Blackmail From A to C

B's information should be controlled by A or disclosed to C according to whether A or C values the information more. Unlike the case of contiguous lots, however, the regime of free bargaining between B and A does not clearly tend toward that result. What shapes the particular course of bargaining in blackmail is that the underlying rights consist entirely of information, a form of property different from others in significant respects. Information is less susceptible to exclusive ownership than other property; it is hence more costly to appropriate and to transmit, and the return from information is generally independent of the amount invested in it.47 Bargaining over information raises unique problems. If allowed to bargain without constraint, B would be more likely to sell silence to A than to disclose the information to C, regardless of the value of the information to C. With information concerning A, the course of bargaining between B and A is by far the easier. B and A already know the information; C does not. Indeed, in the normal setting of blackmail, A knows more of the value of the information than C knows of its very existence. Regardless of who ultimately values the information the most, at the time of a potential blackmail bargain, B stands to gain more from the effort of bargaining with A, who already knows the value of the information. B cannot bargain with C over the value of the information without revealing some part of it, thereby reducing the amount still undisclosed. If C is the public, B must bargain with some proxy, such as a newspaper or magazine that will pay for a circulationboosting story. If blackmail were legal, in short, B would tend 47 See Kenneth Arrow, Information and Economic Behavior, reprinted in 4 COLLECTED PAPERS OF KENNETH J. ARROW 136, 14243 (1984). Another aspect of bargaining between B and A over information is that it approximates a bilateral monopoly. To be sure, C is to some extent in the picture, but to a less significant degree than in other kinds of bargaining. With information, the bargaining is more completely contained between B and A. This content downloaded from 207.46.13.180 on Thu, 08 Sep 2016 04:49:22 UTC All use subject to http://about.jstor.org/terms 1924 UNIVERSITY OF PENNSYLVANIA LAW REVIEW [Vol. 141: 1905 consistently to try to sell silence to A rather than disclosure to C.48 The outcome of bargaining that leaves no change in the surface distribution of rights is more likely when information is at issue, regardless of the values assigned to the information by A and C. Concerns over deadweight loss are thus especially acute in bargains over information. The simplest way to make the point is that a bad outcome is a more likely result of bargaining over information than of other bargaining, so that the transactional cost of the bargaining itself is less obviously justified. Information is a ubiquitous source of transaction costs, to be sure, and complicates the course of many kinds of bargaining. In bargaining over building on contiguous lots, for example, A and B may need (and in any event will likely gain from) information about market values, potential buyers, and the like. The cost of such information may well affect the course of bargaining. B is more likely to bargain initially with A, who is close at hand, than seek out some unknown buyer. But the bias toward bargaining with A is less systematic than in cases involving pure information. In blackmail, the bargaining raises problems of information about information. In analyzing blackmail, we cannot assume a world of perfect information without assuming away the entire problem, whereas with other problems (including, I think, A's and B's contiguous lots) the assumption of perfect information is a step toward uncovering the best legal regime. We can safely posit, therefore, that unfettered bargaining between B and A would not lead to the same allocation of rights as in a world of perfect information. That does not mean, of course, that prohibition of bargaining induces the best possible allocation of rights in information. In practice, the prohibition of blackmail prevents bargaining from following its natural course between B and A and, indirectly, strengthens C's hand in acquiring information held by B. With B denied the (legal) benefit of bargaining with A, disclosure to C is more likely. B also has less to gain from acquiring information about A in the first place. The prohibition of blackmail, therefore, leads to more disclosure from a smaller body of information held by B. Perhaps that is why defenders of privacy and proponents of disclosure both find merit in the prohibition of blackmail. Whether the absolute amount of information disclosed to C is greater or lesser than under the regime of free bargaining is 48 This is probably so even with the prohibition of blackmail, just somewhat less. This content downloaded from 207.46.13.180 on Thu, 08 Sep 2016 04:49:22 UTC All use subject to http://about.jstor.org/terms 1993] BLACKMAIL FROM A TO C 1925 hard to say. While the prohibition of blackmail is likely to have little effect on the type of information adventitiously discovered by B about A, it may bear on what sort of information B deliberately seeks out. Under prohibition, B has more reason to seek out information of interest to C than information merely costly to A. This effect is likely to be small, however, because it is difficult in any event for B to get full value for information in dealings with C. The prohibition of blackmail creates for C leverage that C would not otherwise have with respect to information concerning A. And this at B's expense. The prohibition of blackmail, in broad terms, shifts rights in private information discovered by B to C. While it is not a tax, it is similar to one in that it reduces the value to B of a certain kind of economic activity-the discovery of informationand has the same likely effect of reducing the extent of that activity, to the advantage of A's privacy. The "tax" also reaches information obtained by B as a windfall, and shifts part of the windfall advantage to C. Some part of the potential windfall-possibly larger than C's on average-goes back to A in the cases where B simply remains silent without seeking compensation from anyone. Across the full range of situations both C and A get part of the value that is denied to B, which is why the prohibition of blackmail can plausibly be viewed as serving the ends of disclosure and privacy. VII. AN ALTERNATIVE REGIME FOR BARGAINING OVER