Is There a Dissenting Tradition in Law and Economics?
| Date | 01 March 1991 |
| DOI | http://doi.org/10.1111/j.1468-2230.1991.tb02656.x |
| Author | Neil Duxbury |
| Published date | 01 March 1991 |
REVIEW ARTICLE
Is
There a Dissenting Tradition in Law and
Economics?
Neil
Duxbury*
Nicholas
Mercuro
(ed),
Law
and
Economics,
Boston, Dordrecht and London:
Kluwer, 1989,
viii
+
264 pp, hb
f55.00.
It is now over three decades since American legal scholarship witnessed the birth
of the ‘new’ movement
in
law and economics. Up
until
the 196Os, American academic
lawyers had been interested
in
economics only
in
so
far as it was seen
to
be important
for a proper estimation of those areas of law which quite obviously involve economic
issues, areas such as anti-trust, taxation and the regulation of industry. This ‘old’
tradition of law and economics centred around the task
of
analysing the degree
to
which these select areas of law could be said to be economically efficient in their
operation.
In
the 1960s, law and economics branched outwards, as its proponents
began
to
extend their analyses beyond those specific areas of law which were regarded
as essentially ‘economic’ at their core and focus more generally on the common
law (including thosc areas of the common law which do not appear,
prima facie,
to
regulate economic relationships).
I
This widening of focus among lawyer-
economists was inspired by a paradigmatic
shift
of Kuhnian proportions* at the
foundation of law and economics theory,
a
shift which was at once stimulated and
achieved by Ronald Coase’s path-breaking economic study of liability rules, ‘The
Problem of Social
Cost.”
Coase’s study, more than any other,4 heralded the birth of the ‘new’ law and
economics. The most basic insight to be inferred from his work is that, from an
economic perspective,
it
may prove rational for parties
to
contract around pre-existing
legal rules, should those rules preclude them from maximising their resources and
minimising their costs.5 Coase took issue with the view
-
common among welfare
economists of the time
-
that agents should be wholly responsible for the undesirable
external effects of activities carried out on their own land (for example, that factories
emitting polluting smoke should be liable in costs to their neighbours). Legal rules,
welfare economists had argued, were
to
be devised
to
ensure that agents would bear
the
full
costs of their offending activities. Coase shattered this traditional economic
reasoning. The core of his thesis is that where two parties have rights
in
neighbouring
plots of land and the activities of those parties
in
exercising their rights turn out
*Faculty of Law, University
of
Manchester.
For criticistiis of an earlier draft,
I
should
like
to
thank Anthony
Ogus
and
Ronnic
Warrington, neither
of whom should be assumed to share any
of
the views that
I
express.
See
G.
Calabresi, ‘The New Economic Analysis
of
Law: Scholarship, Sophistry,
or
Self-Indulgence?’
(1982)
68
Proceeditigs
qf
rlw
Bririslr
Accrdettiy
85-108,
at pp
86-87.
T. Kuhn,
Tlre
Strirctrrre
qfScietirf$c
Reiolirtiwrs
(2nd ed. Chicago: Univcrsity of Chicago Press, 1970).
R.
Coasc. ‘The Probleni of Social Cost’ (1960) 3 Jnl of Law and Econ 1-44.
Though one should not overlook
G.
Calabresi, ‘Some Thoughts
on
Risk Distribution and the Law
of
Torts’
(1961)
70 Yale
LJ
499-553.
For example, by creating licences or caseincnts over land, thereby making lawful that which would
otherwise have been unlawful. Rationality. here, requires that parties be possessed of substantial rclcvant
information
to
enable them
to
predict the consequences
of
their particular choices of action.
I
2
3
4
5
300
Tlic
Mo(/crti
L.mv
Rcvieiv
54:2 March 1991 0026-7961
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