Philosophy Of Law and Economics.pdf - Reader for the course...

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Unformatted text preview: Reader for the course Philosophy of Law and Economics January-March 2009 Prof.Dr. Frank van Dun The texts in this collection provide some background for the discussions in class. However, the topics of our discussions are not limited to those raised in the texts. You are free to bring up other subjects as long as these involve some significant philosophical distinction within the broad range of “law and economics”. 1 Introduction This course is about elements of reality that are of interest to economists and lawyers alike: elements that constitute the common ground of their studies, theories and professional activities. After all, both law and economics are concerned with human beings and how they interact. The many differences between their respective approaches (methods, theories) to their common “material object” certainly warrant the claim that law studies and economic studies have different “formal objects”, but they should not obscure the fact that there is a common material object. Thus, ultimately, there can be no contradiction between what is true “in law” and what is true “in economics”. This should not be understood in the trivial sense in which a statement about one thing cannot contradict a statement about another thing. It should be understood in the non-trivial sense in which no two true statements about the same thing can contradict one another. It follows that a true theory of law cannot presuppose or imply a false theory of economics, and vice versa. Just as there are obvious differences between the approaches of law and economics to their common material object, just so there are significant differences among schools of law as well as among schools of economics. In this context, a school refers to a group of students, scholars and researchers with a shared commitment to particular theoretical presuppositions, assumptions and methods of research and theoryconstruction. In other words, a school refers to a particular “formal object” (defined in terms of its theoretical and methodological approaches) as the relevant representation of the reality it purports to study. The separation into distinct schools is a dynamic process, as differences arise among their adherents that may develop into diverging tendencies and perhaps lead to the formation of distinct schools. Occasionally, a school may disappear or merge into another. In the field of law, the top-division is generally taken to be the split between natural law theorists and so-called legal positivists, neither of them constituting a monolithic bloc. In economics, a similar pervasive line of division exists between natural law economists and positivist economists. In both cases, the main division appears to be between those who see the object of the study of law, respectively economics, as a manifestation of human nature and those who see it as a “given” system of incentives (stimuli) to which human beings react (respond) more or less predictably because of some innate or acquired disposition. Thus, the natural law approach is concerned with the problems of order and disorder in human affairs on the assumption that an understanding of human nature reveals principles of order that are valid universally for all human actions and interactions. In contrast, the positivist approach is primarily concerned with analysing existing systems of incentives and considering ways to modify them so as to make people behave in one way rather than another. As they are stated here, it would seem that both approaches are complementary rather than mutually exclusive. Indeed, natural law theorists in law or economics have never denied that there is a place for considering and tinkering with systems of incentives, as long as this is done with due regard to the natural-law principles of law and economics. However, beginning at the latest in the eighteenth century but mainly in the nineteenth century, as far as the study of human affairs was concerned, positivism became virtually synonymous with a denial of the relevance, even the existence, of natural law. It embraced the stance that there is no human nature to consider, as it supposed that, for all practical purposes, man and human society can be made into 2 anything one wants them to be, either by wholesale revolutionary, or by gradual piecemeal social engineering and education. The question, whose wants (“ideals”) should guide the process of reconstructing man and human society, was deemed to have no scientific relevance.1 That question was left to politics, which in tandem with the rise of the modern “sovereign” state and its cult of democracy (“collective selfgovernment”) came to embody the notion that humanity can control the conditions that define its own existence.2 With respect to law and economics, differences among schools are the primary occasion for doing philosophy of law, respectively philosophy of economics. In the former, we look at the differences among theories of law3 to arrive at an informed judgement on which of them provides the better understanding of law as it really is. The same goes, mutatis mutandis, for the philosophy of economics. The whole point of doing philosophy is to supply a reality check on thought and theoretical ingenuity, and hence to keep “education in science” from falling into the trap of dogmatic indoctrination. Every science endeavours to know the truth about the real world and needs theories and methods to arrive at the truth. However, theories and methods are only means to the end of true knowledge, not ends in themselves—a fact that should be reflected in the curricula of institutions of higher education, especially the universities. In its classical “catholic” conception, the university was indeed supposed to provide a scientific education that prepares the mind for a study of the real world as “the work of God”, i.e. as something that can only be discovered, not made or made up, by the human intellect. It was not supposed merely to multiply the number of people who accept the theories of this or that professor or author or school, no matter how fashionable or “authoritative” they may be. Hence, philosophy was seen as a necessary part of the curriculum in every one of its faculties and departments. That classical aim has always, but perhaps never more so than in recent times, been compromised by “practical considerations”. For one thing, where large numbers of students are involved, it is easier to teach theories, which are readily reduced to sets of questions-plus-the-correct-answers, than to induce the elusive spirit of critical scientific 1 ‘Positivism’ is sometimes linked to ‘positive’, i.e. ‘non-normative’, ‘descriptive’. However, natural law theories are also descriptive in that they attempt to describe the laws of nature. To what use we ought to put our knowledge of the laws of nature is a separate question. In our discussion, ‘positivism’ refers to the idea that science is not concerned with the nature of things but only with “data” about things. 2 This development was partly a consequence of attempts to define the formal objects of the study of man and society as epistemologically akin to the formal objects of the physical sciences (see further down in the text). It was also partly a consequence of the decline of the traditional Christian religion (with its intense focus on persons and their relations) and the rise of the religion of Man or Humanity (which regarded the species rather than the individuals that compose it). In effect, ‘positivism’ and the ‘Religion of Humanity’ were closely connected in the thought of Auguste Comte (1798-1857), the self-styled inventor of “sociology” (which he presented as the current master-science, and which would find its completion in “anthropology”, the true science of Man). His emphasis on statistical analysis and on rational decisionmaking as the application of quantitative, mathematical methods combined easily with empiricist (especially utilitarian) approaches to practical problems. The main theme of the religion of Humanity (which existed also in other versions, e.g., in Marxism) was “the liberation of Man” from the shackles of religion, metaphysics, and history. It subverted the traditional idea that there are absolute limitations on human knowledge and power because human nature and the natural world that man inhabits are “gifts of God” or “givens” of reality, not human creations. According to the Humanist religion, Man (i.e., the present or at the latest the next generation) can and will escape from history and take command of his own future (i.e., of all later generations), thereby becoming the God-Creator of a New Order. Shortly after Comte's death, his vision of a scientifically enlighted, harmonious humanity, solidified by universal “altruism”, was shaken by the impact of Darwinism and its emphasis on rivalry and natural selection in a universal “struggle for life”. This further radicalized positivist tendencies in that it was taken as proving that universal norms and values (including altruism) are irrelevant: only the particular norms and values that prove advantageous in the struggle of one group against all others can make a difference. 3 For an overview, see the chapter Theories of Law. 3 inquiry.4 This carries the risk that a university class becomes a place where students come to study and absorb particular theories rather than to learn how to acquire knowledge of the particular aspects of reality that the theories profess to deal with. The means of understanding risk becoming its end. For another thing, the demands of the labour market for academically trained students favour the production and reproduction of skills that meet the requirements of existing arrangements in government, social services, industry, commerce, the media, and formal schooling itself. Inevitably, formal schooling at the university level can and does serve other interests than fostering science and philosophy. There is therefore a permanent risk that these other interests overshadow the interests of science and philosophy to which the institution of the university was supposedly specifically dedicated. The risk is especially great in the fields of law and economics, where formal schooling is nowadays more often than not seen as a requirement for entering a labour market centred on large established organizations (the state's court system and legislative and administrative branches, local government, political parties and interest groups, international bureaucracies, corporations and professional associations). In such an environment, it is to be expected that prevailing prejudices and preconceptions, especially those that are widely shared among social elites, influence or even determine the curricula of schools and universities. It is not surprising that in the Soviet Union only Marxist economics and the principles of socialist legality were taught. Nor is it surprising that when Marxist economics was introduced in the 1960s as a formal subject at western universities, it quickly lost ground again to the mixture of Keynesian macroeconomics and neo-classical or “mainstream” microeconomics. It had little to offer to those out to make a career in the political and economic institutions of the socalled mixed economies in the Western world. One is therefore entitled to ask whether or to what extent prevalent theories of economics in the modern western (or to a large extent “westernised”) world owe their widespread acceptance to their scientific qualities rather than to their conformity with the interests of western political and economic institutions and the worldviews of the elites that man them. Similar questions arise with respect to established theories of law, which are almost without exception wedded to the idea that law is really only “positive law”, i.e., the rules and regulations promulgated or sanctioned by the official, legal authorities of political corporations (states) or associations of such corporations. Thus, law is conceived primarily as “national law” (and international law accordingly as a consequence of the co-existence of many systems of national law). The approach of legal positivism mirrors that of economic positivism, which also tends to identify the geographical extent of “the economy” with the area controlled from a single national political centre. The international economy is accordingly discussed far more often in terms of trade among countries (states) rather than in terms of border-crossing trade among persons and business entities. In the next chapter, we shall take a closer look at these mainstream approaches to the study of law and economics. First, however, we should consider the common reality that provides the basic reason for studying law or economics from a scientific rather than a merely practical point of view. 4 It is a telltale sign when course books hide arguments and controversies behind a few references in footnotes and bibliographies and only list the main conclusions of one or a few theories. 4 1. Human actions and interactions Law and economics are concerned primarily with human actions (actiones humanae), which constitute a subset of the things human beings are capable of doing (actiones hominium). For example, sneezing, sweating, blinking, dozing off, digesting, stumbling, getting sick and the like are things human beings are capable of doing but they are not human actions—although, say, pretending to sneeze or to stumble may well be a human action. Students of law and students of economics are obviously not concerned primarily with such actiones hominium. They focus on human actions such as buying, selling, saving, investing, giving, stealing, respecting or violating rights, commanding, obeying, rewarding, punishing, negotiating, arguing, studying, taking care. An action in the relevant sense of the word is a purposeful use of means for a particular goal, i.e., for achieving a particular result that is thought to be a satisfactory realization of a desired condition. It implies that the agent of the action is an actor, i.e., someone who prefers to act in one way rather than another while being aware that how he will act is a matter of choice for him. An actor can do many things but, typically, he cannot do all of them at the same time. What he can do in a particular situation depends on the means available to him, but these do not dictate what he will do. He must make a choice, in fact, several choices involving a great many factual and value judgments about the situation he is in, the means available to him, his skills in employing them; also about how the world works and the causal and means-ends relationships that characterize it. In many cases, he must also make judgments about how others are likely to perceive and react to what he does or does not do. Moreover, and not least, an actor must rely on judgments about himself, what his talents are, what makes him tick, what makes him happy or unhappy, what he really wants, what sort of person he is, what his limits are, and so on. Self-knowledge is as fallible as is knowledge of other things. It happens that an actor succeeds in achieving his goal only to discover that it does not produce the satisfaction he expected from its achievement. Conversely, it happens that an actor fails to achieve his goal only to realize that he was lucky not to have succeeded. An actor is or can be made aware of the possibility that what he wants is not necessarily good for him: want-satisfaction does not automatically translate into a satisfactory personal condition. Even from his own point of view, the fact that an actor wants something does not guarantee that trying to get it is the right thing to do. Each of those judgments may be more or less autonomous (reflecting the actor's own deliberations) or heteronomous (accepted on the authority of others), more or less wise, competent, informed, considered, or impulsive, intuitive, habitual, tainted by unconsidered prejudices. An action may seem to be as entirely spontaneous as a sneeze or a blush, but it would still make sense to ask the actor what his motives or reasons for doing it were. It may be of interest to find out what made him sneeze or blush, but it would be odd if the answer referred to his purpose, to what he hoped to accomplish by sneezing or blushing. Another way to make the distinction between mere actiones hominium and actiones humanae is to point out that among the things human beings are capable of doing some require a reference to the fact that [most] human beings are persons while other things require no more than a reference to the fact that [all] human beings are [biological] organisms. Students of law and students of economics share an overriding interest in the actions of human persons. In fact, their shared interest can be narrowed down to the interactions of human persons and to the effects one person's actions have on other persons. For example, a person who commits suicide would not be of interest to either a 5 student of law or a student of economics if his act did not change the situation of other persons or if it was not perceived by other persons as a reason for reacting to it in one way or another. Of course, things and beings other than persons may enter into the study of law and the study of economics but only as objects or means or conditions of human action— not as economic agents or subjects of law or rights. From the point of view of law as well as from the point of view of economics, human persons are the primary subjects. A dog wandering into a butcher's shop and running away with a sausage would not be considered as engaging in an economic transaction unless one were of the opinion that the animal was a person, a being capable of personal action. Nor would the dog be considered a potential defendant in a court case unless one believed the beast to be a person. Note that only persons can suffer economic damages or enjoy economic profits, and that only persons can have, assert, or waive claims in law or suffer infringement of their rights.5 Thus, in the example just given, the dog causes economic damage to the butcher, but it would not make sense to say that a beggar who steals a dog's food causes economic damage to the dog, or that the dog had a lawful claim against the beggar (again, unless one were to consider the dog a person). However, if the dog had an identifiable owner, a human person, then the incident would be of interest to a student of law or of economics, regardless of one's opinion of the dog's personhood. Persons In studying law or economics, then, we presuppose the concept of a person. A philosophically sound definition of that concept is a subject in itself, but for our present purpose, we need not go into great detail. Only one element needs explication: what makes a human being a human person is the capacity to speak, i.e. to have, communicate (by oral, written, or other means) and understand factual and counterfactual thoughts and arguments. Speech (Greek: logos, Latin: ratio) implies reason and logic. It is to be distinguished from mere voice, which includes the capacity to express feelings of pleasure, pain, fear, anger, anticipation and the like, and maybe even the ability to name individual things (the use of proper names) or sorts of things (the use of generic names). It does not imply the capacity to speak. There is a wide gap between being able to use expressions such as “This is a snake” correctly and being able to understand and use expressions such as “If I were built like a snake then I would not be able to walk.” The distinction between speech and voice goes back at least to the Greek philosopher Aristotle (384-322 BC). It is involved in the classical definition of man as a rational animal. It is also in evidence in discussions about a great many topics that are relevant to students of law and economics. For example, in human organizati...
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