Money and Markets: Essays in Honor of Leland B. Yeager

108 Jürgen G. Backhausproperty rights define and circumscribe alternatives for meaningful actions. Hence,the mere property title to some commodity, such as land, is meaningless if it doesnot imply discretionary alternatives and options that can be exercised.In particular, the guarantee of private property rights implies the right to exerciseprivate property prerogatives within workable institutions. The guarantee isviolated if, for instance, the contrac tual forms in which a property right can beexercised are unworkable or impractical, thereby destroy ing the value of theproperty right or seriously reducing it. The institutions in which private propertyrights can be exercised have to provide for the possibility that the four standardoptions of economic conduct 13 remain open. These options include:1 exit, the right to end an economic relationship;2 voice, the option to meaningfully improve upon a relations hip by changing itthrough negotiations;3 loyalty, the ability to foster the growth of trust and goodwill in a relationshipeven in the face of serious problems; and4 avoidance, the option to ignore a particular relationship altogether withoutfacing sanctions.This option is extremely important for Nietzsche and those who followed him.Look at the Widerstand literature, and most recently Helge Peukert (2004), whodiscusses the different economic concepts, but also their motivations, based inChristian and other thought.LiabilityThe two basic rights of freedom of contract and private property need to be complementedby the institution of liability in order to be meaningful at all. The faithfulobservance of contractual terms requires the protection of a shield of liability forfailure of living up to contractual terms just as much as the respective privateproperty rights require the need to make the intruder liable. Although this principleis straightforward, from an economic point of view the implications can be farreaching. In particular, liability can only be assigned if the agent to be held liablewas indeed in control of events that led to the liability. If this is not the case, theclaim has to be followed through all the way to those who were either in control orcreated the situation that made control impossible. If, for instance, a patient suffersa serious injury because a doctor did not administer the necessary treatment, whichhe failed to do because, in order to administer the treatment, according to stateregulations he needed the written consent of two colleagues whom he could notreach because they were tied up in meetings, this doctor is not liable for the injuryimposed on the patient; nor is the full damage to remain with the patient; rather,the principle of synchronizing control and liability requires to make those jointlyand severally liable who contributed to passing the regulations causing the problem– tying up doctors in meetings and requiring written consent to engage in professionalactivities – in the first place. 14