This Article explores the divergence in law and convergence in economics in dealing with harms and benefits. While tort law usually makes the injurer internalize wrongful harms through damages, restitution law does not enable the benefactor to internalize the benefits she confers on others without their request. In both harm and benefit cases, however, internalization seems to make economic sense for the same reason: injurers and benefactors alike will behave efficiently if they internalize the externalities that they create. The Article’s main goal is to develop eight liability rules for harm and benefit cases and to point out the symmetry between the rules relating to harms and the rules relating to benefits. It also provides an explanation for the legal divergence between tort law and restitution law and makes the claim that the gap between these two fields should be narrowed. Finally, the Article relates these eight rules to the main relevant categories of harm and benefit cases in positive law and appraises their advantages and disadvantages.

In this Article, we study rules that solve the conflict between the original owner and an innocent buyer of a stolen or embezzled good. These rules balance the protection of the original owner’s property and the buyer’s reliance on contractual exchange, thereby addressing a fundamental legal and economic trade-off. Our analysis is based on a unique, hand-collected dataset on the rules in force in 126 countries. Using this data, we document and explain two conflicting trends. There is a large amount of first-order divergence: both rules that apply to stolen goods and those that apply to embezzled goods vary widely across countries. Yet, there is also remarkable second-order convergence: virtually all legal systems protect the innocent buyer more strongly if the good was embezzled (rather than stolen) and if she purchased it in an open market, at an auction, or from a professional seller (as opposed to a private sale). We show that, while divergence is attributable to varying cultural values, convergence can be rationalized using a classic functional approach: these rules harmonize the owner’s incentives to protect property and the buyer’s incentives to inquire about title.

This Article utilizes a unique data set of property laws in 119 jurisdictions in the world to test convergence/divergence theories in comparative property law. Our theory predicts that first, because legal systems face similar positive transaction costs in delineating property rights, the structure of property law among all jurisdictions in the world will converge or remain similar since some time in the distant past. Second, our theory posits that the style of property law will tend to converge when the doctrines in question are isolated, but diverge when they are interconnected. Our data and descriptive analysis support the theory. Doctrines regarding possession, sales, condominiums, tenancies in common, and limited property rights serve as prominent examples.

What are business entities for? What are security interests for? The prevailing answer in legal scholarship is that both bodies of law exist to partition assets for the benefit of designated creditors. But if both bodies of law partition assets, then what distinguishes them? In fact, these bodies of law appear to be converging as increasing flexibility irons out any differences. Indeed, many legal products, such as securitization vehicles, insurance products known as captive insurance, and mutual funds, employ entities to create distinct asset pools. Moreover, recent legal innovations, including “protected cells” (which were created to facilitate such products), further blur the boundaries between security interests and entities, suggesting that convergence has already arrived.

This Article identifies and defends a central distinction between business entities and security interests. We argue that while both bodies of law support asset partitioning, they do so with different priority schemes. Security interests construct asset pools subject to fixed priority, meaning that the debtor is unable to pledge the same collateral to new creditors in a way that changes the existing priority scheme. Conversely, entities are associated with floating priority, whereby the debtor retains the freedom to pledge the same assets to other creditors with the same or even higher priority than existing ones.

A fiduciary is someone with a certain form of discretion, power, or authority over the legal and practical interests of a beneficiary. As a result of this arrangement, the beneficiary is vulnerable to predation by the fiduciary. Fiduciary relationships trigger a suite of duties, at the core of which is the duty of loyalty. In a sense, the fiduciary relationship is oriented around the possibilities of trust and betrayal. One point of fiduciary duties is to prevent betrayal or, failing that, to assure that betrayals are rectified insofar as possible. What constitutes loyalty or betrayal in fiduciary law, however, is not always clear.

Consider Item Software (UK) Ltd. v. Fassihi. Messrs Fassihi and Dehghani were corporate directors of a small software distribution company called Item Software, whose main business was selling software developed by Isograph. Dehghani was the managing director, and Fassihi was the sales marketing director. In November 1998, Dehghani decided to renegotiate the terms on which Item sold Isograph’s products. Fassihi urged Dehghani to drive a hard bargain with Isograph, so Deghani negotiated aggressively. Ultimately, the negotiations between Item and Isograph broke down, and Isograph terminated its contract with Item.

In one of his columns, the economist Paul Krugman observed that “liberals don’t need to claim that their policies will produce spectacular growth. All they need to claim is feasibility: that we can do things like, say, guaranteeing health insurance to everyone without killing the economy.” Krugman’s belief that providing everyone with health insurance is desirable unless doing so would “kill the economy” expresses a familiar, if debatable, position. Many of us believe that some goods should be provided to everyone, and they should be provided even if their provision comes at a cost in economic efficiency. The underlying belief is that some goods are essential to leading decent, independent lives, and their provision therefore has a special priority. As a society, we owe it to each other to secure the basic conditions necessary for people to lead decent and independent lives.

Like health, physical safety is a strong candidate for inclusion on a list of the essential conditions of a decent and independent life. Illness usually takes the form of physical harm, and accidental injury can impair basic powers of agency as much as ill-health can. Assertions that safety has priority over garden-variety “needs and interests” are commonplace in popular discourse. You might, therefore, expect to find a debate in the legal literature on risk and precaution over whether or not safety, too, should be prioritized over efficiency and secured to the extent that it is feasible to do so. Prominent federal statutes take this very position. Indeed, they echo Krugman’s exact word choice in requiring that the risks of certain activities be reduced as far as it is “feasible” to do so, and they mean the same thing that he does in choosing this word. “Feasible risk reduction” requires that the risks in question be reduced as far as possible without killing the activity in question. A chorus of contemporary commentators, however, insists that feasible risk reduction is not just normatively mistaken; it is indefensible. Jonathan Masur and Eric Posner, for example, argue that statutes prescribing feasible risk reduction have no defensible normative underpinning. Feasibility analysis, they write, “does not reflect deontological thinking . . . [and] does not reflect welfarism in any straightforward sense,” and “[n]o attempt to reverse-engineer a theory of well-being that justifies feasibility analysis has been successful.” According to this line of thought, efficiency is the only plausible standard of precaution, and its handmaiden, cost-benefit analysis, is the only plausible test.