ground beneath your feet cannot be used to live off on without the express permission of the king. The laws that we copied from country A, B, C, etcetera don’t really address these problems. Thankfully, some legal luminaries thought up the IPRA and CARL but then again, despite these laws, justice is not always served on the deserving. Would the Hobbes or Coase theorems help?

Technology and economics may have a nexus. For example, the VoIP law’s aim is to encourage competition and improve telecommunications technology. Faced with such a policy, the hard neutral theorems would fit like a glove. For instance, although Globe was mandated to reach certain service levels, not applying the same policy to Sun Cellular could perhaps be described as an efficient solution which ultimately resulted in lower rates offered by competitor service providers.

Indigenous rights and efficiency or economics are hard to reconcile. It would be efficient and economic to award a tract of land to a rich landowner because he can cultivate it, employ more workers or put it to some profitable venture. Does justice lie in reimbursing the indigenous people the value of their land? There is more to this at stake than remuneration. Socio-political factors more often than not come into play. Even King Solomon’s seemingly fair solution of cutting the baby in half was merely a test. What is efficient or economic is always fair, but what is fair may not always be just.

*NOTE: The author is currently taking up the elective Law on Information and Technology

traversing boundaries

Law and Economics Paper #2

Is justice always the economic? Are laws made with efficiency in mind? These questions can be best answered by looking at the policy behind the law. What is right (i.e., what the law says is not wrong) may not always be what is efficient. Legislators craft laws with various intentions in mind, not always legitimate. Whatever intention might be behind the passage of a law, on paper, what always appears would be a reference to state policy, as enshrined in the Constitution. If the intention behind the law cannot be truly discerned, perhaps we need to examine the effect of the law. The obvious subject of scrutiny would be the courts and how courts apply the law.

Courts in the Philippines are courts of both law and equity. As for law, the courts dispense justice according to what the law says. Lady Justice is often depicted blindfolded, holding scales in one hand and a sword in the other. Equity on the other hand, if used apart from torts cases and application of penalties, would not be enough to interfere with the judgment of the court based on law, meaning, no matter how harsh the consequences, no judge in his right mind would rule for the party who values it the most, disregarding laws that are as good as etched on rock. In other words, “win-win” decisions (as in the case of Fortich v. Corona) are not favored if not based on law, even if such would be an equitable and efficient way of dispensing justice.

Due to the high cost of litigation, most disputes are resolved through out of court settlements or arbitrations. The Normative Coase theorem postulates that laws should be structured so as to remove the impediments to private agreements while the Normative Hobbes theorem suggests that the law should be structured so as to minimize the harm caused by failures in private agreements. Hobbes and Coase’s theorems are premised on the existence of private agreements, that both parties in dispute would try to agree on an equitable solution. These theorems are best suited for arbitration laws. It is through this medium that equity, instead of the hard and fast rule of law, can be applied in greater measure. With this in mind, it would be advisable for legislators to consider making economics the basis of laws. Incentives must be given to parties willing to bargain and give out correct private information without overreaching.

The creation of a law ensuring maximum benefit to both parties could prove to be quite a feat. In the last three readings assigned in class, the authors have intimated that law and economics is becoming a popular discipline or school of thought. Such optimistic view, however, cannot be applied to the Philippines yet. There is a need for more economists to traverse the boundaries between law and economics.

We are not neo-classicists

Law & Economics Paper #1


The world does not operate in a vacuum. Neither does the law. Various considerations come into play whenever one would try to explain what the law is and how it operates. Legal theories and ideologies analyzing the law from different perspectives abound. The two introductory readings assigned in class beg the question, what then is the nexus between law and economics?

It is obvious that laws are part and parcel of a country’s economic policy. If the President decides to meddle with tariffs, then her decision must be grounded on sound advice from economists, else, she and her cohorts will be in the poorhouse along with the rest of the country. The legislature could also direct the course of the country’s economy in formulating laws that would, for example, give incentives to manufacturers/producers of agricultural products. It is less perceptible, however, how economics could come into play in shaping legal thought or trends, especially in the Philippine setting.

The Philippine legal system can perhaps be summed up in the separation of powers doctrine. The legislature makes, the judiciary interprets, and the executive implements, the law. This seemingly clear-cut allocation of the powers of government is still subject to the first premise above, that the world does not operate in a vacuum. For instance, the oft-quoted legal maxim, Dura lex, sed lex, suggests that for laws to be effective, there must be no deviation from what the law says. The rigid application of the law, although ideal, is not always the rule. Consider the Manila Hotel case where the Supreme Court suddenly used national patrimony, evoking thoughts of a hundred years of struggle to regain the Filipino identity, in ruling for the losing bidder. One would wonder if the court really knew what it was doing. In Congress, it would also appear that the only thing related to economy would be how much money it would take for a bill to be passed and approved and how much this year’s pork barrel allocation would be. As for the implementation of the law, a P 100 bill would be enough to write off that MMDA ticket. For all the considerations behind each law, decision or implementation of the law, it would appear that economics takes the back seat.

The two readings submit that it might be possible to use principles of economics in shaping/analyzing legal thought. If laws do not operate in a vacuum, how must they be construed and more importantly, what approach must be used in ensuring that the laws achieve their ends? Economics is scientific in its application. In economics, certain conditions always give rise to certain results. Can this approach seriously be used in the Philippine legal setting where even an obvious interpretation of the law can be glossed over so glaringly? Is there a pattern in Philippine jurisprudence that can be explained away by principles in economics? Is it feasible for the judiciary to consider economics as a factor in its decisions? A negative answer might prove to be just a symptom of myopia.