Calabresi's Law and Economics

By Murray, Phil R. | Regulation, Winter 2017 | Go to article overview

Calabresi's Law and Economics


Murray, Phil R., Regulation


The Future of Law & Economics: Essays in Reform and Recollection

By Guido Calabresi

228 pp.; Yale University Press, 2016

Guido Calabresi is a judge on the U.S. Court of Appeals for the Second Circuit and the Sterling Professor Emeritus of Law and Professorial Lecturer in Law at Yale Law School. In his recent book The Future of Law & Economics, he combines Coasean insights, his own contributions, and extensions of his work to write a history of thought in law and economics with recommendations for future scholarship.

"What I call Economic Analysis of the Law," he explains, "uses economics to analyze the legal world." The analyst evaluates laws "from the standpoint of economic theory" and may "argue for change in that legal reality." "What I call Law and Economics," he continues, "instead begins with an agnostic acceptance of the world as it is, as the lawyer describes it to be."

The lawyer-economist also uses economics as a tool to evaluate the laws themselves. However if the legal environment is inconsistent with economic theory, the lawyer-economist may recommend modifications to economic theory. Calabresi exalts the law-and-economics approach so that we may gain a better understanding of both laws and economic theory.

Merit goods I We may learn a lot by studying "merit goods," he writes, referring to goods that are deemed "loathsome to price." In the economic way of thinking, people undertake projects when the expected benefits exceed the expected costs. But if we learn that, say, a construction project incorporates the value of lives lost as simply another cost of the project, we may cringe.

This "commodification" of human life is only one offensive notion that concerns Calabresi; another is "commandification" of human life. For instance, those who would take offense at a construction company manager approving a project despite the possibility of workers losing life or limb would also be offended to know that officials at the Occupational Safety and Health Administration might reason the same way. Calabresi observes, "If we do not want to price lives (and we don't), we also do not want the government to tell us, too obviously, that some lives, in some circumstances, are not worth saving." The solution is to find the right tradeoff between commodification and commandification.

Tort law helps to find this tradeoff. "In effect," he writes, "what we do in torts is to some extent pricing lives and safety, but we do this in ways that do not lead to the heavy moral costs that would be imposed if we did that pricing obviously and directly." These moral costs are the offense we take at pricing life or limb. We tolerate the "huge costs" of tort law, such as litigation costs, because tort law lowers moral costs.

Other merit goods are such that "it is loathsome to allocate them through a prevailing wealth distribution that is highly unequal." For instance, human vital organs belong in this class, Calabresi argues, because poor people may not be able to afford them, and poor people may be eager sellers of their own organs. In order to determine how many of these goods will be available and who will get them, he recommends "modified command structures" and "modified market structures."

Compulsory service / The distinction between these structures is "nuanced," to use one of the author's favorite words. Consider "a rationing scheme" for national service. Assuming that "service" is mandatory and that there are multiple ways to serve, "each subject individual would be free to choose where and how to spend his or her time." Calabresi imagines many possibilities. A young adult could serve in the armed forces, "an international peace corps," or "in varied American 'needy' zones."

The author imagines that "service in, say, sunny Italy or rainy England would be priced to take into account how much each was favored or disfavored by those who had to choose. …

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