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

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. 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. 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 there is no general framework for legal analysis. It has been and remains my objective to use comparative institutional analysis to provide such an analytical framework for legal analysis.


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 fundamental rights and suspect classifications, the concept of property, class actions and the 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. In the second part of the paper, I 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. 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. 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

JEL Classification: K41

Accepted Paper Series