Assessing the Social Impact of Legal Principles and Rules through Posner’s Economic Analysis of Law

Posner’s Economic Analysis of Law is one of the most widely read books among legal professionals in the United States and many other countries.

Since its first edition was published in 1973, the book has gone through nine editions, with the 9th edition appearing in 2014. When it was first published, it drew great attention as a systematic analysis applying economics to a broad range of legal issues.

Many scholars have contributed greatly to the development of law and economics, but it is hard to find anyone who has left a mark across as many areas of law as Posner.

The author, Posner, was born in New York in 1939 and majored in English literature at Yale University. He later graduated from Harvard Law School, taught at Stanford University, and until recently served as a professor at the University of Chicago Law School.

From 1981 to 2017, he served as a judge on a U.S. federal court of appeals. Although most federal judges in the United States hold lifetime appointments, he retired suddenly in 2017; only recently was it revealed that the reason was Alzheimer’s disease.

He authored nearly 40 books as well as many articles, and is known as the most frequently cited legal scholar in the United States.

In the preface to Economic Analysis of Law, Posner makes clear that economics is a powerful tool for analyzing a wide range of legal issues. Economics predicts the consequences that an event or shock will have on the economy or related markets and evaluates whether those consequences are socially desirable.

Law and economics uses these methods of economic analysis to predict how a legal doctrine or rule will affect the relevant parties and what outcomes will result.

Furthermore, it judges whether those outcomes are socially desirable and seeks legal doctrines or rules that can produce socially desirable results.

Economic Analysis of Law helps economists understand the economic structure of law, but it is also of great help to legal professionals in grasping the coherent logic of the legal system and legal institutions.

For legal professionals, applying economics to analyze a variety of legal issues is not easy. Economics often relies on mathematical models, and its excessive rigor can make it seem distant from concrete legal problems.

However, Economic Analysis of Law shows how sound economic analysis of real-world legal issues can be conducted even without using complex mathematical models. For that reason, even readers unfamiliar with economics or mathematics will not find it particularly difficult to follow the book’s logic.

There are many excellent books on law and economics, but it is hard to find one that analyzes nearly every field of law as comprehensively as Posner’s Economic Analysis of Law: civil law and criminal law, commercial law and financial market law, economic regulatory law, tax law, civil and criminal procedure, and constitutional law.

It also analyzes a wide range of legal issues, including international law, drug crimes, art theft, sex crimes, surrogacy, flag desecration, the pardon power, democratic theory, and terrorism.

What Posner seeks to show through this analysis is that economic calculation lies at the foundation of most legal doctrines formed across various fields of law. A country’s legal system consists of many different areas, and each area has its own distinctive legal doctrines.

His point is that when legal doctrines that appear unrelated are examined through economics, one can discover a logic that runs through them all.

Posner sees this as the maximization of wealth. In the Anglo-American legal tradition, the doctrines of what is commonly called common law in the fields of civil and criminal law can largely be interpreted as taking wealth maximization into account.

Statutory law and constitutional law, by contrast, often do not appear to do so. Even then, however, economic considerations still permeate them at a fundamental level, and they can be better understood through economic analysis. That is why economics is useful for understanding various legal doctrines and improving them.

Legislation without economic consideration misses both justice and efficiency

As an academic field, law and economics has influenced a wide range of legal areas in the United States and has also significantly changed legal education. Nearly every American law school offers courses in law and economics, and decisions of U.S. courts also reflect some of the findings of law and economics scholarship.

Even so, analyzing law in terms of efficiency still makes many legal professionals uncomfortable. Justice and efficiency are not the same, and law as a normative system does not pursue efficiency.

If, under the banner of pursuing efficiency, the law restricts or compels individual conduct, individual liberty and property rights may be put at risk, and efficiency may in fact be greatly reduced.

It is clear that realizing justice or protecting the vulnerable entails economic costs. If those in power engage in reckless legislation in the name of justice or the protection of the weak without economic consideration, the economy will fall into difficulty, making it hard to secure the resources needed to realize justice or protect the vulnerable.

When that happens, both justice and efficiency are lost. There is nothing more hollow than justice that remains a feast of words because there is no means to realize it.

The message Posner’s Economic Analysis of Law offers our society is clear. Since democratization, our society has faced the task of establishing the rule of law. Yet all too often, laws are enacted as tools for imposing the ideology of the governing forces, without serious reflection on what kind of laws they ought to be.

As a result, predatory legislation that plunders minorities in order to distribute benefits to majorities is easily enacted. This is not the rule of law; it is merely the use of law to give a veneer of legality. For our society to prosper over the long term, the two wheels of growth and welfare must both turn smoothly.

To make that possible, legislation and judicial decisions need not pursue efficiency as their ultimate goal, but they must reflect economic considerations. Only then can the resources needed for welfare be secured over the long term. Furthermore, only then will it be possible to realize the justice that law seeks and to protect the vulnerable.

Kihwa Jung, Emeritus Professor, Department of Economics, Chonnam National University

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Original title: Posner의 '법경제학' 경제적 분석으로 법리·법규정의 사회적 영향력 판단

Author: Gi-hwa Jeong

Date: 2022-04-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24724