A Critique of Modern Law and Economics Research

30 September 2008 at 8:59 am 6 comments

| Peter Klein |

From Eric Engle. How can I not link to a paper with “Theoretical Puffery” in the title? (Thanks to Mark Thornton for the pointer.)

Law and Economics: Theoretical Puffery, Exaggerated Claims and Counterfactual Models

Eric Engle
Universität Bremen; Harvard University – Berkman Center for Internet & Society

September 15, 2008

Economic analyses of law predominate in the United States because they can claim to be objective and scientific thus verifiable and the basis of predictions and reproducible experiments. However, several of the claims of economic analysis of law go too far and are entirely unrealistic. This explains why economic analysis of law has not been taken up outside of the U.S. to the extent it has in the U.S. This article points out the unrealistic presumptions within law and economics theory (homo economicus and efficient markets, mostly) and the unrealistic claims of law and economics (that the law is and should be a mirror of the economy). Economic analysis of law cannot and should not serve as a general basis of legal decision making. However, as a special theory applicable as a method for determining certain issues economic methods can well inform legal decision making helping judges to shape justice correctly. This article exposes the competing schools within law and economics and presents a defensible version of economic methodology applied within legal discourse.

Entry filed under: - Klein -, Law and Economics, Methods/Methodology/Theory of Science. Tags: .

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6 Comments Add your own

  • 1. spostrel  |  30 September 2008 at 8:22 pm

    The abstract is not encouraging.

  • 2. Rafe Champion  |  1 October 2008 at 1:12 am

    “Theoretical puffery” indeed. Check out his confusion over the relationship between the logical positivists of the Vienna Circle and the apriorism of the Austrian school. Bryan Caplan appears to be his authority on some of these matters.

    His paper on Hume and the is/ought dualism looks like rubbish as well.

  • 3. Brian Pitt  |  1 October 2008 at 3:52 pm

    Wait a minute Rafe. Do you not agree that the law and economics field, today, has a near monopoly on the analysis of the relationship between the law and economics. Posner, Coase, and (perhaps) Hayek (with his spontaneous orders approach) capture the theoretical perspectives that inform law and economics in the United States. It appears possible, at least to me, that another approach may be fruitful.

    No doubt, that for problems related to the incidence of a certain kind of tax, model building of the type that Posner discusses is most appropriate. Also, when discussing the emergence of law, the spontaneous order approach, a la Hayek, appears quite satisfactory. But what about more complicated empirical phenomena such as why the Congressional Black Caucus consistently supports minimum wage increases, although it has been demonstrated, continually, that black teenagers are the most likely group to be left unemployed? Here, it seems as though the social action of Weber – action oriented to interests as well as to the behavior of others – will be fruitful.

  • 4. Rafe Champion  |  1 October 2008 at 4:34 pm

    Brian, my comment was not directed at the field of law and economics as a discipline but at the contents of one section of the paper by Eric Engle where he wrote about the epistemology of the Vienna Circle and the Austrian economists. See if it makes sense to you!

    Likewise his paper on Hume and the is/ought question.

  • 5. Brian Pitt  |  1 October 2008 at 7:16 pm

    I know. It was probably unfair of me to direct my comment toward you. My beef is more with (economic) sociologists,with all their rhetoric about norms and networks, who have not thought to contribute the law and economics literature. In fact, “law and society” journals are replete with the conventional perspectives of law and economics.

    Engle’s paper, if nothing else, may give rise to another theoretical perspective being invoked in the literature.

  • 6. Martin Fronek  |  3 October 2008 at 1:32 pm

    I have just finished reading the paper. Unfortunately, it does not make a sense at all. The part on Vienna Circle is very confusing – does Engle know the Vienna Circle is not the Austrian economics? Is it really the case that, I quote, “The Austrian school, despite its rejection of epistemological realism, should be seen as purely formal representation – and thus, this doomed to sterility”?

    Does the author recognize the difference between economics and libertarianism/classical liberalism? p.23: “As to his prescriptions, like other neoclassical (!!!!!) theorists Hayek too advocates privatizing certain state functions. ”

    etc. etc.

    Wow!:(

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