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).