An economic approach to law is on the rise. Efficiency is the big fish. A common example is the idea of an “efficient breach” of contract, which ostensibly leaves all parties better off. It works like this:
Bill agrees to sell Andy a dog for $50. Later, Bill meets with Chris and finds that Chris will pay $200 for the same dog. Bill breaches his contract with Andy and sells the dog to Chris. Bill pays Andy $50 (what Andy would have gotten, had Bill carried out the contract).
When the situation began, Andy had $50 and the desire to buy a dog, Bill had a dog and the desire to sell, and Chris had $200 and the desire to buy a dog.
If the contract had been carried out, Andy would have lost $50 and gained a dog, Bill would have gained $50 and lost a dog, and Chris would be left with $200 and the desire to buy a dog.
After the breach, Andy has $100 (his original $50 plus what he was paid by Bill) and the desire to buy a dog, Bill has $150 ($200 from the sale to Bill less $50 for what he paid for breaching his contract with Andy) and no dog, and Chris has lost $200 and gained a dog.
All three people are in a better position.
Andy still wants a dog, but he now has $50 more to spend on one. Bill sold his dog and made $150 instead of $50. Chris, who valued the dog more highly than Andy, got the dog.
We could start to poke at the idea with a stick and see if it holds up, but that’s not the point of this post. Suffice to say, not everyone agrees that efficient breach is a great idea, whether based on moralist (a promise is a promise!) or realist (if Bill won’t pay Andy, then they’ll have to go to court and that costs money, too) grounds. What this post is about, however, is an example of efficient breach—and, therefore, an economic approach to law—in Miguel de Cervantes’ 17th-century masterpiece Don Quixote!
The situation is this:
Sancho Panza, Don Quixote’s squire (or “squire”, as Don Quixote is something of an anachronistic make-believe knight errant) is in conversation with the squire of another knight errant (or “knight errant”, if you will). Don Quixote and the other knight, the Knight of the Wood, will be dueling at dawn. Thus, Sancho and the second squire, the Squire of the Wood, will be seconds in the duel; and the Squire of the Wood tells Sancho that it is custom in Andalusia for seconds to also fight.
Sancho counters this argument by saying that that custom only applies to ruffians and fighting men, not the squires of knights errant. Don Quixote, says Sancho, has never mentioned this rule and he knows all the rules of knight errantry.
However, Sancho goes further:
“No matter how much I’d like it to be true that there’s a specific rule that squires have to fight when their masters fight, still, I wouldn’t obey it, and I’d pay whatever fine they make peaceable squires pay, and I bet it wouldn’t be more than two pounds of wax, and I’d be happy to pay those two pounds, because I know they’ll cost me less than the bandages I’ll need to heal my head: I already count it as split and broken in two.” (Part II, Chapter XIV)
In Sancho’s hypothetical, there is a rule requiring squires of dueling knights errant to fight. We can think of it as being a rule in a contract signed by every person who becomes a squire. There is also a penalty for breaching that rule: two pounds of wax. Sancho weighs the cost of two pounds of wax against the cost of having his broken head healed and finds that it makes more sense to breach the contract and pay the wax. The other squire, we may say, will do whatever Sancho does.
Before the duel was decided, both Sancho and the other squire had the benefits of being squires, the desire to continue being squires and some amount of money (let’s say the equivalent of 100 pounds of wax). The guardian of squirely law (the other contracting party) also has some set amount of money.
If the rules were followed, the squires would still have the benefits of being squires, would still (probably) want to be squires, would still have the equivalent of 100 pounds of wax, but would now have broken heads, which would cost more than 2 pounds of wax to heal. In effect, they have, let’s say, 70 pounds of wax. The guardian of squirely law would gain nothing and lose nothing.
If Sancho breaches the rules and pays 2 pounds of wax to the guardian of squirely law, and the Squire of the Wood does the same, both end up with whole heads, the same benefits and desires regarding squireness, and 98 pounds of wax. The guardian of squirely law has whatever money it had plus 4 pound of wax.
Hence, if we don’t take into account any loss to the guardian of squirely law (for example, a loss to the prestige of the squire profession on which it relies to receive benefits from third parties and grant them to its member squires), all three parties are better off. Of course, this also doesn’t take into account the other squire’s possible desire to fight or the possibility of either Sancho or, more probably, the Squire of the Wood, winning the fight, thus coming out unscathed (no broken head) and thereby having to pay nothing for healing and nothing to the guardian of squirely law.
But as imperfect as the example is, it’s interesting to find this type of reasoning in the novel. Indeed, the entire conversation between Sancho and the other squire is a crafty defense by Sancho, who also says that he can’t fight because he doesn’t have a sword, to which the squire responds, so then we’ll use sacks, to which Sancho agrees, because sacks don’t hurt, though the squire counters that they’ll be sacks with stones in them…
This Defeasible Life 