Ephemerisle And Efficient Law
From a conversation today w/ John Chisholm at the new TSI office:
Patri: Different islands can have different laws on things like nudity. But they can’t have spillover effects onto other islands, so if you have nudity you have to have walls.John: But why can’t the other islands, that don’t like nudity, have the walls? If you start limiting one island for the good of others…
Patri: I didn’t think of that! I guess…the efficient rule depends who is the least-cost avoider…Wow, I should have thought of that, considering the Coase Theorem was invented (or at least popularized) at my great-uncle Aaron Director‘s house.
John: It would depend how many nudist-hating islands there are. If there is one, then it’s the same price for them to have a wall as the nudists, if there are more than one, it’s cheaper for the nudist island to have a wall.
Patri: But that’s assuming there’s only one nudist island, which may not be true! So it depends whether there are more nudist islands or nudist-hating islands. Whichever is least numerous would need the fewest walls and is the least-cost avoider.
John: But that’s assuming that the other islands are indifferent! Maybe they prefer to see or not see nudity. *And* it depends how much people care either way.
Patri: You’re right – it depends on the total utility function of the whole group with respect to nudity!
And so we re-derived part of the theory of economically efficient law in the course of discussing Ephemerisle rules. I love how Ephemerisle invokes the real issues of seasteading, front and center. (Fortunately we already have questions in the placement survey that ask not only what people want but what they want to be around.)
(If you have no idea what I am talking about, go read my dad’s book on Law & Economics: Law’s Order, it’s free online)
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Let A Thousand Nations Bloom 
Make sure you take into account the path-dependency that can be introduced by different mechanisms for reaching your maxima…
http://legalhistoryblog.blogspot.com/2010/04/hovenkamp-on-coasean-markets.html