Economic Theory, Free Speech, and the SEC
One of the major influences in modern law is the economic analysis of law. That body of scholarship has recently begun to analyze the free-speech doctrine. Although generalization is dangerous, it is fairly safe to assert that a predominant aspect of this analysis is the application of a cost-benefit analysis. Richard Posner, one of the most famous and influential of the law and economics scholars, has put it, I shall not assume . . . that freedom of speech is a holy of holies which should be exempt from the normal tradeoffs that guide the formulation of legal policy."1
Posner took exception to the assertion of another scholar that "[o]ne of the things that separate our society from theirs [Nazis] is our absolute right to propagate opinions that the government finds wrong or even hateful."2 Posner responded, "[V]aluable as the right of free speech is, I for one would be willing to trade off a modest curtailment of it in exchange for saving millions of lives."3 He is not willing to permit the untrammeled propagation of vicious ideas that will lead to violence and totalitarian oppression. As he puts it, any other approach renders the "Constitution a suicide pact."4
In this chapter we consider the leading economic analyses of free speech. We begin with the essays of Ronald Coase and Aaron Director.
In a piece first presented in 1953 (and published in 1964) Aaron Director argues that there is a marked identity between the market for ideas and the market for commercial goods and services.5