The Logic of the Law and the Essence of Economics: Reflections on 40 Years in the Wilderness

Neil K. Komesar 

University of Wisconsin - Madison
January 3, 2013

Wisconsin Law Review, Forthcoming
Univ. of Wisconsin Legal Studies Research Paper No. 1217 
Abstract:      
In this article, I explore the role of comparative institutional analysis in understanding and reforming both legal analysis and economic analysis. For me, understanding both legal analysis and economic analysis means focusing on decision-making institutions and, in turn, their behavior and the choice between them. These must be the building blocks of any approach to law and public policy. If institutional choice is the central theme of both legal analysis and economic analysis, it should follow that the central focus of both legal analysis and economic analysis would be institutional comparison weighing the relative merits of the relevant decision-making processes. In other words, the core of both legal analysis and economic analysis at least the economic analysis of law and public policy should be comparative institutional analysis. But it isn't. This failure is far more obvious in economic analysis than it is in legal analysis primarily because it is difficult to know what legal analysis is. I can quite comfortably show that the study of institutional behavior defines economic analysis in general and that institutional choice defines the economic analysis of law and public policy. Under these circumstances, the absence of comparative institutional analysis is a glaring error. But legal analysis is difficult to pin down. What we teach as legal analysis is really just a negative lesson that the law is not simply an internally closed system of logic based on the words of cases and statutes combined with unarticulated or poorly articulated ad hoc intuitions about what law may actually be about. It has been and remains my objective to use comparative institutional analysis to provide an analytical framework for legal analysis. Such a framework should provide a way to integrate, test and understand the various views on law. It should allow us to establish what we know and what we need to know. For law teaching, it should provide the key to the meaning of the terms and thresholds that seem to define law, but which themselves are ill-defined. The resulting framework should be able to operate across all areas of law for both descriptive (positive) analysis and prescriptive (normative) analysis. It should work for practitioners, judges, policymakers and scholars. In the first part of this paper, I explore the role of institutional choice and comparative institutional analysis in defining the basic intuitions of law. I explore what comparative institutional analysis has to say about several important legal issues including defining the thresholds of equal protection fundamental rights and suspect classifications, the concept of property, the thresholds for class actions and the thresholds of judicial review of contracts under doctrines like unconscionability and of corporate decision-making under doctrines like the business judgement rule. Using this broad range of applications shows how comparative institutional analysis reveals the parallels across areas of law often considered unconnected. There will be other legal applications in the paper including an examination of tort law and tort reform. But these other applications will await the second part of the paper where I will explore both the role of economic analysis in understanding and constructing comparative institutional analysis and the role of institutional choice and comparative institutional analysis in unlocking the potential of economics for the analysis of law and public policy. Here I will consider the role and limits of resource allocation efficiency, the intellectual costs of single institutional analysis and the central place of the dynamics of participation. I will close by drawing implications for the reform of legal education, legal scholarship and the economic analysis of law and public policy. This paper is my contribution to a Symposium, entitled "30 Years of Comparative Institutional Analysis: A Celebration of Neil Komesar," held at the University of Wisconsin in October, 2012. Other contributors include Andy Coan, Dan Cole, Bill Eskridge, Shubha Ghosh, Michele Goodwin, Miguel Maduro, Victoria Nourse, Paul Olszowka, Ed Rubin, Greg Shaffer, David Skeel, Matthew Stephenson, Peter Swire and Wendy Wagner. The Symposium will be published in the Wisconsin Law Review.

Number of Pages in PDF File: 57

Keywords: decision-making, constitutional law, judicial review, rights, institutional choice, comparative institutional analysis, constitutional theory, dynamics of participation, participation, dynamics of litigation, European Union, EU, political malfunction, judicial resources, fundamental rights, suspect

Full text availablee at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2195963