Laws Order: What Economics Has to Do with Law and Why It Matters

Law's Order: What Economics Has to Do with Law and Why It Matters

---

Normative law and economics goes one step further and makes policy recommendations based on the economic consequences of various policies. The key concept for normative economic analysis is efficiency , in particular, allocative efficiency. A common concept of efficiency used by law and economics scholars is Pareto efficiency.

A legal rule is Pareto efficient if it could not be changed so as to make one person better off without making another person worse off. A weaker conception of efficiency is Kaldor-Hicks efficiency. A legal rule is Kaldor-Hicks efficient if it could be made Pareto efficient by some parties compensating others as to offset their loss.

Guido Calabresi , judge for the U. A Legal and Economic Analysis has been cited as influential in its extensive treatment of the proper incentives and compensation required in accident situations. The economic analysis of law has been influential in the United States as well as elsewhere. Judicial opinions use economic analysis and the theories of law and economics with some regularity, in the US but also, increasingly, in Commonwealth countries and in Europe.

The influence of law and economics has also been felt in legal education, with graduate programs in the subject being offered in a number of countries.

Laws Order: The Web Page

Many law schools in North America, Europe, and Asia have faculty members with a graduate degree in economics. In addition, many professional economists now study and write on the relationship between economics and legal doctrines. Anthony Kronman, former dean of Yale Law School, has written that "the intellectual movement that has had the greatest influence on American academic law in the past quarter-century [of the 20th Century]" is law and economics.

Despite its influence, the law and economics movement has been criticized from a number of directions. This is especially true of normative law and economics. Because most law and economics scholarship operates within a neoclassical framework, fundamental criticisms of neoclassical economics have been drawn from other, competing frameworks, though there are numerous internal critiques as well. Critics of the law and economics movements have argued that normative economic analysis does not capture the importance of human rights and concerns for distributive justice.

Some of the heaviest criticisms of the "classical" law and economics come from the critical legal studies movement, in particular Duncan Kennedy [11] and Mark Kelman.

Relatedly, additional critique has been directed toward the assumed benefits of law and policy designed to increase allocative efficiency when such assumptions are modeled on "first-best" Pareto optimal general-equilibrium conditions. Under the theory of the second best , for example, if the fulfillment of a subset of optimal conditions cannot be met under any circumstances, it is incorrect to conclude that the fulfillment of any subset of optimal conditions will necessarily result in an increase in allocative efficiency.

Consequently, any expression of public policy whose purported purpose is an unambiguous increase in allocative efficiency for example, consolidation of research and development costs through increased mergers and acquisitions resulting from a systematic relaxation of anti-trust laws is, according to critics, fundamentally incorrect, as there is no general reason to conclude that an increase in allocative efficiency is more likely than a decrease.

Essentially, the "first-best" neoclassical analysis fails to properly account for various kinds of general-equilibrium feedback relationships that result from intrinsic Pareto imperfections. Another critique comes from the fact that there is no unique optimal result. Warren Samuels in his book, The Legal-Economic Nexus , argues, "efficiency in the Pareto sense cannot dispositively be applied to the definition and assignment of rights themselves, because efficiency requires an antecedent determination of the rights 23—4 ". Law and economics has adapted to some of these criticisms see "contemporary developments", below.

One critic, Jon D. I think you have to be careful with this sort of thing, because even when you know and acknowledge that your conclusions are based on dubious premises and simplified models, it's easy to imbue them with more normative force than they deserve. I feel like Friedman falls into this trap himself: My other criticism is that, although it is written in a fairly accessible style, it can be a bit of a slog -- sometimes because the pace or style of the explanation is for me a bit off, sometimes just because it's fairly dry stuff.

It took me a long time to get through, and I often had to push myself to go back to it. Still, Friedman is clearly a very smart guy who, despite his ideological biases, cares about the rigorous pursuit and honest communication of truth.

So long as you take his caveats literally, and remember to actively apply them throughout, I think this is a really useful and interesting book. Jun 12, Ryan rated it really liked it Shelves: Law's Order presents an adequate introduction to a number of important issue in Law and Economics, but the schizophrenic matter by which it attempts it tries to appeal to all, but will educate few. As a book for an Economics OR a Law student, it goes through too much elementary material of both to keep interest. For the general but educated audience, it jumps between perhaps too many technical economic and legal terms to be readable without note-taking.

On the same note, the topics handled su Law's Order presents an adequate introduction to a number of important issue in Law and Economics, but the schizophrenic matter by which it attempts it tries to appeal to all, but will educate few. On the same note, the topics handled such as antitrust or tort law are given far too little time generally pages to support the author's thesis. That thesis, a rejection Posner's conjecture that common law approximates economic efficiency, is not even formally presented to the reader until the last chapter.

At that point, the scattershot chapters finally coalesce, although not nearly as well as Friedman would probably have liked. To the book's general idea, aside from the seemingly ad hoc thesis in the final chapter, is the use of judging law through the standpoint of pure economic efficiency.

He frequently states that, although other people may object to enforcing whatever punishment with whatever terms such as execution, or making burglary a tort with no possible prison sentence , it is necessary to reduce them to what Neoclassical Economics says will happen. Then, if we determine if our laws match what is economically efficient, that is "interesting", and that if we should take notice whenever there is an anomaly, we should bow to either the economist's omniscience or admit our own irrationality.

Either way, Friedman wins, especially dismissing a legitimate objection to his methodology with what amounts to artful dodging and pure rhetoric.

Navigation menu

Still, I'm probably being overly critical. Excepting Friedman's desire for economic efficiency and economic efficiency which could have been easily fixed by making the book explicitly contingent on his goal and not as asininely rejecting his academic opponents , there isn't much wrong with the economic analysis, although if you know him at all, you know David Friedman is rabidly pro-market.

The law that I say also seemed sound, although as an economics student albeit one with an interest in law , I am not qualified to approve of it. The readability problems could have been solved by splitting Law's Order into two books, one directed at economists and one directed at lawyers and law students.

Or, Friedman could have made like Posner and write an tome, do the whole academically thing properly, and say screw it to the popular audience. Apr 30, H. His target audience in mind math-phobic law students , Friedman son of Milton has stripped the main text of formulas and, more unfortunately, charts while leaving markers to indicate where you may find the math on his website.

Law and economics

But public choice at least certainly deserves an entire book of its own. Charts are in my mind a must have in any economics textbook, even one aimed at text-friendly lawyers. But those are the sort of things that separate very, very good from perfect. Dec 26, Ushan rated it liked it Shelves: An attempt to apply economic analysis to law, from an anarcho-capitalist perspective. Regardless of Friedman's politics, I liked one story from the book. When Friedman's children told him they wanted kittens, they went to the nearest animal shelter, and were subjected to a humiliating two-hour interview by a shelter volunteer; she almost extracted a promise from Friedman not to let the kittens outside, although she did not apply this rule to her own cat.

Friedman and his children did not get the An attempt to apply economic analysis to law, from an anarcho-capitalist perspective. Friedman and his children did not get the kittens, and he wrote a letter to the charity running the shelter, asking: Surely, a good owner is better for a kitten than a bad owner, but even a bad owner is better than being put to sleep, which is what happens to kittens who do not find an owner.

The charity official replied that if they gave kittens to just about anybody, they wouldn't find any volunteers. Apr 14, Justin rated it it was amazing.

See a Problem?

He approaches law and economics with a pleasant mix of humility and boldness. The book clarifies a great deal about law today, and elsewhere like medieval Iceland. This is the book that decisively dissuaded me of a strong libertarian stance on property rights and convinced me to advocate for the free market and cultural norms to regulate law instead. Feb 11, Kamilia Aziz rated it it was amazing Shelves: Bought this book because it is a required text for my law and economics module.

His writings though, piqued my economics side; the part I never knew I had. In the book, he states his opposition to violent anarcho-capitalist revolution. He advocates a consequentialist version of anarcho-capitalism, arguing for anarchism on a cost-benefit analysis of state versus no state. Friedman is a longtime member of the Society for Creative Anachronism , where he is known as Duke Cariadoc of the Bow. He is known throughout the worldwide society for his articles on the philosophy of recreationism and practical historical recreations, especially those relating to the medieval Middle East.

He is a long-time science fiction fan , and has written two fantasy novels, Harald Baen Books , and Salamander He has spoken in favor of a non-interventionist foreign policy. From Wikipedia, the free encyclopedia. For other people with the same name, see David Friedman disambiguation.

The Machinery of Freedom. Archived PDF from the original on 17 December Retrieved 25 November Much is made in libertarian circles of the division between 'Austrian' and 'Chicago' schools of economic theory, largely by people who understand neither. I am classified as 'Chicago'.

• Baltimore Volume 2: The Curse Bells HC
• Blood Shadows (Blackthorn Dark Paranormal Romance Series Book 1)
• A Texas Cowboy or Fifteen Years on the Hurricane Deck of a Spanish Pony (Illustrated)
• Spanish-Colonial Architecture in the United States (Dover Architecture)
• The high failure rates of cross-border mergers due to the focus of companies on hard factors
• Evoluant