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December 08, 2004

In Defense of Law and Economics

Amber Taylor links to one of her fellow Harvard law student's comments on law and economics:

so much of [studying law] is so joyless, so soulless, the opposite of spiritual. especially law and economics. and that is why it helps me remember who i am. i insctinctively recoil from it because to me it is the fucking matrix. it is kryptonite to my spiritual core, which is actually, the ethos of the Romantic.

I'm not sure exactly what is behind this criticism. A commenter on Amber's post suggests that the "point is just that law and economics focuses too much on a cold numbers calculation and fails to take into account the personal/distributive aspects of the case." A related criticism of law and economics I hear often is that the movement is "immoral" or "inhumane" (other attention grabbing words may be inserted here) because of its focus, to the exclusion of other factors and objectives, on efficiency. Unfortunately, more than one professor at my institution has advanced this view in class and it generally seems to be accepted as truth by most students. I suspect this criticism takes hold easily in those with only a passing familiarity with the movement, though I'm sure there are some who are guilty of willful mischaracterization. In any event, this sort of talk ignores some important things about the law and economics movement.

First, stripped down, law and economics is simply the application of rational choice theory to the law -- that is, it's about taking into account the notion that people by and large are rational maximizers of their utility and exploring the implications of this insight for the law. There doesn't seem to be anything especially cold or potentially harmful to one's spiritual core in recognizing and grappling with the possibilities that flow from this sort of analysis.

We move closer to the heart of these sorts of criticisms when looking at the potential implications of this analysis. Again, the idea here is that the application of economic principles to the law leads one to favor the efficient outcome while ignoring other important factors. One objection to this line of argument is that it paints with too broad a brush. After all, there are two lines of analysis in law and economics: positive and normative. (There is another objection: that efficiency is often the fairest and best ground for decision. Thus this objection takes head on the notion that these “other important factors” really hold up as “fair” or “just” decisionmaking guides. For my purposes here, though, this point will not be explored further.)

The positive line attempts to explain the state of the law as it is and/or make predictions about future states of the law. Thus positive law and economics surely isn't what critics have in mind when they complain that the movement is immoral or what have you. Of course, positive law and economics can have normative implications, but it need not, and, in any event, this notion is pretty far removed from the heart of the sort of argument made by those who I’m addressing here.

Most critics of law and economics, then, have only a limited part of the movement in mind -- its normative component. This is the area where commentators argue, for example, that a given legal rule is better because it is more efficient. But rarely does this sort of argument take on the mystical "inhumane" character attributed to it by some critics. A lot of the important normative work in law and economics has been done in fields like public utility and common-carrier regulation, antitrust, and other areas influenced by traditional market conceptualizations -- hardly the stuff that generally leads to moral outrage.

To be sure, like anything else, normative law and economics has its limitations. But this is not a good reason to condemn the field outright. It would be far more useful for those inclined to disagree with some aspect of the field to be clear about what it is that drives their criticism.

My fear -- which I've arrived at mostly from listening to people (again, including certain professors) at my law school and through other conversations and observation -- is that many simply don't understand the field. The tendency seems to be to think that law and economics is simply a tool for conservatives to shape legal doctrine the way they see fit. Rather than familiarize themselves with content, they hear "efficiency" or even "economics" (not to mention "Posner") and dismiss the conversation out of hand. This is unfortunate.

(Incidentally, I should add that this isn't necessarily meant as a criticism of the aforementioned blogger's comment. Again, I'm not sure what exactly the individual had in mind. The post, because of its tone, simply brought to mind this traditional criticism.)


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Levy Watch

[Where is Jacob Levy?]

At the moment, commenting at Political Arguments about European and American Liberalism. Victor Muniz-Fraticelli follows up here.


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Lecture, jam, both, or neither?

This Friday evening, there will be a strange musical event here at YLS:

DJ Spooky, a virtuoso DJ and leading spokesman for the art and intellectual movement of DJ culture, will headline the event with a musical performance and presentation of his art. Mark Hosler of Negativland, a legend in the art of digital appropriation, will show video clips of recent Negativland projects and discuss his long experience with the clash of copyright law and art. Mike Godwin of Public Knowledge, a leading advocate of the public interest in information and cultural policy, will talk about the latest legal and legislative challenges to democratic culture. Finally, Nelson Pavlosky, of the Free Culture, will talk about the efforts of students across campuses to organize and support these issues.


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Sam's under fire

The Chicago Tribune has this story about how Illinois liquor regulators are attacking Sam's Wine and Spirits, an incredible source of inexpensive and unusual wine and alcohol for those in Chicago. I don't know all of the legal details, but this does seem to be but one more example of how the regulation of wine seems designed to do something other than make the world a better place, by almost anybody's metric. [C.F. Granholm v Heald and Swedenberg v Kelly]


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Lichtman on Self-Help

Professor Douglas Lichtman (Chicago) guest-blogged here a while back on the topic of self-help. He's just posted a draft of his essay on the topic -- How the Law Responds to Self-Help -- to SSRN. Here's the abstract:

Legal rules are typically implemented through a combination of public and private mechanisms. Burglars, for example, are deterred from unauthorized entry in part by the threat of jail time and police intervention, and in part by the knowledge that homeowners have guns, security systems, and other private measures by which to defend their property. Similarly, while entrepreneurs obviously use patent, copyright, and trade secret law to protect proprietary information, they also routinely take matters into their own hands by, for example, dividing sensitive information across employees such that no single employee ever knows enough to betray the firm completely. Every area of law can to some degree be characterized in this manner, framed in a way that emphasizes substitutability between public responses and their private alternatives. In this Essay, I examine several specific areas of law (free speech jurisprudence, trade secret law, copyright law, and patent law) from this perspective, using each as a case study from which to cull broader lessons about the proper structure for these public/private partnerships.

In case you missed any of Professor Lichtman's posts while he was visiting, here is the rundown:


(1) Self-Help: Getting Started
(2) Self-Help: Captive Audiences and the First Amendment
(3) Self-Help: The V-Chip
(4) Self-Help: Trade Secrets
(5) Self-Help: Trade Secrets and the Arms Race
(6) Self-Help: Arms Races and Baseball
(7) Self-Help: Copyright
(8) Self-Help: More Copyright


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