Chapter three
Economics and Sociology of law
Dr Khalil Hussein
Professor at Lebanese University
Director of studies at Lebanese Parliament
Law and economics
Law and economics, or economic analysis of law, is the term usually applied to an approach to legal theory that incorporates methods and ideas borrowed from the discipline of economics.
Origin and history
As early as in the 18th century, Adam Smith discussed the economic effect on mercantilist legislation. However, to apply economics to analyze the law regulating nonmarket activities is relatively new. In 1961, Ronald Coase and Guido Calabresi independently from each other published two groundbreaking articles: "The Problem of Social Cost"[1] and "Some Thoughts on Risk Distribution and the Law of Torts".[2] This can been seen as the starting point for the modern school of law and economics.[3]
In the early 1970's, Henry Manne (a former student of Coase) set out to build a Center for Law and Economics at a major law school. He began at Rochester, worked at Miami, but was soon made unwelcome, moved to Emory, and ended at George Mason. The latter soon became a center for the education of judges -- many long out of law school and never exposed to numbers and economics. Manne also attracted the support of the John M. Olin Foundation, whose support accelerated the movement. Today, Olin centers (or programs) for Law and Economics thrive at Harvard, Yale, Chicago, Stanford, Georgetown, Michigan, and more.
Positive and normative law and economics
Economic analysis of law is usually divided into two subfields, positive and normative.
Positive law and economics
Positive law and economics uses economic analysis to predict the effects of various legal rules. So, for example, a positive economic analysis of tort law would predict the effects of a strict liability rule as opposed to the effects of a negligence rule. Positive law and economics has also at times purported to explain the development of legal rules, for example the common law of torts, in terms of their economic efficiency.[4]
Normative law and economics
Normative law and economics goes one step further and makes policy recommendations based on the economic consequences of various policies. The key concept for normative economic analysis is efficiency. The weakest concept of efficiency used by law and economics scholars is Pareto efficiency. A legal rule is Pareto efficient if it could not be changed so as to make one person better off without making another person worse off. (By weak, economists mean that Pareto efficiency makes very few normative assumptions, not that it is supported by weak arguments.) A stronger conception of efficiency is Kaldor-Hicks efficiency. A legal rule is Kaldor-Hicks efficient if it could be made Pareto efficient by a side payment.
Important scholars
Many important figures in law and economics have been associated with the University of Chicago Law School. These include the Nobel Prize winning economists Ronald Coase and Gary Becker, U.S. Court of Appeals for the Seventh Circuit judges Frank Easterbrook and Richard Posner, and William Landes. Guido Calabresi of Yale, judge for the U.S. Court of Appeals for the Second Circuit, also played a seminal role. His 1970 book, The Cost of Accidents: A Legal and Economic Analysis, had an enormous impact on modern thought on the subject.
Influence
In the United States, economic analysis of law has been extremely influential. Judicial opinions utilize economic analysis and the theories of law and economics with some regularity. The influence of law and economics has also been felt in legal education. Many law schools in North America, Europe, and Asia have faculty members with a graduate degree in economics. In addition, many professional economists now study and write on the relationship between economics and legal doctrine.
Criticisms
Despite its influence, the law and economics movement has been criticized from a number of directions. This is especially true of normative law and economics. Because most law and economics scholarship operates within a neoclassical framework, fundamental criticisms of neoclassical economics have been applied to work in law and economics. Within the legal academy, law and economics has been criticized on the ground that rational choice theory in economics makes unrealistic simplifying assumptions about human nature (see rational choice theory (criminology)); Posner's application of law and economic reasoning to rape and sex may be an example of this. Liberal critics of the law and economics movements have argued that normative economic analysis does not capture the importance of human rights and concerns for distributive justice. Some of the heaviest criticisms of the "classical" law and economics come from the critical legal studies movement, in particular Duncan Kennedy[1] and Mark Kelman.
Law and economics has adapted to some of these criticisms (see "contemporary developments," below). One critic, Jon D. Hanson of Harvard Law School, argues that our legal, economic, political, and social systems are unduly influenced by an individualistic model that assumes "dispositionism" - the idea that outcomes are the result of our "dispositions" (economists would say "preferences"). Instead, Hanson argues, we should look to the "situation", both inside of us (including cognitive biases) and outside of us (family, community, social norms, and other environmental factors) that have a much larger impact on our actions than mere "choice." Hanson has written many law review articles on the subject and has books forthcoming.[5]
Contemporary developments
Law and economics has developed in a variety of directions. One important trend has been the application of game theory to legal problems. Other developments have been the incorporation of behavioral economics into economic analysis of law, and the increasing use of statistical and econometrics techniques. Within the legal academy, the term socio-economics has been applied to economic approaches that are self-consciously broader than the neoclassical tradition.
Sociology of law
Sociology of law refers to both a sub-discipline of sociology and an approach within the field of legal studies. Sociology of law is a diverse field of study which examines the interaction of law with other aspects of society: such as the effect of legal institutions, doctrines, and practices on other social phenomena and vice versa. Some of its areas of inquiry include the social development of legal institutions, the social construction of legal issues, and the relation of law to social change. Sociology of law overlaps with jurisprudence, economic analysis of law and more specialised subjects such as criminology.[6]
History
Max Weber in 1917 - Weber who began as a lawyer and economic historian is regarded as one of the founders of sociology and sociology of law.
Initially, legal theorists were suspicious of the sociology of law. Kelsen attacked one of its founders, Eugen Ehrlich, who wanted to emphasize the difference between positive law, which lawyers learn and apply, and other forms of 'law' or social norms that regulate everyday life, generally preventing conflicts from reaching lawyers and courts.[7] Around 1900 Max Weber defined his "scientific" approach to law, identifying the "legal rational form" as a type of domination, not attributable to people but to abstract norms.[8] Legal rationalism was his term for a body of coherent and calculable law which formed a precondition for modern political developments and the modern bureaucratic state and developed in parallel with the growth of capitalism.[9] Another sociologist, Émile Durkheim, wrote in The Division of Labour in Society that as society becomes more complex, the body of civil law concerned primarily with restitution and compensation grows at the expense of criminal laws and penal sanctions.[10] Other notable early legal sociologists included Hugo Sinzheimer, Theodor Geiger, Georges Gurvitch and Leon Petrażycki in Europe, and William Graham Sumner in the U.S.[11]
Law and Society
In legal studies, the sociology of law is part of a more broadly conceived law and society approach or socio-legal studies. Its focus is on theoretically guided empirical studies. As such it draws on and contributes to social theory. The sociology of law is not to be confused with sociological jurisprudence. The latter is a juristic perspective, developed in the United States by Roscoe Pound and by earlier jurists in various European countries, that seeks to base legal arguments on sociological insight.
[1] Ronald Coase, "The Problem of Social Cost", Journal of Law & Economics Vol.3, No.1. 1961.
[2] Guido Calabresi, "Some Thoughts on Risk Distribution and the Law of Torts", Yale Law Journal, Vol.70 (1961).
[3] Richard Posner, The Economics of Justice 1983, p.4.
[4] Boudewijn Bouckaert and Gerrit De Geest, eds., Encyclopedia of Law and Economics (Edward Elgar, 2000.
[5] Robert Cooter and Thomas Ulen, Law and Economics (Addison Wesley Longman.
[6] Jary, Collins Dictionary of Sociology, p 636.
[7] Rottleuthner, La Sociologie du Droit en Allemagne,p 109.* Rottleuthner, Rechtstheoritische Probleme der Sociologie des Rechts,p 521.
[8] Rheinstein, M. (1954). Max Weber on Law and Economy in Society. Harvard University Press Max Weber on Law and Economy in Society, p336.
[9] Jary, Collins Dictionary of Sociology, 636.
[10] Johnson, Johnson, Alan ,The Blackwell Dictionary of Sociology. Blackwells publishersThe Blackwell Dictionary of Sociology,1995, p 156.
[11] Gurvitch, Sociology of Law Gurvitch, Georges; Hunt, Alan (1942-New edition 2001). "Max Webber and Eugene Ehlrich", Sociology of Law. Athens: Transaction Publishers ,p 142.
Economics and Sociology of law
Dr Khalil Hussein
Professor at Lebanese University
Director of studies at Lebanese Parliament
Law and economics
Law and economics, or economic analysis of law, is the term usually applied to an approach to legal theory that incorporates methods and ideas borrowed from the discipline of economics.
Origin and history
As early as in the 18th century, Adam Smith discussed the economic effect on mercantilist legislation. However, to apply economics to analyze the law regulating nonmarket activities is relatively new. In 1961, Ronald Coase and Guido Calabresi independently from each other published two groundbreaking articles: "The Problem of Social Cost"[1] and "Some Thoughts on Risk Distribution and the Law of Torts".[2] This can been seen as the starting point for the modern school of law and economics.[3]
In the early 1970's, Henry Manne (a former student of Coase) set out to build a Center for Law and Economics at a major law school. He began at Rochester, worked at Miami, but was soon made unwelcome, moved to Emory, and ended at George Mason. The latter soon became a center for the education of judges -- many long out of law school and never exposed to numbers and economics. Manne also attracted the support of the John M. Olin Foundation, whose support accelerated the movement. Today, Olin centers (or programs) for Law and Economics thrive at Harvard, Yale, Chicago, Stanford, Georgetown, Michigan, and more.
Positive and normative law and economics
Economic analysis of law is usually divided into two subfields, positive and normative.
Positive law and economics
Positive law and economics uses economic analysis to predict the effects of various legal rules. So, for example, a positive economic analysis of tort law would predict the effects of a strict liability rule as opposed to the effects of a negligence rule. Positive law and economics has also at times purported to explain the development of legal rules, for example the common law of torts, in terms of their economic efficiency.[4]
Normative law and economics
Normative law and economics goes one step further and makes policy recommendations based on the economic consequences of various policies. The key concept for normative economic analysis is efficiency. The weakest concept of efficiency used by law and economics scholars is Pareto efficiency. A legal rule is Pareto efficient if it could not be changed so as to make one person better off without making another person worse off. (By weak, economists mean that Pareto efficiency makes very few normative assumptions, not that it is supported by weak arguments.) A stronger conception of efficiency is Kaldor-Hicks efficiency. A legal rule is Kaldor-Hicks efficient if it could be made Pareto efficient by a side payment.
Important scholars
Many important figures in law and economics have been associated with the University of Chicago Law School. These include the Nobel Prize winning economists Ronald Coase and Gary Becker, U.S. Court of Appeals for the Seventh Circuit judges Frank Easterbrook and Richard Posner, and William Landes. Guido Calabresi of Yale, judge for the U.S. Court of Appeals for the Second Circuit, also played a seminal role. His 1970 book, The Cost of Accidents: A Legal and Economic Analysis, had an enormous impact on modern thought on the subject.
Influence
In the United States, economic analysis of law has been extremely influential. Judicial opinions utilize economic analysis and the theories of law and economics with some regularity. The influence of law and economics has also been felt in legal education. Many law schools in North America, Europe, and Asia have faculty members with a graduate degree in economics. In addition, many professional economists now study and write on the relationship between economics and legal doctrine.
Criticisms
Despite its influence, the law and economics movement has been criticized from a number of directions. This is especially true of normative law and economics. Because most law and economics scholarship operates within a neoclassical framework, fundamental criticisms of neoclassical economics have been applied to work in law and economics. Within the legal academy, law and economics has been criticized on the ground that rational choice theory in economics makes unrealistic simplifying assumptions about human nature (see rational choice theory (criminology)); Posner's application of law and economic reasoning to rape and sex may be an example of this. Liberal critics of the law and economics movements have argued that normative economic analysis does not capture the importance of human rights and concerns for distributive justice. Some of the heaviest criticisms of the "classical" law and economics come from the critical legal studies movement, in particular Duncan Kennedy[1] and Mark Kelman.
Law and economics has adapted to some of these criticisms (see "contemporary developments," below). One critic, Jon D. Hanson of Harvard Law School, argues that our legal, economic, political, and social systems are unduly influenced by an individualistic model that assumes "dispositionism" - the idea that outcomes are the result of our "dispositions" (economists would say "preferences"). Instead, Hanson argues, we should look to the "situation", both inside of us (including cognitive biases) and outside of us (family, community, social norms, and other environmental factors) that have a much larger impact on our actions than mere "choice." Hanson has written many law review articles on the subject and has books forthcoming.[5]
Contemporary developments
Law and economics has developed in a variety of directions. One important trend has been the application of game theory to legal problems. Other developments have been the incorporation of behavioral economics into economic analysis of law, and the increasing use of statistical and econometrics techniques. Within the legal academy, the term socio-economics has been applied to economic approaches that are self-consciously broader than the neoclassical tradition.
Sociology of law
Sociology of law refers to both a sub-discipline of sociology and an approach within the field of legal studies. Sociology of law is a diverse field of study which examines the interaction of law with other aspects of society: such as the effect of legal institutions, doctrines, and practices on other social phenomena and vice versa. Some of its areas of inquiry include the social development of legal institutions, the social construction of legal issues, and the relation of law to social change. Sociology of law overlaps with jurisprudence, economic analysis of law and more specialised subjects such as criminology.[6]
History
Max Weber in 1917 - Weber who began as a lawyer and economic historian is regarded as one of the founders of sociology and sociology of law.
Initially, legal theorists were suspicious of the sociology of law. Kelsen attacked one of its founders, Eugen Ehrlich, who wanted to emphasize the difference between positive law, which lawyers learn and apply, and other forms of 'law' or social norms that regulate everyday life, generally preventing conflicts from reaching lawyers and courts.[7] Around 1900 Max Weber defined his "scientific" approach to law, identifying the "legal rational form" as a type of domination, not attributable to people but to abstract norms.[8] Legal rationalism was his term for a body of coherent and calculable law which formed a precondition for modern political developments and the modern bureaucratic state and developed in parallel with the growth of capitalism.[9] Another sociologist, Émile Durkheim, wrote in The Division of Labour in Society that as society becomes more complex, the body of civil law concerned primarily with restitution and compensation grows at the expense of criminal laws and penal sanctions.[10] Other notable early legal sociologists included Hugo Sinzheimer, Theodor Geiger, Georges Gurvitch and Leon Petrażycki in Europe, and William Graham Sumner in the U.S.[11]
Law and Society
In legal studies, the sociology of law is part of a more broadly conceived law and society approach or socio-legal studies. Its focus is on theoretically guided empirical studies. As such it draws on and contributes to social theory. The sociology of law is not to be confused with sociological jurisprudence. The latter is a juristic perspective, developed in the United States by Roscoe Pound and by earlier jurists in various European countries, that seeks to base legal arguments on sociological insight.
[1] Ronald Coase, "The Problem of Social Cost", Journal of Law & Economics Vol.3, No.1. 1961.
[2] Guido Calabresi, "Some Thoughts on Risk Distribution and the Law of Torts", Yale Law Journal, Vol.70 (1961).
[3] Richard Posner, The Economics of Justice 1983, p.4.
[4] Boudewijn Bouckaert and Gerrit De Geest, eds., Encyclopedia of Law and Economics (Edward Elgar, 2000.
[5] Robert Cooter and Thomas Ulen, Law and Economics (Addison Wesley Longman.
[6] Jary, Collins Dictionary of Sociology, p 636.
[7] Rottleuthner, La Sociologie du Droit en Allemagne,p 109.* Rottleuthner, Rechtstheoritische Probleme der Sociologie des Rechts,p 521.
[8] Rheinstein, M. (1954). Max Weber on Law and Economy in Society. Harvard University Press Max Weber on Law and Economy in Society, p336.
[9] Jary, Collins Dictionary of Sociology, 636.
[10] Johnson, Johnson, Alan ,The Blackwell Dictionary of Sociology. Blackwells publishersThe Blackwell Dictionary of Sociology,1995, p 156.
[11] Gurvitch, Sociology of Law Gurvitch, Georges; Hunt, Alan (1942-New edition 2001). "Max Webber and Eugene Ehlrich", Sociology of Law. Athens: Transaction Publishers ,p 142.
