JC's Life: A Journey in the Incentives of the Law - Part 3

Note: This is the continuation of a longer story. Click below to read:

• Part 1
• Part 2

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As Country became chaotic, eventually everyone except JC and the original Mr. Customer moved out of Country (even the members of the court left).

JC and Mr. Customer knew they had taken a good step in the past when they decided to create the court to enforce explicit promises. From this past experience they knew that the Court needed to act even when there was no explicit agreement to act or not to act in a certain way. So they decided to bring another third party to Country, provided him with a gun, and told him to shoot whoever person committed the following acts: 1) did not fulfil an explicit promise; 2) caused harm to some other person; 3) took some other people's belongings; 4) created more more serious wrongs against other people; among other acts.

Without noticing, JC and Mr. Customer created the bases of what later would be denominated in Country as Contract Law, Tort Law (yes tort, not cake nor pie), Property Law and Criminal Law.

With these enhanced powers, the Court of law made everyone better off again. JC's business became prolific again, and he no longer had an incentive to hit pedestrians (at least not on purpose). Now he knew that even if there was no agreement between him and the injured party, he could be held liable and could be shot to death.

The penalty of being shot to death was eventually eliminated (at least whenever pedestrians were hit). Every injured pedestrian knew that if JC was shot, then his fabulous pizzas would no longer be available, and JC had an incentive to bribe the injured pedestrian so that he wouldn't take him to court. In the end all these cases were settled outside the court, and injured pedestrians were just compensated by JC for the harm that he had caused.

So, it seems like a socially optimal solution had been achieved since having to pay damages disciplined JC when driving and led him to be careful when delivering pizzas. Completely eliminating the possibility of hitting pedestrians could only be achieved if JC's business was shut down, but this wasn't an optimal action to take because pedestrians actually liked to consume these pizzas. In the end pedestrians were happy for having the right to be compensated when they were hit by JC's car and also because they knew that JC was being sufficiently careful when driving (some people say that some pedestrians tried to get hit on purpose to be able to get a compensation from JC, but this is another story).

As people started moving back to the new Country, JC realized that he no longer could run the business by himself, so decided to hire an employee to deliver the pizzas... oh, boy, if JC had only known what he was getting himself into... (to be continued).

JC's Life: A Journey in the Incentives of the Law - Part 2

Note: This is the continuation of a longer story. Click below to read:

• Part 1

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So, last time we had John Cautious (JC for short) having bought a car for his deliveries of pizzas. The creation of the court of law directly benefited him and Mr. Customer, and, over time, it also brought additional benefits to his business; namely, an increased customer base. What happened is that Country had become well known for its Court and people started moving into what was known as "those fabulous lands in which promises had value."

Needless to say that owning the car had become absolutely necessary to attend the increased number of orders of pizzas. Driving fast became necessary as well. One problem was that pedestrians were walking on the streets of Country and this could potentially delay his deliveries, having an adverse effect on his business. But his business was not affected at all. Why? Because JC chose not to care about pedestrians and eventually hit one or two of them with his car -'that will teach them not to interrupt my way', he thought.

And yes, pedestrians sometimes played the role of his customers, but JC didn't care. With such a large population, hitting an eventual pedestrian would not affect his customer base. Come on, who would care about pedestrians whenever hitting them brought no consequences? It might actually become a fun thing to do.

Well, it surely wasn't any fun for pedestrians. One of the injured ones went to the famous court of law and requested that JC be shot, or at least that he pay a compensation for the damage that was caused. JC won the legal battle. The court concluded that there was no contract in which JC had promised not to hit pedestrians.

This legal sentence only brought chaos to Country. This was the case not only because JC simply kept on hitting pedestrians, but also because other inhabitants of Country knew that the Court would only act whenever there was a specific promise to act (or not to act) in a certain way. Over time the streets of Country became full of criminals as there were no explicit agreements not to steal or damage other people's belongings.

Now Country was in a really bad situation again. Everything would have been better if such legal sentence had never been written. It seems no one had realized that this sentence was not only going to have an effect on JC and the pedestrian, but also on all the other inhabitants of Country.

As a result, JC had to shut his business down and thought about joining the great migrating wave. Was this the end of the fabulous lands of Country? Of course not. Check part 3 (forthcoming) to know what happened.