The Economic Analysis of Law
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Economic analysis of law applies the tools of microeconomic theory to the analysis of legal rules and institutions. Ronald Coase [1960] and Guido Calabresi [1961] are generally identified as the seminal articles but Commons [1924] and Hale [1952] among others had brought economic thinking to the study of law in the 1910s and 1920s. Richard Posner [1973] brought economic analysis of law to the attention of the general legal academy; by the late 1970s, his work had provoked a vigorous controversy. This controversy was both general and doctrinally specific. Posner had claimed generally that the common law was and ought to be efficient. This latter claim provoked a broad controversy about the evaluation of legal rules. More specifically, controversy recurred each time economic analysts of law addressed another doctrinal area. More often than not, the introduction of economic analysis into the study of a doctrine transformed that area of scholarship. For a time, economic analysis dominated the study of private law in the United States; arguably it still dominates, though a healthy resurgence of moral accounts of these areas has recently emerged to challenge economic analysis of private law. Many practitioners and critics alike believe that economic analysis of law offers a comprehensive theory of law. As traditionally understood, a comprehensive theory of law has several components. First, a comprehensive theory of law begins with a characterization of the nature of law. This component distinguishes law not only from other normative systems such as morality, religion, and social conventions such as etiquette but also from coercion and politics. The second part of a comprehensive theory of law characterizes the grounds of law. Dworkin framed the grounds of law as the truth conditions for a proposition of law. From this perspective, much of the debate over the concept of law concerns the role that morality plays in these truth conditions. As discussed in section 3 below, the first and second parts of a comprehensive theory of law have often been conflated in the debate over the concept of law. The third part of a comprehensive theory of law identifies the nature of the reasons for action that law provides. Often, this aspect of a theory of law is subsumed under the second part that identifies the grounds of law. For purposes of an exposition of the economic theory of law, however, it is useful to distinguish these two questions. The fourth part of a comprehensive theory of law identifies the value of legality. The fifth and final part of a comprehensive theory of law articulates a normative theory of adjudication, a theory of how judges ought to decide cases. Framed this way, it is not clear that economic analysis of law does provide a comprehensive theory of law. The questions posed above have rarely been addressed clearly and explicitly by economic analysts of law. The early debates conflated theories of adjudication with the value of legality; subsequent debates have largely concerned theories of private law rather than of law generally. This essay thus offers both an interpretation of the approach to these five questions implicit in the practice of economic analysis of law and a recharacterization of economic analysis of law generally. Economic analysis of law is not a single, unitary practice but a set of projects that share a methodological approach. The typical economic analysis of law does not set its task within the framework of a general legal theory. Rather, it addresses a specific question about the causes or consequences or social value of a specific legal rule or set of legal rules. Phrased differently, the typical economic analysis of law investigates a specific legal rule or institution rather than make general claims about the nature of law. Nonetheless, economic analysis of law, or at least strands of it, implicitly offer distinctive, often radical, answers to the questions addressed by legal theory. Moreover, some strands suggest a radically different perspective on law and legal theory. The next section sets out the complex set of claims that emerge from the mass of economic analyses of law and identifies three projects that organize much of the work in the field. Subsequent sections ask what perspective on law these claims and projects implicitly or explicitly provide.
Source Publication
Stanford Encyclopedia of Philosophy
Source Editors/Authors
Edward N. Zalta
Publication Date
2022
Edition
spring 2022
Recommended Citation
Kornhauser, Lewis A., "The Economic Analysis of Law" (2022). Faculty Chapters. 1034.
https://gretchen.law.nyu.edu/fac-chapt/1034
