Academic journal article Journal of Politics and Law

Aristotle and Optimal Deterrence

Academic journal article Journal of Politics and Law

Aristotle and Optimal Deterrence

Article excerpt

Abstract

The central role of corrective justice in shaping private law has vigorously been challenged by the law and economics movement, and its concept of optimal deterrence. The fierce rivalry between the two competing theories seems to be at a dead end since scholars on each side appear to be deaf to the arguments raised by their counterparts. However, building on Kantian notion of conceptually sequenced ideas, it is suggested that the two theories are not only perfectly compatible, but also necessary complements of each other. Law needs justice, justice needs deterrence, and deterrence without justice is an empty and incoherent exercise.

Keywords: corrective justice, deterrence, Kantian rights, efficiency

(ProQuest: ... denotes formulae omitted.)

1. Introduction

"Prior to 1970 the debate on the purposes underlying the law of torts was either empty or banal" (Schwartz, 1996 p.1802). However, in the past decades the situation has drastically changed and a fierce battle has exploded between the champions of the Aristotelian "corrective justice" (Fletcher, 1972; Epstein, 1973; Coleman, 1982; Weinrib, 2012) and law and economics scholars (Calabresi, 1970; Posner, 1972; Kaplow & Shavell, 2009).

In spite of a few attempts of reconciliation (Chapman, 2001; Geistfeld, 2001 and 2009) it appears that there is an enormous gap between the opposing doctrines, as they seem to imply completely incompatible policies.

Law and economics scholars would chase optimal deterrence; it is conventional wisdom that it can be achieved only if damages are equal to the harm times the inverse of the probability that compensation is due (Polinsky & Shavell, 1998). The obvious implication is that the use of punitive damages should be widespread, since such probability is strictly smaller than one.

With regards to sanctions, one of the core ideas advocated by Becker is that if sanctions are monetary and individuals are risk neutral in wealth, then optimal sanctions are maximal (Becker, 1968; Polinsky & Shavell, 1999). At a first glance it might appear that, from an economical perspective, the obvious solution to achieve optimal deterrence at the least cost would be to increase the magnitude of the fines and to introduce (or enhance, depending on which side of the ocean we stand) that intriguing creature known as punitive damages.

Conversely, it is not possible to offer a single definition of corrective justice and hence for now the focus will be on the original definition offered by Aristotle. According to him, corrective justice involves the notion of balance, or equipoise, between two individuals (Aristotle trad., 1962). Torts can be considered as transactions that alter this balance; corrective justice aims at righting the scales. As corrective justice sees remedies as a mean to undo the wrongs (Weinrib, 2002), it is straightforward that the ideal solution would be to have certain compensation that is equal to the harm (Note 1).

Using a more formal language, a superficial look at deterrence theory might induce one to think that the probability of detection by public authorities should tend to zero (with the consequent introduction of enormous fines), and compensation should always exceed the harm. Neither of these two policies is implied by corrective justice.

Not only the opposing doctrines have completely diverging policy implications, they are usually assumed to be absolutely incompatible since they rest on opposite axioms.

However, starting from the Kantian argument of conceptually sequenced ideas, it will be suggested that, not only they are not mutually exclusive, but they are necessary complements. The one without the other cannot offer a satisfying description of tort law as a whole.

Two examples will be introduced to ease the exposition: the first involves a case of product liability, the second a hard core cartel.

2. Deterrence Theory

The idea of sanctions (or more generally punishment) to deter unwanted behavior has a millenarian history (Lebow, 2007), but an economic formalization is owed to the pioneering works from Becker (1968), Calabresi (1970) and Posner (1972). …

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