Kaushik Basu: The Republic of Beliefs: A New Approach to Law and Economics
| Published date | 01 June 2019 |
| DOI | http://doi.org/10.1111/jols.12159 |
| Date | 01 June 2019 |
| Author | Robert G. Lee |
THE REPUBLIC OF BELIEFS: A NEW APPROACH TO LAW AND
ECONOMICS by KAUSHIK BASU
(Oxford: Princeton University Press, 2018, 238 pp., £27.00)
Socio-legal scholars have long been convinced of the futility of seeking to
examine the workings of the law from within the discipline of law, believing
that some form of exogenous analysis is likely to cast greater light on law as
the object of study. Sunstein has argued that the most influential intellectual
development in law in the last one hundred years has been that generated in
the field of law and economics.
1
In The Republic of Beliefs, Kaushik Basu,
formerly Chief Economist and Senior Vice-President of the World Bank,
adds to this literature while at the same time depicting the neoclassical work
in law and economics in the Chicago School tradition as flawed and
fallacious. The book calls instead for a new approach to law and economics
which is founded in game theory, which, it is argued, can offer a more
convincing analysis of why a law, `nothing but some ink on paper', can
function effectively to lead to fairer outcomes.
Basu's concern with this question emanates in part from his background
in development economics and his observation of the gap between law as it
might read in the statute book and its operational influence in practice. A
good deal of the book concerns corrupt practices and he offers an early
example of the Indian Prevention of Corruption Act 1988, which takes a
clear stance on the issue of bribery by penalizing in equal terms the bribe
giver and the bribe taker. The outcome is that, however resentful the bribe
giver may be at having to pay for something to which (s)he has a legitimate
entitlement (a so-called harassment bribe), once paid, then, as game theory
would suggest, it becomes impossible to gather evidence of the fact of the
bribe from either party. As policy adviser to the Indian Finance Ministry,
Basu's suggestion that the Act might be reformed to absolve the bribe giver
in such circumstances was loudly shouted down as an unethical stance which
law could not be seen to endorse. In competition law, always closely aligned
to economic policy, we do now see examples of whistleblowers who have
engaged in cartel behaviour being offered immunity from suit, suggesting
that the pragmatic approaches to effectiveness can override moral scruple.
Although not with any great relish, Basu is prepared to accept the amoral
premise of much of law and economics and also accept the assumption that
individual actors will seek to maximize their own utility at all times, though
he does ask why, if this assumption is correct, airlines instruct passengers in
emergency situations to fix their own oxygen mask first before helping
others. In chapter 7, in discussing rationality and law, Basu positions himself
among those who would never assert that the rational-actor thesis is always
valid but nonetheless claims that it is an assumption that could be put to good
340
1 C. Sunstein, `Listen, Economists' New York Rev. of Books, 10 November 2016, 53.
ß2018 The Author. Journal of Law and Society ß2018 Cardiff University Law School
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