I will conclude my review of Klein and Clark’s classical liberal theoretical framework (see their 2010 paper on “Direct and Overall Liberty“) by making the following three closely-related observations:

1. Point #1: Ronald Coase’s key insight about the reciprocal nature of harms (see, e.g., image below) applies to all governmental actions. (All laws, rules, and regulations, for example, involve direct coercion or restrictions of liberty.)
2. Point #2: Because harms are reciprocal, it does not really matter what the “overall” effect (net positive or net negative) a governmental action has on our liberty. Why not? Because regardless whether the amount of overall liberty is positive (+) or negative (–) on balance, one group of actors or set of interests will always be harmed by the governmental action.
3. Point #3: Therefore, the question we should be asking is not whether the overall amount of liberty produced by a government action is + or –. Either way, someone or some group is always going to be harmed by that action. Instead, we should be asking: what is the optimal amount of harm?

To conclude, allow me to illustrate these theoretical points with a concrete example: copyrights. In brief, the purpose of copyright law is to reward content creators by protecting their original works of authorship, and this legal protection begins as soon as the author or creator fixes his work in a tangible form of expression. To protect this property right, copyright law also imposes legal liability on would-be copiers or unauthorized users of copyrighted materials. As a such, one could argue that copyright law promotes the liberty interests of copyright creators at the expense of the liberty of copyright copiers.

But that is not the whole story. In practice, copyright law is not just about protecting the property and liberty interests of copyright creators. It is also about finding the optimal amount of copyright infringement! Under the fair use doctrine, for example, copiers are allowed to “steal” under certain circumstances. Broadly speaking, fair use is about balancing the interests of both creators and copiers, but if we define fair use too broadly, making it easy for copiers to “steal” too much intellectual property, content creators will be harmed. But at the same time, if we define fair use too narrowly, then it is the copiers who are going to be harmed! This is Coase’s key insight about the reciprocal nature of harms.

As a result, the right question to ask about copyright law is not, “What is our overall level of liberty with or without copyright law?” That question is impossible to answer. The question we should be asking instead is: “What is the optimal level of harm?” Once our analysis of copyrights is formulated this way–in terms of reciprocal harms–the problem of coercive laws becomes soluble: We should choose that level of fair use that minimizes the overall level of harm.