Economic Logic and Legal Logic

Economic Logic and Legal Logic

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In the mid-70s, Richard Posner claimed that common law legal rules both are and ought to be efficient (in a sense to be made clear below in Sect. 2). These claims posit a deep connection between economic logic and the substance of the law. The positive claim asserts that common law legal rules are in fact efficient; the normative claim asserts that common law adjudicatory institutions should adopt rules that are efficient. The claims do not, however, assert that, in the course of reasoning about the law, judges, lawyers, or other legal officials deploy or ought to deploy economic reasoning. Empirical confirmation that common law rules were in fact efficient would not entail that common judges deploy an economic logic. The efficiency of legal rules might result from processes other than the reasoning of judges. Similarly, a requirement that courts announce efficient rules does not entail that judges should adopt an economic logic. Given the structure of adjudication, judges might better achieve efficiency by aiming at something else. Conversely, a rejection of these claims does not imply that judges or other legal actors ought to renounce economic reasoning. One might reason economically but not pursue efficiency. The relation between economic logic and legal logic is thus an intricate one. This essay seeks to disentangle some of these intricacies. This task presents several difficulties. First, as stated above, economic logic might have at least two distinct senses. “Economic logic” might refer to the process of economic reasoning. In this sense, the claim of the efficiency of the common law reduces to a claim about the nature of legal reasoning. Alternatively, “economic logic” might refer to the way in which we understand the social processes that result in law. In this sense, Posner’s claim about the common law reduces to a claim about the causal mechanisms underlying the institutional structures of common law adjudication rather than a claim about the reasoning of judges or a claim about the causal mechanisms underlying the institutional structures of legislation and administrative law making. Second, and related to the first, Posner’s claim interpreted as the process of economic reasoning adopts a very restrictive sense of the nature of economic reasoning. After all, efficiency, in the economic sense, is a goal or a criterion against which to assess institutional performance rather than a methodology. Economists assess the performance of institutions against the standard of efficiency. Presumably, economic reasoning refers to the process or methods of assessment not the criterion against which the institutions are measured. Further, economic methodology understood as a method of assessment or analysis is not monolithic. The logic of welfare economics may differ from the method of microeconomics which in turn may differ from the methods of macro-economics or econometrics. Third, legal reasoning may vary across and within legal systems. The logic of a judicial decision rendered by the French Cour de Cassation may differ from the logic of a judicial decision rendered by the US Supreme Court. Even within a legal system, the nature of “legal reasoning” might depend on the substantive law. One might think, for example, that the decisions in competition law should deploy economic reasoning but not the decisions in domestic relations law. On this account, then, we might endorse Posner’s claims with respect to competition and contract law but not with respect to domestic relations law or criminal law. Fourth, and related to the third, the logic of justification, in both law and economics, differs from the logic of discovery. The argument in an opinion does not necessarily reflect the cognitive process that led the judge (or the court) to the announced disposition or legal rule. In what follows, I shall generally restrict attention to the logic of justification. Fifth, the logic of legal decision extends beyond the scope of Posner’s claim. Posner made a claim about the logic of judicial decision; but other actors also deploy legal reasoning and make legal decisions. Legislators, administrators, constitutional designers, and citizens, both in their role as private agents and their political role as voters make legal decisions. The logic of the law and its relation to economic logic may depend on the role the decision maker occupies or the nature of the institution in which she sits. One might argue that a legislator should deliberate about which legal rule to enact differently than she would deliberate if she were a judge (or an administrator) applying an extant legal rule. Specifically, one might contend that legislators, but not judges, should incorporate economic reasoning. Alternatively, one might, for example, contend that the institution of legislation is shaped by an economic logic. Public choice theorists and positive political theorists make claims of this type though, in their models, the economic logic consists of causal mechanisms that explain inefficient rather than efficient outcomes. Sixth, and perhaps most importantly, we must distinguish reasoning normatively about what our goals and values are from reasoning about the means for achieving those goals. Economic reasoning, though it addresses some normative questions, is primarily instrumental. It reasons about the means we should use to achieve given ends and it reasons about the causes of various social phenomena. Economics typically takes the aims of individual agents and, sometimes, collective entities, as given. Legal reasoning, by contrast, often involves the elaboration or interpolation of ends. Purposive interpretation of constitutions and statutes provide the clearest examples of this. This essay strives to disentangle these interconnections between economic logic and the logic of the law. At the outset, Sect. 2 offers a brief account of economic logic as economic reasoning; this account will be deployed in Sect. 4 through 7 which investigate the relation between legal and economic reasoning. Section 3 discusses economic logic understood as economic processes that may causally explain legal phenomena. Section 8 concludes.

Source Publication

Handbook of Legal Reasoning and Argumentation

Source Editors/Authors

Giorgio Bongiovanni, Gerald Postema, Antonino Rotolo, Giovanni Sartor, Chiara Valentini, Douglas Walton

Publication Date

2018

Economic Logic and Legal Logic

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