Theoretical Foundations of Law and Economics

Cover......Page 1
Half-title......Page 3
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
THE TWO SIDES OF SOCIAL SCIENTISTS......Page 11
THE PROGRAM OF THIS BOOK: SOCIAL DECISION FROM THEORY TO PRACTICE......Page 12
ONE PERSON\'S BRIEF WORLDVIEW......Page 14
Preface......Page 17
Notes on Contributors......Page 19
1 Modeling Courts......Page 23
A. A Variety of Court Models......Page 24
B. Formal Models and Their Interpretations......Page 26
C. Interpretations of the Domains of Preference, Choice, and Outcome......Page 27
II. CHOOSING THE DOMAIN OF PREFERENCE......Page 33
III. AN ILLUSTRATIVE EXAMPLE......Page 36
IV. THE COMPLEXITY OF ADJUDICATION......Page 39
V. MORE COMPLEX COURTS......Page 40
CONCLUDING REMARKS......Page 41
2 Is There a Method to the Madness? Why Creative and Counterintuitive Proposals Are Counterproductive......Page 43
A. Baby-Selling......Page 44
B. Racial Discrimination......Page 45
C. Insider Trading......Page 46
A. Wealth versus Welfare......Page 48
B. Fairness......Page 49
A. Getting the Calculation Wrong: The Failure of the Legal Rule to Maximize......Page 53
B. The Hidden Externalities of Unfair Rules: Undermining Moral Norms and Legitimacy......Page 56
CONCLUSION......Page 62
3 Functional Law and Economics......Page 63
I. CONSTITUTIONAL DESIGN AND METARULES......Page 66
A. The Metaphor of the Market for Legal Rules......Page 68
B. Reciprocity as a Metarule in the Design of Law......Page 72
SUGGESTIONS FOR FUTURE RESEARCH......Page 75
4 Legal Fictionalism and the Economics of Normativity......Page 77
I. LEGAL REDUCTIONISM......Page 79
II. LEGAL CONVENTIONALISM......Page 80
A. The Artifice of Fictional Motives......Page 83
B. The Is–Ought “Fallacy”......Page 87
IV. IDEOLOGY AND LEGAL NORMATIVITY......Page 90
V. LEGAL NORMATIVITY AND IDEOLOGICAL ADVERTISING......Page 95
CONCLUDING REMARKS......Page 98
I. LAW AND ECONOMICS AS EXPLANATIVE AND NORMATIVE THEORY......Page 99
A. Law and Economics and the Moral Point of View......Page 101
B. Act versus Rule Utilitarianism and the Role of Social Practices......Page 102
II. LIMITATIONS OF LAW AND ECONOMICS AS AN EXPLANATIVE THEORY......Page 104
III. LIMITATIONS OF LAW AND ECONOMICS AS A NORMATIVE THEORY......Page 108
A. Internal Criticism......Page 109
B. External Criticism......Page 111
IV. THE DEMAND FOR A FURTHER GROUND: CONNECTING DESCRIPTIVE AND NORMATIVE THEORIES......Page 116
INTRODUCTION: PARETO VERSUS MARSHALL–PIGOU–KALDOR–HICKS......Page 118
A “Proof” that the Earth Does Not Move......Page 120
A “Proof” that an Apple Has the Same Value to Any Consumer......Page 121
II. NUMERAIRE ILLUSION AND OTHER CRITIQUES OF THE KALDOR–HICKS PRINCIPLE......Page 122
A. A Simple Generic Example......Page 124
B. A Pollution Example......Page 126
A. Summing Up So Far......Page 129
B. The Standard Textbook Treatment......Page 130
C. The Inverse Description......Page 131
FINAL REMARKS......Page 134
APPENDIX: THE ALGEBRA OF THE BASIC ARGUMENT......Page 135
7 Justice, Mercy, and Efficiency......Page 141
A. The Chief Potential Conflict with Justice......Page 144
B. Justice Restated and the Judge’s Role Clarified......Page 145
C. Mercy Refined......Page 146
A. An Example......Page 149
B. The Context......Page 150
C. Justice and Mercy......Page 151
A. Mercy and Efficiency......Page 152
B. Moral Foundations – Possibilities and Problems......Page 154
C. Woodward Again......Page 156
CONCLUSION......Page 157
A. Instrumentalist Normative Frameworks and Decision Theory......Page 159
B. DT and the Specification of Outcomes, Actions, and States......Page 162
C. Specification and Bounded Decision-Makers......Page 164
A. Uncertainty versus Bounded Rationality......Page 166
B. Optimal Search......Page 169
C. Tversky and Kahneman and the Heuristics-and-Biases Program......Page 171
D. Simon and Satisficing......Page 173
E. Gigerenzer, Take the Best, and Noncompensatory Choice Procedures......Page 174
III. LEGAL SCHOLARSHIP......Page 177
9 Emotional Reactions to Law and Economics, Market Metaphors, and Rationality Rhetoric......Page 185
I. EMOTIONAL AND UNEMOTIONAL REACTIONS TO LAW AND ECONOMICS......Page 186
II. HOW MOST ECONOMISTS – AS OPPOSED TO MOST LAWYERS – VIEW LAW AND ECONOMICS......Page 191
III. QUALIFICATIONS REGARDING MARKETS......Page 195
IV. CONCERNS ABOUT RATIONALITY......Page 200
CONCLUSION......Page 205
II. PLURAL VALUES......Page 206
III. THE PARADOX OF PLURALISM......Page 208
IV. AVOIDING THE ARROVIAN (STRONG) PARADOX......Page 211
A. Preference Intransitivity......Page 214
B. Real Intransitivity......Page 216
A. Broome’s Way: Transitivity as Conceptual Truth......Page 217
B. Finnis’s Way: Rejecting Comparability......Page 218
C. Chapman’s Way: Appeal to Natural Structures......Page 219
CONCLUSION......Page 222
I. THEORIES, EXPLANATION, AND JUSTIFICATION......Page 225
II. UNIVERSAL THEORIES AND PARTICULAR THEORIES......Page 228
III. LAW-AND-ECONOMICS THEORIES......Page 229
IV. HISTORICAL EXPLANATION: TRADITIONAL AND ECONOMIC......Page 230
V. OTHER VERSIONS OF ECONOMIC ANALYSIS AND CONTRACT LAW......Page 232
VI. CRITIQUE AND RESPONSE......Page 233
CONCLUSION......Page 234
12 Welfare, Autonomy, and Contractual Freedom......Page 236
I. A CONTRACTARIAN APPROACH TO MANIPULATION......Page 237
II. THE UNCONSCIONABILITY OBJECTION AND CRITIQUES......Page 241
A. The Morality of Enforcement......Page 242
B. Manipulation and Reliance......Page 244
C. Prudential Authority......Page 246
D. Where Evildoing Lies......Page 249
III. ZOOMING IN ON THE ARGUMENT FOR THE CONVERGENCE THESIS AND THE CONTRACTARIAN THESIS......Page 250
CONCLUDING REMARKS......Page 255
13 Efficiency, Fairness, and the Economic Analysis of Tort Law......Page 256
I. EFFICIENCY V. FAIRNESS?......Page 258
II. RIGHTS-BASED TORT RULES AND WELFARE ECONOMICS......Page 262
A. Rights-Based Tort Rules and the Pareto Principle......Page 263
B. The Pareto Principle and the Choice of Tort Rules......Page 265
C. The Efficiency–Equity Criterion......Page 268
III. ECONOMIC ANALYSIS IN A RIGHTS-BASED TORT SYSTEM......Page 270
CONCLUSION......Page 274
14 Retributivism in a World of Scarcity......Page 275
I. ECONOMICS AND RETRIBUTIVISM......Page 276
II. COMPARING RETRIBUTIVE AND DETERRENT PENALTIES......Page 279
A. Retributivist Punishment Only......Page 283
B. Retributivist Punishment and Prosecution......Page 285
IV. FINDING COMPROMISES IN RETRIBUTIVISM......Page 286
A. Level of Punishment......Page 288
B. Prosecution and Apprehension......Page 290
CONCLUSION......Page 292
Index......Page 295