From: thf2@ellis.uchicago.edu (Ted Frank)
Subject: Re: Law and Economics
Reply-To: thf2@midway.uchicago.edu
Organization: University of Chicago Computing Organizations
Distribution: usa
Date: Tue, 21 Jul 1992 16:09:14 GMT

In article <1992Jul21.032844.13285@panix.com> lkk@panix.com (Larry Kolodney) writes:
>In <1992Jul20.034441.25202@midway.uchicago.edu> thf2@ellis.uchicago.edu (Ted Frank) writes:
>>Leaving aside the arguable second clause of your statement, I'd like
>>to address the first contention.
>
>>Assume for a moment that L&E's most famous practitioners do use L&E
>>to justify, etc.  How is that the fault of the methodology?
>
>Did I fault the methodology?  Read what I said, "Its NOT law and
>economics that <etc> ...."

No, but Ed did.

>>The advantage of L&E is that it forces legal thought into an analytical
>>framework.
>
>Yes, and that analytical frame work is useful for answering a narrow
>range of questions.  It does not, as Posner et al seem to believe,
>serve as a universal language of human desire and social value.

I question the use of your word "narrow" and whether Posner et al
ever call it a "universal language."

[Re Epstein:]
>It may be that the flaws of his formal model may be exposed.  But even
>if there were no technical flaws in his formal model, he would still
>be wrong, for reasons which have nothing to do with economic modeling.

If he had a flawless model, he might very well have come to a different
conclusion.

Whether he's wrong on the non-economic questions is a subjective question,
unless you believe in a set of natural rights.  (But even if you do
believe in a set of natural rights, how does one resolve conflicts with
another person's belief in natural rights?)

>>I assume you're referring to Epstein (who honestly believes that he *is*
>>giving rich and poor equal footing).  Posner's come out in favor of
>>gay rights.
>
>Posner has also waged an virulent battle against the regulatory state
>and attempts to redistribute income.  He is, however interesting his
>writing, basically an apologist for entrenched economic power, Gay
>rights notwithstanding.
>
>For example, Posner argues from Coase's theorem that, given a choice
>of legal rules governing transactions between two parties, the correct
>rule is always the one which avoids transactions costs (i.e. imposes
>the outcome that would have accured after a Coasian transaction).  The
>rationale is obviously that such a rule is more efficient.

This is a bit of an oversimplification.  

>Of course, Posner's claim is nothing more than ideology dressed up a
>neutral science.  There is nothing in Posner's calculation which tells
>us whether it is better, in any given case, to increase efficiency or
>to redistribute wealth.  Clearly, Posner was on the efficient side all
>along, and used fancy equations and talk about pareto-superiority to
>justify it.

Yes, clearly Posner is on the side of "efficiency" all along.  But you
act as if it's part of his secret agenda, when he's been very publicly
defending efficiency on what he calls "ethical" and "political" grounds.
See his article in Volume 8 of the Hofstra Law Review (1980) and in
Volume 8 of the Journal of Legal Studies (1979) (where he attacks
Benthamite utilitarianism).

Once again, you confuse causality.  That Posner's conclusions were
(in some instances) anti-regulatory does not mean his goals, ex ante,
were anti-regulatory.

And, for what it's worth, you're incorrect about wealth redistribution.
Posner supports it in Problems of Jurisprudence (on efficiency grounds).

>>I must take issue with your use of the word "justify," because it implies
>>that anti-regulatory stances are the ex ante purpose of L&E rather than
>>the ex post conclusion.  If it were the former, perhaps you could show
>>where in L&E corners are cut to justify bad policies.
>
>See above.

No, you still haven't shown it.  You're implying that they're misapplying
the methodology to come up with the wrong answers.  My claim is that they
(with the possible exception of Epstein, who actually has mellowed his
libertarianism somewhat in recent years) come to the conclusions because of
the methodology, not the methodology because of the conclusions.

>>  L&E in and of itself
>>is neutral.
>
>No it isn't.  It necessarily excludes certain types of data from the
>calculus, data which would tend to support (dare I say it)
>"counter-hegemonic" conclusions.  L&E is useful for making predictions
>about outcomes *in the current system*.  

This is inaccurate.  I just spent a good portion of yesterday arguing with
a professor about how a Rubinstein bargaining model would apply to a different
legal regime wrt contracts than the one that exists today.  L&E is precisely
at its best when it's able to model how different legal systems would
affect society as a whole.

>Unless you beleive that
>neo-classical economics is a universal science of human behavior, than
>you must see that L&E has an inherent bias toward a liberal free-trade
>and instrumental economic outlook.

I see no such bias.  One can accept the usefulness of law and economics
without buying kit and kaboodle the concept of wealth-maximization as
an end-goal of society.  I see nothing wrong with Law and Economics saying
"Title VII costs $x to society" or "Legal Regime Y would prevent 98% of the 
discrimination that Title VII does, but only cost half as much."  At some
point we have to make tradeoffs.  Law and Economics never (honestly) claimed
to know where the best place to make the tradeoff was -- it's merely a tool
to identify the costs and benefits of different sets of legal rules.

>> The results may show, for example, that the one regulatory
>>regime cost society more than another, but it doesn't necessarily follow
>>from that that the one that costs less is better, as I discussed in a post
>>a few days ago in misc.legal regarding the 1964 Civil Rights Act.  It's
>>important to separate criticism of Posner's theory that wealth maximization
>>is the appropriate goal of a society from criticism of law and economics
>>in and of itself.  One can take advantage of the latter without subscribing
>>to the former.
>
>As you know, Ted. I've used economic analysis in my own (decidedly
>anti-establishmentarian) writing, so you don't need to tell me this.  
>
>What is truly obnoxious about Posner is not that he used L&E, but that
>he has the pretense to think that he can explain everything with it.

"Economic analysis cannot, for example, solve the moral issue of
abortion; but it can help to clarify it." -- Posner, Sex and Reason, p. 8.

"But there is more to notions of justice than a concern with efficiency....
An effort will be made in this book to explain some of these [legal rules]
in economic terms, but most cannot be; there is more to justice than
economics, a point the reader should keep in mind in evaluating
normative statements in this book."  -- Posner, Economic Analysis of Law,
3d ed, pp. 25-26.

Are there any other straw men you'd like to attack?
-- 
                      ....................................
                      ted frank | thf2@midway.uchicago.edu
                      the university of chicago law school 
                      official member of the cultural elit