Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Wednesday, March 30, 2005

The Coase Theorem and Terri Schaivo

According to the Coase Theorem,

  1. If legal entitlements are well-defined and easily enforceable, and
  2. if transactions costs are low, then
  3. resources will move to their most highly valued use.

In the case of Terri Schaivo, the courts appear to have decided: her husband has the legal entitlement to decide what to do with her. It has been costly for him (and many others), but this legal entitlement has withstood many assaults and is (in some sense) comparatively easy to enforce.

If her parents wished to obtain the legal entitlement to decide what to do with her, presumably the transaction costs were quite low. They could have made a deal. If her husband was in it strictly for the money, he could have sold his legal entitlement for quite a large sum, according to Steven Landsburg.

I have less understanding of why Schiavo's parents want to keep
feeding her. And insofar as they want others to keep feeding her—through Medicare, etc.—I think we can safely ignore their preferences. But provided they and their supporters are willing to bear those costs, I infer that this is something they want very much and there's not much reason to stop them.

You could argue in response that Michael Schiavo has signaled an equally strong desire to bury her (by turning down an offer of $1 million and by some reports $10 million)...

He turned down a $10m offer to purchase that legal entitlement? I understand he wanted to remarry, and that he is nominally a Roman Catholic and so divorce might not have been acceptable, but why would he turn down such a large offer?

He may not have had much of a choice. Aside from the bad PR he would receive -- accepting money for his wife's life would seem like some form of ghoulish ransom -- the decision was apparently made many years ago. This is from Wikipedia:
On March 11, 2005, media tycoon Robert Herring (who believes that embryonic stem cell research could cure Schiavo's condition in the future) offered $1 million to Michael Schiavo if he agreed to waive his
guardianship to his wife's parents. The offer was rejected, Schiavo having reportedly found it "offensive." Schiavo's attorney, George Felos, stated that Schiavo has received other monetary offers, also rejected, including one of $10 million. These offers may have been made under the misconception that the removal of Mrs. Schiavo's feeding tube remains simply a matter of Mr. Schiavo's choice. It was ruled in February 2000 that Mrs. Schiavo would choose to have the tube removed, and Michael Schiavo does not have the ability to simply overrule this legal determination.
According to this interpretation, the legal entitlement was determined to belong to Terri Schiavo herself; the court also determined that she did not wish to sell it to her parents (or their representatives) on behalf of her husband. I am sure there are many other interpretations of the events, but I like this Coasian approach.
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