I hate to bring up the Confederate dorm issue again, but it so nicely illustrates a principle of legal economics that I’m going to anyway. The latest news is that Dr. Eddie Hamilton, a black Vanderbilt alumnus, has offered $50,000 to the United Daughters of the Confederacy if they will allow Vanderbilt to change the name of the building. He’s encouraged others to chip in as well and the UDC has stated a willingness to “look at any offer on the table.” [Thanks to Chad for the update.]
Anyone who’s done some reading in the economics of law will recognize this as an illustration of the Coase theorem, which states that resources will be allocated efficiently regardless of the initial distribution of property rights (assuming there are no transaction costs). As long as this dorm dispute was tied up in the court system, the name was stuck as is. Bargaining has begun now that the appeals court has determined that the right to name the dorm belongs to the UDC. The transaction costs are not insignificant, but if there are enough Vanderbilt alumni who care about this aspect of the university’s image, the name will change.
The other interesting thing about this is that it makes the appeals court’s determination that Vanderbilt could void the contract for about $700,000 (the approximate value of the UDC’s donation in today’s dollars) nearly irrelevant. This was a somewhat arbitrary decision, but if the UDC’s reservation price is below that it doesn’t matter. The existence of a well defined property right forces each side to take the other’s interests into account: the UDC has to ask itself if keeping the name “Confederate Memorial Hall” on an increasingly progressive campus is worth the opportunity cost of whatever else it could do with a sizeable amount of money while the university community considers whether it’s worth compensating the group to change the name. Can we imagine any other situation in which Dr. Hamilton would voluntarily write a $50,000 check to the United Daughters of the Confederacy?
Debates about this stupid dorm have raged for years in the Student Government Association, op-ed pages, weblogs, and the courts. Perhaps people will finally be happy when they let the market decide the issue.