Of Coase and cattle: Dispute resolution among neighbors in Shasta County

1
Of Coase and cattle Dispute resolution among
neighbors in Shasta County

• Robert C. Ellickson, Stanford Law Review, 1986
• -The farmer and the rancher is the canonical
  example given for the Coase theorem
• When loose cattle cause property damage, what
  does Coase say should happen? What actually
  happens?
• Shasta County is uniquely ideal for testing this,
  as there are two property rights regimes in
  effect, in a spatial patchwork fence out, in
  which cattle ranchers have right to let cattle
  roam free and landowners bear the cost of fencing
  them out, and closed range in which landowners
  have the right to cattle-free property and
  ranchers bear the cost of keeping their cattle
  out.

2
Coase prediction

• -Disputing parties have or can costlessly obtain
  full knowledge of the law (property rights)
• -Parties treat these laws as exogenous
• -Based on these property rights, parties bargain
  to a compensatory settlement
• -The assignment of property rights determines who
  pays whom (though not the efficient allocation of
  resources)

3
What actually happens?

• -Societal norms determine dispute resolution,
  regardless of the property rights regime that is
  legally in effect
• -The norms are, in escalating order
• 1) lump ita minor infraction here or there is
  no big deal
• 2) call owner of cattle to have them retrieve
  stock
• 3) gossip
• 4) threaten to hide/kill/castrate cattle
• 5) complain to county officials
• 6) threaten or petition to change applicable law
• -Good neighbors avoid costly litigation or
  insurance claims as a matter of pride those very
  few that took legal measures were regarded as
  outsiders/odd ducks/Texans
• -Those who offered monetary compensation for
  damages were rebuked for starting a bad precedent!

4
Why does the system work?

• -Reciprocity what goes around comes around
• -neighbors interact on many levels repeated game
• -small number of participants can keep mental
  account of who owes whom