What is libertarian theory's view of consequential damages? I break your car while you were on your way to an important meeting. I owe you the cost of the car repairs plus whatever you lost in your business because you didn't make it to the meeting.
But why should that be the case?
Also, if somehow that is supported by the libertarian theory, why doesn't it also support 'pure' opportunity damage: e.g., if I lied about your business, or opened a competing local business, you lost customers. So, I should pay you for the lost opportunity. We say: not true, because the customers' money belongs to them before they made a transaction, so you didn't own it, and, hence, I did not 'steal' or 'damage' anything of yours.
But, going back to the car example, the same is true there! When I broke your car, I only broke your car. Until you made a business deal, you didn't own any money that you would have made had you made the deal. So, I should owe you only the direct damages to the property that already was owned by you at the time of the damage (the car). No?
Update: what does libertarian theory say about paying the cost of lost time? I.e., you replaced my car damage, but I also lost time while I was getting my car towed to the mechanic and while I was sitting there. Shouldn't there be some 'basic' cost of time? (Update: replaced 'opportunity cost' with 'consequential damages'.)
Would you mind explaining what relation either of your scenarios have with opportunity cost? It sounds more to me like you have a problem with legal procedures.
Opportunity cost = whatever losses I incurred from losing opportunity to do business with whatever you broke.
The classic case of opportunity cost in Western law's history is when an owner of a laundromat hired someone to fix broken laundry machinery. They contractor failed to fix it in time. Meanwhile, the laundromat's owner received an offer for a nice business deal, which he was not able to accept (or fulfill his promise regarding) because the machinery was not fixed in time.
So, the owner of the laundromat sued the contractor for the lost profit that he would have made on the deal had the machinery been fixed in the proper time.
I think the verdict was that the opportunity cost must have been forceable. So, the contractor owed the laundromat owner whatever business the owner lost in terms of normal laundry users' traffic (which also doesn't seem to jive with libertarian theory), not some 'once-in-a-lifetime' offer.
It's true that my second example was not an example of opportunity cost (in its classic definition). I was just drawing a parallel: just like we don't say that reputation 'damage' is a real damage, since I don't own other people's opinion of me or their potential business, opportunity cost should also not be a real damage, since I don't own my potential customers' money until they gave it to me.
So, if I am a taxi driver, and you announced around the town that I am a lazy bum, and I suffered loss of business: according to libertarian law, you owe me nothing, since I didn't own the custom of all those potential passengers who now will not ride with me.
But if you broke my car and I lost custom of the same number of people, the same logic should apply. Therefore, you should only repair my car and not pay me for whatever business I lost while I was waiting for it to be fixed.
What if there were no repayment for lost time etc? Then Walmart could bomb Kmart's road entrances, pay the comparatively low replacement cost, and dominate the market for a day while kmart rebuilds its road access. I'm not saying the economics works out here, just an example. Like in sports, there should never be a smart penalty. If there is a situation where it is smarter to take a penalty than to let the other guy score a touchdown, the rules suck.
FlyingAxe:Opportunity cost = whatever losses I incurred from losing opportunity to do business with whatever you broke.
That's not what opportunity cost means in an economic sense. At all.
Oh, I confused it with consequential damages. Oops.
Anyway, here is another case. I am quoting from my wife's old college paper:
The classic case in English law which deals with consequential damages is Hadley v. Baxendale. Hadley was a miller in Gloucester whose mill broke down because of a broken crank-shaft. He hired a welder in Greenwich to make him a new one, and he hired Baxendale, who operated a transportation business, to transport the broken crank-shaft to Gloucester so that the welder would know how to make the new one. Because of Baxendale’s neglect and delay in transportation, Hadley received the crank-shaft several days later than he otherwise would have, and lost the potential earnings from his mill for those days. He sued Baxendale for consequential damages and won. When the case was appealed, Baxendale won because the court ruled that “the damages … should be such as may fairly and reasonably be considered either arising naturally … or such as may reasonably be supposed to have been in the contemplation of both parties…”. In other words, whether or not a defendant is required to pay consequential damages depends on whether he could reasonably be expected to have known that they would occur as a result of his actions. Because Baxendale did not realize what a serious loss would result because of the delay in delivering the crank-shaft to Greenwich, he was not held liable for the lost profits of the mill. This precedent established that in English and American law, whether or not consequential damages are paid depends on the subjective state of mind of the damager (assuming that he is reasonable) (Wikipedia: Hadley vs. Baxderdale).
dude6935: What if there were no repayment for lost time etc? Then Walmart could bomb Kmart's road entrances, pay the comparatively low replacement cost, and dominate the market for a day while kmart rebuilds its road access. I'm not saying the economics works out here, just an example. Like in sports, there should never be a smart penalty. If there is a situation where it is smarter to take a penalty than to let the other guy score a touchdown, the rules suck.
Yes, but the point is that rules should not be for some utilitarian purpose.
Presumably, Walmart would suffer a loss of reputation and loss of customers as a result of bombing Kmart's roads.
But I agree that normally, what's right (morally and legally from pov of natural rights) also turns out economically better. So, the same should be with consequential damages.
I think there's roughly two views among NAP libertarians on this. The first, espoused by scholars like Walter Block, takes a hardline propertarian approach. Since you don't "own" the potential value of having a car to with which to get to work, the crook can't be held responsible for whatever losses occured there.
The second view is espoused by scholars like Frank van Dun, and incorporates common law concepts to complement the NAP. He might say something very similar to the case your wife wrote about in college. If you slashed my tires with the intent of keeping me from getting to work (and especially if you knew I had a big meeting or something), then there is an intent to harm on your part which would make you liable for the damages.
Van Dun gives the example of hikers coming to a rickity old bridge, and some guy tells them that it's totally safe to cross (even though he knows it is not). This guy doesn't own the bridge, and lying isn't illegal, so according to Block's view, the man wouldn't be liable for any damages.
they said we would have an unfair fun advantage
If X takes an action which violates Y's property rights, X is liable for all resulting damages to Y's property which X knew or should have known would occur as a result of his action.* The key here is understanding "damages," which I would limit to physical damages, which excludes opportunity cost, which, by definition (being counterfactual/hypothetical) never involves actual physical damage to actual property.
*This "knew or should have known" business is to limit the causality. For example, suppose Jones drops a penny on the street on Tuesday, and on Saturday, by some freak occurance this penny causes a car acident: Obviously Jones should not be liable. And we can explain why he should not be liable by saying that Jones did not know, nor is it reasonable to say he should have known, that dropping the penny would cause the car accident.
The key phrase here is his property. How can you call something your property if it never became it (which is what you're suing me for)? I.e., your potential customers' property is not your property. So, if I damaged your business, and as a result, you lost some customers, I only damaged the property that at the moment was yours.
mikachusetts: The second view is espoused by scholars like Frank van Dun, and incorporates common law concepts to complement the NAP. He might say something very similar to the case your wife wrote about in college. If you slashed my tires with the intent of keeping me from getting to work (and especially if you knew I had a big meeting or something), then there is an intent to harm on your part which would make you liable for the damages.
What if I opened a branch of my bookstore next to your bookstore -- not because I want business there, but because I hate you and want you to 'lose business'? Should you be able to sue me for damages, if my intent can be proven (e.g., I myself announced it on my web-site)?
While we can argue whether lying to inflict damage is a type of tort, the example does not fully apply to consequential damages. If I lie to you about the bridge and you end up falling down and breaking your leg, I have caused damage to your existing property (your body). But that's not what consequential damages are. A more accurate example would be if I was on my way to some business meeting and falling down from the rickety bridge delayed me and cost me customers. I.e., Van Dun's rickety bridge example is not very easily translatable.