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Wednesday, October 11, 2006

Research Canons: Law & Economics

Our next subject matter for the research canons project is Law & Economics.  (See here for a discussion of the research canons project, including some newly added categories, dates, and links to previous installments.)  Please comment on the books and articles that are essential to a new academic in the field.

One question to address: to what extent is law and economics a field, rather than a methodology that informs other subject areas (contracts, corporate law, etc.)?

Posted by Matt Bodie on October 11, 2006 at 07:54 AM in Research Canons | Permalink


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Excellent question, and as an outsider looking in, I would argue that 'law and economics' is, strictly speaking, about methods and methodology (e.g., rational choice theory), and not its own field, despite the ambitions and pretensions of some of its practitioners. It brings much to the table, but until very recently was quite obtuse when it came to such things as a full-bodied appreciation of social norms. As Peyton Young said in a talk at the Legal Theory Workshop at Yale Law School:

'Although sociologists and anthropologists have long understood the central role played by norms, economists have traditionally viewed them as peripheral to economic decisions (notable exceptions are Thomas Schelling, George Akerlof, and Robert Sugden). The fact is, however, the norms influence terms of employment, the amount that people save and consume, attitudes toward debt, decisions about when to retire, and a host of other economic variables. Even property rights are governed to a considerable extent by social expectations about who is entitled to what.'

That said, I have three books I rely on here:

Polinsky, A. Mitchell. An Introduction to Law and Economics. New York: Aspen, 3rd. ed., 2003.

Shavell, Steven. Foundations of Economic Analysis of Law. Cambridge, MA: Belknap Press of Harvard University Press, 2004.

Sunstein, Cass R., ed. Behavioral Law & Economics. Cambridge, UK: Cambridge University Press, 2000.

Several books by Judge Posner are useful too (see his webpage).

An absolutely amazing and exhaustive resource, freely accessible online, is the Encyclopedia of Law and Economics (to which R. Posner has a foreword): http://encyclo.findlaw.com/foreword.html

Those philosophically inclined, will want to keep ready-at-hand:

Hausman, Daniel M and Michael S. McPherson. Economic Analysis, Moral Philosophy, and Public Philosophy (Cambridge, UK: Cambridge University Press, 2nd ed., 2006),

Maki, Uskali, ed. The Economic World View: Studies in the Ontology of Economics (Cambridge, UK: Cambridge University Press, 2001).

McCloskey, Donald N. The Rhetoric of Economics (Madison, WI: University of Wisconsin Press, 1985).

McCloskey, Donald N. If You’re So Smart: The Narrative of Economic Expertise (Chicago, IL: University of Chicago Press, 1990).

McCloskey, Donald N. Knowledge and Persuasion in Economics (Cambridge, MA: Cambridge University Press, 1994).

McCloskey, Deirdre. The Secret Sins of Economics (Chicago, IL: Prickly Paradigm Press, 2002).

Mirowski, Philip. Machine Dreams: Economics Becomes a Cyborg Science (Cambridge, UK: Cambridge University Press, 2002).

And virtually anything written by Kaushik Basu, Partha Dasgupta, and Amartya Sen.

Posted by: Patrick S. O'Donnell | Oct 11, 2006 9:17:24 AM

Erratum: The Hausman and McPherson title should read '...Public Policy.'

Posted by: Patrick S. O'Donnell | Oct 11, 2006 9:19:53 AM

I found my copy of Posner's 'textbook-treatise:' Economic Analysis of Law (New York: Aspen, 5th ed., 1998).

Posted by: Patrick S. O'Donnell | Oct 11, 2006 9:35:17 AM

People working in L&E who want to avoid error both silly and sophisticated can do well to read first Ronald Dworkin's serious spanking of Richard Posner, "Is Wealth a Value?" (It's chapter 12 in his _A Matter of Principle_. I think it was originally in a symposium w/ Posner and other in the Hofstra Law Review) where the idea that wealth maximizing is a plausible goal for the law is demolished. (Posner still holds this view, I believe, but now no longer tries to give it a normative foundation, just asserting it as a brute preference or something.) Jules Coleman's _Markets, Morals, and the Law_ is also excellent for clearing up many of the normative foundations of L&E.

Posted by: Matt | Oct 11, 2006 9:41:30 AM

Two by Amartya Sen:

1. The "Rational Fools" article in Philosophy & Public Affairs.

2. On Ethics and Economics.

Posted by: Jeff Lipshaw | Oct 11, 2006 10:05:37 AM


Would you agree that Coleman makes an efficient use of the woodshed in his critque of Posner in Ch. 4, 'Efficiency, Utility and Wealth Maximization' (although he does repeat several of Dworkin's points)? All the same, it's nice to find Posner's endorsement of Coleman's book on the back cover!

Posted by: Patrick S. O'Donnell | Oct 11, 2006 10:13:01 AM

A correction- Dworkin's "Is wealth a value?" first appeared in an exchange w/ Posner in Journal of Legal Studies, Vol. 9, 1980. Posner's article, "Utilitarianism, Economics, and Legal Theory" (JLS, Vol. 8, 1979) does quite a good job on its own of showing why wealth maximization isn't an attractive ground for law despite the point of the article being to show that it is an attractive ground.

Posted by: Matt | Oct 11, 2006 10:32:29 AM

* Posner's treatise (Economic Analysis of Law)

* The 1998 Stanford Law Review issue with (1) the Jolls/Sunstein/Thaler Behavioral Econ article and (2) Posner's reply (bashing behavioral econ and defending traditional law & econ) -- a truly classic example of that debate by the folks who are leaders on both sides.

* Calabresi/Melamed, "Property, Liability, Inalienability: One View of the Cathedral" (whose title I'm butchering, which is embarassing, because I've read it several times over many years).

* for an unusually accessible primer on economic analysis of litigation (does that qualify for "Canon" status?), Robert Bone's short book, "The Economics of Civil Procedure" (an amazingly broad overview of the economics of litgation and settlement, as well as various specifics like class actions, discovery, attorney fees, etc.)

Posted by: Scott Moss | Oct 11, 2006 11:10:05 AM

anyone interested in the field of law and economics should read Judge Harry Edwards, THE GROWING DISJUNCTION BETWEEN LEGAL EDUCATION AND THE LEGAL PROFESSION 91 Mich. L. Rev. 34, and specifically this excerpt (from page 47):

"Law and economics exemplifies the second kind of "impractical" scholarship - the kind that is directly prescriptive but wholly theoretical. [FN37] Although law-and-economics scholars are often concerned with practical problems, they also typically ignore the relevant law. One typical kind of law-and-economics article seeks to demonstrate that a particular legal outcome is efficient. [FN38] However, a judge or administrator cannot choose an efficient outcome that violates an applicable *48 statute, precedent, or regulation. Thus, such an article will have much less utility for the judge or administrator than a "practical" article, which first considers whether the legality of an efficient outcome is "easy" or "hard," and then advances the efficiency argument only if the efficient outcome is not clearly illegal."

Posted by: andy | Oct 12, 2006 7:58:12 PM

Fried, Barbara H. The Progressive Assault on Laissez Faire: Robert Hale and the First Law and Economics Movement. Cambridge, MA: Harvard University Press, 1998.

Posted by: Patrick S. O'Donnell | Oct 24, 2006 5:41:27 PM

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