When Law & Economics Violates the Rule of Law: Three Illustrations

Abstract

Law & Economics scholarship movement continues to be an important methodological approach to the positive and normative analysis of law since its inception in the second half of the 20th century. However, Law & Economics has been criticized on various grounds, from its over-reliance on consequentialist arguments against deontological arguments to its indifference towards the fundamental concepts of law such as the Rule of Law. This latter argument is scrutinized and further illustrated in this article. Here, we demonstrate that despite the common theoretical underpinnings between Law & Economics and the Rule of Law (I), it is argued that Law & Economics conflicts with the Rule of Law principles on three major instances, namely the Coase theorem, the theory of efficient breach of contracts and the influential rule of reason in the field of competition law and policies (II). We therefore conclude that there cannot be a practical convergence between Law & Economics and the Rule of Law at the universal level unless Law & Economics revisits some of its normative conclusions that conflict with the Rule of Law as exemplified in this article.

Keywords: Rule of Law; Law and economics; Legal certainty

JEL Classification: K20