Tuesday, October 12, 2010

"Of Coase and Cattle"

That's the title of a 1986 article by Robert Ellickson, published in the Stanford Law Review. The article subsequently became part of Ellickson's classic book, Order without Law: How Neighbors Settle Disputes (Harvard 1991). I was reminded of Ellickson's work this morning by this article in the New York Times about the dispute between cattle ranchers and residential landowners in the sprawling suburbs of Arizona.

Arizona is an "open range" state, which means that cattle can roam at will. Ranchers do not have to fence them in (but they are responsible for collecting wandering cattle). Neighbors must fence them out. From a Coasean point of view, roaming cattle and the harm they cause constitutes a joint-cost problem created by both cattle ranchers and neighbors. The chief solution to the problem is for someone to build a fence. The chief question is: who should have to bear the costs of building and maintaining fences. Ultimately, what "open range" laws do, by insulating cattle ranchers from liability (though not as much as the ranchers might believe) for trespassing cattle, is to allocate the costs of fencing out to the neighbors. The fight going on now in Arizona is about changing the law from "fencing out" to "fencing in," which would basically just reallocate the costs to the cattle ranchers. It would not greatly reduce or increase those costs, though it might be the case that one party or another might be marginally more efficient at building and maintaining fences. Coase would argue that the choice between a "fencing out" rule and a "fencing in" rule should be based on a determination of which party - the rancher or the neighbor - can build and maintain fences at the lowest cost.

The situation is actually more complicated than simple trespass because cattle often move on to roads, where they may be struck by motorists. This is actually a significant part of the issue in Arizona, where a border patrol agent was recently killed after his vehicle struck a bull in the road. As an Arizona legislator explains in the New York Times story, "There have been cases where the survivors have to pay not only for a funeral but for the dead cow." Bob Ellickson writes about this problem in Order without Law, noting that, in the minds of ranchers, the "open range" law means that motorists "buy the cow," but under "closed range" law, ranchers "buy the car." Ellickson goes on to note, however, that "open range" law doesn't protect ranchers from liability nearly as much as they are prone to believe. Most states, including Arizona, follow a comparative negligence doctrine, under which the rancher is liable for a car-cow collision, if the court finds that the rancher was more negligent (in keeping track of his cattle) than the motorist.

As a practical matter, Ellickson finds (in Chapter 6 of his book) that switching from "open range" to "closed range" has little consequence for ranchers. It marginally increases their costs of doing business by reallocating to them the costs of building and maintaining fences. More than anything else, it constitutes a psychological blow to their pride and political influence. At bottom, the contest between "open range" and "closed range" in Arizona and other Western states, "symbolizes a struggle between a traditional agrarian order and an emerging urban rival" (p. 117).

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