Economic Theory in the 1L Curriculum

-- By DanielMargolskee - 27 Feb 2009

Writing about the study of law, Justice Holmes predicted that, while “the blackletter man may be the man of the present, the man of the future is the man of statistics and the master of economics.” In the 1L curriculum, that prediction has proven only half-true. Formal economic analysis has come to dominate the teaching of Torts, Contracts, and Property, and yet, the curriculum falls short of Holmes’s aspirations for a “rational study of law.”

Insights from economics are part of the “rational study of law” Holmes yearned for--but only a part. In privileging the methods of axiomatic economic analysis over the methods in other disciplines, the 1L curriculum fails to confront those unanswerable questions which, despite (or because of) their indeterminacy, were of paramount concern for Holmes: How does the law actually operate? What kind of society do we want to have? How can we change the law to bring about the society we would rather live in? How can a

Economics as Part of a Rational Study of Law

Holmes thought that the tools of economics and statistics would be useful in steering lawyers and judges away from three habitual mistakes: (1) “confusion” of legal terms with moral terms; (2) uncritical mimicry of the past (“the pitfalls of antiquarianism”); and (3) the belief that legal doctrine is logically deducible from self-evident axioms (“the fallacy of logical form”). In Holmes’s framework, these three habits of thought conspire to prevent lawyers from accurately predicting the “incidence of the public force,” and prevent judges and legislators from consciously and intelligently confronting “their duty of weighing considerations of social advantage.” These conceptual mistakes lead lawyers to give wrong answers, because they lead lawyers habitually to ask the wrong questions.

Statistics and economics were to complement history and jurisprudence as part of a “rational study of law.” That study would be characterized by an “enlightened skepticism” of received wisdom and a “deliberate reconsideration of the worth of [legal] rules” from the perspective of present needs. It would be simultaneously theoretical and empirical: it would “get to the bottom of the subject itself.”

Now, Holmes simultaneously maintains that, in weighing considerations of social advantage, no resolution will be accepted always, everywhere, and by everyone. The “longing for certainty and for repose” that inheres “every human mind” is destined to go unfulfilled.

And yet, in the enigmatic closing passage to the Path of the Law, Holmes invokes the universalistic aspirations of Hegel, Kant, and Descartes to express his own longing to “catch an echo of the infinite, a glimpse of its unfathomable process, a hint of the universal law.” Further, he suggests that the “command of ideas” and the exploration of the “remoter and more general aspects of law” (and presumably of social life in general) are a mechanism for actually achieving moments of transcendence. Though there is no certainty in Holmes’ framework, there are gestures toward what Eben sometimes calls “salvation,” and that salvation is found in the rational study of social questions.

Read in light of this passage, it is possible that for Holmes, the perpetually-unsettled questions at the heart of legal decisionmaking (questions of “social advantage”) are also something inexpressibly more than, say, questions of how to minimize the “aggregate social cost” of accidents, or of how to guide society ever closer to one or another Pareto-efficient equilibrium, or, in short, of how to “satisfy[]” the “appetite.” Instead, it is a question of . . . well, of what, exactly?

Economics in the 1L Curriculum

The lawyer of the present is the master of economics, at least in the 1L classroom. Tort class is an extended meditation on Calabresi’s The Cost of Accidents (1970); Contract law is reconceived as a quest for transaction-cost minimizing default rules in the footsteps of Coase’s The Problem of Social Cost (1960); Property law is taught and learned in the shadow of Calabresi and Melamed’s Property Rules, Liability Rules and Inalienability (1970).

To be sure, there are moments of great resonance between Holmes’s Path of the Law and the law-and-economics essays on which so much of the curriculum is now based. Implicit in Holmes’s observation that “the duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it” is a distinction between rights enforced by liability rules and those enforced by property rules. Holmes is keenly aware that some number of accidents are too costly to avoid in modern life; that compensating injured workers can be recast as “the public … insur[ing] the safety of one whose work it uses”; even that the value, in economic terms, “of a life to the community can be estimated.”

Saying Something More

In the first incarnation of this paper, I tried to argue that the formal economic thought experiments taught in the 1L curriculum are yet more transcendental nonsense. As Eben pointed out, this is a point Arthur Leff made more than thirty years ago. And indeed, it’s a point implicit in other works we’ve read this semester: Theory of the Leisure Class posits a small set of human motivations and then tries to explain the human experience solely in terms of those motivations, in what could be read as parodying the economists mistaking, in Leff’s terms, “the light” for “the thing illuminated.”

Not only did Leff make that point, but he also showed that it’s source is in the “terrifying” message of the Realists, their “simultaneously horrifying and banal” recognition, in Holmes’s words, that“[n]o concrete proposition is self-evident, no matter how ready we may be to accept it,” that “certainty generally is an illusion and repose is not the destiny of man.”

But I find myself leaving class wanting to say something more about the world than can be said with the aid of simplifying assumptions or the inhibition that comes from radical uncertainty; what more, it’s hard to say.