Law and Economics: Realism or Democracy?

By Smith, Henry E. | Harvard Journal of Law & Public Policy, Winter 2009 | Go to article overview

Law and Economics: Realism or Democracy?


Smith, Henry E., Harvard Journal of Law & Public Policy


Is law and economics anti-democratic? One hears complaints from many quarters that law and economics is a form of technocracy that cuts off legitimate debate and suppresses other important values that people hold dear. (1) On this view, law and economics privileges efficiency and focuses on quantifiable values to the exclusion of other, less measurable values that could have found expression through the political process. These concerns are central to debates in areas ranging from environmental protection to intellectual property. The irony in these complaints is that they are offered by commentators who are heirs of the legal realists, many of whom would in the same breath decry excessive formalism and applaud judicial sensitivity to policy. There may not be an inherent contradiction here, but there is a tension in practice.

Law and economics and democracy are not enemies, but I contend that legal realism--or its lingering aftershocks--causes law and economics to be more technocratic and less democratic than necessary. While legal realism as a movement itself may be dead, it rules us from the grave. As the saying goes, "We are all realists now." (2) There is nothing wrong with law-and-economics-inspired theories as theories--or with legal realism as a theory for that matter. Analyzing law and legal relations in their smallest parts and considering micro incentive effects (to the extent data is available) are worthy exercises, but without some sensitivity to institutional detail and competence, the tendency is to substitute the wisdom of the analyzing expert, especially in courts and agencies, for the collective wisdom emerging either from democracy or tradition. (3)

Many movements in legal thought draw on legal realism, (4) and law and economics is no exception. Coase's articles on the FCC (5) and social cost (6) are hyperrealist in their assumptions about property, especially in their adoption of the most extreme version of the bundle of rights conception of property. (7) In the bundle of rights conception, property has no content on its own but instead emerges from policy-driven decisions about the actions that people might take. (8) Things are merely a backdrop to this fine-grained analysis of potentially conflicting activities, and rights to exclude from things have no particular status as a starting point.

These assumptions were understandable in light of Coase's goal of demonstrating that, in a world of positive transaction costs, it matters how entitlements are assigned. But when it comes to using Coase's insights, his hyperrealist assumptions have been allowed to steal the show. (9) In Coase's analysis of nuisance, we expect judges to figure out ex post which of the conflicting parties should be awarded each stick in the bundle of rights. (10) And in making these decisions, the questions of "who invaded what" or "who caused what to whom" do no work at all. (11) In contrast to traditional and everyday notions of property as a right to things that is good against the world, Coasean agnosticism about causation leads one to see both the trampling animals and the trampled-upon crops as the cause of conflict. And under this conception, one is to ask whether fists or noses cause punches, or, for that matter, which are the cheapest cost avoiders. (12) None of this accords with non-economic intuition. (13) Although causal agnosticism is a useful theoretical construct and fine as far as it goes, it does not go very far: for transaction-cost reasons--not to mention basic moral reasons--causation is unidirectional. We have made ex ante decisions about what counts as an invasion, (14) and absent good reasons--and sometimes good reasons exist--we should stick to those decisions.

Now it might be thought that this technocratic tendency in fine-grained analysis is specific to property. Such a view seems unlikely when we consider that Coase and many of the bundle theorists are basically treating property as dissolving into torts. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Law and Economics: Realism or Democracy?
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.