The LPE Critique of Law and Economics
I thank participants at the Symposium and the editors at The University of Chicago Law Review. I also thank Kamran King for excellent research assistance.
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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.
With special thanks to Corinne Blalock, David Grewal, Daniel Markovits, Zach Liscow, Jed Purdy, Sabeel Rahman, and Jocelyn Simonson for insightful comments and to the editors of The University of Chicago Law Review for their work convening and editing this Symposium.
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.
We thank Mike Livermore, Mike Gilbert, Greg Mitchell, Pierre Verdier, Bobbie Spellman, Michal Barzuza, Rip Verkerke, and John Harrison for helpful comments and suggestions.
We thank Mike Livermore, Mike Gilbert, Greg Mitchell, Pierre Verdier, Bobbie Spellman, Michal Barzuza, Rip Verkerke, and John Harrison for helpful comments and suggestions.
This Essay was written for the L&E vs. LPE Symposium organized by The University of Chicago Law Review. We thank Mike Livermore, Mike Gilbert, Greg Mitchell, Pierre Verdier, Bobbie Spellman, Michal Barzuza, Rip Verkerke, and John Harrison for helpful comments and suggestions.
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.
For helpful comments, we are grateful to Kiran Chawla, Lee Fennell, Louis Kaplow, Adi Leibovitch, Richard McAdams, David Weisbach, workshop participants at the University of Chicago, and the editors of The University of Chicago Law Review. We thank Hannah Lu and Safia Sayed for excellent research assistance.
For helpful comments, we are grateful to Kiran Chawla, Lee Fennell, Louis Kaplow, Adi Leibovitch, Richard McAdams, David Weisbach, workshop participants at the University of Chicago, and the editors of The University of Chicago Law Review. We thank Hannah Lu and Safia Sayed for excellent research assistance.
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.