ABSTRACT
This chapter examines the choice of legal rules for protecting the assigned property rights. This choice was first examined in the classic article by Guido Calabresi and A. Douglas Melamed in which they distinguished between property rules and liability rules. The chapter provides the examples to illustrate the key difference between a property rule and a liability rule that concerns the manner in which entitlements can be legally exchanged. Under a property rule, exchange can only occur by means of a consensual (market) transaction, whereas under a liability rule it can occur by means of a forced (but legal) exchange. The chapter then turns to the consideration of alienable entitlements. It concludes the current discussion by summarizing the arguments in this and the preceding chapters by means of the "General Transaction Structure", which represents a unified framework for understanding the relationship between markets and law.
