Modern legal scholarship often relegates doctrinal work to a lower-status tier than empirical research, economic modeling, and philosophical speculation. That move is a big mistake. It is only by knowing how cases fit together with each other and with some overarching theory of social welfare that it is possible to be sensible in applying current doctrine to legal disputes and in formulating alternative approaches. Initial theoretical mistakes cannot be cured by their repeated application, which only renders the law more confused and indeterminate than before. The consequences of root error are accordingly examined in three areas: consequential damages, personal jurisdiction, and constitutional standing. Basic errors in each of these areas lead to major distortions of legal doctrine, which in turn lead to undesirable social outcomes.

Introduction

Today, the legal academy is awash in novel approaches to law, driven by a deep distaste for traditional doctrinal analysis. There is a strong push for empirical research, economic modeling, and philosophical speculation, all at the expense of traditional doctrinal analysis based on close reading of decided cases. That latter task is often derided as simpleminded, but done at the highest level it requires a deep understanding of how various legal doctrines interlock with both each other and general normative theory. In dealing with these questions, there are always the issues of how the particular relates to the general and how deductive reasoning relates to analogical reasoning. Both inquiries surely are important. On this score, I think of the traditional Kantian observation that concepts without percepts are empty; but percepts without concepts are blind.1 So we need both. Yet it is critical to set out the right sequencing between them. Chronologically, legal doctrine evolves in a chicken-and-egg fashion, as hard facts present doctrinal challenges, which are understood only when tested against further cases. But when the cases come thick and fast, it becomes ever more important to begin with a strong conceptual framework that fits these particular fact patterns to a larger whole.

Too often, modern legal scholarship focuses on the wrong issues by neglecting matters of first principle. Building a legal system is like building a house or writing a song. The architect who drafts an unsound first sketch of a building will never correct that mistake by fiddling with the size of the doors or the locations of the electrical outlets. A musician who composes a lifeless melody cannot make up that initial shortfall by writing perfect harmonies. So too, a judge, lawyer, or professor who does not understand the major premise of any given area of law will always go astray. On this point, the only way to develop that initial conception is to inquire about the proper goal of the system—just what is it trying to maximize, and why? This initial step is almost always a conceptual matter, and if it is wrongly decided, then, as with architecture and music, every subsequent decision will suffer from the primary inconsistencies. If, however, it is rightly decided, then the process of analogy and comparison can proceed apace because it works off a sound base.2 Indeed, the best way to understand the use of analogy is that it acts as an amplification system for the basic proposition,3 whether it applies to sound or erroneous major premises. Analogies make good rules better and bad rules worse.

The operation of this combined system pervades every area of both private and public law. Indeed, all too often public law decisions are infected by misapplication and misunderstanding of the underlying private law principles. The institutional ramifications are enormous. Indeed, the difficulties are compounded by the fact that modern Supreme Court justices and lower court judges have been raised in a hermetically sealed public law tradition that pays little, if any, attention to private law conceptions.4 Empirical studies never touch these conceptual matters, so basic mistakes are in effect beyond correction.

It is therefore necessary to reconnect public with private law. Yet how? One defect in the full articulation of private law principles is that their operation can be obscured by an uncritical appeal to a strong set of intuitions about autonomy, equality, or racial justice. But these notions should not simply be accepted on faith. They must serve a social end—namely, to maximize the welfare of all individuals under inevitable conditions of scarcity. Accordingly, neither egoism nor radical individualism is a viable social philosophy. It is not enough to say that X is good if A desires X. The clash of desires between A and everyone else is also an essential part of the story. The dominant methodological challenge, therefore, is to construct an analysis strong enough to deal with these ever-present clashing desires without ultimately resting on ad hoc intuitions.

To be sure, these intuitions are often indispensable stepping-stones to understanding how the overall system works. Yet they are not sufficient substitutes for reasoned judgments. This tension is evident from the Roman law tradition, whose constant appeals to natural reason (ratio naturalis) stand in for welfarist arguments that the Roman jurists, given their contemporary economic tools, could not articulate.5 They instead relied on the durability of practices within a particular society, as well as the commonality of practices across different and unrelated legal systems. But neither of these signposts alone, nor the two taken together, completes the journey. The great advantage of the Pareto and Kaldor-Hicks measures of social welfare is that they respect the subjectivity of individual preferences while using a compensation formula to measure collective social welfare.6

The Pareto formula achieves this end by insisting that any state of affairs in which one individual is left better off and no individual is left worse off should be preferred to its alternative.7 The Kaldor-Hicks formula allows for changes that make one person better off and another worse off, so long as it is possible in principle for the winners to compensate the losers so that all parties regard themselves as better off than before under their own subjective measures. Both formulas preclude negative-sum games but respond differently to positive-sum games. With Pareto, each actor has to be left better off. With Kaldor-Hicks, hypothetical compensation from winners to losers, with some left over, means that the total is positive sum, even if the position of some players turns out negative.8

Under either measure, the central task is to look at some ex ante state of affairs and then to ask, person by person, whether some legal initiative works an improvement. It goes without saying that any initiative that flunks Kaldor-Hicks (because it is negative sum) also flunks Pareto, even if the converse is not true. All voluntary contracts satisfy the more exacting Pareto standard as between the parties.9 Hence, I shall break the world into two classes of cases: those involving voluntary transactions between two (or more) parties, and those involving interactions between strangers, that is, individuals with no antecedent relationship between them. I hope to show how this simple framework demonstrates that lines of doctrinal development are profoundly misguided, and why these fundamental errors are likely to have major negative consequences, even though it is notoriously difficult to measure empirically the global losses that come from the faulty analysis of such basic propositions as “aggression is prima facie wrong” and “promises should be prima facie enforceable.”

In this Essay, I look at three initial missteps that historically have proved most difficult to correct. All three show how errors that creep into the private law have infected the public law. The first of these is the role of contract damages. The second concerns the rules governing personal jurisdiction in private litigation. The third involves the rules of standing in both private and public laws. These are by no means the only cases one could choose. The difference between broad and narrow definitions of product defectiveness is another.10 The supposed distinction between physical and regulatory takings is yet another example of an intellectual train wreck wrought by an unsound initial decision.11 But for these purposes, three examples will suffice.

  • 1. Immanuel Kant, Critique of Pure Reason 93 (Macmillan 1958) (Norman Kemp Smith, trans) (“Thoughts without content are empty, intuitions without concepts are blind.”).
  • 2. See Frederick Schauer and Barbara A. Spellman, Analogy, Expertise, and Experience, 84 U Chi L Rev 249, 251–54 (2017) (describing the traditional method of legal analogical reasoning).
  • 3. See Cass R. Sunstein, On Analogical Reasoning, 106 Harv L Rev 741, 744–45 (1993).
  • 4. See Chaim Saiman, Public Law, Private Law, and Legal Science, 56 Am J Comp L 691, 692–97 (2008) (describing the movement in twentieth-century American law toward “public law modes of reasoning”).
  • 5. See, for example, Gaius, The Institutes of Gaius: Part I bk I, § 1 at 2 (Clarendon 1946) (Francis de Zulueta, ed).
  • 6. See Richard A. Posner, Economic Analysis of Law 13–17 (Aspen 5th ed 1998).
  • 7. Id at 14.
  • 8. See id at 15.
  • 9. See Qi Zhou, An Economic Perspective on Legal Remedies for Unconscionable Contracts, in Mel Kenny, James Devenney, and Lorna Fox O’Mahony, eds, Unconscionability in European Private Financial Transactions: Protecting the Vulnerable 129, 132 (Cambridge 2010).
  • 10. The broad definition of defectiveness allows someone to call all cigarettes defective under a risk/utility standard because they contain tar and nicotine. The traditional definition of a latent condition harmful in ordinary use brands as defective only cigarettes that are adulterated in some fashion. See, for example, Restatement (Second) of Torts § 402A, comment i (1964). The difference between these two standards is at least a millionfold. For the most influential articulation of the broader definition, see John W. Wade, On the Nature of Strict Tort Liability for Products, 44 Miss L J 825, 837–38 (1973). For my defense of the older standard, see Richard A. Epstein, The Risks of Risk/Utility, 48 Ohio St L J 469, 474–77 (1987).
  • 11. See, for example, Penn Central Transportation Co v New York City, 438 US 104, 128–35 (1978). For one critique, see Richard A. Epstein, The Common Law Foundations of the Takings Clause: The Disconnect between Public and Private Law, 30 Touro L Rev 265, 281–85 (2014).