Economic Approaches to Law
Module Code: LADD040S7
‘The most interesting aspect of the law and economics movement has been its aspiration to place the study of law on a scientific basis, with coherent theory, precise hypotheses deduced from theory, and empirical tests of hypotheses. Law is a social institution of enormous antiquity and importance, and I can see no reason why it should not be amenable to scientific study’ (Richard Posner, 1989)
Critically assess this statement with specific reference to the material covered in this course.
Lecturer: Dr Amanda Perry-Kessari
Academic Year: 2010/11
Word Count: 4260 (excluding titles, footnotes and bibliography)
Law and economics movement will soon attain its half a century dominance in legal paradigm and scientific theory. The last forty years have seen its spreading beyond traditional stream of explicit market. The economics concepts have been used to explain vividly legal issues, for both market and nonmarket. Nowadays, we witness economics theory of property rights, of corporates, of politics, of crime and punishment, and privacy laws. Some economists who think that economics is just about the market and must not mingle with nonmarket behaviour shrugged this notion. Such thoughts have been misconception of language, because the term “marginal cost” is just a concept, rigorous and unambiguous.It is argued that economics is not what economists do, and cannot only be said to be the science of rational choice.
The most exciting part of the law and economics movement is that it applies social science methods – generating testable hypotheses based on a theory and the theory tested by empirical data – to the study of law. Using social science methods, the law and economics provides a more rigorous, testable way of studying and understanding the law.The concept of most legal research and methodology uses paradigmatic thinking. The phrase “paradigm shift” was propounded by Thomas Kuhn in his theory about development of natural sciences.Kuhn concludes that scientists conduct numerous tests before getting their final results. This is exactly what law and economics as social science does. Kuhn’s analysis of natural science can be adaptable to the analysis of law and the method of legal research. Economic analysis of law also affects legal researchers who are not even on the bandwagon of law and economics, as well as judicial decision-makers in their way of thinking and the reasoning of policy-makers.
Over 100 years ago Justice Holmes had predicted that the study of law would be necessitated by statistics and economics.His influence had been so great that lawyers by now would have taken him seriously but it did not happen so.And this Posner referred to as “the decline of law as an autonomous discipline…”From the mid-20th century, legal scholars made several intellectual revolutions, this has been where legal realism, legal positivism and neutral principles had guided the law to support Holmes’s dream.In recent times the popularity of philosophical pragmatism and so-called ‘conventionalism’ has putting a blueprint in defending legal rules and institutions.From hence the legal formalism has taken shape and has spread beyond the law and society, movement, feminism, and law and economics, all using similar analytical tools to examine legal rules and institutions. Unfortunately, judges are not convinced to decide cases differently because lawyers have not convinced them to think otherwise.
This essay is an attempt to define Posner’s economic analysis of law in law-and-economics movement and his empirical tests of hypotheses to postulate that law is a social science and therefore merits scientific study. Posner is with the view that legal practitioners and judiciary have lots to gain from law-and-economics and therefore must take it serious. I will also attempt to demonstrate that Posner as law and economics realist...