The Measure of Law and Economics Robert Cooter and Jody Kraus European Association of Law and...

The Measure of Law and Economics

Robert Cooter and Jody KrausEuropean Association of Law and Economics

22 September 2011

What is an x?

• What is a man? A rational animal. (Socrates)• What is justice? A utopian republic. (Plato)• What is law and economics?– Economic analysis applied to law?(Posner) – A non-legal form of reasoning? (Coleman)

Three Facts About History of Law and Economics in the U.S.A.

• Fact 1: Explosive growth of L&E beginning in 1980s

• Fact 2: L&E is strongest in the elite law schools.

• Fact 3: A small proportion of legal scholars follow the L&E approach.

• Fact 1: Explosive growth of L&E beginning in 1980s– Scholarship (citation studies –Landes)– Institutions (journals, associations, professors)

AALS Professors Teaching Law and Economics

Professors Teaching Law and Economics and Law School’s Ranking

Law Professors Teaching L&E Compared to All Law Professors

2.0% 2.4%

Two Enterprises

• Say what the law requires of people.

• Say what the law is.• Interpret laws.• Restate the law.• Offer legal reasons.• Determine the law’s

correct categories.

Legal ContentLegal Causes

• Prove the effects of laws.

• Find the empirical consequences of laws.

• Model responses to laws.

• Find what caused officials to make or repeal a law.

Examples of Two Enterprises

• Comparative negligence is the liability rule for automobile accidents.

• Disgorgement damages are available for breach of fiduciary duty.

• Article I Section 8 of the US constitution authorizes Congress to regulate commerce.

Legal ContentLegal Causes

• A negligence rule causes excessive activity by injurers.

• Expectation damages cause excessive reliance by promisees.

• Predictable judgments cause more settlements out of court.

• Compulsory racial integration of neighborhood schools caused residential segregation.

Explaining the Three Facts About History of Law and Economics in the U.S.A.

• Fact 1: Explosive growth of L&E beginning in 1980s.– Explanation: hole in ecology of ideas.

• Fact 2: L&E is strongest in the elite law schools.--Explanation: lower-level law schools teach legal facts, higher-level law schools teach legal reasoning.

• Fact 3: A small proportion of legal scholars follow the L&E approach--Explanation: Most law teaching concerns legal facts on the bar examination.

Economic and Legal Reasoning

In law, economic reasoning is immanent but seldom explicit. – Abstracts from the form of legal reasoning.– Occasionally explicit in legal reasoning.– Law and economics recedes as it succeeds.

Example: Hand Formula abstracts from balancing tests that pervade law, but the Hand Formula is found explicitly only in US tort law.

Conclusion:What is law and economics?

• Economic analysis applied to law? No.• A non-legal form of reasoning? No.

L&E = cause enterprise + content enterprise