Reciprocal Causation

This chapter turns to a deeper discussion of causation as it relates to the meaning of harm. It begins with the Coase Theorem, which is founded on the idea that harm is reciprocal, meaning that there is not a definitive direction of the “arrow of causation.” This idea, coupled with the distinction between property rules and liability rules, forms the basis for the General Transaction Structure, which describes the fundamental economic relationship between markets and law as alternative institutions for organizing the exchange of legal rights. The chapter explicates this framework, offers some examples, and explains how it forms the basis for the economic approach to both tort and criminal law.