Do Posner's property rights and assumption of risk lead to inequality?

 Richard Posner outlines a theory of wealth maximization as the central principle of the economic analysis of law. I understand where Posner’s argument falls in as a mix between Utilitarianism and other ethical theories of free markets and distribution, while he prioritizes economic efficiency as a guidepost for the value of things. If markets depend on property rights and exchange, but property rights cannot be bought and sold because there are absolute rights that are required to be initially vested. And  wealth-maximization principles cannot be used to determine the initial distribution of rights, because willingness to pay (value based on income) presupposes an efficient distribution. 

Take Posner’s house example he uses to explain willingness to pay: Professor Hurley owns a house that has a market value of $100,000, and he would not sell the house for less than $125,000. If he didn’t own the house, he would only be willing to pay $75,000 because that is all Hurley could “afford” to pay. Then what is the house worth? And further, “we must consider whether [Hurley’s] ownership is consistent with ethically proper principles by which rights are assigned (the principles of distributive justice)” (65). Posner goes on to argue that wealth-maximization can derive proper principles to guide these valuations and transactions, “the costs of determining need other than through willingness to pay, allocation by price will also result in a greater accumulation of wealth” (68). Where can existing inequalities, like who had inherited property holdings and is now selling the house to Hurley, or vice versa? We might arrive back in a system of free markets like Locke outlines, where the state of nature is deemed just (although we see clear possibilities for extortion and inequality) and thus the market distribution as it is, is just and thus creates the basis for fair market transactions. 


WTP requires Posner’s argument absolute rights and property being the structure of free and fair market transactions to continue to maximize wealth. This same hole can be found in his section 6.6 in the Economics Analysis of Law where he outlines the “Assumption of Risk Defense”. For example, Hurley works a roofing job without insurance (but with higher wages) from his specific contractor A, and then he falls off the roof and sues the company.  According to Posner, the risk was included in the higher wages Hurley received from this job, therefore the legal proceedings do not need to be based off a risk calculation- because in this market transaction, both parties have seemingly agreed to this. However, there is a danger of coercion of choice and deception on the part of roofing contractor A in this scenario. Maybe Hurley’s previous contractor Z moved to work for A and Hurley was not aware of the new risk in these roofing projects. How does this application of economic analysis to law allow for the reinforcement of inequalities of wealth, and therefore justice, just as the circularity of property rights in Posner’s argument.

Comments

  1. Michelle LeeMarch 12, 2026 at 12:52 AM

    I really like the roofing example.
    Posner's logic is that:
    (1)Riskier jobs pay more.
    (2)Workers accept the risk for higher wages.
    (3) Therefore, the legal system should not interfere.
    However, what about cases where workers lack alternatives or where workers do not receive all the information clearly? This shows that Posner is relying on the assumption of a perfectly ideal market. This reminds me of past readings about coercion, such as the boat example or the example of impoverished surrogates. Like many of these scenarios, would individuals choose to be surrogates if they had no money? Would they choose to do risky jobs that put their lives in danger if they had other options? I think treating these choices as simply "voluntary efficiency maximizing" may lead to exploitation. The biggest critique I have of Posner is that he implicitly accepts the current distribution of wealth and rights as given.

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  2. Paul HurleyMarch 12, 2026 at 9:41 AM

    You claim that for Posner "wealth-maximization principles cannot be used to determine the initial distribution of rights." But doesn't he claim the opposite? Isn't that why women (at least initially) on his view should get the right to determine their sexual partners, in his example, because we determine that such an initial allocation of rights is overall wealth maximizing? It is not because women have an innate right to their person, a right to control their bodies that constrains pursuit of efficiency by the state, it is because allocating them this right, at least initially, is efficient, and they should not have this right if it is not efficient for them to have it.

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