Law and Economics

August 3, 2014

Judge Richard Posner sits on the Seventh Circuit Court of Appeals in Chicago, where has been for almost 33 years. (Attentive readers will recall a mention in Odds and Ends on July 11.)

Judge Posner also teaches and writes. He’s still a Senior Lecturer—albeit a part-timer—at the University of Chicago Law School and has written almost 40 books. He has a page at and writes frequently for many publications. One of his most highly publicized pieces, The Incoherence of Antonin Scalia, reviewed Reading Law:  The Interpretation of Legal Texts, written by Antonin Scalia and Bryan Garner, appeared in the New Republic in August 2012. Judge Posner was very direct, although he does report that he did not write the review’s headline. (He and Justice Scalia were on the U of C faculty together in the 1970s and early 80s.)

Judge Posner comes from and has played a big role in the development of the U of C law and economics school of thought. Regular attorneys focus simply on things like “will it cost my client more to fight than settle,” “how much will the other side’s fees be if we lose,” etc. On the other hand, scholars like Judge Posner, Nobel Economics laureate Ronald Coase (author of The Problem of Social Cost, published in The Journal of Law & Economics), and Cass Sunstein and Richard Thaler, authors of Nudge and Why Nudge? (popular books for lay audiences), and A Behavioral Approach to Law and Economics, published in the Stanford Law Review, focus on bigger, deeper issues. (Confession:  Much of what I have read, and that is not even everything I have linked to, is above my head! Way above it!!!) In basic terms, I think these smart people are trying to figure out how laws and the legal system can improve society, with the least amount of direct and indirect costs. And that’s the best I can do, except to note that they definitely look with favor on market-based solutions!

This piece came together because I read Why Law School’s Love Affair with Economics is Terrible for the American Legal System, by Harvard Law student Ted Hamilton for Salon, published on July 26, 2014. Now, I finished law school more than 33 years ago. Memories fade, and if there was a law and economics class I don’t remember it and I know I didn’t take it. The subject has gained a following since then, for sure. How big a topic it is, I don’t know.

Now, Mr. Hamilton is no fan of the nexus between law and economics. His essay makes his points, and he’s right about the fact that we have problems—he focuses on climate change and inequality—for which an economics-based legal system has not provided solutions.

Two thoughts. First, to some degree Mr. Hamilton sounds like many of my classmates, and law clerks and young lawyers I have mentored for 25+ years. We all expected the law to be about justice, righting wrongs, etc. In fact, it’s a pretty mundane world, full of small hurts, differing perceptions, and practical problems (and solutions). Mr. Hamilton mentions Clarence Darrow, and that sends a message about what he may have been expecting!

Second, I think the legal system has failed to solve problems because, significantly, our government has stopped listening to smart people, no matter from which direction they come. We suffer from a dumbing down, and stay tuned for more on that topic. Really!

Look, we don’t live in a free market economy, and very few businesses want one. Business wants a game that is rigged in its favor. Make the rules work for us … and here’s a little something to help with the campaign this fall!

So what about the free market noise? It’s the Republican Party’s tagline, to distinguish itself from the team it calls the Socialists. (I guess the Ds are in favor of “people who work hard and play by the rules,” but it’s long for a bumper sticker.)

I do hope I can gain a better understanding of the intersection of law and economics. I expect it will come from reading Judge Posner’s body of work, for he writes clearly and plainly. I’ll also be really happy if we can get some decision-makers—other than a certain fellow who, in a former life, taught at the U of C Law School—who understand law and economics, whether or not they agree with the U of C’s so-called free-market school.


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