Economics of Law as Choice of Law

33 Pages Posted: 23 Jul 2009

See all articles by Ralf Michaels

Ralf Michaels

Max Planck Institute for Comparative and International Private Law

Date Written: October 27, 2008


If economics is about choice, then economics of law should be about choice of law. In a broad sense, this is the case. Normative law and economics tells us what kinds of legal regimes to choose from the various models we can think of; choice of law tells us which of actually existing regimes applies. In view of this similarity in sensitivities between choice of law and law and economics, it is not surprising that we see law and economics applied to choice of law. Where choice of law is viewed as too conceptual and abstract, economics promises much-needed pragmatism. Where choice-of-law doctrine is chided for its oblivion to the practical impact of its rules, law and economics promises to provide empirical foundations. Where choice of law is viewed as devoid of theory, economics promises to be that theory. Where choice of law is viewed as hopelessly complex, economics promises to provide clear guidelines.

This article analyzes how far economic models can function as doctrine. It finds that economics does not and probably cannot fulfill this function. It is the heroic failure of economic analysis, not its claimed success, that presents a real, and immensely valuable, contribution. Economic models achieve clarity, but the unrealistic abstractions necessary to achieve it only highlight the inescapable messiness of the problems with choice of law. The isolation of certain values in the economic analysis, especially those of private and public ordering, respectively, shows that it is the combination of, and the conflict between, these values that defines the field. The failure of attempts to develop new solutions on the basis of abstract economic reasoning, regardless of existing doctrine, makes us see clearly the high degree of disciplinary knowledge that is present, though often unacknowledged, within our doctrinal concepts and rules, imperfect as they are.

Keywords: choice of law, country of origin, governmental interest analysis, better-law approach

Suggested Citation

Michaels, Ralf, Economics of Law as Choice of Law (October 27, 2008). Law and Contemporary Problems, Vol. 71, No. 3, pp. 73-104, 2008, Available at SSRN:

Ralf Michaels (Contact Author)

Max Planck Institute for Comparative and International Private Law ( email )

Mittelweg 187
Hamburg, D-20148

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