Law and Economics: Philosophical Issues and Fundamental Questions

Edited by Aristides N. Hatzis & Nicholas Mercuro

London/New York: Routledge, 2015

The Law and Economics approach to law dominates the intellectual discussion of nearly every doctrinal area of law in the United States and its influence is growing steadily throughout Europe, Asia, and South America. Numerous academics and practitioners are working in the field with a flow of uninterrupted scholarship that is unprecedented, as is its influence on the law.

Academically every major law school in the United States has a Law and Economics program and the emergence of similar programs on other continents continues to accelerate. Despite its phenomenal growth, the area is also the target of an ongoing critique by lawyers, philosophers, psychologists, social scientists, even economists since the late 1970s. While the critique did not seem to impede the development of the field, it certainly has helped it to become more sophisticated, inclusive, and mature. In this volume some of the leading scholars working in the field, as well as a number of those critical of Law and Economics, discuss the foundational issues from various perspectives: philosophical, moral, epistemological, methodological, psychological, political, legal, and social.

The philosophical and methodological assumptions of the economic analysis of law are criticized and defended, alternatives are proposed, old and new applications are discussed.

The book is ideal for a main or supplementary textbook in courses and seminars on legal theory, philosophy of law, jurisprudence, and (of course) Law and Economics.

Aristides N. Hatzis is an Associate Professor of Legal Theory at the University of Athens, Greece.

Nicholas Mercuro is Professor of Law in Residence ath the Michigan State University College of Law and Member of the faculty of James Madison College, Michigan State University, USA.

Here you can find the Preface, the Table of Contents and Two Chapters (by Judge Richard Posner and Prof. Martha Nussbaum)

‘Date-Onomics,’ ‘The Sex Myth’ and ‘Modern Romance’

by Kristin Dombek

New York Times
September 9, 2016

Back when adultery and gay sex were widely criminalized in the United States, when masturbation was thought to make you crazy and fellatio was taboo, the Kinsey Institute famously revealed that Americans were secretly less faithful, more gay, more various in their sexual practices and more perverse than most wanted to think. Sixty years later, many of us have come to regard sex — preferably passionate, hot, transformative sex — as central to our lives. In the time of Tinder, our sexuality feels anything but secret. But romance is still mysterious — what does it feel like for everyone else? — and three new books try to explain modern mating.

Rachel Hills, an Australian journalist who lives in New York, argues in “The Sex Myth” that there is a new gap between what we believe and what we do: Americans are secretly having less and worse sex than everyone thinks, and feeling bad about it. She cites a recent study, which shows that on any given weekend, 80 percent of male college students think their schoolmates are having sex (it’s actually 5 percent to 10 percent). Hills argues persuasively that when our value is tied to sexual desirability and performance, we live with a new kind of shame: If we’re not having good sex, all the time, there’s something wrong with us. In this way, the liberation of sex actually regulates us.

Motivated by her own sense of falling short of some sexual ideal, and by conversations with friends who felt the same way, Hills attempts to show how we moved from “a culture that told us we were dirty if we did have sex to one that tells us we are defective if we do not do it enough.” She examines social science literature and media, and interviews hundreds of people to contrast the “myth of a hypersexual society” with our lived reality. “The Sex Myth” provides a clarifying framework for understanding new versions of old contradictions — that women must choose between being “wholly ‘pure’ or ‘empowered,’ innocent Madonna or self-assured Gaga.” Hills makes a smart argument against that strain of neo- or anti-feminism that would have women rebel against objectification by objectifying ourselves: We might be better off, she argues, to stop identifying ourselves primarily with our sex lives.

More

How Homo Economicus Went Extinct

by Carol Tavris

Wall Street Journal
May 15, 2015

As a social psychologist, I have long been amused by economists and their curiously delusional notion of the “rational man.” Rational? Where do these folks live? Even 50 years ago, experimental studies were demonstrating that people stay with clearly wrong decisions rather than change them, throw good money after bad, justify failed predictions rather than admit they were wrong, and resist, distort or actively reject information that disputes their beliefs. In recent years, a new field has emerged—“behavioral economics”—to propose an alternative to the rational man of traditional economics. A spate of popular books and empirical studies have been published exploring human irrationality—in decision making, beliefs and actions. Researchers in this field are making up for lost time, or perhaps realizing that they are social psychologists after all.

As the offspring of traditional economics and experimental social psychology, behavioral economics shows remarkable hybrid vigor, and Richard Thaler, one of the new field’s founders, acknowledges its debt to psychological science throughout his highly enjoyable intellectual autobiography, “Misbehaving.” Indeed, his opening aphorism is Vilfredo Pareto’s 1906 claim that “the foundation of political economy and, in general, of every social science, is evidently psychology. A day may come when we shall be able to deduce the laws of social science from the principles of psychology.” That day is here, as Mr. Thaler explains.

For all of his creative career spanning 40 years, Mr. Thaler, who is a professor of behavioral science and economics at the University of Chicago Graduate School of Business, has been studying “the myriad ways in which people depart from the fictional creatures that populate economic models.” As human beings who arrogantly and often wrongly consider ourselves “sapiens,” we simply don’t match the model of human behavior favored by economists, one that “replaces homo sapiens” (whom Mr. Thaler calls Humans) with “a fictional creature called homo economicus” (whom he calls Econ). “Econs do not have passions; they are cold-blooded optimizers,” he says. “Compared to this fictional world of Econs, Humans do a lot of misbehaving”—thus the book’s title.

More

The Rise of the Frugal Economy

by Navi Radjou & Jaideep Prabhu

Project Syndicate
February 6, 2015

In a famous 1937 essay, the economist Ronald Coase argued that the reason Western economies are organized like a pyramid, with a few large producers at the top and millions of passive consumers below, is the existence of transaction costs – the intangible costs associated with search, bargaining, decision-making, and enforcement. But with the Internet, mobile technologies, and social media all but eliminating such costs in many sectors, this economic structure is bound to change.

Indeed, in the United States and across Europe, vertically integrated value chains controlled by large companies are already being challenged by new consumer-orchestrated value ecosystems, which allow consumers to design, build, market, distribute, and trade goods and services among themselves, eliminating the need for intermediaries. This bottom-up approach to value creation is enabled by the horizontal (or peer-to-peer) networks and do-it-yourself (DIY) platforms that form the foundation of the “frugal” economy.

Two key factors are fueling the frugal economy’s growth: a protracted financial crisis, which has weakened the purchasing power of middle-class consumers in the West, and these consumers’ increasing sense of environmental responsibility. Eager to save money and minimize their ecological impact, Western consumers are increasingly eschewing individual ownership in favor of shared access to products and services.

More

Henry Manne: A Champion of Law Informed by Economics

Wall Street Journal
January 19, 2015

Editor’s note: Henry G. Manne, dean emeritus of the George Mason School of Law, died Saturday at age 86. The author of “Insider Trading and the Stock Market” (1966) and a pioneer in the field of law and economics was a frequent Journal contributor. Some samples:

From “For Milken, Verdict First, Trial Later,” Feb. 3, 1990:

The government wants $1.8 billion in RICO forfeitures from [Michael] Milken and his co-defendants. The government claims that Mr. Milken’s alleged securities infractions were RICO violations, which made Drexel part of a RICO “enterprise,” which means he must forfeit all his Drexel compensation. Kafka, hell; anyone for Torquemada?

The government wants $1.8 billion in RICO forfeitures from [Michael] Milken and his co-defendants. The government claims that Mr. Milken’s alleged securities infractions were RICO violations, which made Drexel part of a RICO “enterprise,” which means he must forfeit all his Drexel compensation. Kafka, hell; anyone for Torquemada?

Every American’s basic civil liberties are critically endangered by this hysterical, politically inspired drive to demean our financial markets and convict or at least disgrace targeted individuals. That the principal defendant has been a disruptive and unsettling innovator in the usually staid financial world makes it all the more important to be vigilant about possible abuse of fair procedures. We hardly need a regime of civil liberties to protect passive, unventuresome members of the community. Tough business competitors should get at least the same legal fairness we normally give Klansmen or crack dealers.

More

See also

           

‘Scoring’ Legislation for Growth

by Edward P. Lazear

Wall Street Journal
January 6, 2015

The House of Representatives on Tuesday adopted a rule that will change Washington and lawmaking for the better. When legislation is proposed, the Congressional Budget Office is tasked with estimating its fiscal consequences. In most cases, the CBO assumes there is no effect on economic growth, positive or negative. In the future, the House will instruct the CBO to take macroeconomic effects into account when estimating the cost of legislation.

The old approach, that ignored effects on economic growth, has been defended as being “neutral,” a way to prevent political pressure from affecting nonpartisan CBO calculations.

The White House has already released a blog post that opposes the change, based on the supposed neutrality of the old approach and arguing that the new rule will introduce bias. But the House, not White House, has it right. Ignoring the macroeconomic impacts of legislation is far from neutral.

Every piece of legislation has economic consequences. Most are small, but some are significant. When the CBO ignores them, it disregards the detrimental effects on economic growth of bad legislation as well as the positive effects on growth of good legislation.

More