Economic Analysis of Law (Casebook)

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Summary: Good economics concepts exposed...
Review: Although the economic theories used by Posner are for the most part sound, nevertheless, he lacks a more realistic approach to the problems presented in this book. For example, in the real world we CANNOT ignore transaction costs in all cases. Also, not all laypeople know the law as well as Mr. Posner. Overall, I do recommend reading this book, it will undoubtly stimulate your mind!

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Summary: University of Chicago "Must"
Review: Anyone interested in Economic Analysis of Law should have this book of "legendary" Posner

Rating:
Summary: University of Chicago "Must"
Review: Anyone interested in Economic Analysis of Law should have this book of "legendary" Posner

Rating:
Summary: An analysis worth putting some serious thoughts into
Review: Posner's Economic Analysis of Law was a real primer at the time of its first publication in 1973, and has undoubtedly continued to be so. Here is an analysis of law and related behavioural and regulatory aspects of society from an economic point of view, free from social, cultural, religious, moral, sexist or racial bias, whether these biases be (today) considered as politically correct (i.e. holy cows), or not.

You will discover, maybe with a certain sense of relief considering the fact that economic aspects do have such an impact on our lives, that economic objectivity often offers more ethical alternatives than some of our socially or culturally favoured solutions, at least in an ideal world, that is, where transaction costs are virtually non-existant, and where one's own money/possessions have no colour or personal human history of their own.

The necessary theoretical assumption (Coase) does of course imply a somehow oversimplified valuation of human undertakings and personal investments (an oversimplification as to what one understands as goods), but the approach allows some sound alternatives to see the light, at least from a judicial point of view, it seems. What it certainly does, is to facilitate an impartial, rational and emotionless abstract attitude, something which should not be underestimated in judicial and legal systems. The arms of law and justice are in the need of being blind, a position of showing total impartiality, otherwise justice is no more just, and law ceases to be universal. And that is precisely where the cold abstractness and impartiality of an economic approach, besides the fact of offering a unifying concept and aiming at being consistent throughout, offers an advantage to other approaches, at least for its objectivity and a certain universal intuitive accessibility for all people (everybody is supposed to know the Law, and to be certain as to what to expect, a cherished concept of European Continental Law known as Rechtssicherheit). It is also certain that the principles of economic analysis would offer a much more fruitful field of application in countries governed by common-law and an anglo-saxon styled system of jurisprudence.

The only limitations of the approach could be seen in our yet still somehow limited understanding of economic phenomena as such and their outcome in the long run. Another limiting factor in the elaboration of flexible and resilient long-term economic models is that, in the end, we are all dead (at least according to John Maynard Keynes). The effect of that human condition upon the mind, its thinking and human activity in general, that is the seal of death stampeded upon all personal human concerns, should not be underestimated when attempting to use economic models to explain human behaviour and thereby derive sound legal systems.

Although most of the analysis in this book relies on the valid pre-supposition of Coase's axiomatic simplification of a world of (nearly) costless transactions, i.e. there is neither emotional nor psychological involvement in man's undertakings/possessions (except objectivity and rationality in their finest and purest sense), and all transactions are smooth, efficient and painless (transaction costs, whatever they be, are never prohibitive), an assumption which one might either agree up to a certain extent, or with which you might find some serious objections to be raised as to its abstract irreality, I believe one may well find this book to be a real and realistic mind-teaser.

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Summary: Monumental, brilliant . . . and ultimately unconvincing
Review: Prior to 1960, legal scholars invoked economics only in a handful of specialized contexts -- mostly antitrust and taxation. But it was not generally thought that economic science had much of anything useful to say about the law generally.

Then, in the early 1960s, Guido Calabresi and Ronald Coase published a couple of papers that a lot of people found pretty darned interesting.

Richard Posner was one of those people. Within about a decade thereafter, he had written a massive treatise-textbook that attempted to apply (Chicago-school) economic insights to almost the entirety of the law, in part relying on Calabresi's insights on risk allocation and Coase's famous theorem about what happens in a world with no transaction costs.

That treatise-textbook is now in its fifth edition, and you're looking at the Amazon page for it. It would be hard to name a more influential work in the field of law and economics -- and even today, as Posner himself will gladly tell you, although there are a few other _textbooks_ on the topic, there are still no other _treatises_.

Posner's scope is breathtaking. Not content to limit himself to the usual array of legal topics (property, torts, contracts, criminal law, legal procedure, and so forth), he also manages to devote portions of his text to, e.g., sex and marriage, surrogate motherhood, prostitution, homosexuality, and a host of other controversial and/or marginal topics you don't typically encounter in an economics text.

The typical reader will probably not find him altogether persuasive on these topics. In fact, if you're anything like me, you'll probably wind up shaking your head in sheer wonderment: how is it possible for someone to be so brilliantly incisive on one page and so infuriatingly obtuse on the next?

But don't assume Posner is the one who's wrong. Don't misunderstand me; I think he _is_ sometimes the one who's wrong. But even then, his arguments are something to be reckoned with, not to be easily dismissed. (Nor is he _ever_ simply "obtuse.")

For the most part I think the book is a success in its more modest aim. In the fifth edition, Posner ends his opening chapter with a short reply to critics of the law and economics movement; with much of what he has to say here I can wholeheartedly agree. His work should, as he notes, be of _some_ interest to anyone who thinks Kaldor-Hicks efficiency/potential Pareto improvement plays any role whatsoever in setting policies. (I don't personally think it plays or should play much role at all, but I can agree with the point as Posner has stated it.) And Posner notes, quite unobjectionably, that the entire field should not be rejected merely because one does not accept the views of its most aggressive exponents.

But make no mistake, Posner _is_ one of its most aggressive exponents, and the apparent modesty of his aims is somewhat disingenuous: he is not merely trying to find out what economics can say about the law but to tell us that it can say quite a lot indeed. And it is here that I find him ultimately unconvincing on a number of points.

(To take one well-known example, I don't think Posner's discussion of the famous "Hand formula" captures what Judge Billings Learned Hand meant by it, and at any rate the formula is not as useful as Posner seems to think it is. There is some good discussion of the Hand formula by Richard Wright in _Philosophical Foundations of Tort Law_, and in general Posner has been roundly and in some respects successfully criticized by a wide range of scholars from Ronald Dworkin to Gary Schwartz.)

But there is no getting around this massive work, and it absolutely cannot be lightly dismissed. On the contrary, the thing bristles with fine insights and obviously massive legal and economic erudition; most of it will repay close reading even for the reader who ends up disagreeing. If you have any interest in the field of law and economics, you really ought to read this book _sometime_.