Hackney2003.Law Neoclassical Theory Phi Lo Approach

Journal of Socio-Economics 32 (2003) 361390
Law and neoclassical economics theory: a critical history of the distribution/efciency debate
James R. Hackney Jr.
Northeastern University School of Law, 41 Cargill Hall, Boston, MA 02115, USA Accepted 25 April 2003
Abstract The law and economics movement is responsible for one of the most inuential and powerful applications of neoclassical economics. Its impact on public policy debates, particularly those centering around law, has been profound. Given its neoclassical heritage, the prevailing norm in applying economic analysis to law was that the distributional implications of legal rules should not be taken into account. This essay chronicles the criticism of this distribution agnosticism and the evolution of a consensus that distributional matters must be dealt with forthrightly. The result is that law and economics can no longer be viewed as a purely scientic enterprise avoiding inevitable political choices. 2003 Published by Elsevier Science Inc.
JEL classication: A13; B29; B31; D31; K10; K13 Keywords: Intellectual history; Law and economics; Distribution
1. Introduction Law and neoclassical economics (LNE), commonly referred to as law and economics, is one of the most prominent theoretical approaches in the legal academy. The movement counts as a founder Roanld Coase, one of the most prominent economists of his generation. Law and neoclassical economics is essentially an offshoot of neoclassical economics, applying neoclassical tools to law. Given that it is situated principally in American law schools, it has had a profound effect on public policy debates. However, its history, particularly recent developments, are probably unfamiliar to those outside of the legal academy. This article is an effort to familiarize the uninitiated with one of the more intriguing recent developments.
Tel.: +1-617-373-4260. E-mail address: j.hackeny@neu.edu (J.R. Hackney Jr.).
1053-5357/$ see front matter 2003 Published by Elsevier Science Inc. doi:10.1016/S1053-5357(03)00047-7
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J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390
LNE has arrived at a crucial moment in its development. From a discipline that at its inception barely, if at all, recognized the importance of distributional concerns, due to the assertion that distributional issues fell under the rubric of politics and what neoclassical economists do is science (Hackney, 1997b), a consensus has emerged that distribution matters. Examining the theoretical debates that have led to this consensus provides insight into the current state of LNE and how we might expect its practitioners, as well as those outside the discipline, to deal with these issues in the future. This essay utilizes a philosophy of science approach to order the eld. The idea is to lay out an intellectual history that while familiar to those within the discipline provides some historical/theoretical context for those on the outside looking in. In the 1970s, Guido Calabresi and Richard Posner began the LNE debate on the importance of distributional concerns. This debate was initially embedded in the doctrinal choice between negligence and strict liability in torts, which will be a major focus of this essay. While at rst glance their positions might seem quite divergent, in fact, from the perspective of philosophy of science, they derive from the same tradition. They constitute a research programme (structure) centering around fundamental questions, accepted assumptions, and heuristics. This research programme evolved in the standard, rather mundane, manner of theory development: increasing technicality and relaxing assumptions. Importantly, as LNE theory development took place, there was an intense questioning of its fundamental heuristics from outside the discipline. This questioning, focused on distributional concerns, had its genesis in aspects of Calabresis initial contribution that fell outside LNEs domain. As a result, there has emerged a counter-paradigm to LNE, law and distribution economics (LDE). This has all been recently capstoned by a dramatic philosophical reconceptualization of the LNE research programme by Posner and intellectual shift by Calabresi. All the while, a more technical attempt, led by Steven Shavell, was made to resolve the distribution issue within LNE. Although this attempted resolution has been called into question,1 it is clear that distribution agnosticism is no longer an option. This seemingly narrow disciplinary moment is important to those on the outside because it reects the broader intellectual moment, one in which science and politics are increasingly intermingled.
2. Structure It is useful to hold in abeyance the entirety of LNE and focus on literature that is particular to tort law, which governs the allocation of losses in the event of an accident. Here, we can take what I will refer to as the CalabresiPosner Research Programme (C-PRP) as a special case of LNE. In this regard, it is important to recognize, as I have argued elsewhere, that LNE is itself an offshoot of general neoclassical economic theory (Hackney, 1997b). It, including C-PRP, is therefore subject to the disciplinary restraints that make up the foundations of
1 By dissolution, I mean the breaking up into parts or disintegration of law and economics and, ultimately, legal theory in general (Hackney, in press). A principal exemplar of this is the evolution of LDE. I do not mean to imply the death or disappearance of LNE as a discipline. It is obviously very much alive and present.
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economic analysis (FEA).2 These restraints, about which more will be said later, prove important to the unfolding of C-PRP. Calabresi is the central gure in C-PRP because he is the rst, with his Cost of Accident Costs, to point to a comprehensive neoclassical analysis of torts. His role in this regard has been discussed previously, including my own historical accounting, so I will not belabor the point. However, it is useful to reiterate the core policy goal of C-PRP as proposed by Calabresi: [I]t is axiomatic that the principal function of accident law is to reduce the sum of the cost of accidents and the costs of avoiding accidents.3 (Calabresi, 1970, p. 26) This axiom would guide C-PRP development. However, it is not an axiom of neoclassical economics analysis but rather a policy prescription or, in Lakatosian parlance, a positive heuristic (PH).4 What Calabresi failed to realize when he articulated this policy heuristic was that it would be circumscribed by the analytic axioms of FEA and varying interpretations of what constituted cost. FEA axioms as inscribed in LNE are most clearly and generally stated by Richard Posner in Economic Analysis of Law: (A1) (A2) (A3) [M]an is a rational maximizer of his ends in life. [P]eople respond to incentives. [T]he tendency of resources [is] to gravitate to their highest valued uses if exchange is permitted. (Posner, 1972a, pp. 14)
These axioms correlate with FEA. In this regard, it is useful to examine a much discussed articulation of FEA by Weintraub (1985). Weintraub puts forth a set of axioms referred to as, again borrowing from Lakatos, the hard core propositions of neoclassical (he uses the term neo-Walrasian) economics: (HC1) (HC2) (HC3) (HC4) (HC5) (HC6) There exist economic agents. Agents have preferences over outcomes. Agents independently optimize subject to constraints. Choices are made in interrelated markets. Agents have full relevant knowledge. Observable economic outcomes are coordinated, so they must be discussed with reference to equilibrium states. (Weintraub, 1985, p. 109)
2 My exposition on the development of the C-PRP owes a great deal to Bert Hammingas discussion on the evolution of HeckscherOhlin programme in international trade and Imre Lakatos general formulation of scientic research programmes (Hamminga, 1983; Lakatos, 1978). However, the claim is not that the development of LNE conforms to the dictates of Laktosian claims for scientic programmes. Thus, the use of Laktosian concepts in this essay are more general than specic. 3 The concept of cost minimization would later be defended under the rubric of wealth maximization by Posner. For purposes of this essay, the two concepts may be taken as interchangeable. 4 For a discussion of positive and negative heuristics and their role in scientic research programmes, see Lakatos (1978).
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According to Weintraub, these propositions are questioned only by outsiders (p. 109).5 (Of course, there are other interpretations of the hard core of neoclassical economics, but we can take Weintraubs formulation as illustrative.) Calabresi, in his prescription for the economic analysis of tort law, admonished that issues outside the parameters of FEA be taken into accountmost notably distributional concerns regarding social dislocation costs. However, Posner imposed FEA discipline on Calabresis endeavor by reminding those who would participate (not be labeled an outsider) in C-PRP, and LNE generally, that: The economists competence in a discussion of the legal system is limited to predicting the effect of legal rules and arrangements on value and efciency, in the strict technical senses, and on the existing distribution of income and wealth. (Posner, 1972a, p. 5) This claim to distribution agnosticism was based on the fact that there is no theoretical [economic?] basis for [the] conclusion that a transfer of money from a wealthy man to a poor one is likely to increase the sum of the two mens total utilities (p. 216). This argument against the interpersonal comparisons of utility was a linchpin in the science and politics of neoclassical economics, championed by Lionel Robbins (Hackney, 1997a, pp. 288291). I have discussed elsewhere the profound political implications of Posners position on interpersonal comparisons of utility and will later expand on it (Hackney, 1997b). For the moment, I want to emphasize how C-PRP structure established disciplinary parameters, directing the scientic research programme. Posners distribution agnosticism takes its place in LNE as a negative heuristic (NH). Hence, we can augment the central axioms of LNE ((A1)(A3)) with C-PRPs fundamental heuristics: (PH) (NH) The principal function of accident law is to reduce the sum of the cost of accidents and the costs of avoiding accidents. There shall be no questioning of the existing distribution of income and wealth.
All tolled, they constitute the structure. As with any scientic endeavor, it would be up to later generations to tackle unsolved problems. The principal unsolved problem concerning this essay is the choice between negligence and strict liability as central organizing doctrines in tort law. The problem was joined at the inception of C-PRP. In response to Calabresis call for strict liability in torts, principally on loss spreading (distributional) grounds, Posner countered not only with the disciplinary argument noted above against distributional analyses (NH) but with a formulation of the problem utilizing the central axioms of LNE. Posner presented his analysis in Strict Liability: A Comment (Posner, 1973). Posners argument centered around relatively straightforward neoclassical analysis and is not particularly noteworthy for its theoretical depth. More crucial was that he concluded by establishing the central policy positions around which C-PRP would develop: 1. Economic theory provides no basis, in general, for preferring strict liability to negligence, or negligence to strict liability, provided that some version of a contributory negligence
5 In order to minimize notes, throughout this essay I will place page references in the text whenever I make continuous and repeated reference to a particular book or article.
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defense is recognized. Empirical data might enable us to move beyond agnosticism, but we do not have any. 2. A strict liability standard without a contributory negligence defense is, in principle, less efcient than the negligencecontributory negligence standard. Empirical data could of course rebut the presumption derived from the theory. (Posner, 1973, p. 221). Posners conclusion opened the debate on the efcacy of strict liability. It strikes at the core of Calabresis policy prescription and strict products liability doctrine (particularly Restatement Section 402A) that did not allow contributory negligence as a defense.6 It also established an interesting question that would consume a generation of law and neoclassical economics development.
3. Development While Posners framing of the negligence/strict liability issue posed an empirical resolution, C-PRP developed along analytic lines. Almost immediately C-PRP theoreticians began formalizing Calabresi and Posners rather loose initial exposition. This should come as little surprise since formalization has traditionally been held out as a means of advancing science (Lakatos, 1978, p. 52). In addition, however, formalization of C-PRP, in adhering to the negative heuristic against accounting for distributional concerns, reied C-PRP politics. A full review of the voluminous literature constituting C-PRP would be unduly burdensome. In lieu of such minutia, I will detail the rst attempt at formalizing C-PRP and illustrate that underneath increased formalization lies an adherence to the foundational structure (science and politics) of C-PRP. John Prather Brown was the rst to formalize C-PRP.7 His path-breaking article, Toward an Economic Theory of Liability, in his words, formalizes a number of important articles by both lawyers and economists analyzing the economic effects of liability rules (Brown, 1973, p. 323).8 It is an essential touchstone for understanding C-PRP development because it is the model for subsequent formalizations and extensions (see Appendix A). Browns model is very elegant. Its simplicity lies in using the standard theory of production (p. 323) in its most rudimentary form: two inputs and one output. This facilitated a breadth of future extensions. However, the reliance on the standard theory of production from neoclassical economics also brought with it the disciplinary apparatus of FEA. This is found in the models structure. Brown poses a liability generator that emits a bill in the amount of A for accidents related to a particular activity. The generator has two controls, X and Y. Increasing these
For a discussion of Restatement Section 402A and its intellectual underpinnings, see Hackney (1995). [T]he rst noteworthy success in applying equilibrium theory to common law was John Browns classic paper on tort liability (Cooter, 1989, p. 821). 8 Brown included in his list of important articles Calabresis Costs of Accidents and Toward a Test for Strict Liability in Torts (with Hirschoff), Coases Problem of Social Cost, and Richard Posners A Theory of Negligence and Strict Liability: A Comment, as well as works by Harold Demsetz and John McKean (Brown, 1973, p. 323, no. 1).
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two controls acts to increase the probability of avoiding an accident, noted as P(X, Y ). The production function analogue is as follows: inputs X and Y are utilized in producing one output P(X, Y ) (safety). Of course, nothing comes free, and the cost of X and Y are assumed to be positive and noted as W(X) and W(Y), respectively. Thus, the total cost of avoiding accidents is W(X)X + W(Y)Y. In the optimization scheme, this cost of avoiding accidents must be weighed against the cost of the accident, which, given the probability of prevention, is denoted A[1 P(X, Y )]. What Brown framed as the central concern in choosing liability rules, minimizing social cost, corresponds perfectly with C-PRPs positive heuristic: min C(S ) = W(X)X + W(Y )Y + A[1 P(X, Y )] In other words, minimize the sum of the cost of accidents [(A[1 P(X, Y )])] and the cost of avoiding accidents [(W(X )X + W(Y )Y)] (Calabresi, 1970, p. 26). Browns model is completed by inserting two parties, injurer and victim, having control over X and Y, respectively. It is their role to act as self-interested agents in the cause of social cost minimization. Before moving on to apply Browns model in making doctrinal choices, it is useful to explore how it mirrors the axiomatic structure for LNE laid out by Posner and neoclassical economics hard core as articulated by Weintraub. The insertion of economic agents into the model corresponds to (HC1). While this may at rst glance seem to be a trivial observation, it is crucial because agents, once endowed with certain characteristics, are the engine that drive the model. A central proposition is the individuals preference for fewer accidents (HC2) or, more generally, the preference for spending less, if anything, on accident avoidance or compensation (as victim or injurer). The context in which these agents perform their roles in the model is A Noncooperative Game Played According to Liability Rules (p. 335). A noncooperative game and the idea of independent agents optimizing (minimizing) their legal liability subject to constraints (liability rules, information, etc.) correspond to (HC3). Posner articulates this idea in his axioms (A1) that an agent is a rational maximizer of his ends in life and that people respond to incentives (A2). Agent choices are taken as constructed in interrelated markets, i.e. the interaction between victim and injurer (HC4). The proposition that agents have full relevant knowledge (HC5) is well dened in the Brown model. The relevant knowledge is the costs of accidents (preventative and ex post) and the legal regime. While (HC6) might initially seem to be violated by the noncooperative nature of the Brown model, its central proposition is adhered to: outcomes must be discussed with reference to equilibrium states. Thus, the central puzzle of Browns model: What are the equilibrium values of X and Y when they are chosen by different people independently? (p. 335). Posner articulates this general equilibrium position in his third axiom (A3): the tendency of resources to gravitate to their highest valued uses. The correspondence between the Brown model and the structure of neoclassical theory laid out in Section 2 conrms that formalization does not entail structural deviation. The core of Browns analysis and the central puzzle in C-PRP is which set of constraints (legal rules) yields equilibrium states that are also social wealth maximizing, C(S) minimizing(PH). We will turn to this momentarily. First, it is noteworthy that Brown was quick to dene what fell outside of the analysis.
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In Browns opinion, Calabresis idea of least cost avoider was too insufciently dened to be included. After going through a series of possible interpretations, Brown reconciles himself to the fact that its insertion into the model would act to likely confuse rather than to clarify matters (p. 327). This brief discussion of cost is illustrative not so much for what it states but for what it does not state. While the concept of least cost avoider is worth mentioning, what Calabresi referred to as secondary costs in The Costs of Accidents is not deemed worth even brief reference. This distributional concern (does it matter in terms of social dislocation whether injurer or victim pays?) has no place in formalizing C-PRP. This is so because of Posners disciplinary admonition (negative heuristic) but also due to the historical development of neoclassical economics generally, which omitted, as a scientic (political) requirement, distributional considerations (Hackney, 1997b, pp. 289291).9 It also serves as a harbinger of LDE. Before moving on to these broader implications, I will take a moment to fully appreciate the elegance and compactness of Browns formalization. The analytic structure laid out above is, in Browns words, The Model. In the span of four pages Brown deftly manages to set out a formal structure from which applications (policy implications) only rely on working through relatively simple mathematical maneuvers. While other practitioners in C-PRP would later make further theoretical contributions to the programme, The Model still stands (see Appendix A). The structure profoundly impacted the policy implications of the Brown model and C-PRP. Brown denes preferred liability rules as those which combine the equilibrium condition with social cost minimization (the positive heuristic). In the most robust application, judges are assumed to know what the socially optimum amounts of X and Y are. Liability, under negligence, is assessed against whichever party fails to meet or exceed the optimal prevention level. Brown examines six possible liability regimes: no liability, strict liability, negligence with contributory negligence, negligence, strict liability with contributory negligence, and strict liability with dual contributory negligence. There are rather technical denitions for these regimes and a good deal of mathematical derivation put into reaching conclusions. However, the nal results are as follows: (1) no liability (sub-optimal); (2) strict liability (sub-optimal); (3) negligence with contributory negligence (optimal); (4) negligence (optimal); (5) strict liability with contributory negligence (optimal); and (6) strict liability with dual negligence (optimal). The central policy implication is not lost on Brown: [W]ith either no liability or strict liability rules in effect the incentives on the party without liability are perverse so the resulting equilibrium will not be the optimal one. For all four remaining rules, which are based on negligence of one or both parties . . . the game will give a unique equilibrium and that equilibrium is the social optimum. (p. 343, emphasis mine) The key here is that, just as Posner concluded, negligence is an essential component of any liability regime that is to comply with the C-PRP positive heuristic of cost minimization and
9 In terms of application, the omission of distributional concerns in the modeling of tort liability rules is not an anomaly. For a discussion of similar considerations in standard neoclassical economics production function modeling, see Blaug (1992, pp. 170177).
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negative heuristic of distribution agnosticism. The structure that determined Posners conclusion, the axioms ((A1)(A3)) and heuristics ((PH) and (NH)), also determines Browns. Formalization is just that: making formal that which is basic and structural. This is true for extensions of Browns model as well. As Appendix A illustrates, within the context of C-PRP, The Model remains largely untouched and its fundamental heuristics unchallenged. Extensions are made at the margins, relaxing assumptions and correcting minor errors in analysis, but, as Richard Epstein phrased it, Browns central conclusion remains unrefuted (Epstein, 1986, p. 1176). In the world of C-PRP, negligence (even if combined with strict liability) reigns supreme. (See Appendix A, Policy Conclusions.) But this is a strange resting point for a research programme founded by Guido Calabresi. Calabresi championed strict liability, without contributory negligence, in the foundational text for C-PRP (The Costs of Accidents). The point of departure and future dissolution is found in the immediate wake of Costs. Calabresi was always somewhat of an outsider.10 His outsider position would evolve into a competing disciplinary strand in the evolution of law and economicsLDEmarking its dissolution.
4. Dissolution On the heels of Costs and in the same year that Posner published his piece on A Theory of Negligence (Posner, 1972b), Calabresi and Jon Hirshcoff published their Toward a Test for Strict Liability in Torts (Calabresi and Hirshcoff, 1972). In Toward a Test, Calabresi began eshing out themes that were buried in Costs but later developed into an outsider position opposing Posners stand on distribution (NH) and wealth maximization (PH). The policy implications were evident in Posners support for negligence versus Calabresis inclination towards strict liability. Calabresi and Hirshcoff began by analyzing liability rules using C-PRP precepts. In this regard, the proposed test for strict liability would be more likely than either Learned Hand type test [negligence] to accomplish a satisfactory job of primary accident cost optimization (p. 1059). This is in the vein followed by Brown, with an emphasis on narrowly dened cost reduction. However, the optimization criterion was satised not by negligence-type cost/benet analysis but strict liability (on either victim or injurer) based on the cheapest cost avoider. The signicant doctrinal implication of the cheapest cost avoider analysis is that it allows for strict liability irrespective of contributory negligence. Calabresi and Hirshcoff recognized that there was still a level of doctrinal agnosticism in their analysis. What are we to do in situations where optimization can be accomplished with a variety (negligence or strict liability) of liability rules? Their answer to this question would mark the beginning of the break with C-PRP. First, they argued that even within the efciency paradigm, the relevant point of analysis is categories of plaintiffs and victims rather than individuals (pp. 10661067). Of course, this is different from the Brown-line of theory development, focusing on individuated Xs
10 This position conrms Neil Duxburys observation that I had previously failed to acknowledge sufciently the differences between Calabresis and Posners positions (Duxbury, 1997, pp. 325326).
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and Ys. (Perhaps this explains Browns confusion over the cheapest cost avoider concept.) However, what is even more signicant is that Calabresi and Hirshcoff use their categories not only to do efciency analysis but to begin a conversation on distribution. I emphasize begin because there is ambiguity in the early Calabresi/Hirshcoff formulation. They argue that [i]t is not likely that the answer [to the move to strict liability] lies simply in the existence of distributional goals which are served better by the strict liability test and that the move is probably based in part on a desire to accomplish better primary accident cost reduction (p. 1074). The ambiguity lies in the fact that they also argue that when different liability rules have . . . different distributional effects . . . distributional differences may well determine the approach taken (p. 1077, emphasis mine). How much consideration should be given to distribution? The answer is found partially in how they dene distribution: For the purposes of this article, we are lumping together as distributional all those effects of liability rules which do not relate to minimizing (a) the sum of accident costs and avoidance costs, and (b) the administrative costs entailed by the minimization. (p. 1078) This includes preferences to fractionize losses (spreading), moving toward a given distribution of wealth, promoting dynamic efciency (entrepreneurship) and notions of just desserts (p. 1078). All of these come under the ideal of justice (p. 1078). This is signicant because in Costs justice serves as a veto constraint on notions of efciency. If this is the case, it is clear that this formulation marks a point of disciplinary crisis in C-PRP and LNE generally. Calabresi and Hirshcoff turn neoclassical analysis on its head. As opposed to distribution lying in the background, it is the foreground. This directly violates the negative heuristic of LNE and, depending on how cost is dened, undercuts the positive heuristic. Of course, there was always a tension in C-PRP. Calabresis secondary costs of accidents as articulated in Costs had as its basis distributional considerations in arguing for loss spreading (Hackney, 1997a, pp. 307316). But, signicantly, in Toward a Test the loss spreading argument is taken out of the cost category and placed under the rubric of distributive justice. This is the nal acquiescence to what Calabresi had acknowledged in Costs: [e]conomists, unlike lawyers, tend to treat secondary cost under the rubric of justice (Calabresi, 1970, p. 28, no. 6). Developing a conception of distributive justice would constitute the outsider progeny of C-PRP. While Calabresi and Hirshcoff had gone a step beyond Calabresis vague allusions to justice in Costs, there was obviously much work to be done.11 This work would take place on several planes: moral philosophy, historical accounting and political theory. However,
11 Calabresi has noted this himself in thinking retrospectively about Toward a Test, saying that he nds the discussion of the relationship of the strict liability and fault-based test to goals other than safety optimization to be inadequate. In addition, [t]he lumping of other goals under the rubric of distribution is not helpful (Calabresi, 1991). The extent to which the distribution issue was taking on evermore importance for Calabresi is found in his Property Rules, Liability Rules, and Inalienability: One View of the Cathedral (Property Rules), authored with A. Douglas Melamed in the same year (Calabresi and Melamed, 1972). Property Rules emphasizes that distributional concerns play a crucial role in the setting of entitlements (p. 1098). It also contains a discussion of the mix between economic efciency, distributional issues and other justice considerations in fashioning legal rules.
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I want to focus on utilitarianism as a particularly relevant strand. The reasons for this are two-fold: it is the strand that received the most attention in Costs and would later be more fully developed by Calabresi and others in LDE; it is also the conception of justice with the closest afnity to neoclassical economics. The utilitarian position, while alluded to in Costs, took center stage in legal academe with Ed Bakers Utility and Rights: Two Justications for State Action Increasing Equality (Utility and Rights) (Baker, 1974). Bakers project was not initially directed specically towards either law and neoclassical economics or tort law theory, but rather the numerous proposals . . . that would move American society toward greater economic equality. The goal was to develop and compare theoretical justications for state interventions in the market which would guarantee to every member of society either minimum income or minimum satisfaction of just wants (p. 39). While on its face this might not seem related to LNE or Calabresis initial framing of the outsider position, it would prove central to future developments. Bakers utilitarianism, borrowing from Jeremy Bentham, had as its core the maximization of social welfare, the central thesis being that societal utility is systematically maximized by a distribution of wealth where equality is greater than it would be if the total wealth of the society, not utility, were maximized (p. 40). This thesis is borne out on the basis of three assumptions: (1) an inverse relationship between equality and societal wealth; (2) utility is derived from personal wealth; and (3) the declining marginal utility of wealth. Of these three, Baker identies the rst and third as critical assumptions (p. 46). The rst assumption denes the alternative states of the world Baker poses and their implications for equality: Persons Possible wealth distributions A X Y Z Total 10 9 1 20 B 8 6 2 16 C 4 4 4 12
Under the rst assumption state of the world A is the least egalitarian and C is the most egalitarian. The third assumption, and analytical core of Bakers approach, determines which state of the world is utility maximizing. The declining marginal utility of wealth proposition is based on the belief that [p]eople place a higher value on their rst dollar than their second, on the second dollar than on their third. This means that a poor man would thus value an extra dollar more than would a rich man. This assumption is crucial to an egalitarian argument because it eliminates state of the world A as necessarily being utility maximizing, which it would be if every increment of wealth (20 in the case of A, as opposed to 16 and 12 in B and C) were valued equally (p. 45). Of course, to apply these statements about the categories (borrowing from Calabresis and Hirshcoffs framing) poor and rich, there must be some interpersonal comparison
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of utility between the poor man and rich man. This is in direct contradiction with the negative heuristic in neoclassical economicsdistribution agnosticismwhich is based on claims that interpersonal comparisons of utility cannot be made. Baker recognizes this argument and attempts to circumvent it by stating that his claim is based on the typical individual utility function for wealth (p. 45). This concept of typical does not require that we know the specic utility function of an individual but that we make policy based on our intuitions concerning average utility functions. Calabresi had hinted at a similar position in Costs. Under the heading Theoretical Bases for secondary cost avoidance, Calabresi discussed the economic rationale for loss spreading based on the diminishing marginal utility of money theory (Calabresi, 1970, p. 39). After noting that [t]his theory has been in substantial disfavor among modern economists because as an empirical generalization it cannot be proven to be universally true (p. 39), Calabresi did not attempt to rebut the negative heuristic directly. Instead he relied on the basic justication that social dislocations, like economic ones, will occur more frequently if one person bears a heavy loss than if many people bear light ones (p. 40). In contrast, Baker took on the central theoretical claim. In taking his position on the declining marginal utility of wealth and interpersonal comparisons, Baker had implicitly struck at the core of neoclassical economics. Its implications for an outsider attack on LNE, and derivatively C-PRP, would soon be developed in Bakers The Ideology of the Economic Analysis of Law (Ideology) (Baker, 1975).12 Bakers central claim in Ideology was that welfare economics as currently used by legal writers provides an ideological, and frequently objectionable, basis for policy judgment (p. 4, emphasis mine). The ideology came in the form of two biases in LNE: (1) it [f]avors the claimant of the right whose use is productive over one whose use is consumptive; and (2) it [f]avors the rich claimant whose use is consumptive over the poor claimant whose use is consumptive (p. 9). The source of this ideology centered on the neoclassical stance that value is measured by consumer willingness to pay and, as Posner phrased it, willingness to pay is . . . a function of the existing distribution of wealth in a society (p. 6). This belief runs against utilitarian arguments for the redistribution of wealth. It is little surprise then that Baker, a proponent of egalitarian utilitarianism, would come to be one of LNEs harshest critics. Baker takes his generalized argument for egalitarian utilitarianism and uses it to critique wealth maximization as a normative goal in legal theory. Wealth maximization is synonymous with the cost minimization heuristic in torts. Generally, it stood as the fundamental policy basis for LNE. Much more will be said about Posners defense of wealth maximization in due course. For the moment, the point is that wealth maximization as a general norm equates to cost minimization as a positive heuristic in C-PRP. Baker notes the utilitarian aspect of Posners wealth maximization norm. However, thinking back to the A, B and C choices listed in Utility and Rights, Posner would choose A over either B or C because it creates the greatest level of wealth. The basis for this choice is that
12 Also in 1975, a similar, but less focused, critique of LNEs distribution agnosticism and refusal to acknowledge interpersonal comparisons of utility was put forward by Markovits (1975, pp. 983990). Markovits criticisms are along much the same lines as Bakers but not as fully developed.
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Posner, in the neoclassical tradition, rejects the critical assumption that rough (typical) interpersonal comparisons of utility can be made. Again, for Posner, there is no theoretical basis for the conclusion . . . that a transfer of money from a wealthy man to a poor one is likely to increase the sum of the two mens total utilities . . . . (p. 28, emphasis Baker). Bakers critique of this position tracks his argument in Utility and Rights. His case for an egalitarian distribution on utilitarian grounds only rests on assumptions regarding average or typical interpersonal comparisons. Toward a Test, Utility and Rights and Ideology represent both a critique and a nascent counter-paradigm to LNELDE. It is a paradigm of distribution analysis that had as its genesis Calabresis original caveat to LNE in Costs. Over the course of the next decade, the distribution paradigm would coalesce as a counter-weight to LNE, eventually leading to a rupture in C-PRP and its dissolution. The year 1980 marks an important moment in this dissolution. Particularly, a symposium published by the Hofstra Law Review entitled Efciency as a Legal Concern (the Symposium) capped developments. The Symposium might just as well have been entitled The LDE Challenge. It, effectively, pitted Posner as a representative of LNE against, among others, Calabresi (1980), Baker (1980), Coleman (1980), Dworkin (1980), Kennedy and Michelman (1980), all of whom argued for the centrality of distributional concerns in some form. We can take Bakers response to his fellow symposium participants in Starting Points in Economic Analysis of Law as a guide to the LDE stance (Baker, 1980). As would be expected, Posners position supporting the status quo distribution was attacked in a manner similar to earlier critiques by Baker. Baker fashioned his criticism around the importance of starting points in determining what constituted wealth maximization and relatedly the choice of legal rules (pp. 948951): Any use of wealth maximization presupposes both prior normative judgments in order to make it determinate . . . and possibly related normative judgments in order to justify its use . . . . [Posner fails] to defend or dene starting points and other commentators have emphasized his related failure to provide a normative grounding. These other commentators included Calabresi, Dworkin, Coleman, Kennedy and Michelman. While Bakers argument with Coleman is rather technical and mundane, the discussion of the other participants is revealing. As for Kennedy and Michelman, Baker argues that [f]or one who feels that law-andeconomics writing keeps saying the same things over and over without making any conceptual progress, the article by Professors Kennedy and Michelman will be pleasantly refreshing (pp. 957958). Despite expressing some minor disappointment with portions of the Kennedy/Michelman thesis, Baker argues that their analysis (mirroring his) clearly demonstrates the importance of starting points (p. 959). Specically, Kennedy and Michelman show that any discussion of starting points must begin with a good deal of specic factual information and, implicitly, that efciency still leads nowhere until one makes further value judgments, until one relies on a background of normative theory (p. 959). In situating the Calabresi/Dworkin debate regarding the relationship between efciency, distribution and justice (rights), Baker, signicantly, sides with Calabresi, at least a particular
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reading of Calabresi.13 Dworkin (1980a) had earlier criticized Calabresi for framing both efciency and distribution as instruments of justice, as opposed to having each subject to a deep theory of equality (p. 954).14 Baker comes to Calabresis defense. (His only quarrel with Calabresi was merely a matter of clarity (p. 956).) Baker agrees with Calabresi that efciency and distribution are useful instruments in achieving a just society but warns that they are not theoretically separable from a dependence on the philosophers rationale for and description of the proper starting points (p. 957, emphasis mine). In other words, there is no way to separate the instrument from the ends (p. 957). This does not mean, as implied by Dworkin, that we should not pay particular attention to the instruments. Bakers reticence to jettison efciency illustrates that the LDE paradigm does not eliminate efciency analysis as a mode of intellectual exploration. (LNEs hard core need not necessarily be discarded.) LDE interrogates LNEs heuristic of distribution agnosticism, displacing it with distribution consciousness. For Baker, the most important signier of Calabresis embrace of LDE is his recognition that economic analysis is dependent upon starting points (p. 956).15 The notion of starting points takes center stage as the central positive heuristic of LDE. This is clear in Bakers sketch of a research programme for LDE. Regarding positive analysis, the starting point problem is fundamental in the legal context because the givens or starting points are typically the subject of the legal dispute (p. 966). With this in mind, Baker puts forth a positive theory to rival Posners positive theory (heuristic) of law as wealth maximizing. Bakers theory is a simplistic class analysis arguing that those with power to choose rules will, when possible, choose as their givens or starting points those preferences and distributions that further ruling class interests (p. 968). In this regard, Baker treats law as a realm of political struggle, of value conict, and of ethical development and realization (p. 968). In Bakers statement we see a blending of the analytic critique of LNE (based on starting points) and the conception of law as a site of political contestation. Starting points could serve a central organizing function for normative analysis in LDE. However, [w]hile many of the symposiums contributors usefully focused on the dependence of economic analysis on starting points and normative theory . . . there were few attempts to offer descriptions [(a philosophers rationale)] of any adequate normative theory . . . . (p. 968). (According to Baker, a noticeable exception outside the Symposium was Anthony Kronmans Contract Law and Distributive Justice (Kronman, 1978).) Baker made reference to his earlier works as not being specically directed to LDE but possibly pointing toward a normative theory for the paradigm: (1) an egalitarian political process and not an economic market . . . provides the proper basis for dening or determining value
The extent to which Dworkin plays a key role in LDE development is seen in Bakers earlier melding of utilitarianism with Dworkins theory of rights (Baker, 1974). In this regard, Bakers defense of Calabresi should not be viewed as an attack on Dworkins positive theory of rights, which played a vital role (though distinct from LDE) in the dissolution of LNE. 14 Dworkin would later go on to unveil his theory of equality in two seminal essays: Equality of Welfare (Dworkin, 1981b) and Equality of Resources (Dworkin, 1981a). 15 The genesis for this position goes back to Calabresi and Melameds (1972) observation that what is a Pareto optimal, or economically efcient, solution varies with the starting distribution of wealth. Pareto optimality is optimal given a distribution of wealth, but different distributions of wealth imply their own Pareto optimal allocation of resources (Calabresi and Melamed, 1972, p. 1096, emphasis Calabresi and Melamed).
13
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to the extent that value notions are used in necessarily collective decisions such as the choice of legal rule; (2) [r]espect for peoples autonomy requires that the collective recognize arenas of liberty where individual choice is free from collective control; and (3) utilitarianism is generally an appropriate policy criterion because it respects the individual and leads to a fulllment of peoples preferences (Baker, 1980, p. 971). With the formation of LDE as a competing paradigm, there is an impending rupture in C-PRP. There are even clearer signs of the break in Calabresis letter to Ronald Dworkin that appeared in the Symposium (Calabresi, 1980). The letter marks Calabresis position as an outsider to C-PRP. A bit of background is necessary for context. Dworkin, in an earlier exchange with Posner, had taken the position that Calabresi, although situated in the moderate wing of LNE, suffered from a similar confusion regarding the role of wealth maximization in a just society. (Dworkin, 1980a, p. 201). Calabresis letter claried any confusion. Calabresi begins by stating that he fully agrees with Dworkins two central propositions: (1) without starting points, meaning cannot be given to the phrase increase in wealth (Calabresi, 1980, p. 554); and (2) even with such starting points, it is difcult to measure the benet in increased wealth without some corresponding relationship to other normative goals, like utility or equality (p. 556). With regard to the latter point, wealth maximization corresponds to utility maximization on the most peculiar, not to say absurd, assumption about the relationship between wealth and utility, namely, that [US] $ 1 is as likely to be worth as much to the rich person as to the poor person (p. 556). Like Baker, and reiterating what he had alluded to in Costs, Calabresi accepts the diminishing marginal utility of wealth as a working assumption, violating the negative (most peculiar) heuristic of LNE. In making this break, Calabresi recognizes that politics are at the core: I do not doubt that there exists an unspecied complex of goalsthat can be spoken of in justice-value termsthat are better served by wealth maximization, without redistribution, than by other measurable instruments . . . . I only suggest that in holding to these, he [(Posner)] is in the very small minority. (p. 557) In framing the acceptance of the existing distribution as the view of a very small minority, Calabresi attempts to carve out space for a competing research programme that places distributional issues at the coreLDE. It is a research programme that he suspects augurs the future of law and economics: I would suspect that most people would say, and indeed do say, Your goals, Richard, are ne for you, but without a lot more in the way of equality (pass, for now, of what) they are totally unacceptable to me. (p. 557) Calabresi posed the rhetorical question, Where does this leave law and economics? (p. 559) His response was that lawyer-economists must take distribution and efciency as road signs to justice. Calabresi would later take important steps in pointing to the road signs and clarifying the nature of the rupture in C-PRP. In a 1981 lecture, The New Economic Analysis of Law: Scholarship, Sophistry, or Self-Indulgence (Calabresi, 1982), Calabresi undertakes a dramatic frontal assault on the positive heuristic of C-PRP that he once described as axiomatic. The claim that the object of tort law is to minimize the sum of accident
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costs and safety costs is sophistry and reductionism (pp. 8788). In this regard, the science of C-PRP and its theoretical development (centered around Browns model) was ill-conceived if it took optimization . . . [as] an independently meaningful object of tort law (p. 88). This position is identied with Posner and his followers (p. 90). In contrast, Calabresi articulates a competing redistributionist paradigm that can be conducted by lawyer-economists and qualify as scholarship. Echoes of Baker ring clear.16 Calabresi reiterates that until we know more about starting points, we can say little about what constitutes wealth. These starting points are the deners of wealth, what wealth is depends on what people want, and what people want depends on the allocation of starting points (pp. 9091). This parallels Bakers assault on LNE because the [neoclassical] economist knows this and denes wealth maximization only given an initial distribution of wealth. However, lawyers (including lawyer-economists) must understand that any change in law changes this initial distribution and thus is allowed no such luxury (p. 91, emphasis Calabresi). Fortunately, an analogous problem does not undermine utilitarianism (p. 91). Utilitarianism has the benet of allowing us, if we could dene happiness, to set up a scheme of starting points so as to maximize happiness. According to Calabresi, [t]he same unfortunately is not true for the strong claim made by Professor Posner and his school (p. 92, emphasis mine). What is this strong claim? It is nothing more than the formerly axiomatic positive heuristic of C-PRP of which Calabresi now states, there is nothing in itself desirable in reducing the sum of accident and safety cost if the result is to burden the wrong party (p. 93). The wrong party is determined by an analytically defensible theory of distribution. But what is this theory (philosophers rationale) of distribution? Calabresi admits to failing to spell out such a theory and to the extent that he and others produced [a]rticle upon article and book upon book . . . in the last 20 years . . . based on [the] Calabresian proposition (p. 97), the program constituted no more than a reection of the scholars own values (p. 98). This constituted self-indulgence. The problem of devising an adequate normative theory for LDE posed by Baker remained unsolved. To get beyond self-indulgence, again citing Bakers Starting Points, the call is to at least begin a conversation about utilitarianism as an overarching distributional theory: An example of a philosophical theory that, to the extent adopted, gives rise to distributional insights that need factual assumptions to apply is, of course, utilitarianism. (p. 104) These utilitarian assumptions are ones to which [e]conomists traditionally have said: Nothing, but they have said it for rather odd reasons (p. 104). The principal odd reason is the refusal to make interpersonal comparisons of utility. Calabresi breaks with this heuristic directlyas opposed to the implied critique in Costsfor many of the same reasons as Baker: If we can say that by and large marginal utility declines, and that by and large most members of a species get roughly similar pleasure from (i.e. desire similarly) the generality
16 In framing his alternative program, Calabresi argued that he was in part synthesizing arguments that he had already made as well as Baker Ronald Dworkin, Anthony Kronman, Jules Coleman, and Richard Markovits (p. 89, note 2).
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of goods (however much they differ as to particular goods), then if we accept the utilitarian philosophical premiss [sic], we have a very powerful distributional theory indeed.17 (p. 104, emphasis Calabresi) But how does one operationalize such a theory? A normative theory in which, according to Baker, utilitarianism is generally an appropriate policy criterion (Baker, 1980, p. 971) might serve as a critique of distribution agnosticism but be problematic as a jurisprudence or philosophers rationale.18 We get a sense of how LDE can, and cannot, be used in doctrinal analysis from Calabresis First Party, Third Party, and Product Liability Systems: Can Economic Analysis of Law Tell Us Anything About Them? (First Party) (Calabresi, 1984). Calabresi begins by recognizing the assault on the economic analysis of law from a variety of standpointsincluding critiques put forth by Dworkin, Kennedy and Richard Epstein (p. 833). However, these critiques to his mind are more fairly directed at the use made of economic analysis of law by [other] practitionersfor example, Richard Posner, further emphasizing the distinction between LNE and LDE (p. 833). Calabresi restates his critique of distribution agnosticism based on the failure to set forth a suitable theory of starting points but also notes that [w]hile this argument would imply that economic analysis does not and cannot carry the day, it does not mean that the values that economic analysis tends to further can be ignored (p. 834). Particularly, [a]voidance of waste [(efciency)] is part of a common notion of justice (p. 834, emphasis Calabresi). Regarding the choice between liability systems for automobile accidents, there are a variety of allocative implications, but there are also different distributional consequences. Calabresi goes through an analysis of winners and losers under different systems with his principal distributional guide being that we do not want a system that disadvantages the poor and the aged. This is not based on any a priori philosophical justication but on the fact that there are rather strong indications of societys distributional preferences in this area (p. 843, emphasis mine). While Posnerians [(LNE)] would suggest that we cannot say anything at all (p. 843) regarding distribution, Calabresi uses distribution as a jurisprudential tool in conjunction with efciency. However, it is not possible to make strong truth (philosophical) claims regarding distribution because it is difcult to dene the overarching distributional preferences of a polity (p. 843). Is this a retreat from the utilitarian position? [A]bsent a notion of starting points, we cannot say anything about distribution (p. 850). The LDE starting-points critique of LNE, given democratic sensibilities, turns on itself when attempts are made to apply utilitarianism to specic problems of jurisprudence. Calabresis resolution to this impasse is that it may not be so hard to identify . . . [distribution] preferences in a specic area, like automobile accident law (p. 843). Thus, what we are looking for are particular indications of societys distribution preferences (p. 843). This political conception of legal policy analysis, combined with LDEs analytic structure (p. 847), is framed as middle theorizing (p. 851). This theorizing in
17 18
These are, of course, identical to Bakers critical assumptions and their defense is also very similar to Baker. For a critique of egalitarian utilitarianism as either arbitrary or inconclusive, see Schwartz (1976).
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its best moments allows us to see far better what is at stake in the choice among the systems discussed (p. 847), thus helping our authorized decision makers [to] choose among systems of accident law intelligently (p. 848). This requires that all law and economics (LDE and LNE) practitioners recognize the limits of theory (utilitarianism included) and take their place in that area of middle theorizing that denes much of American legal scholarship (p. 851). It is an area, given analytic criticisms and general intellectual shifts, in which even Posner would settle. If, as I have argued elsewhere (Hackney, 1997b), LNE arrived at disciplinary dominance in the wake of the analytic movement and decline of pragmatism, then a parallel can be seen in its dissolution with the receding of analytic philosophy as the dominant intellectual position in America and the re-emergence of pragmatism. Just as distribution agnosticism (neoclassical economics negative heuristic) and wealth maximization (neoclassical economics positive heuristic) were coming under heavy analytic assault by LDE, Richard Rorty was proclaiming the demise of the analytic paradigm and resurgence of pragmatism in Philosophy and the Mirror of Nature (Rorty, 1979). In response, Richard Posner would fashion a pragmatist defense (middle theory) for LNE. With the 1979 publication of Utilitarianism, Economics, and Legal Theory (Utilitarianism), Posner began constructing the philosophical argument for LNEs heuristics that would directly lead to the heated debates of 1980 (Posner, 1979). Not surprisingly, given the LDE specter of egalitarian utilitarianism and criticisms of utilitarianism as a philosophical position, Posner began his construction attempting to disassociate LNE from utilitarianism: the economic norm I shall call wealth maximization provides a rmer basis for a normative theory of law than does utilitarianism (Posner, 1979, p. 103). Posner wished to distinguish LNE from practitioners of welfare economics (the commonest contemporary appellation for economics as a normative discipline) [who] regard their activity as applied utilitarianism (p. 105)LDE.19 The contours of wealth maximization are succinctly stated: Wealth is the value in dollars . . . of everything in society. It is measured by what people are willing to pay for something or, if they already own it, what they demand in money to give it up. The only kind of preference that counts in a system of wealth maximization is thus one that is backed up by money . . . . (p. 119) The import of linking LNE to wealth, as opposed to utility, was principally moral. For Posner, utilitarianism suffered the fatal aw of having no principled boundaries on whose happiness should count in our social calculus. Thus, utilitarianism has to give capacity for enjoyment, self-indulgence, and other hedonistic and epicurean values at least equal emphasis with diligence, honesty, etc. . . . (p. 124). Wealth maximization, however, pays homage to the productive (pp. 122123) and encourages and rewards the traditional values (Calvinist or Protestant) (p. 124). Although Posner also sets forth analytic (logical) shortcomings in utilitarianism, his ultimate criteria in arguing for wealth maximization are post-analytic. They include whether:
19 Among the practitioners of welfare economics cited by Posner was A.C. Pigou. Pigous standing as a historical predecessor to LDE can be inferred from Hackney (1997b).
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(1) the theory yields precepts sharply contrary to widely shared ethical intuitions and (2) a society which adopted the theory would not survive in competition with societies following competing theories. A pragmatist defense begins to form. Wealth maximization accommodates, with elegant simplicity, the competing impulses of our moral nature (p. 136). There are also etchings of a political ethic. Harkening back to Adam Smith, and evoking F.A. Hayek and Milton Friedman, Posner frames wealth maximization as a capitalistic conception of justice (p. 136). Posner made attempts to clarify his defense of wealth maximization in the immediate wake of Utilitarianism, including a contribution to the 1980 Symposium (Posner, 1980).20 However, it is in 1985 that we begin to see a crystallization of the pragmatic/political conception of LNE. In Wealth Maximization Revisited, Posner (1985) welcomes the opportunity to reconsider his position on wealth maximization. He begins by providing numerical illustrations (involving the sale of a house on his part and a car by someone else) of the relationship between willingness to pay, exchange and the LNE concept of wealth. Signicantly, he recognizes that both examples ignore a fundamental problemhow it is that I initially came to have the house, and he the car (p. 86). With the formation of LDE, the fundamental problem of starting points must be dealt with. Distribution agnosticism is no longer an option. Posner rejects the LDE prescription to the distribution issue, interpersonal comparisons of utility: The refusal of modern economists to make interpersonal comparisons of utility means in effect that they use wealth rather than happiness as the criterion for an efcient allocation of resources.21 (p. 88) In staking out this position, Posner directly addresses LDEs egalitarian utilitarianism. His attack mixes moralism with consequentialism. In contrast to the LDE position that the poor are more deserving based on the declining marginal utility of wealth, Posner, harkening back to Utilitarianism, raises the specter of a utilitarian world where the pleasure-loving scamp and sadist make claims for redistribution against the productive and hard-working and self-restrained. Wealth maximization, in contrast, favors the productive side of human activity (p. 97), conrming Bakers analysis of bias in LNE (Baker,
20 The Symposium contribution is noteworthy because it represented a nal effort to ground wealth maximization on an overarching conceptual basisconsent. I refer the reader to the devastating criticisms of Posners consent argument in the same symposium (Bebchuck, 1980; Coleman, 1980; Dworkin, 1980b) to appreciate the futility of his effort. 21 The need to shift the terrain from utilitarianism to wealth, begun in Utilitarianism, might be due to Posners own recognition that egalitarian assumptions are, at least, plausible:
[S]uppose, for example, that Bentham and many other utilitarians are right that lacking any real knowledge of the responsiveness of different individuals happiness to income we should assume that every one is pretty much alike [(typical)] in that respect. Then we need only one additional, and as it happens plausible assumptionthat of diminishing marginal utility of incometo obtain a utilitarian basis for a goal of seeking to equalize incomes. (Posner, 1979, p. 115, emphasis mine)
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1975, p. 9). Yes, Posner does look askance at the consuming, the appetitive (Posner, 1985, p. 97). Posner recognizes that his favoring of production over consumption is an ethical choice and that to defend wealth maximization rigorously [(analytically)], it would of course be necessary to assign some ethical value to productivity (p. 98). He attempts to evade this dilemma by stating that it would not be difcult but will not be attempted here (p. 98). The problematic nature of this assertion is found in Posners admission: Ethical arguments do not convince doubters but rather provide rationalizations for ethical positions taken on emotional grounds. Indeed, more ethical arguments have been won on the battleeld than in the lecture hall . . . . Perhapsspeaking descriptively and in the long runmight is responsible for most opinions of what is right. (p. 90) This is a candid admission that analytic arguments (rationalizations) for LNE will not carry the day: you cannot prove, deductively or inductively, that social decisions ought to conform to some ethical theory (pp. 8990). No, we cannot rely on a philosophers rationale. If analysis, either of the deductive or inductive sort, cannot provide us with Truth, what are we left with? Posner pushes forward his pragmatist response. His basic position is that very few people who live in wealthy societies would like to live in poor ones (p. 98). This goes a long way towards supporting an ethic that is consistent with wealth creation (production), such as wealth maximization. However, even wealth maximization is an incomplete guide to social decision-making precisely, among other reasons, because it cannot tell us when some redistributionnot the free-wheeling redistributions of utilitarian societyis called for. Thus, the pragmatist solution is that redistributions that conform to the altruistic feelings that most people harbor or that otherwise serve the interest of the productive people in the society be allowed (p. 99, emphasis mine). Posner recognizes that it is a political philosophy that I am expounding (p. 103, emphasis Posner). Ultimately, we hear echoes of Calabresi (First Party) in that [g]iven the absence of anything approaching a consensus on the optimum distribution of wealth . . . it is very hard to see how courts could adopt a redistributive ethic to guide their decisions. Jurisprudence is conned as an expression of the fundamental values of our political culture (pp. 104105). Posner would expand on this concept of jurisprudence and philosophical (or antiphilosophical?) defense of LNE in 1990, The Problems of Jurisprudence (Problems) (Posner, 1990). He began by taking a general jurisprudential stance. The history of jurisprudence according to Posner is marked by two distinct positions: natural law and positivism. Proponents of these two positions can roughly be framed as the true believers and the skeptics, respectively. Problems was devoted to exploring the basic issues debated by the two groups and the issues that grow out of those issues (p. 26). As for Posner, he would steer a middle course and argue against formalism, against overarching conceptions of justice such as corrective justice, natural law, and wealth maximizationthough not against modest versions of these normative systemsbut also against strong legal positivism (p. 26, emphasis mine). In other words, Posner staked out a position of philosophical pragmatism (middle theorizing). Posners philosophical pragmatism questions the capacity to reach conclusive Truth. In this regard, it argues for the critical as distinct from the constructive use of logic; for
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the idea that the judges proper aim in difcult cases is a reasonable result rather than a demonstrably right one (p. 26). He also argues for objectivity as a cultural and political rather than epestemic attribute of legal decisions (p. 26). If this pragmatist stand seems in tension with my previous account of the LNE enterprise as being founded on analytic precepts (both in Section 2 and elsewhere, Hackney, 1997b), it is. And it is the reason why Posners pragmatist turn helps mark the dissolution of LNE, at least as formerly (formally) constituted. This does not mean that the formal (analytic) structure of LNE is dismantled, but that its claim to preeminence must be staked out on grounds other than superior analytics (constructive use of logic). Recall, C-PRP took as its core positive heuristic the minimization of cost, which translates into a regime of wealth maximization. After the analytic turn, this political position could be defended on the basis of science because to do otherwise would violate the norm of veriabilityscientists cannot make interpersonal comparisons of utility (pp. 288291). In conjunction with the analytic blow dealt to this position by LDE, the decline of analytic philosophy undercut its scientic pretensions as well. It no longer represented scientic truth because science no longer portends to Truth.22 Problems deals with this dilemma by recasting the wealth-maximization approach to law in pragmatic terms (Posner, 1990, p. 31). The pragmatic justication for LNE was cultural and political. For judges wealth maximization is a relatively uncontroversial policy, and most judges steer from controversy (p. 359). Historically, it is no accident, therefore, that many common law doctrines assumed their modern form in the 19th century, when laissez-faire ideology, which resembles wealth maximization, had a strong hold on the Anglo-American imagination (p. 359). This bears a remarkable resemblance to Bakers conclusion in ideology (Baker, 1975, pp. 4748). But the key for Posner is not ideology, but rather prosperity. A pragmatic jurisprudence attempts to fashion rules that further social welfare; prosperity is a proxy for social welfare and can be measured in terms of wealth maximization, thus providing the justication for LNE. But what of LDE arguments that the distribution of wealth is also a central consideration in measuring social welfare? Indeed, [a]lthough there are other possible goals of judicial actors beside efciency and redistribution, many of these . . . are labels for wealth maximization, or for redistribution in favor of interest groups (Posner, 1990, p. 360). No longer able to evade or counter LDE arguments with plausible analytic defenses, Posner extends his pragmatic account. First, judges can, despite appearances, do little to redistribute wealth (p. 359). If this were the only argument offered by Posner, it would indeed look more instrumentalist than based on philosophical pragmatism. However, there is a broader social/historical (pragmatist) justication for wealth maximization: We look around the world and see that in general people who live in societies in which markets are allowed to function more or less freely not only are wealthier than people in other societies but have more political rights, more liberty and dignity, are more
22 For a discussion of changing conceptions of science and their impact on philosophy and legal theory, see Hackney (in press).
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content (as evidenced, for example, by their being less prone to emigrate)so that wealth maximization may be the most direct route to a variety of moral ends. The recent history of England, France, and Turkey, of Japan and Southeast Asia, of East versus West Germany and North versus South Korea, of China and Taiwan, of Chile, of the Soviet Union, Poland, and Hungary, and of Cuba and Argentina provides striking support for this thesis. (pp. 382383) There are several steps and historical parallels in Posners argument that merit attention. Posner insightfully recognizes that the debate over wealth maximization as a norm for deciding between legal rules (for example, negligence versus strict liability in C-PRP) has general implications. (This accounts for the salience of LDEs general argument for an egalitarian society in undercutting LNE distribution agnosticism.) Therefore, in thinking about wealth maximization from a pragmatist perspective, we can glean something from broad cross-national comparisons. Of course, it seems a stretch to perfunctorily dismiss redistributive claims on the basis of, at best, vague contrasts in prosperity across countries.23 This ad hoc comparison of economic systems based on prosperity is reminiscent of F.A. Hayeks argument in The Road to Serfdom (Hayek, 1944): socialism, or the welfare state, leads to totalitarianism (Soviet Union or Nazi Germany) (Hackney, 1997b, pp. 283287). For Posner, the mounting evidence that capitalism is more efcient than socialism gives us an additional reason for believing [neoclassical] economic theory . . . (Posner, 1990, p. 384). This, of course, elides the denition of what constitutes capitalism and socialism, which Posner realizes: My pragmatic judgment is, moreover, a qualied one. All modern societies depart from the precepts of wealth maximization [(capitalism)]. The unanswered question is how the conditions in these societies would change if the public sector could somehow be cut all the way down to the modest dimensions of the night watchman state that the precepts of wealth maximization seem to imply . . . . Until it is answered, we should be cautious in pushing wealth maximization; incrementalism should be our watchword. (p. 387) Returning to the puzzle Baker posited in Utility, could Posners vague, qualied distinctions help us choose between states A and B? Is West Germany (which has a relatively large welfare state) less prosperous than the United States? Who determines what constitutes prosperity? (Judge Posner?) (The productive people?) (The poor?) These questions illustrate that Posner must provide a(n) (anti-)foundational argument to buttress his pragmatist account. The foundation is revealed in Posners Overcoming Law (Posner, 1995). Posner declares that Overcoming Law is the fullest articulation to date of my overall theoretical stance (p. ix). The three pillars of this stance are pragmatism, neoclassical economics and liberalism: [A] taste for fact, a respect for social science, an eclectic curiosity, a desire to be practical, a belief in individualism, and an openness to new perspectives . . . all interrelated with a certain kind of pragmatism, alternatively of a certain kind of economics and a certain
23 Posner does cite secondary sources, but it is difcult to determine their meaning from mere citation (p. 383, no. 31).
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kind of liberalismcan make legal theory an effective instrument for understanding and improving law . . . . (p. viii, emphasis mine) The key to Posners theoretical stance is equating pragmatism with neoclassical economics and classical liberalism. In fact, the circularity of his arguments makes one wonder whether classical liberalism is indeed doing the heavy lifting, with neoclassical economics acting as a surrogate and pragmatism being put forward as a(n) philosophical (anti-)philosophical antidote. It is the type of justication required in an intellectual milieu where doubts about the pragmatic worth of philosophy even touch analytic philosophy (p. 8): The pragmatist thinks the analytic philosopher . . . too prone to equate disagreement with error by exaggerating the domain of logic and thus prematurely opposing views . . . . Logical positivists believe that all propositions can be sorted into three bins: tautological, empirically veriable, and nonsensical. Pragmatists think this is too simple an epistemology, because it leaves no room for nontautological propositions that can be neither veried nor disbelieved . . . . (p. 9) The real antithesis to pragmatism is the kind of rationalism, fairly termed Platonic, that claims to use purely analytic methods to reason to the truth about contested metaphysical and ethical claims (p. 10). This rejection of analytic science could mean the death of LNE. As in Problems, Posner recognized his dilemma in rescuing LNE as a viable enterprise: [w]hen a pragmatic approach is taken to law . . . the results are damaging to the amour propre of the legal profession . . . . A certain [(neoclassical)] conception of economics withers as well. But the enterprise of law and economics does not . . . because it epitomizes the operation in law of the ethic of scientic inquiry, pragmatically understood. (p. 15) But, despite the virtue of being an instrumental science par excellence (p. 151), LNE has normative as well as positive baggage, such as efciency and wealth maximization (p. 17). Thus, the mere equation of neoclassical economics with pragmatismparticularly in light of LDE criticismsdoes not get Posner very far. Enter classical liberalism. Posner articulates his most powerful and forthright vision of the politics underlying LNE: At some point even one strongly committed to the economic approach to law will have to take a stand on issues of political and moral philosophy. I take my stand with the John Stewart Mill of On Liberty (1859), the classic statement of classical liberalism. On Liberty argues that every person is entitled to the maximum libertyboth personal and economicconsistent with liberty of every other person in the society. (p. 23) Posners political stand is the linchpin in his argument for LNE supremacy over LDE. There is a symbiosis between liberty and neoclassical economics: Liberalism also has an intimate practical relation to economics. Competitive markets, being arenas of self-regarding behavior, are in classical liberal theory off limits to government interference (p. 24, emphasis Posner). Is Posners a foundational case for liberalism and thus in violation of his own pragmatist stance? Not according to Posner. He, again reminiscent of Hayek, argues for liberalism on historical (empirical/pragmatic) grounds: [t]he history of the 20th century is rich with
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evidence that communal alternatives to liberalism, whether fascistic or socialistic, are monstrous, nonviable, or both (p. 27, emphasis mine). But history does not end the debate between LNE and LDE because the history lesson is also blurred by the fact that modern liberal states are suffused with socialist elements (p. 27). Ultimately, Posner cannot stake out either a pragmatic or analytic claim for the supremacy of LNE over LDE, or other disciplines for that matter. This is why we must in the end reconcile ourselves to the dissolution of legal economic analysisleft with the fundamental values of our political culture (Posner, 1985, p. 105). Faced with the specter of dissolution through politics, is there sufcient analytic resilience in the neoclassical paradigm to constitute a resolution?
5. Resolution(?) Steven Shavell put forth an ingenious attempt at a resolution. Although ensconced inside both the law school and economics department of Harvard University since 1980, he was formally trained as an economist.24 In fact, he began his career in 1974 in the economics department. Signicantly, given the heated debates of 1980, his endeavor at resolution would begin in 1981 soon after his appointment to the law school. Shavell sought to resolve the efciency/distribution debate not by declaring distribution agnosticism but by placing distributional concerns in their proper institutional forum. Specically, distributional concerns should be dealt with via the income tax system, leaving efciency as the principal concern of the legal systemmuch as Posner would have it. The institutional division proposed by Shavell constitutes a resolution because it presents an analytic, as opposed to Posners pragmatist, defense that leaves the LNE enterprise intact while responding to the equity concerns raised by LDE. Shavells central insight in A Note on Efciency vs. Distributional Equity in Legal Rulemaking: Should Distributional Equity Matter Given Optimal Income Taxation? (Efciency vs. Distribution) (Shavell, 1981) is that an attempt at redistribution through the choice over legal rules would involve the same sort of [disincentive] problem as exists under the income tax (Shavell, 1981, p. 414). Thus, although redistribution via the income tax system creates disincentive problems, they are only exacerbated by turning to the legal system. To prove the point Shavell constructed a simple model of risk-neutral individuals who expend effort at both working and preventing accidents. The model demonstrates that the problem of minimizing expected accident losses plus the cost of care (PH) is solved when efcient liability rules based on harm done and levels of care (and thus not on income) are fashioned. This is nothing more than standard C-PRP analysis. Shavells original contribution is his proof that if we replace an inefcient liability rule (due to
24 Shavell was just one of a group of economists that began engaging law and economics in the 1980s. A partial list of this group includes such important gures as Jennifer Arlen, Lucian Bebchuck, John Calfee, Robert Cooter, Richard Craswell, Louis Kaplow, Louis Kornhauser, Susan Rose-Ackerman and Mario Rizzo. Many in this generation have doctorate degrees in economics and an afliation with economics departments. They have all participated in the efciency/distribution debate in some way, including contributions, critical of Posner, to the Symposium by Kornhauser, Bebchuck and Rizzo.
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income considerations) with an efcient one and appropriately modify the income tax schedule, everyone can be made strictly better off (p. 416). Thence, there is never an occasion to favor inefcient liability rules to address distributional concerns. Efciency reigns. The results of the proof are tempered by the qualication that if the income tax would not be altered on adoption of new liability rules, then the strict logic [(analytic)] argument given for use of efcient rules does not apply (p. 417, emphasis mine). Distribution agnosticism is an untenable position post-LDE. However, Shavell seemed to have solved the distribution problem with his argument for redistribution via income taxation. Legal academics dealing with common law rules need not concern themselves with the distributional consequences. Teaming up with Louis Kaplow, Shavell presented his thesis to legal academe some thirteen years later in Why the Legal System is Less Efcient than the Income Tax in Redistributing Income (Legal System) (Kaplow and Shavell, 1994). In Legal System, Kaplow and Shavell lament that [i]t does not appear . . . that the point [from Efciency vs. Distribution] is understood in legal academia (p. 667). Particularly, it is misunderstood by such LDE theorists as Guido Calabresi and Duncan Kennedy (pp. 667668, no. 3).25 They reiterate the theoretical insight that using legal rules to redistribute income distorts work incentives fully as much as the income tax system, producing a double distortion effect because it creates inefciencies in the activities regulated by the legal rules (p. 668). To bring the message to the masses (legal academia), Kaplow and Shavell do an informal demonstration of the Efciency vs. Distribution model. The demonstration pays considerable attention to institutional dynamics, recognizing that an adequate response to distributional concerns raised by shifting to efcient legal rules requires a functioning democracy. The qualication to the theory pushes us back to politics, an area Kaplow and Shavell do not seek to address. They, in effect, substitute
25 In addition, they take issue with Anthony Kronman, Contract Law and Distributive Justice (Kronman, 1978), and Jennifer Arlen, Should Defendants Wealth Matter (Arlen, 1992), for not recognizing that the income tax system is the proper vehicle for addressing distributive concerns. The critique of Arlen is particularly noteworthy. Arlen had argued that, given the assumption of risk aversion, liability rules should be fashioned to favor the less well off. She adopted the LDE declining marginal utility of wealth assumption:
If individuals are risk averse, then, all other things being equal, a wealthier potential defendant has a lower marginal utility of wealth than does a poorer potential defendant . . . . (p. 422) While Arlen framed her analysis in LNE terms of optimal deference, Kaplow and Shavell criticize her for not disclosing it as the masked transfer of wealth that it is. They see it as a potentially radical redistributionist argument: In fact, a complete analysis of her model would lead to the conclusion that the socially ideal outcome involves damages that fully equalize the wealth of the victim and injurer. (State of the world C in Utility and Rights.) Kaplow and Shavell do not dispute the analytic soundness of her argument but do dismiss it in stating that [o]bviously, it would not be socially desirable to take parties wealth into account in the manner Arlen suggests unless the income tax were unavailable for redistributive purposes (Kaplow and Shavell, 1994, p. 676, no. 14). For a further critique of the Arlen thesis, arguing that if actuarially fair insurance is available and income can be redistributed via taxation, liability rules should be set independently of defendants wealth, see Miceli and Segerson (1995). Miceli and Segerson identify the implication of Arlens thesis and cause for Kaplow and Shavells concern: A consequence of this result is that efciency and distributional considerations cannot be separated in the design of efcient tort rules when the parties are not risk neutral (Miceli and Segerson, 1995, p. 190).
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political agnosticism for distribution agnosticism: [c]ombined with [the] articles efciency argument, [this] suggest that normative economic analysis of legal rules should be primarily concerned with efciency rather than the distribution of income (p. 675). The analytic force of the Kaplow/Shavell argument is unassailable. It constitutes an internal resolution of LNE and response to LDE. As such, it is open to contestation from within. The internal critique, questioning the resolution, is put forth by Chris William Sanchirico, an economist, in Taxes versus Legal Rules as Instruments for Equity: A More Equitable View (Sanchirico, 2000). Sanchirico tweaks the Kaplow/Shavell model to demonstrate that redistribution from rich to poor through changed legal rules is required if there is any concern regarding equity. This is the case even if there is currently an optimal redistributive tax policy in place. Kaplow and Shavell responded in the same journal (Kaplow and Shavell, 2000) arguing that while Sanchiricos qualication is not inconsistent with their model, its implications are insignicant (p. 822). Thus, their basic conclusion (that the tax system should be the vehicle for redistributive goals, as opposed to legal rules) still holds. The Sanchirico/KaplowShavell debate is noteworthy. Given the technical nature of the interchange, it illustrates how broader philosophical disputes become subsumed in theoretical contestation. In this respect, Sanchirico can be viewed as a second-generation technical progeny of the original LDE movement. Of course, the broader political concerns may be in danger of being lost in the technical jousting. Irregardless, the debate illustrates the extent that distributional concerns must be dealt with in order to have a credible claim of presenting a comprehensive legal theory. Kaplow and Shavell have reied this point in their latest work, Fairness versus Welfare (Kaplow and Shavell, 2002). Although they continue to argue that the tax system is the preferred vehicle for redistribution, they accept the LDE propositions that the distribution of income will matter to social welfare, and redistributing income from the rich to the poor will tend to raise social welfare, assuming that the marginal utility of income is greater for the poor than for the rich (p. 30). Kaplow and Shavell do attempt a resolution of a broader sort by arguing that law and welfare economics (which incorporates LDE insights) is a comprehensive legal theory and that noneconomic notions of fairness should not be included in legal analysis. For reasons that will be discussed later, I feel that this effort at resolution is doomed to failure.
6. Epilogue This critical history of LNE chronicles three signicant moments. First, LDE put forth a withering attack on the scientic (analytic) case for distribution agnosticism. Second, the rejection of the analytic paradigm as a cohering scientic garb for LNE outed it as a discipline. Third, the attempt to shift the terrain of social choice from legal rules to taxation was called into question given the consensus, including among those who offer up taxation as a solution, on the intellectual poverty of distribution agnosticism: if distribution matters generally, it must matter in common law decision making. Politics are unavoidable. LNE adherents can no longer claim privileged, insider status to the mantel of science over other interdisciplinary approaches. This is found partially in Posners need to address, if only to debunk, a host of other approaches to overcoming law but more fundamentally in the
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proliferation of interdisciplinary approaches and outsider voices throughout the academy. It is also the reason why the Kaplow/Shavell attempt to resurrect economic analysis as the dominant paradigm will not succeed (Hackney, in press). Posner is right that LNEs ascendancy, on the wings of claims to scientic status, foreshadowed the resurgent intellectual ferment in the legal academy. Its dissolution lies in the nature of a pragmatism that marks the waning of analytic Truth generally (Hackney, in press). With this dissolution and the move towards instrumental science, if the debate within law and economics (LNE and LDE) is illustrative, we may nd a more forthright discussion of politics throughout legal academe. As law and neoclassical economics comes to grips with the equinox of science and politics, it takes its place with the rest of the legal academy in reconciling itself to a moment of middle theorizing.
Acknowledgements The author wrote this essay while in residence as a John M. Olin fellow at the University of Southern California and wishes to thank both the foundation and university for their generous support. In addition, the author wishes to recognize Northeastern University for providing sabbatical support that was crucial in completing this project. This article beneted from ideas generated at the University of Southern California and Loyola University workshops for which the author is grateful. Particular thanks goes to Jennifer Arlen, Ann McCarthy Hackney, Gregory Keating, Matthew Spitzer and Eric Talley for their insightful comments. The author also recognizes the benet of correspondence with Louis Kornhauser at the incipient stage of this research project and the privilege of having early access to Chris Sanchiricos manuscript.
Appendix A 26 1973 Oi, Walter. The Economics of Product Safety. Bell Journal of Economics and Management Science 4: 328. Heuristic: Objective of maximizing the economic welfare of consumers (5). Model innovation: Specic to products liability and focus on bargaining (contract) context. Policy conclusion: Policies that give consumers greater freedom to choose and that place less reliance on direct government controls come closer to minimizing the sum of accident costs and accident prevention costs. Note: although Ois article appeared in the same year as Brown, it has not been nearly as popular as a model for LNE theorists.
26 All of the above works either explicitly build on the Brown model or subsequent works that have done so. This, of course, is not meant to be an exhaustive list of the relevant literature but a sampling, illustrating LNE theory development.
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Appendix A. (Continued ) 1974 Diamond, Peter. Single Activity Accidents. Journal of Legal Studies 3: 107164. Heuristic: Deviates from negative heuristic of distribution agnosticism, but concludes that [t]he difculty in pursuing moral [(distribution)] intuitions in such an abstract setting is why I end the discussion of equity with a mere listing of some possible approaches (161). Model innovation: Focus on a long run situation where the law has become settled . . . and then asks about the differences arising from different due care standards (108). Policy conclusion: Not prudent to draw policy conclusions directly from models with so many omissions. 1976 Green, John. On the Optimal Structure of Liability Law. Bell Journal of Economics 7: 553574. Heuristic: Liability law is a social policy whose aim, as we shall view it, is to administer the distribution of accident costs in an efcient manner (553). Model innovation: Focus on costs of accident avoidance across classes of injurers and victims. Policy conclusion: Fault rules not ambiguous under conditions where there are wide differentials in cost of accident avoidance. 1977 Spence, Michael. Consumer Misperceptions, Product Failure and Product Liability. Review of Economic Studies 44: 561572. Heuristic: Denes regulatory problem as maximizing overall utility as measured by income and product cost. Model innovation: Examination of consumer choice under imperfect information. Policy conclusion: Mix of producer liability rules. 1979 Cooter, Robert, Lewis Kornhauser and David Lane. Liability Rules, Limited Information, and the Role of Precedent. Bell Journal of Economics 10: 366373. Heuristic: Minimizing sum of the cost of accidents and accident avoidance (367). Model innovation: Inserting incremental precedent assumption directly into Brown model. Policy conclusion: With incremental precedent assumption, extant liability rules (all containing some element of negligence) will converge to efciency without having to make the unrealistic assumption that judges have perfect information regarding optimal care levels. 1980 Polinsky, Mitchell. Strict Liability vs. Negligence in a Market Setting. American Economics Association Articles & Proceedings 70: 363367. Heuristic: Analysis under very simple partial-equilibrium model: (364).
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Appendix A. (Continued ) Model innovation: Formally examining negligence versus strict liability in a market setting and the impact of the rules on the market price and on the number of rms in the industry (363). Policy conclusion: Call into question informal discussions suggesting that negligence inefcient in market setting by introducing optimal second best standard. Shavell, Steven. Strict Liability Versus Negligence. Journal of Legal Studies IX: 123. Heuristic: Not concerned with distributional equity for the welfare criterion will be taken to be the following aggregate: the benets derived by parties from engaging in activities less total accident losses less total accident prevention costs (1). Model innovation: Explicating and putting in general form previous contributions, specically building on Posners Strict Liability versus Negligence (25). Policy conclusion: In bilateral (where care level of victim and injurer matters) strict liability inefcient under all conditions and negligence only inefcient under condition of misperception of average risk (22). 1984 Assaf, George. The Shape of Reaction Functions and the Efciency of Liability Rules: A Correction. Journal of Legal Studies. XIII: 101111. Heuristic: No general statement but builds on Brown model. Model innovation: Correcting Browns derivation of reaction function (functions showing minimum level of care party A must take, given level of care by party B, to minimize expected cost to A of accident). Policy conclusions: All the same as Brown, except that cannot in general expect relative negligence to be efcient (110). 1986 Cooter, Richard and Thomas Ulen. An Economic Case for Comparative Negligence. New York Law Review 61: 10671110. Heuristic: Minimizing social cost of accidents. Model innovation: Replacing comparative precaution formulation in Brown model with true comparative negligence analysis. Policy conclusion: Comparative negligence takes its place as an efcient tort liability rule alongside other negligence-based rules. Moreover, under assumptions of uncertainty, comparative negligence is more efcient than other rules. Finally, comparative negligence conforms to the norm of horizontal equity. Crawell, Richard and John Calfee. Deterrence and Uncertain Legal Standards. Journal of Law, Economics & Organizations 2: 279303. Heuristic: Efciency. Model innovation: Introducing uncertainty of punishment into analysis of whether legal rules provide proper incentives for efcient behavior. Policy conclusions: (1) Over compliance likely result given certain plausible assumptions but no denitive answers; and (2) complicates the normative enterprise of designing efcient legal rules.
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Appendix A. (Continued ) Letsou, Peter. A Time-Dependent Model of Products Liability. University of Chicago Law Review. 53: 209231. Heuristic: This comment approaches the problem of dening. A standard of liability from an economic perspective, thus with one value at the forefrontthe minimization of the social costs of accidents (209, no. 2). Model innovation: Examining implications of product age in product liability law. Policy conclusions: Two-tier standard of liability: (1) strict liability with contributory negligence for new products and (2) negligence for old products.
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Journal of Socio-Economics 32 (2003) 361390

Tel.: +1-617-373-4260. E-mail address: j.hackeny@neu.edu (J.R. Hackney Jr.).

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

J.R. Hackney Jr. / Journal of Socio-Economics 32 (2003) 361390

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