European Journal of Law and Economics

, Volume 48, Issue 1, pp 43–63 | Cite as

Complexity and the Cathedral: making law and economics more Calabresian

  • Henry E. SmithEmail author


This article argues that Calabresi and Melamed’s “Cathedral” framework of property rules, liability rules, and inalienability rules needs to be extended using the tools of complex systems theory in order to capture important institutional features of the law. As an applied field, law and economics looks to law in choosing the appropriate analytical tools from economics—something that Calabresi has identified (in strong form) as law and economics as opposed to economic analysis of law. Recognizing law as a complex system requires a rethinking of some Realist-inspired assumptions that underpin economically inspired analysis of law. These assumptions include a preference for narrow, concrete concepts and a skepticism about traditional doctrines and baselines—and ultimately Legal Realism’s extreme nominalism and the strong bundle of rights picture of property. The article shows how the Calabresi and Melamed (C&M) framework exhibits gaps that can be addressed by systems theory; these include narrow entitlements to engage in specific activities, liability rules that allow an affected party to buy out an activity (Rule 4), opportunistic behavior by parties that destabilizes liability rules, and the role of equity as an institutional response. Extending the C&M framework to treat it as a system helps prevent the C&M framework from flattening the law out. If we supplement the C&M framework to take account of law as a system, we can bring it closer to Calabresian law and economics.


Property rules Liability rules Economic analysis of law Law and economics Property Complex systems Equity 


JEL Classification A12 K11 K13 



For very helpful comments, I would like to thank participants at the conference on the Future of Law and Economics, and especially Doug Melamed for his insightful commentary, as well as John Goldberg, Mark Ramseyer, and audiences at the American Law and Economics Annual Meeting at the Boston University School of Law, and the Private Law Consortium Conference at Harvard Law School. Special thanks to Guido for his inspiration and friendship. For all errors I am not only the cheapest cost avoider, but fully to blame.


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© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Harvard Law SchoolCambridgeUSA

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