Sustainability, Distribution, and the Macroeconomic Analysis of Law

79 Pages Posted: 25 May 2001

Abstract

Legal economic analysis has traditionally focused on the application of microeconomic theory to questions of legal import. Scholars have generally regarded macroeconomic effects of legal rules as lying beyond the purview of the legal decisionmaker's jurisdiction; for instance, it is frequently stated that the distributive effects of alternative rules should be ignored because distributive goals are more efficiently accomplished through the tax-and-transfer system than through legal rulemaking. This Article argues that such exclusion of macroeconomic subject matter from legal analysis may rest on a scientifically erroneous view of the economic process.

As ecological economists have argued for the last three decades, the conventional understanding of the economic process presumes an unlimited supply of material inputs and an infinite natural capacity to absorb waste outputs. Fundamental scientific principles, including especially the laws of thermodynamics, suggest that this understanding is flawed. The economic process must necessarily be limited in scale by the capacity of the ecological superstructure to sustain it. Thus, in addition to the efficient allocation of resources and the equitable distribution of wealth, economists must also be concerned with the sustainable maintenance of scale. Particularly, economists must design policy instruments that maintain population levels, per capita consumption habits, and per unit of consumption efficiency levels within appropriate ecological bounds.

This Article argues that such policy choices are also legitimate subjects for legal decisionmaking. Efficiency has become a meta-principle guiding the selection of legal rules in all manner of contexts; scale, because it relates to the ultimate capacity for human economic activity to sustain itself, is arguably of even more importance than efficiency and therefore should also be considered a meta-principle of jurisprudential importance. Additionally, consideration of scale effects by legal decisionmakers cannot be safely ignored in the way that distributive effects have been, given that no political mechanism analogous to the tax-and-transfer system exists to regulate the scale of the macroeconomy.

A related and somewhat surprising effect of incorporating scale effects into legal analysis may be to reinvigorate the debate over distributional effects of legal rules. The dominant Western political economic response to problems of wealth distribution is a belief that unimpeded growth in the scale of economic activity will raise everyone's absolute wealth without requiring significant "redistribution." If, however, the ecological economic worldview is correct, sheer growth in economic activity will necessarily face an ecological limit, perhaps already surpassed. Beyond a certain point, in other words, "rising tides" cannot be offered as the means to "lift all boats." Instead, policymakers will need to address problems of unequal distribution of wealth openly and directly.

JEL Classification: K00, K32

Suggested Citation

Kysar, Douglas A., Sustainability, Distribution, and the Macroeconomic Analysis of Law. Available at SSRN: https://ssrn.com/abstract=268949 or http://dx.doi.org/10.2139/ssrn.268949

Douglas A. Kysar (Contact Author)

Yale University - Law School ( email )

P.O. Box 208215
New Haven, CT 06520-8215
United States

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