The Market for Legal Innovation: Law and Economics in Europe and the United States
Thomas S. Ulen
University of Illinois College of Law
Nuno M. Garoupa
Texas A&M University School of Law; Catholic University of Portugal (UCP) - Católica Global School of Law
University of Illinois Law and Economics Research Paper No. LE07-009
There have been a large number of innovations in legal scholarship in the U.S. legal academy over the past 25 or so years and very few from legal scholars in other parts of the world. For instance, because both of us work in the area of law and economics, we were both acutely aware of the large differences in the receptivity to law and economics as between the U.S. and Europe. The U.S. legal academy has generously embraced law and economics (and some other legal innovations), while Europe (and the rest of the world) has not. Why has the U.S. led the world in the production and adoption of legal scholarly innovations? This Article seeks to answer that question generally and with particular reference to law and economics.
In Part II we deal with two definitional issues - what we mean by a "legal innovation" and what counts as "law and economics." The scholarly innovations on which we focus are new methods of looking at many areas of the law, such as feminist jurisprudence, or the articulation of the principles and boundaries of an entire new area of law, such as elder law. By "law and economics," we mean the application of economic analysis to any of the area to which its application would not be obvious. Then in Part III we offer a series of anecdotes and empirical studies designed to show that law and economics is much more prominent in U.S. legal scholarship than in European legal scholarship.
We then seek, in Part IV, explanations for the differences between the U.S. and European legal academies in their production and adoption of legal scholarship innovations generally and with respect to law and economics particularly. Our central claim is that it is the competitiveness of higher and legal education that is the principal explanation for the scholarly innovativeness of the U.S. and the lack of competition (and the consequent lack of an incentive to innovate) in European higher and legal education that explains the differences. We further hypothesize that the production and adoption of law and economics are attractive only to those who have experienced a prior legal scholarly innovation - legal realism. We draw a clear line of intellectual heritage from legal realism to law and economics.
Before settling on competition and legal realism as the principal explanations for the production and adoption of legal scholarship innovations, we canvass (and reject) a large number of alternative explanations, such as political ideology, money, the differences between common and civil law systems, the structure of legal education, and more.
In Part V we draw a connection between the standard economic theory of innovation and diffusion and our observations in the prior four sections of the Article. That economic theory of innovation and diffusion identifies three factors - demand, supply, and market structure - as determining the presence and pace of innovation and diffusion. We relate each of those factors to observable differences between the U.S. and Europe, showing that our explanation of the production and adoption of legal scholarly innovations follows the same factors as does the economic theory of innovation in production techniques.
Number of Pages in PDF File: 75
Date posted: March 22, 2007
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