Vol. 16 No. 7 (July, 2006) pp.542-545

 

THE ORIGINS OF LAW AND ECONOMICS: ESSAYS BY THE FOUNDING FATHERS, by Francesco Parisi & Charles Kershaw Rowley (eds). Cheltenham, UK: Edward Elgar, 2005. 544pp. Cloth $165.00/Ł95.00. ISBN: 1840649631.

 

Reviewed by Aristides N. Hatzis, Department of Philosophy & History of Science, University of Athens. Email: ahatzis [at] phs.uoa.gr

 

It is widely accepted that Law and Economics (L&E) is the most successful paradigm in legal theory since legal positivism. Today there is an abundance of books in L&E and its periphery: more than two dozen textbooks, and countless papers and monographs have been published on almost every imaginable topic of the legal-economic nexus. A virtual army of legal scholars work unceasingly with the tools of economics in areas where traditional lawyers have little to offer. Despite the success that sheer numbers illustrate, there is also an apparent gap in scholarship: a gap so major that it seems strange. The discussion on methodology, history and philosophy of L&E is almost non-existent inside the L&E camp.

 

The work on these theoretical issues is also immense, but it comes mostly from outsiders with a critical disposition. Most critics are law professors suspicious of L&E, heterodox economists, and philosophers. Their body of work is impressive, although one-dimensional. But this is not their fault. The adherents to L&E generally choose not to answer! With few exceptions (Richard Posner being the most notable one), the majority of L&E scholars do not bother themselves with theoretical issues.

 

This is so for many reasons: the tremendous success of L&E, the dominance of neoclassical economics which is reinforced by their eclecticism (we will get back to this), the uncharted legal territory, the many obstacles in finding publishing outlets for theoretical articles, the various mundane rewards for working on more practical problems, and so on. It is characteristic that the reaction to Kaplow’s and Shavell’s FAIRNESS VERSUS WELFARE (which was a major theoretical contribution) was impressively minimal—I suppose because most L&E scholars implicitly accepted it.

 

This is not necessarily a problem. As I mentioned, the eclecticism of the neoclassical mainstream, for the past five to six decades, has managed to incorporate almost all valuable insights from neighboring schools (the Austrian school, neo-institutionalism, behavioral economics, and so on). This tendency is widespread in L&E as well. However this is not enough. A theoretical discussion on the major epistemological premises is still missing.

 

One of the reasons I found this book particularly useful is that it reminds me that the situation was different in the beginning. This book, by two major scholars, Francesco Parisi and Charles Rowley, is essentially an intellectual history of the L&E school. Parisi is a top young scholar in the field, and Rowley is a leader of the public choice school [*543] working in the margins between the two fields. They are both prolific, and they are among the few who are mostly interested in theoretical issues and bring strong backgrounds in legal theory, political and moral philosophy.

 

This book is one of the many valuable collections Edward Elgar has offered in many fields of economics, most of them being very handy, especially when they gather important contributions otherwise scattered across various reviews and journals, sometimes in obscure volumes. This collection does not include journal reprints, but it allows authors to include previously unpublished or not widely circulated material. Parisi and Rowley have also contributed two introductory essays.

 

The choice of the 16 essayists is obvious, including the four founders, Gary Becker, Ronald Coase, Richard Posner and Guido Calabresi. There are also essays by all the major figures: Robert Cooter, Harold Demsetz, Richard Epstein, William Landes, Henry Manne, George Priest, Paul Rubin, Steven Shavell and Michael Trebilcock. In addition, there are chapters by three major economists whose contributions are at the margins of L&E: James Buchanan, Gordon Tullock (public choice) and Oliver Williamson (neo-institutionalism).

 

I do not have any disagreement with the choices. However I have some minor dissents. The alphabetical order of the essays might prevent some grudges, but it is not practical or even fair. The 16 founding fathers are not all of the same importance to L&E. I would prefer a bolder categorization, or (even better) a thematic presentation (e.g., intellectual history / methodology of L&E). The essays are presented in a way that is most useful to a reader who already knows the subject well, as a companion to someone who is already familiar with L&E – not an introduction to the L&E approach.

 

I believe that this was a conscious choice of the editors. I suspect the purpose behind the selection of the papers was not only to gather all the available essays of L&E’s intellectual history but to encourage a more theoretical approach to younger lawyer-economists. The essays by Becker, Buchanan, Calabresi, Cooter, Shavell, and Williamson prove this point. This produces heterogeneity: one can find different types of essays, such as autobiographical, methodological, philosophical, and reprints of major works. This has rather to do with the fact that the book is based on a Distinguished Lecture Series that lasted four years. The essays presented in these series are mostly published here. Some authors present their own recollections (see e.g. Manne’s essay on his pivotal role as “apostle of the message;” Epstein’s fascinating essay on his intellectual transformation; Landes’ history – who was in many respects the leader of the Chicago school), and experiences (Trebilcock’s impressive presentation of the actual work done in Canada), and most of the theoretical essays are quite original. Unfortunately, it seems that some of the founding fathers were not available, so the editors selected one of their previously published essays. Their choice was not always optimal, as I discuss below. [*544]

 

As intellectual history, the book is very strong. In addition to a recounting of the early years in a discussion of the major figures of the Chicago school (Kitch) and the Rowley essay, several autobiographical essays were written especially for this volume (Epstein, Manne, and Trebilcock) or reprinted here conveniently (Landes). This makes the book a valuable resource for those who work in the area. The only major essay missing is Coase’s “Law and Economics at Chicago” (1993).

 

There are also a number of methodological/philosophical essays written especially for the volume:

 

Richard Posner’s essay is useful in two ways: it is both intellectual history and a methodological essay. According to Posner, L&E is not an isolated phenomenon but part of a rational choice approach to human behavior, culminating with the work of Gary Becker.

 

The papers by Becker, Coase, Buchanan, Posner, and Priest would nicely make up a section on the methodological foundations of L&E if the editors had organized thematically.

 

The essays by Demsetz, Rubin and Tullock do not fit well in the overall structure. On the one hand, I would prefer, as I already argued, autobiographical or theoretical chapters rather than reprinting their representative work. On the other hand, the choice of the Tullock paper seems to be influenced by the Rubin chapter. Shavell’s paper is a recent and interesting one, but it is also not an obvious choice for this collection. I would have included instead one of the recent papers he wrote with Kaplow on fairness and efficiency.

 

Conversely, Oliver Williamson’s paper (which is also a reprint) is quite suitable for this collection – and it nicely complements the original methodological essays.

 

The two introductory essays reinforce the need for such categorization. Rowley’s essay is an insightful intellectual history of L&E, tracing its origins to David Hume, Adam Ferguson and Adam Smith. He discusses the contributions in the prehistory of L&E, from Jeremy Bentham to legal realism and old-institutionalism. His approach is quite original especially in making connections and placing L&E in a broad movement of rule utilitarianism. I believe that this essay should constitute [*545] mandatory reading for young L&E scholars who wish to fully understand exactly what they are doing.

 

Francesco Parisi’s essay is a systematic presentation of the methodological issues in L&E, or rather a reconstruction of a methodological debate that never took place! In his bibliography most articles and books are written by economists rather than L&E scholars, since (as I argued in the beginning of this review) the discussion on methodology is minimal in comparison with an impressive output. Nevertheless, Parisi manages to demonstrate the importance of methodological issues, to organize the few contributions (mainly around Posner’s normative theories), and to locate them within the broader context of economic methodology and political philosophy. He sets the record straight in several instances, discrediting false beliefs about the normative L&E. His piece is most fitting with Rowley’s essay.

 

On the whole, this book is a valuable contribution to the intellectual history and the methodology of L&E. It gathers some of the most important essays on these questions, and it is a must-read for L&E scholars, legal theorists and economists with broader interests. Also, it comes at the right time—i.e. when L&E (after conquering the US) is rapidly spreading across Europe and beyond.

 

Despite some grim predictions (some of them repeated in this book) Law and Economics has been not only successful and enduring, but also all-encompassing. Its influence is so permeating that it is almost imperialistic. Legal theory and legal science in general will never be the same. Its dominance (a result of the most successful paradigm change in 20th century social science) is sometimes treated as a decline. Apparently it is not. Who would have thought 25 years ago that FAIRNESS VERSUS WELFARE would have come out of Harvard?

 

REFERENCES:

Coase, Ronald H.  1993. “Law and Economics at Chicago.”  36 JOURNAL OF LAW & ECONOMICS 239-254.

 

Kaplow, Louis, and Steven Shavell. 2002. FAIRNESS VERSUS WELFARE.  Cambridge, MA: Harvard University Press.

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© Copyright 2006 by the author, Aristides N. Hatzis.