Individual Rights and Collective Rationality: Some Implications for Economic Analysis of Law

Hofstra Law Review, Vol. 10, p. 455, 1982

14 Pages Posted: 22 Jul 2008

See all articles by Bruce Chapman

Bruce Chapman

Faculty of Law, University of Toronto

Date Written: July 8, 2008

Abstract

In recent years there has been much discussion of two theorems in economics that relate individual rights to Pareto optimality. In the area of law and economics, Ronald Coase is well known for demonstrating that in a world without transaction costs bargaining will always result in a Pareto-efficient outcome, whatever the initial distribution of rights. In social choice theory, however, Amartya Sen has shown that for certain configurations of individual preferences, the reasonable exercise of individual rights can lead to outcomes that are Pareto-inferior to other outcomes that are attainable. Clearly, there is some tension between these two results. The purpose of this paper is to point to the lessons we might learn from Sen's theorem in particular and from social choice theory in general, and to suggest some implications for the treatment of individual rights within the currently fashionable economic analysis of law. Specifically, I shall argue that rights cannot be sensibly incorporated within any kind of maximization framework, and that this conclusion renders suspect Richard Posner's normative defense of wealth maximization as a goal for legal systems.

Suggested Citation

Chapman, Bruce, Individual Rights and Collective Rationality: Some Implications for Economic Analysis of Law (July 8, 2008). Hofstra Law Review, Vol. 10, p. 455, 1982. Available at SSRN: https://ssrn.com/abstract=1156881

Bruce Chapman (Contact Author)

Faculty of Law, University of Toronto ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada
416-978-6911 (Phone)
416 978 2648 (Fax)

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