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The new law-and-economics: A research review
International Review of Law and Economics (1984), 4 (229-236)
BOOK REVIEWS Cento G. Veljanovski, The New Law-and-Economics: A Research Review, Oxford: Centre for Socio-Legal Studies, 1982. 160 pp. Copies are available for f4.95 from the Centre for Socio-Legal Studies, Wolfson College, Oxford OX2 6UD, UK. This book is an ambitious effort to concisely survey and summarize contemporary work in law and economics. It will be useful both as an introduction to the field for those unfamiliar with it and as a quick-reference desk book for others. Veljanovski is to be congratulated for the skill and accuracy with which he has digested a vast range of material. Indeed, from this American perspective it is quite remarkable how much Veljanovski has managed to get right working largely from written material and a distant observation point. This review comments on three basic conceptions that structure and shape the Veljanovski volume. First, the definition of the field, and the emphasis that Veljanovski places upon the ‘new’ law and economics. Second, the issues of methodology appropriate to the field. And third, the importance of what law and economics has to offer. 1. The conception of the field. Veljanovski derives his conception of the field from Richard Posner, the author of a popular text. l Veljanovski accepts Posner’s basic notions of what the field is about, what work is important, and where future work should be done. The reader unfamiliar with this field will not be alerted to the fact that Posner’s conception of it is controversiaL2 nor that Veljanovski’s treatment is so strongly derivative. Veljanovski appears to be very critical of Posner. For example: ‘Posner’s work is the principal example of the difficulties that lawyers’ economics create. One is compelled to note, as others have before . . . that Posner’s work tends to ignore the fundamental limitations of economic analysis and, as a consequence, his applications of economics tend often to exceed its applicability’ (p. 128). The sometimes even harsh criticisms of Posner may lead the reader to believe that Veljanovski is a skeptical consumer of Posner’s ideas about law and economics. In fact, on the fundamental issues Veljanovski is an ardent purveyor of Posner’s viewpoint. The criticisms of Posner, along with the frequently repeated assurance that law and economics need not be conservative, seem to be for the purpose of winning over initially skeptical readers by making law and economics seem less threatening. ‘This is interesting material, but you really won’t have to think that differently about what you are already doing because you can be comforted by the fact that it is fundamentally flawed, and it certainly won’t require you to revise any views on political matters that you now hold.’ The view of his audience that Veljanovski seems to hold is not one of brave and adventurous intellectuals, open to new ideas no matter how dangerous or novel their implications. Perhaps this aspect of the book simply reflects a desire to offset Posner’s sometimes strident style, a style that may be less offensive to the American than the English academician. Posner is first and foremost a superb lawyer, and he understands very well, as good lawyers do, that the most important step in successful advocacy is to succeed in defining the issue about which the argument takes place. In the context of academic debate, Posner is the master of the provocatively phrased position to attract attention
230
Book reviews
to the issue he chooses. He may lose his announced position-indeed the very weakness of his position may be what attracts so many to knock him down-but even his critics must concede that he has asked an important question-otherwise the
energy of their criticism would seem rather silly. Veljanovski accepts Posner’s idea3 that law and economics is really two fields. He explains the difference this way: The term ‘law-and-economics’ . . . as used here is defined as the application of economic theory, mostly price or micro-economic theory, and empirical methods to examine the formation, structure, processes and impact of law and legal institutions. As suggested above, the field can be arbitrarily divided into ‘old’ and ‘new’ areas of study. The ‘old’ law-and-economics is concerned with legal subject matter that affects the operation of the economy and markets. It examines the effect that law has on competition, economic organisation, and such economic variables as prices, investment, profits, income distribution and the production and distribution of resources. The areas of antitrust, labour law, industry regulation (such as controls on nationalized industries and public utilities) and tax law all fall into this category. The subject matter of the ‘new’ law-and-economics is the entire legal system and the doctrines and procedures of the civil, criminal and public laws irrespective of whether they regulate explicitly ‘economic relationships’ or not. It is this wider application of economics that constitutes the essence of the new law-and-economics and makes the subject relevant to all legal scholars . . . The scope of economics is coextensive with that of the law and applicable to a large range of questions that all lawyers will confront (P. 2).
Although Veljanovski describes the distinction between old and new as ‘arbitrary’ (p. 2), he leaves no doubt that the ‘old’ is the domain of specialists, of no ‘relevance to the general legal scholar’ (p. 3) and that the ‘new’ law-and-economics differs from its precursors both in rigour and subject matter. It often draws on the most advanced neoclassical economic theory and statistical techniques (p. 7).
As promotional strategy this was wonderful stuff for Posner and others. It enabled them to simultaneously stage brilliant raids upon fields innocent of such seemingly sophisticated but basically common-sense notions as utility maximization, while assuring the reader that the work could be understood on its own terms without long digging through the vast, laborious and tortured literature of the ‘old’ law and economics. Previous occupants of the invaded field, barely sure what hit them, were heard lamely to mutter: ‘But if economists know so much, why do we still have economic problems?‘, an answer that seemed only to offer response by avoidance. What easier position to refute, than the position that economics has nothing to contribute to an understanding of contract, property, criminal law and judicial procedure and organization? For the longer run, however, this view of the field misrepresents the intellectual history and both over and under represents what law and economics has to offer the student of the law. It is no accident that the leading figures of law and economics have come from a background in the ‘old’ law and economics.4 For example, Coase’s interest in contract and property rights has been accompanied throughout his career by a close interest in utility regulation and the regulation of broadcasting.5 Posner
Book reviews
231
began with work in the areas of economic regulation and antitrust6 Antitrust and economic regulation are areas where the law undertakes to limit and displace a regime of private property and contract. Close knowledge of the struggle of legislators, administrators, courts and scholars with problems as simple as the pricing of railroad services or the allocation of rights and responsibilities in product distribution cannot help but teach the sensitive student an admiration for the power of flexible and privately-ordered economic arrangements. The interest in private law and the judicial system of the ‘new’ law and economics flows naturally from an interest in regulation, for they are alternatives to regulation. An appreciation for the power of property and contract to support responsive, sensible and humane economic arrangements can be better appreciated after one has immersed one’s self in the historical details of how, for instance, railroad regulation was used to suppress a new form of transportation-trucking-and then to suppress efforts by the railroads to adapt to this new form of competition. The tendency of regulation to be profoundly conservative, to favor politically entrenched producers, and to harm the public becomes more than a theoretical proposition, it becomes a vivid historical reality. The long effort of the United States Department of Justice to prosecute, and of the United States Supreme Court to identify a class of ‘unreasonable’ commercial arrangements under the Sherman Act can only leave the careful student with an appreciation of how rare harmful commercial arrangements are. It was the perverse aspects of the regulatory and antitrust regimes that led students of law and economics to inquire how it can be that such a seemingly simplistic and primitive system of economic management as: ‘You recognize the rights of the people who presently have the resources, and let them freely enter into whatever arrangements suits them,’ can display such positive characteristics when compared to its replacements. That line of inquiry has emerged as what Posner and Veljanovski call the ‘new’ law and economics. When the literature of law and economics is torn from these roots, and presented free of the empirical judgments and social understanding that literature provides, it becomes a disembodied metaphysic. Thus in the Veljanovski volume one learns nothing of the foibles of the countless historical efforts to displace free markets with more efficient, more humane, fairer, or more scientific systems of organization. Instead, one learns of Pareto efficient solutions (pp. 3436), Kaldor-Hicks efficiency (p. 37), the Coase theorem (pp. 49-54) and the ‘Posner proposition’ (p. 54). One learns nothing of what a social outrage it is to require that box cars be run empty, or to insist that natural gas be priced to a group of arbitrarily selected users at a price below the cost of alternative fuels, or that thousands of human lives be dedicated to the preparation of complex papers that are of no use. Just how charmingly disconnected from reality this whole approach can be is revealed when Veljanovski observes with a straight face that ‘The most sophisticated use of maximization principles is not by Western economists but by Soviet central planners’ (p. 129).’ The American law and economics literature emerged in a social environment that has been persistently ambivalent about modern, scientific, administrative regulation. That environment permitted extensive and skeptical examination of the regulation even as it was being implemented. To judge from the literature, little similar work has been produced in Great Britain. English intellectuals appear to have accepted as obvious, and thus not in need of close examination, the beneficial social effects of ‘modern’ and ‘progressive’ regulation and nationalization. Veljanovski quotes Atiyah: ‘most of the growing literature on this subject is American in origin, and
232
Book reviews
much of it is based on assumptions about private enterprise economics which are not widely or so strongly held in [England]’ (p. 112). It is impossible to evaluate or even understand the effects of the schemes that displace ‘private enterprise’ without close study that goes behind the always beneficient rhetoric, and such studies require years of effort and analysis. Thus a foundation similar to that found in the United States may not exist in England for the development of a ‘new’ law and economics. It is no solution to attempt to solve this problem, as Veljanovski does, by assuring the potential user that law and economics has no threatening political implications and that the issues can be resolved by reference to the correct metaphysic which, properly applied, is reassuringly indeterminate. 2. Methodology. Veljanovski is also an ardent admirer of Posner’s methodological
propositions. He correctly traces these to Milton Friedman’s essay on methodology, ‘Positive economics’. The image of the economist proffered by that essay-much to the delight of the economics profession-was of economics as the queen of the social sciences, testing competing hypotheses through the rigorous use of modern statistical techniques. What else but to concede inadequacy when confronted by these new, modern scientists of all social systems? Friedman’s vision was attractive at a time when sophisticated statistical techniques were just becoming readily available to economists because of the lowered computational costs provided by computer technology. Who else but economists, with a field naturally producing volumes of precise, hard numbers, would be the chosen group to implement this new methodology in the social sciences? And there have been some stunning successes, most notably the empirical work in finance. The methodology had two key elements. First, the development of a precisely defined, mathematical model that generated predictions about relationships within data, and then a statistical testing of those relationships to determine if the predictions of the model were accurate. But the methodology favored the study of fields that had access to the required numbers such as monetary theory or finance and disfavored the study of subjects like industrial organization or law that lacked the numbers. In law, the methodology has tended to become simply the production of the model, without anything other than the most casual ‘testing,’ usually by demonstrating that it is possible to tell stories about the model that are consistent with the way the law in fact is. A methodology that tends to define its subject of study is inherently unsatisfactory. Recently, fundamental questions have been raised about Friedman’s methodological essay.8 A subject should be chosen for study because of the importance of the subject, and the methodology should be chosen that best illuminates understanding of the subject. Many fields of science progress by using non-experimental and non-statistical methodologies appropriate to those fields. This new methodological literature will liberate law and economics to return to its roots, and pursue the continuing and important issue of the field: what are the economic consequences of particular legal arrangements, whether they be property, contract, regulation, or nationalization. Economic consequences are not the only factors relevant to justice, but they are important. 3. The importance of the field Veljanovski concludes that In my view, the economic approach has an important role to play in legal studies. But it will be a limited role. Economics affords one view of a problem, a view that is sometimes narrow and not central to the legal issues in question (p. 142).
Book reviews
233
It is impossible to assess the importance of law and economics without specifying the purpose at hand. For the academic lawyer in the United States, the interest in economics had its genesis in the agenda of legal realism.9 If the purpose of legal scholarship is to understand the social effects of law, then a study of the economic effects of law is important. If, on the other hand, the purpose of legal scholarship is to report on the activity and pronouncements of judges, economics has little role to play. For the practising lawyer, economics is important if it is of concern to the law-maker. If, for instance, the judges are influenced by their understanding of the economic effects of the rules they interpret and enforce-as the judges in the United States are-then economics is important for the practising lawyer. It is impossible to predict what the importance of law and economics will be in the future without making predictions about broader movements in legal scholarship and jurisprudence. Edmund W. Kitch Center for Advanced Studies University of Virginia REFERENCES 1. Richard
A. Posner,
AND NOTES
Economic Analysis oflaw,
Little Brown (2nd ed.-1977). and Continuous Disciplines,’ (1970) 7 J. Legal Stud. 201, was in part a response to Posner. This reviewer’s thoughts on these issues can be found in Edmund W. Kitch, ‘The Intellectual Foundations of Law and Economics,’ (1983) 33 J. Legal Ed. 184. Set out in Richard A. Posner, ‘Observation: theEconomic Approach to Law,’ (1975) 53 Tex L. R. 757. For information on many of the central figures see Edmund W. Kitch (ed.), ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932-1970,’ (1983) 26 J. Law and Econ. 163. E.g., Ronald H. Coase, ‘The Marginal Cost Controversy,’ (1946) 13 Economica 169 41; Ronald H. Coase, ‘The Federal Communications Commission,’ (1959) J. Law and Econ. 1. Richard A. Posner, ‘Natural Monopoly and Its Regulation’, (1969) 21 Stan. L. R. 548; Richard A. Posner, AnM-ust Law: An Economic Perspective, University of Chicago Press (1976). For a view informed by closer experience see Olimpiad S. Ioffe, ‘Law and Economy in the USSR,’ (1982) 95 Harv. L. R. 1591. Donald N. McCloskey, ‘The Rhetoric of Economics,’ (1983) 21 J. Econ. Lit. 482 (1983); Ronald H. Coase, ‘How Should Economists Choose. 3’, the Warren G. Nutter Lectures in Political Economy, American Enterprise Institute (1982). See Kitch, supru, note 4.
2. Ronald H. Coase, ‘Economics
3. 4. 5. 6. 7. 8. 9.
G. Sen, The Military Origins of Industrialisation and International Trade Rivalry, London: Frances Pinter, 1984. 277 pp. This book is based on a doctoral dissertation. It considers two issues: first, the causes of disputes over international trade, particularly since the late 1960s; second, government responses to these disputes and their reluctance to abolish the liberal trading arrangements of the post-war period. The author rejects both neo-classical trade theory and Marxist explanations: it is suggested that they cannot explain international trade disputes over the same products between several countries simultaneously. The alternative theory proposes that the take-off stage of industrialization in all capitalist
BOOK REVIEWS Cento G. Veljanovski, The New Law-and-Economics: A Research Review, Oxford: Centre for Socio-Legal Studies, 1982. 160 pp. Copies are available for f4.95 from the Centre for Socio-Legal Studies, Wolfson College, Oxford OX2 6UD, UK. This book is an ambitious effort to concisely survey and summarize contemporary work in law and economics. It will be useful both as an introduction to the field for those unfamiliar with it and as a quick-reference desk book for others. Veljanovski is to be congratulated for the skill and accuracy with which he has digested a vast range of material. Indeed, from this American perspective it is quite remarkable how much Veljanovski has managed to get right working largely from written material and a distant observation point. This review comments on three basic conceptions that structure and shape the Veljanovski volume. First, the definition of the field, and the emphasis that Veljanovski places upon the ‘new’ law and economics. Second, the issues of methodology appropriate to the field. And third, the importance of what law and economics has to offer. 1. The conception of the field. Veljanovski derives his conception of the field from Richard Posner, the author of a popular text. l Veljanovski accepts Posner’s basic notions of what the field is about, what work is important, and where future work should be done. The reader unfamiliar with this field will not be alerted to the fact that Posner’s conception of it is controversiaL2 nor that Veljanovski’s treatment is so strongly derivative. Veljanovski appears to be very critical of Posner. For example: ‘Posner’s work is the principal example of the difficulties that lawyers’ economics create. One is compelled to note, as others have before . . . that Posner’s work tends to ignore the fundamental limitations of economic analysis and, as a consequence, his applications of economics tend often to exceed its applicability’ (p. 128). The sometimes even harsh criticisms of Posner may lead the reader to believe that Veljanovski is a skeptical consumer of Posner’s ideas about law and economics. In fact, on the fundamental issues Veljanovski is an ardent purveyor of Posner’s viewpoint. The criticisms of Posner, along with the frequently repeated assurance that law and economics need not be conservative, seem to be for the purpose of winning over initially skeptical readers by making law and economics seem less threatening. ‘This is interesting material, but you really won’t have to think that differently about what you are already doing because you can be comforted by the fact that it is fundamentally flawed, and it certainly won’t require you to revise any views on political matters that you now hold.’ The view of his audience that Veljanovski seems to hold is not one of brave and adventurous intellectuals, open to new ideas no matter how dangerous or novel their implications. Perhaps this aspect of the book simply reflects a desire to offset Posner’s sometimes strident style, a style that may be less offensive to the American than the English academician. Posner is first and foremost a superb lawyer, and he understands very well, as good lawyers do, that the most important step in successful advocacy is to succeed in defining the issue about which the argument takes place. In the context of academic debate, Posner is the master of the provocatively phrased position to attract attention
230
Book reviews
to the issue he chooses. He may lose his announced position-indeed the very weakness of his position may be what attracts so many to knock him down-but even his critics must concede that he has asked an important question-otherwise the
energy of their criticism would seem rather silly. Veljanovski accepts Posner’s idea3 that law and economics is really two fields. He explains the difference this way: The term ‘law-and-economics’ . . . as used here is defined as the application of economic theory, mostly price or micro-economic theory, and empirical methods to examine the formation, structure, processes and impact of law and legal institutions. As suggested above, the field can be arbitrarily divided into ‘old’ and ‘new’ areas of study. The ‘old’ law-and-economics is concerned with legal subject matter that affects the operation of the economy and markets. It examines the effect that law has on competition, economic organisation, and such economic variables as prices, investment, profits, income distribution and the production and distribution of resources. The areas of antitrust, labour law, industry regulation (such as controls on nationalized industries and public utilities) and tax law all fall into this category. The subject matter of the ‘new’ law-and-economics is the entire legal system and the doctrines and procedures of the civil, criminal and public laws irrespective of whether they regulate explicitly ‘economic relationships’ or not. It is this wider application of economics that constitutes the essence of the new law-and-economics and makes the subject relevant to all legal scholars . . . The scope of economics is coextensive with that of the law and applicable to a large range of questions that all lawyers will confront (P. 2).
Although Veljanovski describes the distinction between old and new as ‘arbitrary’ (p. 2), he leaves no doubt that the ‘old’ is the domain of specialists, of no ‘relevance to the general legal scholar’ (p. 3) and that the ‘new’ law-and-economics differs from its precursors both in rigour and subject matter. It often draws on the most advanced neoclassical economic theory and statistical techniques (p. 7).
As promotional strategy this was wonderful stuff for Posner and others. It enabled them to simultaneously stage brilliant raids upon fields innocent of such seemingly sophisticated but basically common-sense notions as utility maximization, while assuring the reader that the work could be understood on its own terms without long digging through the vast, laborious and tortured literature of the ‘old’ law and economics. Previous occupants of the invaded field, barely sure what hit them, were heard lamely to mutter: ‘But if economists know so much, why do we still have economic problems?‘, an answer that seemed only to offer response by avoidance. What easier position to refute, than the position that economics has nothing to contribute to an understanding of contract, property, criminal law and judicial procedure and organization? For the longer run, however, this view of the field misrepresents the intellectual history and both over and under represents what law and economics has to offer the student of the law. It is no accident that the leading figures of law and economics have come from a background in the ‘old’ law and economics.4 For example, Coase’s interest in contract and property rights has been accompanied throughout his career by a close interest in utility regulation and the regulation of broadcasting.5 Posner
Book reviews
231
began with work in the areas of economic regulation and antitrust6 Antitrust and economic regulation are areas where the law undertakes to limit and displace a regime of private property and contract. Close knowledge of the struggle of legislators, administrators, courts and scholars with problems as simple as the pricing of railroad services or the allocation of rights and responsibilities in product distribution cannot help but teach the sensitive student an admiration for the power of flexible and privately-ordered economic arrangements. The interest in private law and the judicial system of the ‘new’ law and economics flows naturally from an interest in regulation, for they are alternatives to regulation. An appreciation for the power of property and contract to support responsive, sensible and humane economic arrangements can be better appreciated after one has immersed one’s self in the historical details of how, for instance, railroad regulation was used to suppress a new form of transportation-trucking-and then to suppress efforts by the railroads to adapt to this new form of competition. The tendency of regulation to be profoundly conservative, to favor politically entrenched producers, and to harm the public becomes more than a theoretical proposition, it becomes a vivid historical reality. The long effort of the United States Department of Justice to prosecute, and of the United States Supreme Court to identify a class of ‘unreasonable’ commercial arrangements under the Sherman Act can only leave the careful student with an appreciation of how rare harmful commercial arrangements are. It was the perverse aspects of the regulatory and antitrust regimes that led students of law and economics to inquire how it can be that such a seemingly simplistic and primitive system of economic management as: ‘You recognize the rights of the people who presently have the resources, and let them freely enter into whatever arrangements suits them,’ can display such positive characteristics when compared to its replacements. That line of inquiry has emerged as what Posner and Veljanovski call the ‘new’ law and economics. When the literature of law and economics is torn from these roots, and presented free of the empirical judgments and social understanding that literature provides, it becomes a disembodied metaphysic. Thus in the Veljanovski volume one learns nothing of the foibles of the countless historical efforts to displace free markets with more efficient, more humane, fairer, or more scientific systems of organization. Instead, one learns of Pareto efficient solutions (pp. 3436), Kaldor-Hicks efficiency (p. 37), the Coase theorem (pp. 49-54) and the ‘Posner proposition’ (p. 54). One learns nothing of what a social outrage it is to require that box cars be run empty, or to insist that natural gas be priced to a group of arbitrarily selected users at a price below the cost of alternative fuels, or that thousands of human lives be dedicated to the preparation of complex papers that are of no use. Just how charmingly disconnected from reality this whole approach can be is revealed when Veljanovski observes with a straight face that ‘The most sophisticated use of maximization principles is not by Western economists but by Soviet central planners’ (p. 129).’ The American law and economics literature emerged in a social environment that has been persistently ambivalent about modern, scientific, administrative regulation. That environment permitted extensive and skeptical examination of the regulation even as it was being implemented. To judge from the literature, little similar work has been produced in Great Britain. English intellectuals appear to have accepted as obvious, and thus not in need of close examination, the beneficial social effects of ‘modern’ and ‘progressive’ regulation and nationalization. Veljanovski quotes Atiyah: ‘most of the growing literature on this subject is American in origin, and
232
Book reviews
much of it is based on assumptions about private enterprise economics which are not widely or so strongly held in [England]’ (p. 112). It is impossible to evaluate or even understand the effects of the schemes that displace ‘private enterprise’ without close study that goes behind the always beneficient rhetoric, and such studies require years of effort and analysis. Thus a foundation similar to that found in the United States may not exist in England for the development of a ‘new’ law and economics. It is no solution to attempt to solve this problem, as Veljanovski does, by assuring the potential user that law and economics has no threatening political implications and that the issues can be resolved by reference to the correct metaphysic which, properly applied, is reassuringly indeterminate. 2. Methodology. Veljanovski is also an ardent admirer of Posner’s methodological
propositions. He correctly traces these to Milton Friedman’s essay on methodology, ‘Positive economics’. The image of the economist proffered by that essay-much to the delight of the economics profession-was of economics as the queen of the social sciences, testing competing hypotheses through the rigorous use of modern statistical techniques. What else but to concede inadequacy when confronted by these new, modern scientists of all social systems? Friedman’s vision was attractive at a time when sophisticated statistical techniques were just becoming readily available to economists because of the lowered computational costs provided by computer technology. Who else but economists, with a field naturally producing volumes of precise, hard numbers, would be the chosen group to implement this new methodology in the social sciences? And there have been some stunning successes, most notably the empirical work in finance. The methodology had two key elements. First, the development of a precisely defined, mathematical model that generated predictions about relationships within data, and then a statistical testing of those relationships to determine if the predictions of the model were accurate. But the methodology favored the study of fields that had access to the required numbers such as monetary theory or finance and disfavored the study of subjects like industrial organization or law that lacked the numbers. In law, the methodology has tended to become simply the production of the model, without anything other than the most casual ‘testing,’ usually by demonstrating that it is possible to tell stories about the model that are consistent with the way the law in fact is. A methodology that tends to define its subject of study is inherently unsatisfactory. Recently, fundamental questions have been raised about Friedman’s methodological essay.8 A subject should be chosen for study because of the importance of the subject, and the methodology should be chosen that best illuminates understanding of the subject. Many fields of science progress by using non-experimental and non-statistical methodologies appropriate to those fields. This new methodological literature will liberate law and economics to return to its roots, and pursue the continuing and important issue of the field: what are the economic consequences of particular legal arrangements, whether they be property, contract, regulation, or nationalization. Economic consequences are not the only factors relevant to justice, but they are important. 3. The importance of the field Veljanovski concludes that In my view, the economic approach has an important role to play in legal studies. But it will be a limited role. Economics affords one view of a problem, a view that is sometimes narrow and not central to the legal issues in question (p. 142).
Book reviews
233
It is impossible to assess the importance of law and economics without specifying the purpose at hand. For the academic lawyer in the United States, the interest in economics had its genesis in the agenda of legal realism.9 If the purpose of legal scholarship is to understand the social effects of law, then a study of the economic effects of law is important. If, on the other hand, the purpose of legal scholarship is to report on the activity and pronouncements of judges, economics has little role to play. For the practising lawyer, economics is important if it is of concern to the law-maker. If, for instance, the judges are influenced by their understanding of the economic effects of the rules they interpret and enforce-as the judges in the United States are-then economics is important for the practising lawyer. It is impossible to predict what the importance of law and economics will be in the future without making predictions about broader movements in legal scholarship and jurisprudence. Edmund W. Kitch Center for Advanced Studies University of Virginia REFERENCES 1. Richard
A. Posner,
AND NOTES
Economic Analysis oflaw,
Little Brown (2nd ed.-1977). and Continuous Disciplines,’ (1970) 7 J. Legal Stud. 201, was in part a response to Posner. This reviewer’s thoughts on these issues can be found in Edmund W. Kitch, ‘The Intellectual Foundations of Law and Economics,’ (1983) 33 J. Legal Ed. 184. Set out in Richard A. Posner, ‘Observation: theEconomic Approach to Law,’ (1975) 53 Tex L. R. 757. For information on many of the central figures see Edmund W. Kitch (ed.), ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932-1970,’ (1983) 26 J. Law and Econ. 163. E.g., Ronald H. Coase, ‘The Marginal Cost Controversy,’ (1946) 13 Economica 169 41; Ronald H. Coase, ‘The Federal Communications Commission,’ (1959) J. Law and Econ. 1. Richard A. Posner, ‘Natural Monopoly and Its Regulation’, (1969) 21 Stan. L. R. 548; Richard A. Posner, AnM-ust Law: An Economic Perspective, University of Chicago Press (1976). For a view informed by closer experience see Olimpiad S. Ioffe, ‘Law and Economy in the USSR,’ (1982) 95 Harv. L. R. 1591. Donald N. McCloskey, ‘The Rhetoric of Economics,’ (1983) 21 J. Econ. Lit. 482 (1983); Ronald H. Coase, ‘How Should Economists Choose. 3’, the Warren G. Nutter Lectures in Political Economy, American Enterprise Institute (1982). See Kitch, supru, note 4.
2. Ronald H. Coase, ‘Economics
3. 4. 5. 6. 7. 8. 9.
G. Sen, The Military Origins of Industrialisation and International Trade Rivalry, London: Frances Pinter, 1984. 277 pp. This book is based on a doctoral dissertation. It considers two issues: first, the causes of disputes over international trade, particularly since the late 1960s; second, government responses to these disputes and their reluctance to abolish the liberal trading arrangements of the post-war period. The author rejects both neo-classical trade theory and Marxist explanations: it is suggested that they cannot explain international trade disputes over the same products between several countries simultaneously. The alternative theory proposes that the take-off stage of industrialization in all capitalist