Contemporary Law and Economics

Law and economics (L&E) emerged as a field in the middle of the twentieth century, it focused on using economic theory to study the common law. During this period, L&E offered insights so novel that it not only profoundly influenced legal doctrine, but the movement’s key figures also became some of the most cited and acclaimed scholars in the American academy. The field of law and economics has since continued to grow and become more technically sophisticated, but it is also a less cohesive movement. Moreover, L&E has been misunderstood and misrepresented by the emerging law and political economy (LPE) movement. This Essay starts the process of reclaiming L&E by offering a definition of the current field: Contemporary law and economics is an academic field that (1) has a commitment to using the social scientific method of inquiry to (2) study questions about the law and legal institutions (3) in a way that is typically informed by economic insights. It then describes L&E’s comparative advantages, explains its relationship to the LPE movement, and suggests a roadmap for its renewed relevance.

Is President Donald Trump appealing in part because he has made contracts seem like provisional arrangements likely to endure only insofar as they serve his (or putatively national) interests? Two political economy studies of U.S. workplaces and firms, one ethnographic and one historical, can begin to shed light. Ilana Gershon’s ethnography explores how people’s everyday legal and political consciousness is formed through their experiences of regulatory decision-making in a contract-filled workplace. Sociologist Melinda Cooper’s historical account reveals how a turn to viewing corporations as a conglomeration of individual contracts paved the way for a veneration of autocratic rule. In making this argument, this Essay contributes to the Symposium in two ways. First, it illustrates the value of an insight that has helped organize the field of law and political economy but not law and economics: namely, that people’s legal and political sensibilities are often shaped by their experiences in economic life. Second, it illustrates the value of interpretative social sciences, which has remained marginal in both fields. It argues that qualitative and ethnographic research methods are particularly useful in moments such as the political present in the United States when what can be assumed about political, legal, and class identities and categories is rapidly changing.

Do police help keep us safe? Do prisons make the world less violent? This Essay argues that effectively engaging with these and other notoriously difficult questions about our criminal legal system requires a diverse suite of methodologies. Too often, however, scholars have purported to answer these questions definitively by reference only to top-down, state-created, data categories and numbers: arrest rates, crime rates, formal adjudication outcomes. This Essay argues that opening up research methods to seek knowledge from grounded and communal sources can help unseat assumptions and guide researchers toward more nuanced and expansive understandings of the relationships between law, politics, economics, and our material world. The Law and Political Economy movement (LPE) has provided a natural intellectual home for those who turn to bottom-up sources of knowledge, precisely because of the attention given by LPE scholars to interplays of power, politics, and the law.

Should legal rules be designed exclusively based on efficiency considerations, or should they also attempt to promote an equitable distribution of social resources? The answer traditionally associated with scholarship in law and economics is that they should focus only on efficiency. Even for a society that cares about achieving an equitable distribution of resources by income, the argument goes, it is generally better to adopt legal rules based exclusively on efficiency considerations while relying on the income tax and transfer system to promote distributional goals. However, even proponents of the claim that social welfare is best promoted through the adoption of efficient legal rules agree that there are certain conditions under which it does not apply. This Essay considers when legal rules should be efficient and when they should not. It focuses on conditions that can cause the socially optimal legal rule to diverge from the efficient legal rule—i.e., the legal rule that would be optimal absent distributional considerations. Its goal is to translate these arguments to settings where the question of interest relates to the design of a legal rule rather than, say, the design of a commodity tax. In particular, it seeks to clarify the types of arguments that can support the adoption of inefficient legal rules when income taxation is available as a policy tool.

Mainstream antitrust policy is grounded in economics and views the protection of competition as antitrust’s singular goal. But the populist “antimonopoly movement” believes that antitrust should focus less on economic issues and more on the political influence of large firms. While the courts have long embraced the economic approach to antitrust, antimonopolists have recently gained some support in politics. This battle of ideas is therefore poised to determine the future of antitrust. Antitrust law currently suffers from a number of problems, but the antimonopoly movement does not offer serious solutions. On the contrary, by deemphasizing tangible economic harms in favor of abstract political concerns, it would cause immense economic damage. Antitrust populism is grounded in the moralistic belief that large companies are inherently detrimental to society, overlooking the fact that most big firms attained their success by providing significant economic benefits to the public, such as better products or lower prices. This Essay argues that rather than punishing bigness for its own sake, antitrust should focus on proscribing anticompetitive behavior and ensuring that all firms can compete on a level playing field.

The law and political economy (LPE) approach is a new scholarly framework that stresses that the economy and politics cannot be separated, but deeply shape one another, and are mediated by law. This Essay describes how LPE scholarship relates to and differs from two other major legal schools of thought that have notably engaged questions of political economy: the legal realism associated with Professor Robert Hale and the law and economics movement associated with Professors Richard Posner, Steve Shavell, and Louis Kaplow. This Essay argues that LPE work, though critically inflected, has also been quite methodologically open. It is oriented by a set of shared critical insights, literatures, normative aims, and practical projects, and does not draw its practices or theories from any single law-adjacent discipline. It is, however, developing a distinctive "reparative" approach, aiming not to reorder the political economy in top-down fashion, but to facilitate democratic shifts in power and help bring about institutions that are more genuinely democratically ordered. One strand of this work calls for “non-reformist” or “power-building” reforms that operate dynamically to empower tenants, workers, and others who have been historically disempowered. Another seeks to bring private power under more public authority, for example by introducing public options or proposing new foundational norms to ground private law.

Experiments sometimes get a bad rap. Critics allege that they don’t illuminate how the real world works, are subject to p-hacking and manipulation, and often don’t study the most important populations of interest. This Essay examines historical uses of experiments to generate knowledge for legal academia. Recently, experiments have become associated with law and economics as part of a broader coupling of quantitative empirical work with law and economics. But experimentation is a highly adaptable, if imperfect, research method that can support causal claims and test assumptions that are useful across many legal theories, including law and political economy. The Essay discusses the strengths, limits, and future directions of experiments as a mode of legal research.

The law and political economy (LPE) movement claims concern for marginalized communities as a motivation for its crime agenda. However, efforts to defund police, elect progressive prosecutors, and eliminate prisons are likely to generate large costs for the very communities LPE scholars say they care about. Existing empirical analyses demonstrate that Black individuals benefit disproportionately from the deterrence provided by police. This Essay also provides new evidence that progressive prosecutors have put Black people in lethal danger. Finally, it argues that there are reasons to believe that decarceration would not be costless for the Black community.

Much of the focus of the live Symposium was on comparing existing scholarship associated with two intellectual communities. This Essay instead sketches the ultimate substantive nub of contestation in this conversation about the core subject matter of “the economy” and law’s relationship to it. The crux of the matter, the Essay suggests, is the analytic and normative role to be played by the idea or the picture of the self-coordinating market or economy. The arguments developed in this Essay are not primarily directed toward empirical research or scholarship being produced by L&E scholars today. Instead, the premise is that existing law and policy—and the existing legal and policy thinking through which positive proposals, issues, and cases are evaluated—are deeply shaped by the self-coordinating market picture. While much L&E research today may be primarily in a descriptive and explanatory vein, there is no escaping the essentially normative force of a theory that has, since inception and very much still today, operated in both registers.

The law and political economy (LPE) critique of law and economics offers a clarion call reminding us that methods are never just methods. They are vantage points on power that affect what we see and what we overlook. The LPE critique insists that economics is not a neutral science and that the law and economics approach to understanding society is neither apolitical nor inevitable. It is a compelling critique because, at root, it is correct. And therein lies the tragedy. This Essay argues that in stumbling upon this truth, the LPE movement has managed the remarkable feat of being simultaneously right and curiously unlettered. It has constructed an elaborate structure for critique without engaging with the discipline it claims to dismantle.