This book offers a concise yet comprehensive overview of the roles that economic insights play and could play in legal reasoning. Traditionally, economists have been first and foremost interested in the economic effects of judicial decisions and the legal process. This line of inquiry has generated a wide-ranging literature, covering research questions, such as whether the presence of specialized courts affects the frequency of bankruptcy petitions (Detotto et al. 2019); the effect of court fees on the behavior of prospective litigants (Mora-Sanguinetti and Martínez-Matute 2019); or the role that judicial efficiency plays in reducing endogenous uncertainty in markets (Ramello et al. 2015). In addition to this literature, the interpretation of constitutions, statutes, precedents, and contracts has been the object of economic analysis (see, for example, the selection in Bix 2018).
But what if judges are not the objects but the agents of economic analysis? While there has been occasional judicial reflection on the role of “economists on the bench” (Culp 1987; Clark and Kozinski 2019), this is the first book-length study looking at the role played by economics in legal reasoning. Such a systematic study has a twofold goal. First, it contributes to the jurisprudential self-consciousness of Law and Economics scholars, thereby improving the chances of economic arguments having an impact on important legal decisions. As Richard Craswell argued, economists should avoid “the jurisprudential naïveté about the ultimate connection, if any, between the (…) technical economic analysis and the sorts of argument that might be acceptable to courts” (Craswell 1993, p. 293).
Second, it suggests a step change in how economics contributes to public discourse about adjudication. Theoretical and empirical findings on judicial decision-making bear relevance for (small-scale, marginal) legal reforms and (large-scale, total) institutional design. Both may be complex as the difficulties of competent decision-making arise within complex legal systems, and these systems already use various mechanisms to mitigate problems of legitimacy and expertise. Therefore, the difficulties of competent adjudication are partly generated by the very institutional setting of adjudication.
Hence, to be heard by judicial insiders, economists need to pay closer attention to the insider perspective of legal practice.
By offering an overview of the relationship between economics and legal reasoning, this book shows economists that a more thorough study of legal reasoning is worth the effort. The topic should also be of interest to the legal community, where both supporters and critics of Law and Economics will be exposed to a yet-to-be developed area of interaction between the disciplines, to the effect that the book has the potential of spurring a wider debate.
At the outset, it is worth looking at the reasons for the relative neglect of this topic. We suggest that these are related to two different argumentative styles. In the Law and Economics literature, the difference has been usually epitomized as the opposition between ex post legal reasoning and ex ante economic reasoning (Easterbrook 1984). Indeed, traditionally, legal, and especially judicial, reasoning has been backward-looking: it is in preexisting norms that the authority of adjudication is based and reasoning is about justifying a decision about facts that happened in the past. There is a rich tradition and lively academic literature that aims at understanding legal reasoning in hermeneutical, logical, or rhetorical terms. Chapter 2 by Canale and Tuzet offers a clear and concise introduction to legal reasoning from a legal point of view. Implicit in this literature is the assumption that legal practice is relatively autonomous and sets its own conventional (jurisdiction-specific, relatively flexible, and evolving) criteria for acceptable arguments.
In its modern self-understanding, economics is scientific and objective, and focuses on investigating the causes and effects of (economic) behavior. To this end, economists have been developing a wide set of techniques and methods. It is therefore quite natural for the economic analysis of law to approach legal phenomena relying primarily on those techniques and methods, thereby formulating propositions about causes and effects of laws. For economists, the law is not merely a mechanism of peaceful conflict resolution: they are primarily interested in legal processes because the manner in which disputes are resolved in the (shadow of the) legal system has important effects on the level of transaction costs, on the possibility of moral hazard and opportunistic behavior, on the incentives to innovate, and so on; thus, by studying the economic effects of the law, economists can help improve the functioning of the legal system.
Economists generally focus on the outcome of legal cases or, less frequently, on the motivational determinants and institutional context of judicial behavior; legal processes and doctrines only matter insofar as they have an impact on the incentives of agents or the costs of legal processes. The disregard for legal process and doctrine is related to the underlying assumptions of economic models focusing on instrumental rationality and aggregative measures of welfare. It is also motivated by economists’ political or moral “realism”, similar to Bentham’s project of demystifying the law, and in its zeal reminiscent of Bentham’s impatience with common law and the legal profession (Postema 2019).
From a jurisprudential perspective, the economic view of law may seem overly reductive and superficial. Even if the role of economic expertise in legislation and in specific legal processes is generally acknowledged, economics is often perceived as alien to judicial reasoning. This external perspective is clearly different from the one legal scholars are used to. Could economics, then, as an explanatory social science contribute not only to policy debates but also provide an input to adjudication directly? Indeed, there is ample room for economic analysis within the parameters of legal objectives. As Cserne argues in Chap. 3, economics can either provide arguments within the parameters of legal discourse (economics in legal reasoning) or retain an external perspective (economics of legal reasoning).
As Chap. 4 by Hubková demonstrates, judicial reasoning is commonly confronted with concepts, arguments, and theories that are economic in character, and judicial activity involves economic considerations more generally: these stand to benefit from more self-consciousness. Her typology of the ways in which economics customarily informs legal reasoning suggests that the old adage iudex non calculat is not really true. Having said that, the institutional features of legal decision-making, especially those relating to the availability of data, resources, and training of judges, determine the role of economic inputs in legal discourse.
In a subtler way, the normative concerns and institutional constraints of adjudication come together to form a dominant judicial mindset, which is reproduced and reinforced by education and professional socialization. Gómez Pomar discusses these issues in Chap. 5, noting that even in explicitly economic areas of the law such as market regulation, the decisions of the European Court of Justice illustrate how legal reasoning may focus on a narrow set of c...