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Functional Law and Economics: The Search for Value-Neutral Principles of Lawmaking


Francesco Parisi


University of Minnesota - Law School; University of Bologna

Jonathan Klick


University of Pennsylvania Law School; Erasmus School of Law; PERC - Property and Environment Research Center


Chicago-Kent Law Review, Vol. 79, p. 431, 2004
George Mason Law & Economics Research Paper No. 03-39

Abstract:     
Functional law and economics, which draws its influence from the public choice school of economic thought, stands as a bridge between the strictly positivist and normative approaches to law and economics. While the positive school emphasizes the inherent efficiency of legal rules and the normative school often views law as a solution to market failure and distributional inequality, functional law and economics recognizes the possibility for both market and legal failure. That is, while there are economic forces that lead to failures in the market, there are also structural forces that limit the law's ability to remedy those failures on an issue-by-issue basis. The functional approach then uses economic tools to analyze market and legal behavior in order to create meta-rules which limit the extent of the failures in each realm. These meta-rules are designed to induce individuals to reveal their preferences in cases where collective choices are necessary, and to internalize the effects of their actions generally. This mechanism design or functional approach to law and economics focuses on ex ante social welfare maximization, rejecting both the ex post corrective function of law assumed by the normative school of thought and the naturally evolving efficient system view espoused by the positive school.

Number of Pages in PDF File: 20

Keywords: functional law and economics, public choice

JEL Classification: K000

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Date posted: September 16, 2003 ; Last revised: January 28, 2010

Suggested Citation

Parisi, Francesco and Klick, Jonathan, Functional Law and Economics: The Search for Value-Neutral Principles of Lawmaking. Chicago-Kent Law Review, Vol. 79, p. 431, 2004; George Mason Law & Economics Research Paper No. 03-39. Available at SSRN: http://ssrn.com/abstract=441941 or http://dx.doi.org/10.2139/ssrn.441941

Contact Information

Francesco Parisi (Contact Author)
University of Minnesota - Law School ( email )
229 19th Avenue South
Minneapolis, MN 55455
United States
University of Bologna ( email )
Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy
Jonathan Klick
University of Pennsylvania Law School ( email )
3501 Sansom Street
Philadelphia, PA 19104
United States
2157463455 (Phone)
Erasmus School of Law ( email )
3000 DR Rotterdam
Netherlands
PERC - Property and Environment Research Center
2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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