As Deirdre suggests, Sidgwick was a bright boy--brighter, in fact, than
Deidre probably realizes. His utilitarian approach to law is the subject
of a paper that appears in the first 2007 issue of the American Law and
Economics Review.

When discussing the collision between individual interests in the use of
natural resources, including the potential depletion of mines,
fisheries, and plant species, and the diversion of waterways necessary
for irrigation and "the supply of motive power," Sidgwick points out
that in a "perfectly ideal community of economic men all persons
concerned would doubtless voluntarily agree to take the measures
required to ward off such common dangers" (Sidgwick, Principles of PE,
1901, pp. 409-10). It would be foolhardy to suggest that Sidgwick's
"perfectly ideal community of economic men" is nineteenth-century-speak
for a world of zero transaction costs. Nevertheless, both Coase and
Sidgwick understood that, under idealized conditions, agents would
cooperate to resolve these self-interest-generated problems of harmful
effects.

But of course, these are only idealized conditions. Sidgwick argues that
the underlying conditions necessary for the system of natural liberty to
work the wealth-maximizing magic so often attributed to it do not, in
many instances, correspond to actual economic circumstances. The effect,
he says, is that "even in a society composed-solely or mainly-of
'economic men,' the system of natural liberty would have, in certain
conditions, no tendency to realize the beneficent results claimed for
it" (1901, pp. 402-403). Sidgwick instances the depletion of common pool
resources, where "the efforts and sacrifices of a great majority are
liable to be rendered almost useless by the neglect of one or two
individuals" (1901, p. 410), and he illustrates the problem by applying
the then-emerging marginal analysis to the fishery:

"Take, for instance, the case of certain fisheries, where it is clearly
for the general interest that the fish should not be caught at certain
times, or in certain places, or with certain instruments, because the
increase of actual supply obtained by such captures is overbalanced by
the detriment it causes to the prospective supply. Here-however clear
the common interest might be-it would be palpably rash to trust to
voluntary association for the observance of the required rules of
abstinence; since the larger the number that voluntarily abstain, the
stronger becomes the inducement offered to those who remain outside the
association to pursue their fishing in the objectionable times, places,
and ways, so long as they are not prevented by legal coercion"
(Sidgwick, Principles of PE, 1901, p. 410).

Steven G. Medema