European Law and Economics

I've just returned to Chicago from Switzerland.  There I taught a short introduction to law and economics to the Faculty of Law at the University of St. Gallen.  That University has just started a master's program in law and economics, largely due to the efforts of Professor Peter Nobel, who is not only a distinguished academic but also one of the most successful attorneys in Switzerland and Europe.  Peter and the Faculty invited me to give them a brief course -- about 10 hours in three days -- on the field of law and economics. 

The class was marvelous.  When can you get 10 or so extremely busy, very bright, eager, but skeptical people to listen to what you have to say and to take it seriously?  Not very often.  In addition to being grateful to the Faculty of Law at St. Gallen for their attention to my talks, I was struck by a couple of things.  First, the questions that they asked me about law and economics are exactly the questions that traditional U.S. law professors used to ask me in the early and mid-1980s, when law and economics was new in this country.  For example, in the early 1980s my colleagues at the University of Illinois College of Law would ask me such questions as this: "Why are you economists in favor of labor market discrimination?"  It is, incidentally, a real character-building exercise to answer such a question.  In St. Gallen the law faculty asked me this rough equivalent: "Why does law and economics believe that a person or a corporation has an affirmative duty to disobey an inefficient law?"  Put that question somewhat different ("Would you advise a client to disobey an inefficient law?"), and you've got a really interesting discussion topic.  I tried to reply to this good question by saying that I cannot imagine that there is anything good to be said on behalf of a lawyer advising his or her client to break the law.  If the law is inefficient, then one should take that matter up with lawmakers.  Moreover, I told them that one should recognize, as a positive matter, that people are more likely to violate an inefficient than an efficient law.  We had a vigorous discussion about that proposition. 

A second impression I had of the extraordinarily bright law professors whom I taught in St. Gallen was that they were uncomfortable with the ex ante analysis that characterizes law-and-economic analysis -- if the following were the law, how would people react?  And, normatively speaking, is that the reaction that we would like them to have? 

There are, I believe, two reasons for their unease.  First, they are not comfortable speculating on how people might behave.  They have no particular expertise at that and feel that no one else has any dependable expertise at that either.  They have an attitude of "Your guess is as good as mine" attitude toward these behavioral predictions.  Second, and more importantly, they are extremely skeptical of the rational-actor theory that formed the central explanatory model of much early law and economics.  Naturally, their skepticism about that theory made them skeptical about behavioral predictions premised on that theory. 

When I gave them a brief introduction to behavioral economics and psychology and in so doing stressed the importance of the systematic deviations from the predictions of rational actor theory that form the core of behavioral psychology, they began to take the entire enterprise of law and economics more seriously. 

They were a great class and wonderful hosts.  Thanks so much to Peter Nobel for his warm hospitality. 

TSU